American Express Co. reported a surge in spending on its card products during the latest quarter, reaching an all-time high. This increase was primarily driven by consumers’ willingness to pay for travel and entertainment experiences.
Impressive Growth in Network Volumes
In the second quarter, American Express’s network volumes grew by 8% to reach $427 billion. Furthermore, revenue net of interest expense experienced a significant boost, rising from $13.40 billion to $15.05 billion, indicating a 12% increase. However, the revenue fell slightly short of the FactSet consensus, which was $15.41 billion.
Strong Financial Performance
American Express achieved a net income of $2.17 billion, or $2.89 per share, in comparison to $1.96 billion, or $2.57 per share, in the same quarter of the previous year. Analysts surveyed by FactSet had anticipated earnings of $2.81 per share.
Focus on Premium Offerings and Consumer Accounts
During the second quarter, American Express noticed a steady demand for its premium offerings, as 70% of new accounts acquired were fee-based products. Additionally, more than 60% of new consumer accounts went to cardholders from the Millennial and Gen Z generations.
Higher Provisions for Credit Losses
Total provisions for credit losses rose to $1.20 billion compared to $410 million in the same period last year. This increase reflects greater net write-offs and a net-reserve build of $327 million. In comparison, American Express only saw a net reserve build of $58 million in the same period the previous year.
Positive Outlook for the Future
American Express remains optimistic about its future performance. The company expects a revenue growth of 15% to 17% for the full year, along with earnings ranging from $11.00 to $11.40 per share.
In conclusion, American Express has observed exceptional spending levels, driven by consumers’ continued desire for travel and entertainment experiences. The company’s strong financial performance, focus on premium offerings, and upbeat outlook for the future highlight its position in the market.
