JULY 24 — Credit card issuer American Express Co reported an 85 per cent slump in quarterly profit today as spending using its card collapsed during global lockdowns imposed to contain the coronavirus.
Shares were down 1.7 per cent before the bell, even as the group managed to eke out a small profit rather than report a loss as expected by analysts.
American Express, one of the largest corporate card issuers in the United States, has been hit especially hard by cuts in large corporations’ spending on travel and entertainment after the pandemic brought that sector to a virtual standstill.
Global commercial services group, which issues proprietary corporate and small business cards, suffered a US$60 million loss in the second quarter, compared with a net income of US$561 million a year ago.
In all, consumers and businesses cut their spending on travel and entertainment by 87 per cent in the quarter, with overall spending down by more than a third.
“Spending volumes, which declined to their lowest point this quarter in April, gradually improved in May and June, with small businesses being the most resilient,” chief executive officer Stephen Squeri in a statement.
Total revenue, excluding interest expense, fell 29.2 per cent to US$7.67 billion, a steeper drop than a 24.8 per cent decline forecast by analysts.
AmEx said its consolidated loss provisions stood at US$1.6 billion, up from US$861 million a year ago, mainly due to US$628 million set aside in anticipation of a spike in defaults as a result of a wave of layoffs caused by the health crisis.
That left the group with net income of 29 cents per share, down from US$2.07 a year ago, but ahead of a 11 cent loss expected by analysts according to IBES estimates from Refinitiv.
Leading card issuers JPMorgan Chase & Co and Citigroup have created about US$18 billion in provisions for potential credit losses. — Reuters
