Cyprus Mail
Banking and FinanceBusiness

AmEx issues dismal outlook on business travel spending as profit slumps

American Express Co on Friday warned that business travel spending would not pick up before early 2022 after reporting underwhelming third-quarter profit due to weak spending on travel and entertainment by its card users.

In what appears to be a shift in strategy, the New York-based credit card issuer also walked back on its cost-cutting target of nearly $1 billion in 2020 and instead decided to spend heavily to add new card customers.

“We have begun to selectively spend in areas critical to rebuilding growth momentum … we expect our Q2 through Q4 year-over-year OpEx declines will be somewhat less than the $1 billion we initially discussed back in April, which … was at the moment of peak uncertainty about the future,” Chief Financial Officer Jeff Campbell said in a post-earnings conference call with analysts.

Credit card companies have been hit hard as the pandemic-induced recession forces companies to lay off workers and consumers to stay at home.

Spending on AmEx cards fell 19 per cent to $248.7 billion in the quarter, with travel and entertainment related spending sliding 69 per cent from a year earlier.

AmEx, which has tie-ups with large airlines and hotels and whose largest shareholder is Warren Buffett’s Berkshire Hathaway Inc, set aside $665 million in loss provisions during the quarter.

However, that was less than it set aside last quarter, as the outlook for potential defaults improved, with AmEx saying overall spending volumes had shown a “steady recovery” since the lows of mid-April.

Online consumer retail spending was a bright spot for the card issuer during the quarter, clocking a 32 per cent jump over last year.

Quarterly profit fell 40 per cent to $1.07 billion, or $1.30 per share, missing analysts’ average estimate of $1.35 per share, according to Refinitiv data, hurt mainly by higher-than-expected expenses.

Total revenue, excluding interest expense, fell 20 per cent to $8.8 billion, but came in ahead of muted expectations.

AmEx shares, which have lost about 16 per cent of their value so far this year, closed down nearly 4 per cent on Friday.

Related Posts

German road traffic agency says 59,000 Tesla vehicles have software glitch

Gnox (GNOX) makes A 60% price surge during bear market, honorable mentions: Tron (TRX), and Bitcoin Cash (BCH)

CM Guest Columnist

Buckle Up: How investors can deal with crypto turbulence

Reuters News Service

Ferrari to churn out gas guzzlers on its slow road to electric

Reuters News Service

1970s-style stagflation now playing on central bankers’ minds

The Conversation

Jacobi Asset Management to launch Europe’s first bitcoin ETF on Euronext

Reuters News Service