AmEx misses profit estimate as loan-loss provisions weigh

AmEx misses profit estimate as loan-loss provisions weigh

(Reuters) – American Express Co missed market estimates for fourth-quarter profit on Friday as the credit card giant stockpiled more rainy-day funds to prepare for a worsening economy, wrapping up a turbulent quarter for major U.S. card companies.

With a looming recession and sky-high inflation burning the pockets of consumers in recent months, the likelihood of people being unable to pay back debt incurred on credit cards has gone up significantly.

Americans have also begun to see the effects of an economic slowdown as the cost-of-living crisis worsens, pushing many, particularly those in the lower-income bracket to dip into household savings buffers.

Provisions for credit losses were $1.03 billion in the reported quarter, compared with $53 million a year ago.

The results come after rivals Visa and Mastercard sailed past quarterly estimates, but warned that revenue growth would slow through this year as the pandemic-driven pent-up travel demand begins to ebb.

Still, the typically strong holiday season saw AmExs largely wealthy customers shrug off inflationary pressures to splurge on gifts, travel, and entertainment, helping sustain card member spending volumes.

Net income fell 9% to $1.57 billion, or $2.07 per share, in the three-month period ended Dec. 31, from $1.72 billion, or $2.18 apiece, in the year-ago period.

Analysts on average had expected $2.22 per share, according to IBES data from Refinitiv.

The New York-based companys total revenue excluding interest expense increased 17% to $14.18 billion in the quarter.

(Reporting by Manya Saini in Bengaluru; Editing by Sherry Jacob-Phillips)

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