AmEx profits fall as higher spending offset by loan losses

By AP News


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American Express said its first-quarter profits fell by 13% from a year ago, despite record revenue in the quarter, as the credit card company had to set aside more than $1 billion for potentially bad loans

Earns American Express

NEW YORK (AP) — American Express said its first-quarter profits fell by 13% from a year ago despite record quarterly revenue as the credit card company had to set aside more than $1 billion for potentially bad loans.

The noticeable increase in loan loss reserves reflect the uncertain direction of where the economy is heading for many of the banks. AmEx's biggest credit card competitors also set aside money to cover potentially bad loans and have talked about how consumers are now carrying higher balances and aren't paying off their cards.

The credit card giant earned a profit of $1.82 billion, or $2.40 a share. That's down from $2.1 billion, or $2.73 a share, a year earlier. The results missed analysts' forecasts of around $2.60 a share, according to FactSet.

If AmEx hadn't set aside money for loan losses, this would have been a blockbuster quarter for the company. The New York firm grew revenues by 22% from a year ago, and total network volumes — the amount of money spent on American Express' proprietary network — was up 14%. The company also added 3.4 million new accounts in the quarter.

The company saw a 39% increase on travel and entertainment spend by its card members, which is often AmEx's most lucrative place for its customers to spend their money.

But with high inflation and economic signals that show a strong job market but low economic growth, the company put more money into its rainy fund, which it has done for the past several quarters. Roughly 1.2% of AmEx accounts were more than 30 days past due, up from 0.8% of accounts a year earlier. AmEx executives have repeatedly said they don't have worries about consumer health, and that increases in credit losses are just their balance sheet normalizing after all the stimulus from the pandemic.

“Our customers have been resilient thus far in the face of slower macroeconomic growth, elevated inflation and higher interest rates, with credit performance remaining best-in-class," said Steve Squeri, the company’s chairman and CEO, in a statement. "That said, we’re mindful of the mixed signals in the external environment.”

AmEx said it did not see any behavioral changes of its customers after the failure of Silicon Valley Bank and Signature Bank last monnth. However the bank did see a double-digit increase in deposits into products like its high yield online savings account, likely a reflection of customers looking for yield to store savings as well as AmEx being seen as a relatively safe place to store money since it's considered one of the “too big to fail” financial institutions.

Total revenue at AmEx rose to $14.28 billion from $11.74 billion in the same period a year earlier.

Shares of the company slipped about 1.3% in premarket trading.


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American Express Company

Author: AP News

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Originally published by Associated Press, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

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