American Express Company announced yesterday it plans to spin off American Express Financial Advisers – a personal finance unit with 12,000 advisers and 2.5 million customers – claiming the move will give the resulting businesses more opportunity for growth.

The announcement sent American Express’s shares soaring 6.32% or $3.40 to close at $56.75 in New York Stock Exchange trading.

Also yesterday, Google, the most popular Internet search engine, said its fourth-quarter profits in 2004 increased seven-fold to a record $204.1 million. It attributed the increase to more ads. Sales in the same period doubled from $512.2 million to $1.03 billion, also a record.

The AmEx spin off will allow the personal finance unit to pursue products, partnerships, and expansion without having to compete for capital with the credit card business and other units for capital, according to American Express.

The financial adviser unit has been generating about an 11% return on equity, whereas the rest of the company has been generating about 28%, said an analyst with St. Louis-based A.G. Edwards, Matthew Park. “From that perspective, it [personal finance] has been a bit of a drag [on the rest of American Express],” he said.

American Express on January 24 reported a profit for 2004 of $3.4 billion on $29 billion in revenue and $16 billion in equity.

Without the Minneapolis-based personal finance unit, American Express would have profited about $2.7 billion on revenue of about $22 billion and equity of about $9.6 billion, said the chief executive, Kenneth Chenault, on a conference call yesterday.

The personal finance unit, or AEFA, reported a 2004 profit of $700 million on revenue of $7 billion and equity of $6.4 billion.

“The financial scenario leaves two entities with substantial equity and earnings,” Mr. Chenault said.

As a result of the spin-off, American Express will be able to increase its return-on-equity goal to 28% to 30% from 18% to 20%, he said adding that American Express also said it will keep its current dividend of 48 cents a share.

The company’s main businesses after the spin-off will be credit cards, payment processing, travel booking and travelers checks, and an international bank that serves financial institutions and wealthy clients.

Mr. Park estimated that the remaining American Express will also grow about 15% annually. “For people looking for large-cap growth financial names, American Express has gotten a little more attractive,” he said.

Also, the spin-off will allow the personal finance unit to pursue acquisitions it wouldn’t be able to consider under American Express, according to Mr. Park.

“If an opportunity comes along to buy something that’s going to generate 15%, American Express is not going to be interested in that, but [AEFA] as a company may be,” said Mr. Park. “It will result in more growth opportunities for both companies.”

The move is expected to take place in the third quarter, at which time all of the shares of AEFA will be distributed to American Express shareholders. The number of shares American Express’s investors hold at the time of the spin-off will stay the same, and the number of AEFA shares they get is yet to be determined, the company said.

The company said it expects to incur “significant” expenses as a result of the spin-off and will record them as they occur on a quarterly basis.

American Express also said it will infuse the personal finance unit with an undisclosed amount of capital in order for it to obtain necessary liquidity and an A-level credit rating so it has easy access to capital markets The personal finance unit owns or manages more than $410 billion in assets, and more than $145 billion in life insurance. The unit will keep the American Express name as it searches for a new one to be used after the spin-off, the company said.

“AEFA is built on a solid foundation that goes back 110 years,” said the unit’s chief executive, James Cracchiolo. “We will develop a new name for AEFA that builds upon that heritage, which we will begin to use after the spin-off.” Mr. Cracchiolo will remain chief executive of the spun-off company.

American Express has a market capitalization of about $67 billion. Financial terms of the spin-off have not been determined.