American Express will cut up to 5,000 jobs, or 5.6 per cent of staff, and take up to $1.2 billion in charges, the latest large financial services firm to fall victim to the slowing US economy.
American Express, which is already in the process of cutting 1,600 jobs in addition to the layoffs announced today, joins companies such as Merrill Lynch & and Morgan Stanley in cutting staff to deal with falling revenues and weak stock market and economic conditions.
American Express shares were off 68 cents, or 1.8 per cent at $38.10 in morning trading on the New York Stock Exchange. Its shares are down more than 30 per cent this year due to a profit slump as its corporate customers spend less on travel and other expenses.
The New York-based firm, known for its ubiquitous green charge cards and travelers checks, said it expects second-quarter profits to fall 76 per cent from the $740 million in last year’s second quarter.
"We now believe the high level of defaults will continue through next year," chief executive Mr Kenneth Chenault said on a conference call. The company also expects the US economy to be weak through next year, he said.
To save money, the company is cutting some technology jobs and outsourcing some data processing. It also will move some processing and service functions to the Internet and cut staff who used to perform these duties.
The restructuring changes are expected to save $275 million to $300 million next year and $345 million to $370 million annually after 2002.
The largest US full-service brokerage Merrill Lynch said it has cut 5 per cent of its staff this year to cope with falling revenues. Morgan Stanley, which owns the Discover credit card and has about 14,300 brokers, also has shed workers to deal with weak conditions.