As the Associated Press reports, second-quarter results are in for many issuers, and life is grand at American Express.
- According to a survey by Zacks Investment Research, revenue, net of interest expense, jumped to $10.24 billion from $7.68 billion last year, stronger than the $9.47 billion that Wall Street was looking for.
- Shares of American Express Co. climbed 3.4% at the opening bell.
- “We saw cardmember spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers,” Chairman and CEO Stephen Squeri said in a prepared statement.
The release of loan loss reserves from Current Expected Credit Loss (CECL) helped push the revenue projection increase.
- The current quarter included $866 million in credit reserve releases.
Investor reports at American Express indicate a 33% increase YoY in Total Revenues Net of Interest Expenses, with Billed Business on par to 2019, which is a win for the network/issuer. U.S. Billed Business recovered ahead of International business, which remains about 20% behind the Q120 mark. Additionally, U.S. consumer T&E recovered more than International Consumer and Large and Global Corporate.
American Express loan write-off rates continued an excellent trend with only 1.0% entering charge-off, 1500 basis points better than Q120. Credit card net write-offs were a mere 0.3%.
New cards booked at American Express were 2.4 million, slightly lower than the Q120 peak of 2.5 million, but steady improvement for the four proceeding quarters. In line with the increase was a $1.3 billion investment in marketing for Q220.
Growth in vertical spending is always interesting at American Express. Airlines remain 63% lower than the 2019 baseline, but restaurants are only 10% off, as you can probably validate from personal experience. Lodging is down 50%.
Cardmember receivables now include 15% from International Consumer, 27% from U.S. consumers, 25% from corporate cards, and 33% from Small Businesses.
Amex exits COVID on two feet, with strong operational performance, reduced risk, and confident enough to reduce its loan provisions. The firm’s performance is on par with many other strong reportings, and for credit cards, it appears that “happy days are here again.”
Overview provided by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group