American Express Update
Sign up for myFT Daily Digest and be the first to learn about American Express’s news.
Backed by a rebound in consumer spending, American Express’s revenue soared in the second quarter, ending five consecutive quarters of declines for credit card issuers.
According to consensus data compiled by Bloomberg, revenue increased by 33% from US$7.7 billion a year ago to US$10.2 billion, higher than the US$9.6 billion predicted by analysts.
This increase underscores the recent recovery in consumer spending, after the number of customers paying off debts and closing accounts exceeded the number of new registrations in the previous months.
Stephen Squeri, Chairman and Chief Executive Officer of American Express, said: “We have seen card member spending accelerate from the previous quarter and surpassed pre-pandemic levels in June, with the largest spending Growth comes from millennials, Gen Z, and small business customers.”.
Prior to the launch of the American Consumer Platinum Card, American Express’s marketing expenses increased by 63% this quarter. The company said the card provides a better lifestyle and travel benefits.
Discover Financial Services, which announced earnings earlier this week, said marketing activities increased by 36%, resulting in a 26% increase in new accounts in the most recent quarter from 2019 levels. The average credit card loan still fell by 7%.
The top US banks, including JPMorgan Chase, Citigroup, and Bank of America, have launched new credit cards in recent months, offering enhanced incentives, such as enhanced cash-back products, to drive growth. But analysts expect that these promotions will soon be controlled.
“I do think that some of the reward products there will not be sustainable in the long term,” warns Discover CEO Roger Hochschild.
Overall, American Express reported a net income of US$2.3 billion in the second quarter, up from US$25.7 billion a year ago. This is due to the release of potential non-performing loan reserves of US$866 million.
American Express shares rose 3.3% in premarket trading.