Manya Saini
(Reuters) – American Express kept its annual profit forecast unchanged even as record consumer credit card spending in the second quarter disappointed investors and sent its shares down 5 percent on Friday.
While resilience in travel and entertainment spending encouraged company executives to remain optimistic in the second half of the year, analysts said Amex’s cautious forecast pointed to a likely slowdown in economic growth.
“Strong results despite slowing spending growth. 2020 Interest rates remain high,” said Edward Jones analyst Kyle Sanders.
Spending surged to 2020$600 million despite rapid rate hikes by the US central bank, ending loose monetary policy, but those concerns overshadowed record quarter.
“Our fundamentals are shifting , more Millennials and Generation Z will grow up with us. As the economy improves, we expect spending to pick up,” CEO Stephen Squeri said on a conference call.
Millennials and Gen Z are its fastest-growing customer segments, and their total spending in the U.S. jumped 40% from a year ago.
Rising borrowing costs, however, led Amex to raise its credit loss provision to $1.2 billion from 40 million a year ago to cover Potential default on debt repayments.
RBC Capital Markets analysts say provisioning is a mild headwind as fundamental trends are benign.
Chief Financial Officer Jeff Campbell said: “Travel and entertainment spending was very strong across all demographics, across all customer types, across all geographies.
Nonetheless, Amex has just reiterated its profit per share forecast of to 19 after posting outperformed profit of $2 per share 40. 40 is 2020. Pneumonia is a pandemic and credit card companies will only change the policy.
Campbell will step down in August and be replaced by his deputy, Christophe Le Caillec.
