American Express Co. saw volumes on its cards slow faster than expected in the third quarter as small business and corporations alike pulled back on their spending on the firm’s cards.
(Bloomberg) — American Express Co. saw volumes on its cards slow faster than expected in the third quarter as small business and corporations alike pulled back on their spending on the firm’s cards.
Total network volume jumped 7% to $420.2 billion, the lowest level of growth in ten quarters, according to data compiled by Bloomberg. That missed estimates as spending by commercial services customers climbed just 1% in the period.
“We’re still very positive on small-business, albeit the last two quarters were relatively slow,” Chief Executive Officer Steve Squeri told analysts on a conference call.
Amex shares dropped 3.8% to $143.87 at 10:44 a.m. in New York. The company’s stock has declined 2.8% so far this year, compared with the 0.24% advance of the Dow Jones Industrial Average.
For much of the last few years, Amex’s total network volume has benefited from a resurgence in travel following the pandemic. Now, though, growth in overall spending on the firm’s cards is slowing from those post-pandemic highs.
Consumer Growth
Spending by US consumers continued to be strong in the third quarter, rising 9% to $154 billion compared with the same period a year ago.
“Spending was strongest in our US consumer segment,” Squeri said. “Millennial and Gen Z consumers continue to be the fastest-growing portion of our cardmember base.”
Despite the slowdown in volume growth, Amex said revenue and profit soared to record levels in the third quarter as the company continued to attract new cardholders willing to pay an annual fee for its premium products.
Amex reported $15.4 billion in revenue, topping analyst estimates and surpassing the $13.6 billion it generated in the same period a year prior. That was aided by a 20% increase in net card fees, with Amex saying fee-based cards accounted for more than 70% of all new accounts it added in the quarter.
“We continue to innovate our value propositions to deepen engagement with our premium cardmembers and to attract new ones,” Chief Financial Officer Christophe Le Caillec said during the conference call.
Read more: Amex Hooked Big Spenders, Regained Throne With Pricier Platinum
For years, Amex has been investing in its Platinum card, which comes with a $695 annual fee. During the quarter, the company announced it will add more perks to its Business Gold Card and raise the annual fee to $375 from $295.
Net income for the quarter rose 30% to $2.45 billion, or a record $3.30 a share. That was higher than the $2.95 average of analyst estimates compiled by Bloomberg.
Amex also joined its credit-card rivals in setting aside more money to cover souring loans, with provisions jumping 58% to $1.23 billion in the third quarter. That beat the $1.18 billion average of analyst estimates compiled by Bloomberg.
The company reiterated its guidance for full year revenue growth to rise as much as 17%, while earnings per share should fall within $11 to $11.40. Longer term, it continues to expect revenue growth in excess of 10%, while profits should rise by a percentage in the mid-teens, Amex said.
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