The CFO of American Express said that consumer spending trends remain strong, despite acknowledging “mixed signals” in the economy.
AmEx reported a 21 percent rise in cardmember spending in the previous quarter, as the goods and services and the travel and entertainment categories witnessed growth.
The financial services company posted on Oct. 21 better-than-expected earnings for the third quarter of $1.88 billion in net income, or $2.47 a share.
This is an increase from $1.83 billion for the year-prior quarter, at $2.27 a share.
AmEx gained $13.56 billion in total revenues in net interest revenue for the third quarter, just above the $13.52 billion expected by analysts.
The credit card company took in $10.93 billion in earnings in the third quarter of 2021.
“We are seeing the continuation of the pandemic-driven step-up in digital payments,” Chief Financial Officer Jeff Campbell told MarketWatch.
AMEX’s CEO Reinsures Investors After End of Week Loss
However, AmEx’s CEO Stephen Squeri, reassured investors on Friday, after its stock fell 4 percent in pre-market trading after the third-quarter earnings release.“We’re not seeing any changes in consumer spending,” Squeri told Yahoo Finance. “We have strong credit quality.”
“We expected the recovery in travel spending to be a tailwind for us, but the strength of the rebound has exceeded our expectations throughout the year.”
The CEO addressed some concerns with Yahoo Finance, over a potential slowdown when the long-awaited recession occurs. “If anything changes, we have plans in place to pivot,” said Squeri.
“If I didn’t say that, you would think I was an idiot. What CEO doesn’t have plans in place for recession? You know, I mean, everybody has, but I had plans in place in 2019. And I was able to pull it off the shelf to navigate the pandemic and that worked out pretty good for us.”
He reiterated the credit card firm’s full-year sales forecast for 23 to 25 percent growth.
“So my view is I think we’re going to have strong retail spending, and we'll have strong travel spending through the holiday season,” he said.
CFO Expects Gains Into Fourth Quarter
Meanwhile, Campbell said that AmEx’s third-quarter spending was 30 percent higher than 2019 levels.This comes after second-quarter spending was up 28 percent, which he says indicates a “sequential strengthening.”
The CFO explained to Marketwatch that this holds true regarding July through September.
“The demand for travel has exceeded our expectations throughout the year,” said Squeri said in an earnings release.
He said that overall spending on travel and entertainment was 57 percent higher than last year’s levels, after adjusting for foreign exchange impacts.
Campbell also said that travel and entertainment spending rose above pre-pandemic levels for the first time during the same quarter.
“I’d say with each quarter our confidence grows in our longer term multiyear growth aspirations,” said Campbell.
AmEx reported 3.3 million new card accounts, along with a record boost in American-based consumer Platinum and Gold card accounts as well as business Platinum cards.
The CFO told Marketwatch that larger companies, which have accounts largely geared towards travel, are “not fully back to pre-pandemic levels,” but that the “steady recovery for businesses getting back on the road is still going.”
However, smaller firms, which make up the majority of the credit card company’s commercial accounts, are currently witnessing healthy trends in contrast.
AmEx disclosed $778 million in consolidated provisions for credit losses in the last period, with a year-to-period gain of $191 million.
The creditor explained that the losses reflected a $387 million reserve build.
This was largely driven by growth in customer loans and changes in economic forecasts, in contrast to its previous $393 million reserve release in 2021, while facing an increase in write-offs in the third quarter.
Campbell noted that an excess in liquidity during the pandemic, due to Federal COVID relief, led AmEx to later expect moderate incremental increases in delinquencies and write-offs.
He repeated to Marketwatch that he still does not “see any particular signs of stress driven by the economic environment.”
