American Express Co said fourth-quarter revenue grew 13 percent from a year earlier, as consumer spending increased.
But an uncertain regulatory outlook threatened to overshadow the company's ambitions for future growth.
Shares fell about 1.4 percent in after-hours trading on Monday, after the credit card lender and payment network reported its full fourth-quarter results. The company last week posted a profit for the quarter that narrowly fell short of analyst estimates.
American Express, whose affluent credit card customers generally pay their bills in full every month, is increasingly turning to its processing business for future profits. That business carries less credit risk than lending, but it faces increased regulation, especially from the so-called Durbin amendment to the U.S. Dodd-Frank financial reform law.
The top line looked very healthy, but there's still a lot of skepticism in this market, said Michael Holland, chairman of money manager Holland & Co, which includes American Express shares in its more than $4 billion worth of assets under management.
You have the Durbin sword of Damocles out there ... that leads to a proclivity toward negativism among investors, he said.
Federal rules proposed last month as part of the Durbin amendment would slash the fees that merchants pay banks every time a customer buys something with a debit card.
While American Express does not have a debit card business, its credit cards carry some of the highest merchant fees in the industry, and investors are worried that it will lose business as merchants ask customers to pay with cheaper debit cards.
The company is also fighting a Justice Department antitrust lawsuit over its processing business's rules for merchants. Its decision last week to close down customer service centers and cut some 550 jobs did not reassure investors about its ability to grow in the face of increased regulation.
SIGNS OF IMPROVEMENT
American Express, which lends directly to consumers but also competes with Visa Inc and MasterCard Inc to process credit card transactions, has recovered from the financial crisis more fully than many other consumer lenders.
The company cut its provision for losses on bad loans by 68 percent from a year earlier, to $239 million. It also said expenses rose 17 percent from a year earlier, to $5.6 billion, and said it intended to invest significantly in building up its business.
American Express on Monday reported $7.3 billion of quarterly revenue net of interest expense, slightly above what analysts on average were expecting, according to Thomson Reuters I/B/E/S.
The company said the increase in revenue resulted from an accounting change as well as increased spending on American Express cards.
Chief Executive Kenneth Chenault said in the earnings release that American Express customers increased their spending on their cards by 15 percent in the quarter. The company also benefited from fewer losses on soured loans.
Unemployment levels and housing remain a concern, but other aspects of the economy continue to show signs of improvement, he said.
The company's shares closed down less than 1 percent at $45.79 on Monday, and fell about 1.4 percent in after-hours trading.