Charge cards made losses in 2009

The two dominant charge card companies traded in the red for a second year in a row in 2009, financial statements for American Express Australia and Diners Club show. Receivables also fell, reflecting caution on the part of their customers last year.

American Express reported a slight dip in revenue to $1.3 billion over the year to December 2009. Income from merchant fees, which is 43 per cent of revenue, increased but net interest income and service fees charged to the global company fell.

Amex recorded a reduced loss, of $21.9 million in 2009 down from $76 million in 2008.

Receivables fell by more than 10 per cent to $4.9 billion over the year, with most of the declines concentrated in the credit card side of the business. Receivables fell to a lesser degree on the charge card side. The small personal loan portfolio is in run off.

Luisa Megale, vice president public affairs and communication at Amex, put the continuing loss down to investments, including in setting up and marketing the co-branded credit card with David Jones and business card initiatives.

The charge for bad and doubtful debts increased to $279 million in 2009 from $181 million the year before. Some of this rise is due to one-off factors since Amex now writes off overdue loans after six months rather than one year, and to fit in with the rules for bank holding companies (which American Express now is, and reflecting the need for bank status in the wake of the financial crisis).

Megale said new business levels were strong among small business customers and reflected the cautious approach to lending by banks. She said underwriting standards remained high and there was no increase in arrears.

At Diners Club, where the charge card brand is just one in the cards' portfolio of its owner Citibank, revenue fell 28 per cent to $79 million in 2009, according to special purpose accounts filed with ASIC.

The loss after tax widened to $7.9 million from a loss of $3.1 million in 2008.

Receivables, which are all charge-card related, fell 10 per cent to $251 million.

Diners has worked its way through the last of the residual tussles over the collapse of Ansett more than nine years ago; Diners paid the final legal bill of $1.6 million last month.

New business, in the form of corporate accounts, is picking up at Diners more recently, though according to Amex, Diners did not win this business from them.