American Express CEO: High earners cut spending

Reuters
American Express CEO: high earners cut spending
Wed Dec 3, 2008 1:49pm EST

WASHINGTON (Reuters) - The chief executive of American Express Co said on Wednesday that the current financial downturn is strongly affecting the spending of people in high income levels, a departure from prior economic slowdowns.

"It's very different from the last two downturns," Kenneth Chenault said during the Fortune 500 Forum. "The impact on spending has been very strong ... across a range of income levels and high income levels."

He said discretionary spending has dropped substantially and that he sees tough business conditions through next year.

"We think that this is going to continue to be a challenging environment certainly through 2009," Chenault said, adding that until housing prices stabilize, conditions will remain "very, very challenging."

American Express, the fourth-largest U.S. credit card issuer, won approval last month to become a bank holding company, a step that could cut its borrowing costs and provide more access to government money.

The company offered more credit to more customers even as the housing crisis began last year, and is paying the price as delinquencies rise.

American Express said in October that it would cut 7,000 jobs, significantly decrease expenses and scale back investments to save $1.8 billion next year.

Chenault said the company, however, is still solidly profitable.

"Relative to the financial services sector ... we have not had a situation where we're not making money or we have dramatic subsequent losses."

(Reporting by Karey Wutkowski; editing by Jeffrey Benkoe and Matthew Lewis)

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