AmEx 4Q profits jump 23% as cardmembers carry heftier balances

NEW YORK — American Express' fourth quarter profits jumped 23% from last year as more cardmembers kept a running balance on their accounts compared with previous years, meaning more interest income for the credit card issuer.

But a considerable rise in maintained balances — up 17% from last year — as well as rise in delinquencies and credit losses, can raise questions about the financial health of AmEx cardmembers who are typically more financially stable and more likely to pay off balances by the end of each month.

The New York company posted a profit of $1.93 billion, or $2.62 a share. That's up from a profit $1.57 billion, or $2.07 a share, in the same period a year earlier. That fell short of analyst projections for per-share earnings of $2.64, according to FactSet.

However AmEx gave a strong full-year forecast for 2024 and boosted its quarterly dividend, which helped lift the stock in midday trading Friday.

There was a relatively modest increase in spending by cardmembers in the quarter, up 5% to $434.4 billion. The credit card company historically makes the bulk of its revenue from the fees it collects from merchants who accept American Express cards as a form of payment. Spending on card accounts slowed as well, with the average cardmember spending about 2% more on their card from a year ago.

Profits this quarter were driven in part by interest-accruing accounts — cardmembers who aren't paying off their balances in full. AmEx pivoted away from the charge card business model before the COVID-19 pandemic to a model that encouraged customers to keep a balance. That push has been largely successful, which means AmEx collects interest from accounts where historically it had not.

AmEx had $126 billion in cardmember loans at the end of 2023, up 17% from last year. That resulted in AmEx bringing in $4.91 billion in interest revenue last quarter, up from $3.62 billion a year earlier.

But the push to allow cardmembers to keep a balance has led an increasing number of credit card accounts going delinquent. The company wrote off 2.2% of credit card balances last quarter, up markedly from 1.3% a year earlier. The number of accounts that are 30 days past due also ticked up.

AmEx expects revenues this year will climb between 9% and 11%, and it believes earnings per share will be between $12.65 and $13.15 per share.