American Express (NYSE:AXP) witnessed a significant rise in profit and revenue during the second quarter, with credit card usage on the upswing. However, the company’s stock experienced a slip before the market opening, as it allocated more funds to prepare for potential payment defaults.
In the second quarter, the card issuer reported earnings of $2.17 billion, equivalent to $2.89 per share, surpassing Wall Street expectations of $2.80 per share, as reported by analysts surveyed by Zacks Investment Research. Comparatively, the company had earned $1.96 billion, or $2.57 per share, during the same period the previous year.
American Express reported a total provision of $1.2 billion for credit losses, significantly higher than the $410 million recorded in the same period last year. The increase was attributed to higher net write-offs and a net reserve build of $327 million, compared to a net reserve build of $58 million a year ago.
As a result of these developments, the company’s shares witnessed a nearly 4% decline before the market opened on Friday.
Despite the robust performance, revenue, net of interest expense, stood at $15.05 billion, falling short of Wall Street’s projected $15.42 billion. However, the rise in revenue was primarily driven by higher average loan volumes and increased card member spending.
A noteworthy trend emerged among millennial and Gen Z consumers, who accounted for over 60% of new accounts acquired worldwide. Their spending witnessed an impressive 21% increase in the U.S. from the previous year.
Despite concerns about elevated inflation, consumer spending has remained robust, and the job market continues to show strength. Recent data from the Commerce Department indicated that retail sales rose 0.2% from May to June.
Economists paid particular attention to the data, excluding volatile sectors such as autos, gas, building materials, and food services, which exhibited a solid 0.6% rise in June. This 0.6% figure plays a crucial role in calculating overall economic growth in the U.S., and June’s performance was notably strong.
American Express (NYSE:AXP) upheld its full-year forecast, expecting earnings of $11 to $11.40 per share and revenue growth of 15% to 17%.
Featured Image: Unsplash @ CardMapr.nl
Author Faith Yakubu 
