AmEx profits fall 9% as customers fall behind on payments

American Express saw its fourth-quarter profits fall by 9%, as the credit card giant had to set aside significantly more money to cover potentially bad loans.

AmEx CEO Steve Squeri said in a statement that the company’s credit metrics “remained strong” in the quarter however. Squeri told analysts on a call with investors that the company is seeing few signs of a recession in the short-to-medium term, noting that cardmember spending continues to remain strong.

Over the past several years, AmEx has moved its traditional charge card business model — where a customer must pay off their entire balance each month — to a model closer in line with traditional credit card companies that encourage customers to keep a balance and the company collects interest off of that balance. Worldwide cardmember loans were $108 billion last quarter, up 22% from 2021.

While investors have applauded the higher profits from AmEx, the adoption of a business model that encourages customers to keep a balance also exposes the company to losses if the economy were to sour. Investors did ask executives if the recent white collar layoffs are impacting their business at all, and executives said it did not appear so and that the rise in credit losses was mostly a normalization from the pandemic, when customers paid off their credit cards.

Noting the growth in cardmember spending and an expectation that delinquencies will level off this year, AmEx did forecast a full-year profit between $11.00 and $11.40 a share for 2023. It also raised its quarterly dividend to 60 cents a share from 52 cents per share.

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