AmEx’s third-quarter profit tops estimates on robust spending

Oct 20 (Reuters) – Credit card giant American Express (AXP.N) on Friday reported third-quarter profit that beat expectations, helped by resilient spending from its wealthy customers who shrugged off concerns about an economic downturn.

AmEx, which caters to a premium customer base, has largely been able to mitigate the hit from inflation and the Federal Reserve’s rate hikes, which have made borrowing costly and reined in discretionary spending.

“It appears that the firm’s relatively affluent cardholder base is providing it with a level of credit protection not shared by many of its peers,” Morningstar analyst Michael Miller said.

“The sequential resiliency of American Express’s credit metrics is a noticeable contrast to other consumer lenders, who did see continued deterioration during the quarter.”

AmEx’s provisions for credit losses – the sum the company sets aside to account for consumers defaulting on their debt – of $1.23 billion climbed 58% from last year, but were up just 3% from the second quarter.

“It’s a bit of a business-as-usual quarter for us,” CFO Christophe Le Caillec said. “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.”

The resumption of student loan repayments in October has not changed spending patterns so far, the CFO said.

AmEx reported a profit of $3.30 per share, up from $2.47 per share a year earlier. On average, analysts had expected a profit of $2.94 per share, according to LSEG IBES data.

It also said its earnings per share and revenue for the full year would be in line with the prior forecast. The company has previously said it expects to earn $11 to $11.40 per share in 2023.

Revenue, net of interest expense, surged 13%, to $15.38 billion. Consolidated expenses climbed 7%, to $11 billion, driven by higher customer-engagement costs.

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