By AnnaMaria Andriotis and Maria Armental
American Express Co. reported a 31% increase in first quarter earnings, driven by an increase in cardholder spending and borrowing.
The company reported earnings of $ 1.63 billion at $ 1.86 per share. Net sales after interest expenses increased 12% to $ 9.72 billion. Analysts polled by FactSet had predicted a profit of $ 1.71 per share on sales of $ 9.13 billion.
The dollar amount of purchase transactions on AmEx cards increased 10 percent year-on-year for the company since the third quarter of 2014.
The acceleration seems to be largely due to improved consumer sentiment. "There is obviously something with increased confidence and increased spending," especially with wealthier customers, said Jeffrey Campbell, chief financial officer of AmEx, at the company's earnings statement on Wednesday.
The company increased its sales growth guidance to at least 8%. for 201
AmEx focuses on rebuilding the capital, which was strained by the tax reform in the US. In the fourth quarter of 2017, a charge of approximately $ 2.6 billion resulted in a quarterly loss in a quarter century, and AmEx discontinued share buybacks for the first half of the year. Quarterly dividends remain unchanged. Mr. Campbell said Wednesday that the company was "confident that [it] will resume stock repurchases in the second half of the year."
Equities that outperformed the market by 26% over the past 12 months. Gain, up 3.5% to $ 98.45 in after-hours trading.
AmEx changed CEOs in February after longtime Chief Kenneth Chenault retired and handed over the reins to AmEx veteran Stephen Squeri. The company continues to pursue two of the larger strategies that have been put into action under Mr. Chenault: Increase revenue by increasing lending to customers and reducing the fees retailers charge when customers use their cards for purchases.
On the dealer side, AmEx "discounted" revenue from swipe fees by 9% over a year ago $ 5.9 billion, even though the average swipe-fee rate fell 0.06 percentage point from a year ago before 2.37%. This is part of a wider effort by the company to gain greater acceptance among traders and fill the gap that currently exists with Visa and Mastercard.
The company continues to push for lending in the US and abroad. Focus is on wealthy consumers who pay their monthly bills in full. Global member loans totaled $ 72.8 billion, an increase of 14% over the previous year and a slight decline from the previous quarter. Loan lending in the US increased 13% from a year ago to $ 63.9 billion. This exceeded the rate at which credit card debt is rising nationwide. In February, the United States' total credit card debt rose 5.5% yoy, according to the latest data from the Federal Reserve.
Credit losses and the amount the company raised to cover future losses increased. The global credit-to-net write-off rate – including capital, interest and fees – increased from 2.2% in the previous quarter to 2.4% and to 2.0% in the previous year. Total provisioning was up 35% from a year earlier at $ 775 million. AmEx chief Mr. Squeri said in a corporate statement that "credit indicators meet our expectations."
Expenditure increased 9% year-over-year, despite being 3% lower than in the previous quarter. AmEx expenses paid out as cardholder premiums, including points redeemed for hotels and airline tickets, reached $ 2.35 billion, the largest single issue and 3.8% more than in the fourth quarter of 2017.
An increase in lending should be a good sign for AmEx and other card issuers in an environment at an increasing rate. Mr. Campbell, who discusses the company's floating rate debt, said on the payout that the company recently saw a compression in the spread between its refinancing rates and the benchmark rate, which weighed more on net interest income than we had originally expected.
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