American Express reports $3.71 billion third-quarter profit
American Express posted a third-quarter profit of $3.71 billion, marking a 28% increase from the previous year, ABC News reported. The New York-based credit card giant beat Wall Street earnings estimates as its well-to-do customer base continued to spend aggressively and nearly all cardmembers absorbed a higher annual fee.
Higher fees and spending boost American Express earnings
The company earned $5.42 per share for the quarter ending in September. Excluding a one-time gain from the sale of its stake in Global Business Travel Group, adjusted earnings reached $4.68 per share. Revenue and profits climbed as customers charged more on their accounts and paid higher membership costs. Last year, American Express updated its Platinum Card by adding perks while raising the annual fee from $695 to $895. Wall Street questioned whether wealthy clients would accept the $200 price increase, but nearly all customers who transitioned to the new tier kept their cards. Net card fees rose by more than $400 million compared to the prior year.
Inflation impacts travel and entertainment spending
Average spending per customer reached $6,735 during the quarter, equaling $2,245 a month, which is up 5% from last year. AmEx Chief Financial Officer Christophe Le Caillec stated in an interview that inflation partially drove the higher spending figures. Cardmembers lean heavily into travel and entertainment purchases, and airline fares have climbed sharply due to higher fuel costs and broader inflationary pressures. Beyond higher prices per transaction, the company also recorded an increase in the total number of transactions per cardmember.
Full-year profit forecast raised
Following the third-quarter results, American Express adjusted its outlook for the remainder of the year. The company now forecasts an adjusted profit between $17.60 and $17.90 per share for the full year. This update raises the lower end of its previous forecast range, which stood at $17.30 to $17.90 per share.
Questions about American Express earnings and card fees
Why did American Express profits rise in the third quarter?
Profits rose 28% to $3.71 billion due to higher customer spending and an increase in net card fees. Nearly all cardmembers kept their accounts after the annual fee on the Platinum Card increased from $695 to $895.
How much did the average American Express customer spend?
The average customer spent $6,735 during the quarter, or $2,245 a month. That figure represents a 5% increase compared to the same period a year earlier.
What is the updated full-year profit forecast for the company?
American Express expects to earn an adjusted profit between $17.60 and $17.90 per share for the full year. The company raised the lower end of its previous forecast, which started at $17.30.
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