Dive Brief:
- American Express bolstered its credit loss provisions to $778 million in the third quarter in light of the uncertain economic climate, even though the card company’s executives aren’t observing changes in consumer spending behaviors at this point, they said Friday in an earnings conference call with analysts.
- The company has “been taking thoughtful risk management actions to be prepared in the event of a downturn,” said CEO Steve Squeri during the webcast of Friday’s call to discuss third quarter results. If consumer spending changes, “we will be prepared to pivot,” Squeri said, noting he remained bullish on the strength of cardholder spending currently and over the next three months.
- Amex’s third-quarter revenue, taking into account interest expense, jumped 24% to $13.6 billion, the company said in a Friday news release. Net income increased just 3% year-over-year, to $1.9 billion. Expenses climbed 19% to $10.3 billion for the quarter.
Dive Insight:
New York-based Amex has been bullish on its cardholders’ health and spending trends despite macroeconomic headwinds, but the company has seen consumer delinquencies on their payments that are due tick up in recent months.
Among its cardholders, delinquencies went from .7% in July, to .8% in August, to .9% in September, according to a Monday filing with the Securities and Exchange Commission. Write-offs have remained the same, at .8%.
Comparatively, delinquencies were .6% in July and August 2021 and .7% in September 2021. However, recent figures are still below 2019 levels: Delinquencies during that same three-month period that year were 1.5%.
COVID-19 pandemic-era government aid and low unemployment caused credit card delinquencies and write-offs to decline. Now, as inflation and interest rates climb, and unemployment is forecast to rise, analysts expect credit losses to grow.
Amex CFO Jeff Campbell said in September that he didn’t expect higher, pre-pandemic levels for consumer credit delinquencies and write-offs to return any time soon, partly because Amex has a more premium product mix today than it did pre-COVID.
On Friday, Campbell again said those metrics are expected to rise slowly over time, but for now they remain below pre-pandemic levels. Economists are predicting modest upticks in unemployment, and those are “contemplated in the guidance” the company has given, he noted.
