By KEN SWEET
AP Business Writer
NEW YORK (AP) — American Express’ profits fell 14% in the second quarter, the company said Friday, as higher expenses more than offset record spending on its network by its cardmembers.
AmEx had profit of $1.96 billion, or $2.57 a share, down from $2.28 billion, or $2.80 a share, in the same period a year earlier. That topped the $2.42 that Wall Street was looking for, according to FactSet.
The New York company saw a massive surge of spending on its proprietary cards in the quarter, up 30% from a year ago, a surge that the company attributed to higher travel and entertainment spending. Spending on AmEx’s corporate cards also increased, a notable trend since companies had still be reluctant to pay for employee travel in an age of remote work and post-pandemic travel behavior.
But the jump in card spending was negatively impacted by two different factors. AmEx set aside $410 million in the quarter to cover potentially bad loans, compared to the $606 million the company released from its loan-loss reserves in the same period a year earlier. Typically banks and credit card companies put more money into their loan-loss reserves when they expect more loans to go bad in the future, however AmEx said in a statement that its credit quality “remained near historic lows.”
The company also saw a big uptick in expenses, mostly due to cardmembers redeeming points for travel-related benefits. There have been reports this summer of consumers cashing in their points — accumulated during the pandemic — to cope with high airfare and hotel costs this summer, and AmEx’s results seem to confirm those reports.
Despite the higher expenses, AmEx raised its full-year revenue forecasts and said it is maintaining its full-year profit forecast of $9.25 to $9.65 a share.