Amex Earnings: Gen Z, Millennials Drive Credit Card Volume Growth

American Express earnings released on Friday (July 19) show that consumers continue to spend on experiences — particularly on dining out, and that momentum belongs to the younger generations who are using their cards more often.

Spending by millennial and Gen Z customers was up 13% year over year, management said.

CFO Christophe Le Caillec said on the conference call with analysts that spending growth was visible across several categories, where spending on goods and services was 6% higher and there was 7% growth in travel and entertainment related spending.

“We did see some slower growth in certain [travel and entertainment] categories versus the prior quarter, especially in airline and lodging,” he said. But spending at restaurants, he said, “remained strong.”

As for using the cards more often, the company’s transaction growth was 9% higher in the June quarter vs. last year.

‘Strong Engagement’ From Younger Consumers

“Younger card members continue to demonstrate strong engagement, and we see that they transact over 25% more, on average, than our older customers,” said Le Caillec, and when it comes to categories such as dining, they transact twice as much.

Millennials and Gen Z consumers represented a third of the $165 billion in U.S. Consumer Services Billed Business — a metric that includes card member spending and cash advances.

Spending growth from small and medium-sized businesses, as detailed in the earnings supplementals, was 2% higher than a year ago. International geographies are showing double-digit spending growth on the consumer side of the equation, said Le Caillec.

“As we progress through 2024, we expect loan growth in particular to continue to moderate by a few percentage points, but to still grow in double digits as we exit the year,” said the CFO.

The supplementals reveal that reserves represent 2.8% of card loans, down a bit sequentially.

The 30 days past due metrics were 1.2% of loans, compared to 1.3% in the first quarter, and lower than the 1.5% seen before the pandemic. Net write-off rates were steady at 2.1%.

CEO Steve Squeri said spending was “strongly influenced” by younger consumers, and even in a “slower growth economic environment … for our consumers, If they decide they’re going to pull back, they’ll pull back a little bit on a discretionary, but they’ll continue to pay their bills, which is why our credit numbers continue to be so strong.”

Asked on the call about the trajectory of credit metrics, Le Caillec said that with better visibility on consumer trends and the delinquency rates, “it’s going to be stable at about the level you saw in Q2, and at around 2.1%.”

Management guided to revenue growth of 9% to 11% in 2024, unchanged from previous projections. Shares were 4% lower at the start of trading on Friday.