American Express hails benefits of youth

American Express beat Wall Street profit estimates as affluent Gen Z and millennial cardholders helped boost membership and limit provisions for credit losses.
The credit card company’s profit rose 2 per cent to $2.51 billion in the three months to the end of September.
Revenue climbed 8 per cent to $16.64 billion but narrowly missed Wall Street expectations. At the close in New York the shares were down $9.04, or 3.2 per cent, to $276.74.
American Express was founded in 1850 and now has more than 140 million cardholders worldwide who spent $1.5 trillion on their cards last year, up by 37 per cent. Growth in new credit card holders has been driven by Gen Z, aged up to their late twenties, and millennials, aged up to their early forties.
Stephen Squeri, chairman and chief executive, said: “The new benefits and capabilities we have added in popular categories like dining are fuelling our growth with millennial and Gen Z consumers, who represent 80 percent of the new accounts acquired on the US Consumer Gold Card, and remain our fastest-growing consumer cohort overall in the US.”
American Express is less exposed to lower-income customers than some rival credit card companies and banks, some of which have been reporting growing default levels among poorer customers. This has meant it has been able to maintain relatively smaller provisions for credit losses compared with some peers. In the third quarter, provisions for credit losses were $1.4 billion, compared with $1.2 billion a year ago.
A survey published this week by Bankrate, the price comparison site, found that 37 per cent of US cardholders have either borrowed the maximum on a credit card or come close to doing so since the Federal Reserve began raising interest rates in March 2022.
American Express has also shown restraint in managing rewards and other expenses, allowing it to outdo profit expectations even when revenue growth slows.
Its total expenses were $12.08 billion in the quarter, lower than expectations of $12.74 billion, according to estimates compiled by LSEG.
Christophe Le Caillec, chief financial officer, said profits were supported by the company’s “disciplined” approach to operating expenses and its “very strong” credit.
Keith Horowitz, analyst at Citigroup, said the quarter was “another proof point of management’s ability to flex expenses to hit earnings-per-share targets when top line is softer”.
Analysts at William Blair, the investment bank, said in a note: “Expectations were elevated, but we believe the growth opportunities remain large and the valuation remains attractive.”