AmEx Profit Gets Lift From Commercial Unit Built by Incoming CEOBy
Firm also increases full-year earnings per share guidance
Third-quarter profit increases 19%, topping analyst estimates
As Steve Squeri prepares to take the helm of American Express Co., the company is increasingly counting on the business he built to help boost revenue.
The lender, which gets the biggest share of its revenue from commercial cards, said profit from that division climbed 14 percent in the third quarter. AmEx has been sweetening rewards on credit cards issued to small businesses and building out its commercial lending platform in an effort to spur revenue growth in the unit.
The New York-based company has had to defend its position as the largest issuer of commercial cards as rivals including JPMorgan Chase & Co. offer richer rewards to small businesses and lure large corporate customers with improved incentives. AmEx has said it sees the opportunity to capture $19 trillion worth of customer spending from a group that still largely relies on checks and wire transfers.
Squeri, 58, a vice chairman who has been at the firm for three decades, will replace Chief Executive Officer Kenneth Chenault, 66, in February.
The lender boosted its guidance for full-year profit. It now expects earnings per share of $5.80 to $5.90, higher than the $5.60 to $5.80 it previously forecast.
AmEx shares climbed 0.4 percent to $92.45 at 5:14 p.m. in extended trading in New York.
The commercial unit suffered after AmEx failed to renew its partnership with Costco Wholesale Corp., its largest co-brand partner, as many small businesses used the card for daily expenses. AmEx has “more than replaced” the lost volumes as the lender added new products and deepened relationships with customers, Squeri said at the company’s investor day in March.
“The growth opportunities in this space are significant, particularly in the small and middle market segments,” Squeri said at the time. “Despite intense competition, we’re confident that we can maintain and grow our position, due to our many unique advantages.”
Here’s a quick summary of key numbers from the results:
- Net income rose 19 percent to $1.36 billion, or $1.50 a share, from $1.14 billion, or $1.20, a year earlier, AmEx said Wednesday in a statement. The average estimate of 24 analysts surveyed by Bloomberg was for adjusted profit of $1.48 a share.
- The company set aside $769 million for bad loans, a 53 percent boost compared with the year-ago quarter, which it attributed to an expected increase in delinquencies.
- Worldwide billed business, a measure of customer card spending, increased 8 percent to $271.9 billion in the three months ended Sept. 30, the first quarter that didn’t include the effects of severing its Costco relationship. That beat analysts’ estimates of $268 billion.