Amex Q123 earnings miss analyst forecasts and net income is down by 14% y-o-y. Specifically, analysts under-estimated the extent of Amex allowance for provisions.
Consolidated provisions for credit losses were $1.1bn billion. This reflects higher net write-offs and a net reserve build of $320m. Consolidated provisions for credit losses in the prior year significantly benefited from the release of pandemic-driven reserves. But Amex says metrics remain strong in the current quarter.
Amex Q123 expenses up 22% y-o-y
Consolidated expenses were $11.1bn, up 22% percent from $9.1bn a year ago. The increase primarily reflects higher customer engagement costs. This is driven by higher network volumes and increased usage of travel-related benefits. Operating expenses also increased. This primarily reflects higher compensation costs and a loss on Amex Ventures investments of $95m.
Amex US Consumer Services unit reported first-quarter pre-tax income of $1.1bn, compared with $1.5bn a year ago.
Amex International Card Services reported first-quarter pre-tax income of $189m million, compared with pre-tax income of $244m a year ago. Results for this segment were impacted by the strengthening of the US dollar.
Otherwise, the Amex first quarter fundamentals are all generally positive.
First-quarter consolidated total revenues net of interest expense of $14.3bn is up 22% from $11.7bn a year ago. The increase was primarily driven by increased card member spending. Higher net interest income, reflecting higher average loan volumes, also boosts the numbers.
“Our first-quarter results reflect strong growth in card member spending and continued high engagement with our premium products. Earnings are tracking with the full-year 2023 guidance we provided in January, which we are reaffirming today. That is for revenue growth of 15% to 17% and earnings per share of $11.00 to $11.40,” said Stephen Squeri, Chair and CEO.
Amex Q123 highlights
- Revenue rises by 22% from a year earlier to reach a quarterly record;
- card member spending rose 16% on an FX-adjusted basis.
- travel and entertainment spending was particularly robust, growing 39% on an FX-adjusted basis;
- in March, Amex saw a record level of reservations booked on its Resy restaurant platform.
- an acceleration in spending in its international card services segment, up 29% on an FX-adjusted basis.
- spending on goods and services around the globe grew 9% on an FX-adjusted basis.
Customer wins within key millennial and Gen Z consumer segment
Amex acquired 3.4 million new cards during the quarter. US Consumer Platinum and Gold, US Business Platinum, and Delta co-brand account acquisitions all reached record levels. Demand from Millennial and Gen Z consumers continues to fuel this growth. This accounts for more than 60% of all new consumer account acquisitions in the quarter. Millennial and Gen Z customers also continued to be Amex’s fastest growing US cohort in terms of spending, growing 28% from a year earlier.
Squeri added: “Our customers have been resilient thus far in the face of slower macroeconomic growth, elevated inflation and higher interest rates, with credit performance remaining best-in-class. That said, we’re mindful of the mixed signals in the external environment.
“Based on our performance to date and the momentum we see in our business, we remain confident in our ability to achieve our longer-term growth plan aspirations.”