American Express Sheds 7,000 Jobs

The US credit card company American Express is shedding 7,000 jobs as it grapples with a surge in bad debts among customers who are feeling the pinch from the global economic slowdown.

In a sign that the credit crunch has reached even AmEx's relatively affluent cardholders, the company is embarking on a wide range of cuts ? including reducing its workforce by 10% ? intended to produce savings of $1.8bn (?1bn) annually.

The firm has imposed a recruitment freeze and is halting pay rises for its management. Spending on travel, consulting and entertainment will be scaled back and the group will reduce its budget for technology and marketing.

The chief executive, Kenneth Chenault, said: "The re-engineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades."

On Wall Street, shares in AmEx have slumped by 26% this month amid rising concern about a slowdown in consumer spending and a build-up of delinquent debts in the credit card industry.

AmEx last week revealed a 23% slump in quarterly profit to $861m. It made accounting provisions for losses of $941m. In a year, the proportion of debts to be written off by AmEx has doubled from 3% to 6.1%.

In common with other card issuers, AmEx has been clamping down on customers' credit limits and has tightened criteria for applications for new cards.

The ratings agency Standard & Poor's recently put the company on watch for a downgrade, saying "dislocations in the global credit markets are resulting in unprecedented challenges for wholesale-funded institutions, including AmEx".

Banks including Citigroup and JPMorgan have made it clear that credit card liabilities are likely to rise.

Earlier in the week, the global credit cards processor Visa said its revenue growth was likely to be "somewhat challenged" as the international economy slowed, affecting the number of card transactions.

Americans owe about $900bn on credit cards. In a joint proposal, business leaders and consumers' representatives this week called on the US government to back a huge program of forgiveness in which lenders would reduce the amount owed by customers by as much as 40%.

Travis Plunkett, the legislative director of the Consumer Federation of America, said the plan would "help many customers in serious debt trouble pay back much of what they owe and avoid bankruptcy".

Credit card rewards programs have become less generous and even credit card junk mail has become less prevalent - the US Postal Service recently said it expected to deliver 9bn fewer items this year, largely due to fewer mail shots from financial institutions and the housing industry.