AmEx profit misses as consumer spending falters

FILE PHOTO: Pedestrians walk past an American Express sign in New York U.S., July 16, 2018. REUTERS/Lucas Jackson

(Reuters) – American Express Co AXP.N missed third-quarter profit estimates on Friday, as its customers spent less during the COVID-19 fueled economic slowdown and it set aside money for potential payment defaults, sending its shares 3% lower.

The COVID-19 pandemic has triggered the worst economic downturn in decades and led to mass layoffs, resulting in more people defaulting on their bills and offering more evidence that the economic recovery from the COVID-19 recession was faltering.

The credit card issuer said consolidated loss provisions in the third quarter ended Sept. 30 stood at $665 million, down 24% from a year earlier.

The reserve levels at the end of the quarter were generally consistent with second-quarter levels, AmEx added.

“While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels,” Chief Executive Officer Stephen Squeri, said.

The company reported a nearly 40% slump in profit to $1.07 billion, or $1.30 per share, missing analysts’ average estimates of $1.35 per share, according to IBES data from Refinitiv.

Total revenue, excluding interest expense, fell 20% to $8.8 billion.

Net income from the global consumer services unit – which primarily issues a wide range of proprietary consumer cards globally – was down about 14% at $855 million, reflecting a decline in spending and lower loan volumes.

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