AmEx credit spending slump eclipses profit beat, shares fall

Sohini Podder and Niket Nishant
·2 min read
File photo of credit cards of American Express in this illustration picture

By Sohini Podder and Niket Nishant

(Reuters) -American Express Co said on Friday travel and entertainment-related spending on its cards halved in the first quarter as customers stayed at home during the COVID-19 crisis, overshadowing its better-than-expected profit.

Cross-border restrictions and a resurgence of COVID-19 cases in several parts of the world have forced people and businesses to put travel on hold, hitting credit-card issuers.

Chief Financial Officer Jeffrey Campbell said in an interview with Reuters the continued travel restrictions would slow a rebound in business travel for large corporations.

"Our baseline assumption remains that by the fourth quarter of this year, global T&E (travel and entertainment) spending will be at around 70% of 2019 levels. But travel for large and global corporations is going to rebound slower," Campbell said.

Shares of AmEx fell over 2% in afternoon trading.

But Campbell struck a more optimistic tone on overall spending volumes, saying he expected recovery to pre-pandemic levels either later this year or in 2022.

The credit card issuer is already seeing signs of a pick-up in domestic travel thanks to pent-up demand and vaccine rollouts, Chief Executive Officer Stephen Squeri told analysts on a call.

Cross-border travel, however, will bounce back only in the second half of 2022, he said.

The New York-based company's first-quarter revenue fell 12% to about $9 billion, also hit by lower loan volumes.

But AmEx's net income surged six-fold to $2.2 billion as it freed up more than $1 billion of funds it had set aside to cover credit losses from the pandemic.

Excluding that benefit, earnings were $1.74 per share, higher than a Refinitiv IBES estimate of $1.61 per, driven by a rebound in non-travel spending.

(Reporting by Sohini Podder in Bengaluru; Writing by Anirban Sen; Editing by Aditya Soni)