By Mehnaz Yasmin and Manya Saini
(Reuters) -American Express Co’s quarterly card spending soared to a record as pandemic-weary travelers shrugged off rising airfare to throng airports, helping the company raise its annual revenue forecast and sending its shares 5% higher.
The credit card giant also trounced estimates for April-to-June profit and joined major U.S. banks including JPMorgan Chase & Co in highlighting the resilience of consumer spending in the face of an uncertain economic outlook.
Chief Executive Officer Steve Squeri, however, said loss rates would rise slowly, though they would remain well below pre-pandemic levels this year.
The company added $410 million in provisions for credit losses, mirroring similar buildups at major U.S. banks, and said it expects to set aside more funds.
“What I have seen a correlation between … people losing their jobs and not being able to pay their bills. And so that’s potentially an issue down the road,” Squeri said.
The number of Americans enrolling for unemployment benefits rose for a third straight week last week to the highest in eight months, signs the economy was slowing due to rising interest rates and high inflation.
For now, though, AmEx is benefiting from bottled-up demand and the easing of COVID-19 curbs that have sparked the strongest summer travel season since the start of the pandemic.
Strong consumer spending has been a feature of the company’s earnings for several quarters, but the recovery in international and corporate travel was the key driver this time, said Michael Miller, equity analyst at Morningstar.
He added that “a growing premium cardholder base creates a virtuous cycle for American Express.”
The company added 3.2 million new proprietary cards in the quarter ended June 30. Its net income of $2.57 per share beat the $2.41 expected by analysts, according to Refinitiv data.
Rivals Visa and Mastercard report earnings next week.
(Reporting by Manya Saini and Mehnaz Yasmin in Bengaluru; Editing by Aditya Soni)