Amex reports massive loss

Amex warned there would be big losses

American Express, the US financial services firm, on Monday reported a 76% fall in second-quarter profits taking a big hit because of its junk bond portfolio and the weakening economy.

The company that is known for its green credit cards and travellers' checks, reported earnings of $178m compared with $740m a year earlier.

Junk bonds

High-yield bonds that are rated as risky investments by credit agencies.

American Express, one of the 30 companies that make up the Dow Jones industrial average, stunned Wall Street last week by announcing plans to slash up to 5,000 jobs and that it would take $1.2bn in charges.

The bulk of the charge covers losses in its junk bond portfolio and expectations of future defaults in a slack US economy, the company said.

The stock market slump and the weak economy also curbed consumer spending and profits the company makes from managing money and selling mutual funds.

American Express shares have fallen about 30% in the first six months of the year.

The only positive news for the company was in its travel services arm, which includes its vast credit card operations, where profits rose 3% to $519m in the quarter.