Earnings

American Express Rides Higher Spending To Q3 Revenue Win

Card member spending, higher-net interest income and card fees combined to produce an 11 percent year-over-year revenue gain for the Global Consumer Services Group of American Express in the third quarter of 2019.

Revenue for that unit hit $6 billion, the company said in its latest financial report, released on Friday (Oct. 18). Provisions for losses, meanwhile, stood at $653 million, an increase of 7 percent from the same period a year ago.

“The increase reflected slightly higher net lending write-offs and delinquencies,” the company said.

American Express beat analyst expectations for overall revenue (net of interest expense), which increased 8.3 percent to $10.99 billion, above the expectation of $10.94 billion. For the fourth quarter of 2019, revenue will increase between 8 percent and 10 percent year over year, the company said.

“The trends we saw in the business this quarter continue to be consistent with an economy that continues to grow, albeit at a more modest pace than last year,” said CEO Steve Squeri. “I’m pleased with the breadth and consistency of our revenue growth, driven by a well-balanced mix of card member spending, loans and membership revenues from our fee-based products, which grew 19 percent and exceeded $1 billion this quarter for the first time.”

Billed business growth was up 14 percent internationally, and 8 percent for the U.S. The charge net write-off rates stood at 1.8 percent in the third quarter, compared to 1.7 percent for the second quarter of 2018 and 1.7 percent for the third quarter of 2018. Net card fees increased 19 percent year over year, and accounted for 9 percent of the total revenue for American Express in the third quarter.

New Amex Offering

As American Express prepared to release its latest financials, news emerged that it was is introducing a suite of new commercial card products, targeted at startups and entrepreneurs in a move aimed at competing with industry newcomers like Brex.

According to reports, American Express plans to roll out the new cards in the coming months, targeting startup owners with an offering that does not require them to offer a personal guarantee or security deposit. Dubbed the Corporate Program for Startups, the new cards will integrate with a range of services to support expense management, while offering startups “dynamic” spending capacity that adjusts based on a company’s bank account, the company said in an announcement.

American Express will have access to the business owner’s bank account data — which, according to American Express President of Global Commercial Services Anna Marrs, will enable the company to provide card products to startups that normally would not have a strong enough financial footing to obtain one.

“It’s a new data source and a new lens on underwriting,” Marrs said. “We acknowledge that for a younger company, with a younger set of founders, the traditional corporate program wasn’t meeting their needs.”

American Express currently stands as the globe’s largest commercial card issuer by spend, reports noted, and is pushing for an even greater position in the B2B payments market. However, competition is on the rise, too, as Visa, Mastercard and other credit card giants similarly expand their B2B payments offerings.

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