American Express Profits Surge 12% on Consumer Spending Tailwinds
American Express Co. (AXP) reported a 12% increase in profits, exceeding analyst expectations. Well-heeled consumers spent generously on their credit cards during the holiday season, a trend that the company anticipates will persist.
Billed business, representing the transaction volume on credit cards and other products issued by Amex, grew 8% to $408.4 billion in Q4 2022. Net income reached $2.17 billion, or $3.04 per share, slightly below estimates.
"We concluded the year with growing momentum, with billings growth accelerating to 8% in Q4 due to increased spending from our consumer and commercial customers during the holidays," commented CEO Steve Squeri. "Throughout the year, we maintained our industry-leading credit performance and exercised disciplined expense management."
Full-year revenue is projected to increase by 8-10%. Squeri remarked that this growth is closely linked to billings, indicating that if spending continues its Q4 trajectory, Amex will achieve the higher end of its revenue guidance.
"There's a sense of optimism in the current US economic environment, coupled with a strong dollar," Squeri noted. This favorable exchange rate is expected to encourage US travelers to venture abroad.
Amex continues to invest in its offerings for affluent travelers and hospitality customers. Notably, the company acquired restaurant platform Tock and introduced a $100 annual statement credit for Resy-linked restaurants on its Gold card.
Co-brand card partner Delta Air Lines Inc. projected that payments from Amex for loyalty points will reach $10 billion annually in the long term.
Amex also announced a $230 million settlement to resolve federal probes related to small business product sales practices. The company discontinued the products and implemented disciplinary measures, internal reviews, and compliance enhancements.
Delinquency and net write-off rates remained low compared to pre-pandemic levels. Squeri attributed this to growing consumer confidence, which is driving increased spending.