American Express Company (NYSE:AXP) has reported record first-quarter revenue but earnings that fell short of analysts’ forecasts after it raised provisions for credit losses.
The credit card company grew revenues net of interest expense by 22% to $14.3 billion for the three months to March 31, 2023. It attributed the gains to a 16% increase in card member spending on a currency-adjusted basis, with a 39% jump in travel and entertainment spending. It also benefitted from higher net interest income, reflecting higher average loan volumes.
However, net income declined 13% to $1.82 billion after it increased provision for credit losses to $1.06 billion, which the company said reflected higher net write-offs and a net reserve build of $320 million.
Diluted earnings per fell 12% to $2.40, below the $2.66 expected by Wall Street.
“Our customers have been resilient thus far in the face of slower macroeconomic growth, elevated inflation and higher interest rates, with credit performance remaining best-in-class,” chairman and CEO Stephen Squeri said in a statement. “That said, we’re mindful of the mixed signals in the external environment.”
Millennials and Gen Z
During the quarter, American Express said it acquired 3.4 million new cards, with US Consumer Platinum and Gold, US Business Platinum, and Delta co-brand account acquisitions all reaching record levels.
It noted that the growth continues to be fuelled by demand from Millennial and Gen Z consumers, who accounted for more than 60% of all new consumer account acquisitions in the quarter.
“Based on our performance to date and the momentum we see in our business, we remain confident in our ability to achieve our longer-term growth plan aspirations,” Squeri added.
The company’s shares were 2.2% down at $164.95 in pre-market trade.
Contact the author at stephen.gunnion@proactiveinvestors.com