American Express, the credit card group, is cutting 7,000 jobs, or nearly 10 per cent of its workforce, as it seeks to reduce costs by $1.8 billion (£1.1 billion) next year.

The cuts come ten days after the group announced a 24 per cent drop in third-quarter profits as the financial crisis prompted its affluent customers to spend less.

Kenneth Chenault, chairman and chief executive, said: “The re-engineering programme will help us to manage through one of the most challenging economic environments we've seen in many decades.”

Bruce Wasserstein, the chief executive of Lazard, yesterday added his voice to the mounting gloom as he gave warning that “what we are to see is the world getting much worse”.

In an interview with Fortune magazine that was open to the media, Mr Wasserstein added that “the financial system has a long way to go” before it rebounds.

“We have yet to begin to see writeoffs,” Mr Wasserstein said, referring to losses that he expects lenders to take on credit cards and commercial property.

In addition to the American Express job cuts, which will mostly fall on management and other positions that do not interact directly with credit card holders, the group said that it will freeze management salaries for a year and will not fill open positions. These moves are expected to save American Express about $700 million in 2009.

Much of the rest of the $1.8 billion in cost-cuts will come from the reduction in the use of consulting and other professional services, lowering travel and entertainment budgets and decreasing investment in technology, marketing and business development.

The company will take a restructuring charge of between $370 million and $440 million in the fourth quarter to cover the redundancies.

This month, American Express reported net income of $815 million, or $0.70 a share, for the third quarter. Although this was comfortably ahead of the $0.59-a-share consensus analyst forecast, it was well below the $0.90-a-share from a year earlier.

The group accompanied its third-quarter result with the warning that the level of charge-offs — or loans deemed to be uncollectable — would continue to rise in the next two quarters.

About 5.9 per cent of American Express's loans were deemed uncollectable in the third quarter, compared with 5.3 per cent in the previous three months and 3.9 per cent a year earlier.

There were also job losses in the telecoms sector, where Motorola said that it was looking to cut 3,000 posts, or about 5 per cent of its workforce.

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