American Express beats earnings expectations as card spending accelerates

American Express topped earnings and revenue expectations Friday morning, while pointing to an acceleration in spending and “robust” interest in its fee-based cards.

The company posted second-quarter net income of $2.3 billion, or $2.80 a share, up from $257 million, or 29 cents a share, a year earlier. Analysts tracked by FactSet were expecting $1.63 in earnings per share.

The latest quarter’s results reflect the impact of $866 million in credit release reserves, or $658 million after taxes, which American Express
said in a release was mainly driven by its “strong credit performance and continued improvements in the macroeconomic outlook.”

American Express’s revenue net of interest expense was $10.24 billion in the second quarter, up from $7.68 billion a year earlier and ahead of the FactSet consensus, which called for $9.57 billion. The company attributed those results largely to growth in cardholder spending and a rise in the average discount rate due to more travel and entertainment spending relative to a year ago.

“Our strong second quarter results show that the steps we have taken to manage the company through the pandemic and our strategy of investing to rebuild our growth momentum are paying off,” Chief Executive Stephen Squeri said in a release.

American Express saw “record levels” of U.S. Platinum Card member acquisitions in the quarter, the release continued, amid what it said was “robust” demand for its premium fee-based cards.

Amex acquired 2.4 million new proprietary cards in the quarter and saw member retention “at rates above pre-pandemic levels.” Spending accelerated relative to the prior quarter and exceeded pre-pandemic levels in June, per the release.

The company noted that its consolidated provisions for credit losses led to a $606 million benefit in the quarter, mainly reflecting the reserve releases and lower net write-offs. That compares with a provision expense of $1.6 billion from a year prior due to “significant credit reserve builds” at the time.

Shares have gained 18.4% over the past three months as the Dow Jones Industrial Average
has risen 2.3%.

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