American Express hikes loss provisions

As I noted last Friday Bank of America (BAC) raised their loan loss provisions almost 50% as non-performing loans rose 18% in 2Q07.

After hours Monday, American Express Co. (AXP) reported a healthy 12% increase in 2Q07 profit, although growth was restrained somewhat by an 85% jump in loss provisions. Granted provisions are coming off a low base from the same time last year, however expect them to keep rising as the credit cycle worsens.

No doubt the large banks are big enough to absorb higher delinquency rates but both higher loss rates and higher provisions are obviously starting to effect earnings growth. With delinquency rates set to increase expect provisions and loan losses to further dampen earnings growth in the remaining quarters of this year and into the first half of 2008.