NEW YORK—Fourth-quarter profits at American Express saw its fourth-quarter profits fell by 9% as the company set aside significantly more money to cover potentially bad loans, according to new data.
The company reported it saw charge-offs and delinquencies rise, a “troubling sign for a company whose customer base is usually well-to-do and extremely creditworthy,” noted the New York Times in reporting the results.
American Express, however, did announce it planned to raise its quarterly dividend and also forecast higher-than-expected profits for 2023, as cardmembers are still strongly spending on their accounts.
“While AmEx saw a double-digit rise in card usage from a year ago — cardmembers spent $413.3 billion on their cards last quarter — the increase in revenue was eclipsed by a noticeable deterioration in the financial health of AmEx customers,” the Times reported. “The company set aside $1.03 billion to cover potential credit losses, compared to only $53 million in the same period a year earlier. The company wrote off 1.3% of its total loans, compared to only 0.8% a year earlier. The number of card members who were 30 days or more past due also rose.”
‘Strong’ Metrics
AmEx CEO Steve Squeri said in a statement that the company's credit metrics “remained strong” in the quarter. However, Squeri told analysts on a call with investors that the company is seeing few signs of a recession in the short-to-medium term, noting that cardmember spending continues to remain strong, the Times said.
The Times added that over the past several years AmEx has moved its traditional charge card business model — where a customer must pay off their entire balance each month — to a model closer in line with traditional credit card companies that encourage customers to keep a balance and the company collects interest off of that balance. Worldwide cardmember loans were $108 billion last quarter, up 22% from 2021.
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