Credit card giant American Express (NYSE:AXP) announced its third-quarter profit on Friday, surpassing expectations thanks to steady spending from its affluent customer base, who appear unfazed by concerns of an economic downturn. AmEx, known for catering to a premium clientele, has successfully navigated the challenges posed by inflation and the Federal Reserve’s interest rate hikes, which have driven up borrowing costs and curtailed discretionary spending.
In a cautious move, AmEx increased its provisions for credit losses to $1.23 billion, marking a 58% rise from the previous year. This adjustment acknowledges the growing likelihood of consumers defaulting on their debt. However, the company noted that net write-off and delinquency rates remained below pre-pandemic levels.
CFO Christophe Le Caillec remarked, “It’s a bit of a business-as-usual quarter for us. We see a lot of demand for our products and services coming from Gen Zs and Millennials. They are also signing up for premium products.” Notably, the resumption of student loan repayments in October has not significantly altered spending patterns, according to the CFO.
AmEx reported a profit of $3.30 per share, a substantial increase from the $2.47 per share reported the previous year. Analysts had, on average, anticipated a profit of $2.94 per share, according to LSEG IBES data. The company also affirmed that its earnings per share and revenue for the full year are on track with prior forecasts, reiterating expectations of earning between $11 and $11.40 per share in 2023.
CEO Stephen Squeri added, “Travel and Entertainment (T&E) spending remained robust… Restaurant spending was again one of our fastest-growing T&E categories.” The company’s revenue, net of interest expenses, surged by 13% to reach $15.38 billion. Consolidated expenses also increased, climbing by 7% to $11 billion, primarily due to rising customer engagement costs.
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