American Express (AmEx), the renowned credit card giant, pleasantly surprised investors by exceeding third-quarter profit expectations.
This accomplishment was primarily attributed to the unwavering spending habits of its affluent clientele, who seemed unperturbed by concerns of an impending economic downturn.
AmEx’s customer base primarily consists of high-end clients, and the company has adeptly navigated the challenges posed by inflation and the Federal Reserve’s interest rate hikes.
These rate hikes have made borrowing more expensive and curtailed discretionary spending for many, but AmEx’s upscale customers have seemingly provided a unique layer of credit protection.
Morningstar analyst Michael Miller noted the stark contrast in credit metrics between AmEx and other consumer lenders, many of whom experienced ongoing deterioration during the same quarter.
AmEx’s provisions for credit losses, the funds set aside to account for potential consumer defaults, increased by 58% from the previous year but rose only 3% from the preceding quarter, reflecting a relative stability in its credit portfolio.
CFO Christophe Le Caillec described the quarter as “business as usual” for the company.
Despite the resumption of student loan repayments in October, spending patterns remained consistent.
Notably, AmEx has seen significant demand for its products and services from Gen Z and Millennial consumers, who are also showing interest in premium offerings.
In terms of financial performance, AmEx reported a profit of $3.30 per share for the third quarter, a substantial increase from the $2.47 per share recorded in the same period the previous year.
This exceeded analyst expectations, with consensus estimates averaging $2.94 per share.
AmEx also confirmed that its earnings per share and revenue for the full year would align with prior forecasts.
The company had previously projected earnings of $11 to $11.40 per share for 2023.
In addition to the profit beat, AmEx’s revenue, net of interest expense, surged by an impressive 13% to reach $15.38 billion.
Consolidated expenses rose by 7% to $11 billion, primarily driven by increased customer-engagement costs.
AmEx’s robust financial performance in the face of economic uncertainties highlights its ability to cater to a discerning and resilient customer base, positioning it favorably in the credit card industry.