NEW YORK (AP) — Credit card giant American Express on Friday reported a 34% jump in first-quarter profit, helped by more customers spending on its namesake cards and more customers carrying balances on their cards. announced.
The New York-based company said its profit for the first three months of the year was $2.44 billion, or $3.33 per share, up from $1.82 billion, or $2.40 per share, in the year-ago period. did. The results beat Wall Street expectations, which had expected the company to earn about $2.95 per share in the quarter.
AmEx’s jump in profits was largely due to higher spending on cardmember accounts and higher interest-bearing balances. The company’s revenue for the quarter was $15.8 billion, an 11% increase from the same period last year.
AmEx customers spent $419.2 billion on cards in the quarter, an increase of 5% year over year. Amex takes a percentage of each transaction you pay for with your card as a fee from merchants. This has been the company’s primary business model for decades.
But AmEx now also brings in significant interest income from customers who maintain balances and use their accounts. The company earned $5.06 billion in interest income from loans to cardholders last quarter, an increase of 28% from a year ago. Currently, about one-third of Amex’s revenue comes from interest income.
The company added 3.4 million new cardmembers in the quarter, and about 7 in 10 new customers use credit cards with annual fees. AmEx executives say the increased use of fee-based products is evidence that customers see value in cards despite fees.
“We continue to attract high-spending, high-credit customers to our franchises,” Steve Squery, AmEx Chairman and CEO, said in a statement.
As more customers maintain balances, AmEx has confirmed that some customers are delinquent on their payments. The company’s charge-offs and 30-day delinquencies have continued to rise post-pandemic. But AmEx’s amortization rate is about half the rate currently faced by competitors like Capital One, Discover and Chase.
