What do the latest numbers from American Express tell us about the state of the credit card carrying consumer? In the U.S., certainly, the spending engines are purring nicely, and elsewhere, cards are being brandished as well.
The payments giant posted better earnings than The Street expected, with $1.45 on the bottom line, better than the $1.33 The Street had expected (though down 6.5 percent year over year). The full-year forecast was at $5.70 at the top end, which may have helped boost shares up 4 percent after-market, as investors looked for any lingering impact of the loss of the Costco partnership.
Key among the results: The firm issued 3.1 million new credit cards. Beyond the U.S., said CEO Ken Chenault, the firm is feeling “pretty good about volume in Europe and the U.K. in particular.”
The revenue growth that, even adjusted for FX and for the impact of the Costco relationship, remained positive (and, in many segments, accelerated) showed the impact of the card issuance, which helped bring the top line company-wide to $8.1 billion, up 2 percent. Total cards in force were up 6 percent, and spend on those cards at billed businesses grew by 4 percent year over year and 2 percent globally.
The underlying loan portfolio was up 11 percent (excluding the JetBlue and Costco portfolios), and management pointed to credit metrics as showing the resilience of the core Amex customer base. It was the loan portfolio that drove net interest income up 9 percent in the March quarter measured year over year.
Profit gleaned from the U.S. card segment was up 5 percent, even while international services saw a 5 percent decline, a trend caused by the strong U.S. dollar.
As has been the case with the Costco relationship, the end of that link has haunted Amex like a co-branded specter. Amex cards are, of course, the singular cards that are accepted at the Costco warehouse clubs, and the impact is likely to be fully felt after June, when the split finally happens. Thus, the cautious guidance and wide bottom line range that marks current year projections. As the firm’s chief financial officer, Jeffrey Campbell, noted during the analyst conference call, the “real battle for the hearts and minds of our consumers” remains “in the early stages.”
If some of the company’s challenges are all its own, such as the end of the Costco relationship, the metrics are enough of a read for the consumer at large, with some implications for other companies and other industries. The billed business worldwide has grown since being dead flat just two quarters ago. The net card fees also grew year over year by mid-single digits. And, even in Latin America, growth in the billed business was positive after longstanding negative (and then, at best) trends.
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