American Express reported results Friday (April 24) that showed a marked decline in card spending in the last few weeks of the first quarter tied to a worsening economic environment in the wake of the global COVID-19 pandemic, and built reserves for its credit losses.
In terms of loss provisions, the card giant boosted those provisions by $1.7 billion from $809 million last year to an end of period.
In terms of headline numbers, Amex said adjusted earnings per share came in at $1.98, better than consensus of $1.67 and up from $1.80 a year ago.
Total revenues, net of interest expense, were $10.3 billion, off 1 percent from a year ago, and lower than the $10.7 billion that analysts had expected.
Drilling down into reported segments, the company said net revenues tied to its Consumer Services Group stood at $6 billion, up 4 percent year over year. Global Commercial Services revenues were roughly unchanged year over year to $3.1 billion.
Earnings materials filed with the Securities and Exchange Commission (SEC) showed that, of the increased reserves, $1.9 billion were tied to card member loans.
Looking at Amex’s billed business — defined as transaction volumes (including cash advances) on cards and other payment products — that number was $190.2 billion in the latest quarter in the U.S., down 3 percent from last year. Outside the U.S., the same metric was down 11 percent, to $89.1 billion.
Total cards in force were up 1 percent in the U.S. to 54.9 million, down 2 percent outside the U.S., and flat globally to 113.6 million.
Average spending across proprietary basic cards from members was down 5 percent year on year to $4,497 in the quarter.
CEO Stephen Squeri noted that strong performance in January and February were dramatically impacted in subsequent weeks, with volume slowing significantly in April.
In a bit of granular detail, American Express management said, in tandem with investor slides, that total Amex billed business growth had been 6 percent in January, 7 percent in February, and slid 23 percent in March. Weekly billed business was even lower in April, by as much as 40 percent. Non travel and entertainment billed activity fared relatively better, down in the mid 20 percent level. T&E spending virtually disappeared, down as much as 95 percent into April.
At a higher level, overall global consumer billed business was off 2 percent in the first quarter, and 5 percent in the same period for commercial.
Ending total loans were $82.9 billion at the end of the quarter, down 3 percent, with 70 percent exposure to the U.S. consumer, 20 percent to small businesses and 10 percent to the international consumer.
And with a nod to small and medium-sized businesses (SMBs), “We think it will bounce back and we feel good about our small business portfolio,” said Squeri, “but it will go through, like everything else, a tough time” before the world starts to open again.
Reserve builds assume unemployment levels in the second quarter at 9 percent to 13 percent, and a GDP contraction of between 18 percent to 25 percent.
On the conference call with analysts, CEO Squeri and CFO Jeffrey Campbell took note of the diversity of client base across consumer and commercial card users, where 88 percent of the roster are (in terms of credit ratings) prime and super prime — and where strong spending will likely resume on the other side of the pandemic.
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