AmEx’s fourth-quarter profits jump 23% as cardmembers carry larger balances

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NEW YORK (AP) — American Express’s fourth-quarter profit jumped 23% from a year ago as more cardmembers kept a checking balance in their accounts than in previous years, meaning more interest income for the credit card issuer.

But the spike in balances on hold — up 17% from last year — combined with a rise in delinquencies and credit losses, could raise questions about the financial health of AmEx card members who are typically more financially stable and more likely to pay off balances by the end of each year. Month.

The New York company achieved profits of $1.93 billion, or $2.62 per share. This is higher than a profit of $1.57 billion, or $2.07 per share, in the same period a year earlier. That’s below analysts’ earnings per share expectations of $2.64, according to FactSet.

However, AmEx gave a strong full-year forecast for 2024 and boosted its quarterly earnings, which helped lift the stock at midday Friday.

There was a relatively modest increase in cardmember spending in the quarter, up 5% to $434.4 billion. The credit card company historically generates the bulk of its revenue from the fees it collects from merchants that accept American Express cards as payment. Spending on card accounts has slowed as well, with an average cardholder spending about 2% more on their card compared to last year.

Earnings in the quarter were driven in part by interest-bearing accounts — card members who don’t pay off their balances in full. AmEx has moved away from a charge card business model before the COVID-19 pandemic to one that encourages customers to maintain balance. This push has been largely successful, meaning AmEx is collecting interest from accounts that historically have not done so.

AmEx had $126 billion in cardmember loans at the end of 2023, up 17% from last year. This led to AmEx generating interest income of $4.91 billion in the fourth quarter, up from $3.62 billion a year earlier.

But pressure to allow cardmembers to maintain a balance has led to a growing number of delinquent credit card accounts. The company wrote off 2.2% of credit card balances last quarter, up significantly from 1.3% a year earlier. The number of accounts that are 30 days past due has also increased.

AmEx expects revenue this year to rise between 9% and 11%, and believes earnings per share will range between $12.65 and $13.15 per share.

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