Chillin' out till it needs to be funded
The large U.S. credit card issuers American Express Co and Capital One Financial Corp said rising customer delinquencies reduced second-quarter earnings. Thus, profit decreased by 84 % at American Express, while Capital One reported a third straight quarterly loss. Both are writing off close to $1 out of every $10 they lend, even after the government let them repay federal bailout money. American Express repaid $3.39 billion and Capital One $3.55 billion. Besides, shares of American Express dropped 4.4 % to $28.14, and Capital One dropped 4.8 % to $26.50 in after-hours trading.Moody`s Investors Service said defaults on U.S. credit cards rose to a record 10.76 % in June and could reach 13 % by the middle of 2010. According to economists, charge-off rates are closely tied to the nations unemployment rate, which has reached an all-time high 9.5 % since 1983 and is widely expected to soon reach double digits.American Express said quarterly net income available to common shareholders decreased to $102 million, or 9 cents per share, from $650 million, or 56 cents, a year earlier. Before preferred stock dividends, net income was $337 million. Capital One, based in McLean, Virginia, had a quarterly net loss available to shareholders of $275.5 million, or 65 cents per share, compared with a profit of $452.9 million, or $1.21, a year earlier. Before preferred stock dividends, profit was $224.2 million.