The New York-based company had previously alerted investors that its earnings would be taking a hit in the October-December period as a result of booking roughly $594 million in after-tax charges.
The biggest portion of the costs pertains to a restructuring plan that involves cutting some 5,400 jobs, mostly from the company's travel business. The strategy aims to reduce costs and put the company in better position to cater to customers increasingly turning to online and mobile devices to shop, pay bills and make travel plans.
The rest of the charges were related to the company's cardholder rewards program and for reimbursements of interest and fees to customers.
Expenses aside, American Express was buoyed by an 8 per cent increase in cardholder spending during the quarter, which coincided with the holiday season, traditionally a time when consumers spend more.
Steady job growth and lower gas prices kept U.S. consumers shopping for the holidays, despite worries about potential tax increases. Retail sales rose 0.5 per cent in December from November, according to the Commerce Department.
On a conference call with Wall Street analysts, American Express Chief Financial Officer Dan Henry said that spending growth by cardholders continued to be healthy in a "very uneven economy."
Even with the impact of Superstorm Sandy, which devastated much of the Northeast in late October, the rate of growth in the company's billings was consistent with the third quarter, he noted.
"We continue to feel positive about our performance, especially given the uncertain economic environment," Henry said.
Revenue at the company's U.S. card services segment rose 4 per cent to $4.1 billion, as cardholders spent more. And net interest income grew 7 per cent, as borrowers took on more debt, on average.
At the same time, loan losses remained near all-time lows. The company's provision for losses grew 56 per cent to $638 million, but that reflected higher loan loss reserve releases a year earlier.
An increase in cardholder rewards helped drive American Express' expenses 18 per cent higher to $6.6 billion.
American Express cardholders tend to be more affluent than other credit card users, and the company has done well in the slow, bumpy recovery from the recession.
For the three months ended Dec. 31, American Express reported net income of $637 million, or 56 cents per share. That compares with net income of $1.2 billion, or $1.01 per share, in the same period last year.
Excluding the after-tax charges, American Express' earnings amounted to $1.09 per share. Analysts polled by FactSet expected adjusted earnings of $1.06 per share.
Revenue for the quarter grew 5 per cent to $8.14 billion, in line with analysts' forecast.
For the full year, American Express net income fell 9 per cent to $4.48 billion, or $3.89 per share, compared with net income of $4.94 billion, or $4.12 per share, in 2011.
Revenue for 2012 grew 5 per cent to $31.6 billion from about $30 billion.
American Express shares ended regular trading up 12 cents at $60.74. The stock lost 64 cents at $60.10 in after-market trading.
Rival credit card issuer and lender Capital One Financial Corp. also reported fourth-quarter earnings on Thursday.
The McLean, Va.-based company said its net income rose to $825 million, or $1.41 per share. That compares with $381 million, or 88 cents per share, in the same period a year ago.
Revenue jumped 38 per cent to $5.62 billion from $4.05 billion.
The results fell short of Wall Street expectations. Analysts polled by FactSet expected earnings of $1.58 per share on revenue of $5.76 billion.
Capital One shares fell $4.41, or 7.2 per cent, to $57.18 in extended trading. The stock ended the regular session down 16 cents at $61.59.