Higher consumer spending and improved credit quality propelled first quarter earnings for American Express, which more than doubled its profit to $885 million, or 73 cents a share, up from $437 million, or 31 cents a share, a year ago.
Beating Wall Street forecasts of 64 cents a share, the top credit card brand – based on purchase volume – reduced provisions for losses by $943 million, down 48 percent compared to $1.8 billion a year ago.
Its vastly improved credit outlook rivals or surpasses similar scenarios from competing credit card issuers JPMorgan Chase and Bank of America, which also reported significantly more positive loan risk assessments.
Additionally, American Express reported cardmember spending up 16 percent in the first quarter.
“The biggest turnarounds in spending came from corporate cardmembers and banks who issue cards on our network. Consumer and small business volumes also rose in part because of strength in travel, entertainment and other discretionary categories,” said Kenneth I. Chenault, chairman and chief executive officer.
The company’s return on average equity was 18 percent, up from 16.3 percent a year ago. And consolidated revenue net of interest expense was $6.6 billion, up 11 percent, from $5.9 billion a year ago.
Chenault said the company bolstered marketing and promotion investments back to pre-recessionary levels and made “other substantial investments to further strengthen our competitive position as we come out of the recession.”
He added that high unemployment and the “uncertain legislative environment” remain as challenges.
Landmark credit card restrictions on interest rates took effect Feb. 22, and a final wave of provisions becomes official in August placing curbs on certain penalty fees.
The Senate is also close to a vote on sweeping new financial oversight rules aimed primarily at the largest financial institutions. Among the proposals is a new consumer financial protection agency to oversee loan products, including credit cards.
