Earnings results from American Express results Friday (Jan. 27th) show credit continues to be a preferred payment method among younger consumers.
At a high level, billed business, which is a measure of card spending that includes transactions and cash volumes, was up 15% to $357 billion in the aggregate.
As for the travel snapback — where spending has ramped up as economies have reopened — the company noted that travel and entertainment spend was 112% of fourth-quarter 2019 levels.
The supplemental filings from the company showed that U.S. consumers spent 15% more than last year, and corporate spending continued to rebound as well, as U.S. large and global companies spent 26% more than last year.
Total spending on goods and services, at $108 billion, was higher than the 2019 pre-pandemic level of $106 billion in the fourth quarter of that year. So was travel, at a recent $41 billion versus $30 billion in 2019’s corresponding period.
Management noted on the call (and data from the filings showed) that millennials’ and Generation Z consumers’ spending was up 30%, outpaced a bit by Generation X spending, which surged 37%.
Card member credit metrics showed that loans past due and write-off rates increased but are still below pre-pandemic rates. The write-off rates stood at 1.1% in the latest quarter, and were 2.3% pre-pandemic. Card member loans at least 30 days past due stood at 1%, where they had been 1.5% before the pandemic.
During a conference call with analysts, CEO Stephen Squeri said, “we acquired 3 million new card members in the fourth quarter, even as we increased our already high credit thresholds through the year for the full year.”
And with a nod to younger consumers, the CEO said: “Millennial and Gen Z customers continue to be the largest drivers of our growth, representing over 60% of proprietary consumer card acquisitions in the quarter.”
Squeri said later during the call that “the reality is the lifetime value of these cardholders is going to be significantly more than the lifetime value of acquiring a baby boomer or acquiring aa Gen Xer right now… that’s very attractive.”
Chief Financial Officer Jeff Campbell said that smaller firms have started to slow their spending in service categories, such as digital advertising. Smaller firms are still recovering in terms of their overall spending, but they remain the sole segment where that spend has not come back to pre-pandemic levels (and, in fact, spending is 11% below pre-pandemic levels).
Campbell said, with focus on credit metrics, that “we expect delinquency and write-off rates to continue to move up over time, but to remain below pre-pandemic levels in 2023.”
During the question-and-answer session with analysts, management noted that the macro pressures that are facing other companies are not necessarily impacting results, certainly not in terms of card spending.
Separately, and in a post-earnings-release interview with Yahoo Finance, Squeri noted that “we aren’t seeing any recessionary signals.”
As for American Express’ position within the economy at large, Squeri said during the Friday earnings call: “You have to look at … this is a premium card member base that appreciates premium product and is spending. It’s a market that is a small piece of the overall U.S. economy.”