American Express topped earnings and revenue expectations Friday, while pointing to an acceleration in spending and “robust” interest in its fee-based cards.
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The company posted second-quarter net income of $2.3 billion, or $2.80 a share, up from $257 million, or 29 cents a share, a year earlier. Analysts tracked by FactSet were expecting $1.63 in earnings per share.
The latest quarter’s results reflect the impact of $866 million in credit release reserves, or $658 million after taxes, which American Express said in a release was mainly driven by its “strong credit performance and continued improvements in the macroeconomic outlook.”
American Express’s revenue net of interest expense was $10.24 billion in the second quarter, up from $7.68 billion a year earlier and ahead of the FactSet consensus, which called for $9.57 billion. The company attributed those results largely to growth in cardholder spending and a rise in the average discount rate due to more travel and entertainment spending relative to a year ago.
The company saw consumer travel and entertainment spending in the U.S. reach 98% of pre-pandemic levels during the months of June with continued growth in July, Chief Executive Stephen Squeri said on the earnings conference call.
American Express saw “record levels” of U.S. Platinum Card member acquisitions in the quarter, said the release, amid what it said was “robust” demand for its premium fee-based cards.
The company “refreshed” the Platinum card on July 1 with new benefits around subscriptions for fitness and digital entertainment, among other perks, and the company is upbeat that the changes can drive further momentum.
“I would note that the last time we refreshed our U.S. Platinum Card, we doubled the customer base, bringing in a larger number of younger card members, and our intent with our current refresh is to attract an even broader pool of customers to the franchise,” Squeri said on the call.
Overall, Amex acquired 2.4 million new proprietary cards in the quarter and saw member retention “at rates above pre-pandemic levels.” Spending accelerated relative to the prior quarter and exceeded pre-pandemic levels in June.
The company expects that in 2022, it will “be within the high end” of the EPS range of $8.85 to $9.25 that it had originally set for 2020 before the pandemic took hold, Chief Financial Officer Jeffrey Campbell said on the earnings call.
“As we express our confidence in our ability to get to our 2022 financial objectives, we’re really not counting on international T&E [travel and entertainment] coming back in any meaningful way next year,” he said. “We are confident it will at some point, and whenever it does, that’ll be a tailwind. But it’s not a key element of our confidence about 2022.”
The company noted in the release that its consolidated provisions for credit losses led to a $606 million benefit in the quarter, mainly reflecting the reserve releases and lower net write-offs. That compares with a provision expense of $1.6 billion from a year prior due to “significant credit reserve builds” at the time.
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