American Express managed to put up a surprising profit in the second quarter, but saw revenue sharply drop as consumer spending collapsed as the COVID-19 pandemic slammed America, figures released Friday (July 24) showed.
“While our second quarter results reflect the challenges of the current environment, we remain confident that our strategy for navigating this period of uncertainty is the right one,” CEO Stephen Squeri said in the firm’s earnings release. “Our customers continue to be engaged with our products and services; we have a productive and dedicated workforce; our capital and liquidity levels remain strong; and we continue to focus on those areas most critical to our long-term growth.
Amex reported large drops across all of its operations. For example, its Global Consumer Services Group saw net income fall to $527 million from $881 million a year ago.
The company’s Global Commercial Services unit likewise recorded a $60 million quarterly loss vs. a $561 million gain a year ago. And Amex’s Global Merchant and Network Services business saw net income fall to $66 million from $564 million in the same period last year. Lastly, its Corporate and Other division lost $276 million, up from $245 million in red ink during second-quarter 2019.
All told, Amex’s second-quarter earnings came in 29 cents a share, an 86 percent decline from a year ago, but ahead of analyst estimates that forecast Amex losing 11 cents per share during the quarter. However, quarterly revenues fell some 30 percent year on year to $7.7 billion, well below analysts’ roughly $8.2 billion estimate.
Squeri said spending volumes endured their biggest drop in April, but gradually showed signs of recovery in May and June — particularly in its small and medium-sized business (SMB) sector. He also touted Amex’s recently launched “Shop Small” campaign, noting that the firm has committed to spend more than $200 million over the next three months to help jumpstart spending at small merchants worldwide.
As for the future, American Express joined other financial firms in being light on specific predictions given the uncertain global environment. However, the firm did set aside an additional $628 million to cover what it expected to be a wave of defaults in the months ahead, taking its overall loss provisions to around $1.6 billion.
“All in all, while we can’t predict the future, I remain confident that the way we are managing the company will enable us to emerge from the current crisis in a position of strength,” Squeri said. “Looking ahead, we will continue to focus on what we can control – backing our customers, colleagues and communities while managing our expenses prudently and making strategic investments to drive our growth over the long term.”