AmEx Puts Its Pandemic Exposure Firmly in the Past

Card companies with a heavy exposure to travel and entertainment spending took a beating during the pandemic, but that’s ancient history now so far as American Express Co. is concerned.

The T&E giant early Friday reported its sixth consecutive quarter of record revenue, backed by strong cardholder spending and new cardholders added. “There are many ways for us to grow revenue,” AmEx chief executive Steve Squeri told equity analysts on a conference call to discuss the company’s September-quarter performance. “Cardmember spending remains strong.”

Indeed, AmEx has added new cardholders at a steady clip of around 3 million per quarter since at least the start of 2022. “New card acquisitions is a major driver [of revenue growth], not raising fees,” Squeri said. This comes on top of spending by “tenured cardmembers we know well,” added Christoph Le Caillec, who took over the chief financial officer role this summer on the retirement of long-time CFO Jeffrey Campbell.

The continuing growth in cards helped drive revenue to more than $15 billion for the quarter. But the discount fees AmEx collects from merchants remain the company’s biggest source of revenue, accounting for 55% of the total. This fee generated $8.4 billion in the third quarter, a 7% increase year-over-year.

Still, the pebble in AmEx’s shoe could be spending at small and medium-size businesses, which grew a modest 2%. “This is the second quarter in a row [the category] has been low growth,” Squeri conceded, adding merchants that have been with AmEx for some time are lagging. “We haven’t seen as much momentum from an organic perspective,” he said.

On the other side of the spectrum, restaurants have recovered swiftly from the beating they took during the pandemic, with billed business growing 13% year-over-year Here, AmEx offers a reservation-booking app called Rezy, which it acquired in 2019. “Restaurants continue to be one of our largest and fastest-growing segments,” Squeri said, pointing to a record level of reservations on its app in the quarter.

AmEx is confident enough now, Squeri told the analysts, that it plans to increase its marketing spend to $5.5 billion in 2024, a move that will start promptly. “We look at cards acquired and we still see tremendous opportunity. You will see a higher level of marketing spend in the next quarter,” he said.

In the September quarter, AmEx posted $15.4 billion in revenue, a 13% rise over the same quarter last year. Net interest income, the second largest portion of the total after merchant fees, rose fully 33% to $3.4 billion.