American Express Co.'s affluent base of cardholders apparently felt pretty confident about the economy, driving strong growth in card purchases that helped to produce record first-quarter profits for the card company.
"Spending growth remains strong, and we continue to grow above the average rate of our large issuing competitors," Dan Henry, Amex chief financial officer, told analysts during an April 18 conference call to discuss the quarter’s earnings.
Amex is seeing "continued, high engagement" with customers, Henry said, noting that while card purchase-volume growth rates are still lagging in certain regions of Europe, consumer and corporate cardholders spent more across the board.
The company's worldwide card-billed business rose 12.4% for the quarter ended March 31, while loan-loss rates remained exceptionally low. Corporate net income was $1.26 billion, up 6.8% from $1.18 billion a year earlier, while total revenue rose 8.6%, to $7.6 billion from $7 billion.
Though Amex cut its merchant discount rate slightly compared with a year earlier, its overall merchant-discount revenue rose 9.2%, to $4.26 billion from $3.9 billion, which Henry said was the result of higher card spending.
The network cut the discount rate it charges merchants to 2.35% of the sale from 2.55% in the first quarter of 2011, Henry said. The rate reduction was the result of "our strategy to increase penetration into everyday-spend categories as well as the mix of spending," he added.
All segments produced gains in cardholder spending.
Amex's U.S. Card Services unit's net income rose 35.5%, to $752 from $555 million. Revenue from Card Services grew 8.3%, to $3.9 billion from $3.6 billion.
Total card-billed business rose 12.1%, to $107.7 billion from $96.1 billion, while total cards in force rose 2.7%, to 41.2 million from 40.1 million. Cardholders spent an average of $3,529 per month, up 9.2% from $3,231.
Total outstanding loans rose 4.5%, to $51.4 billion from $49.2 billion, while the charge-off rate on outstanding receivables declined 140 basis points, to 2.3% from 3.7% a year earlier.
Basic cards in force during the quarter rose 2.7%, to 30.6 million from 29.8 million.
Amex's International Card Services net income rose 4.2%, to $197 million from $189 million, with revenue up 8.3% to $1.3 billion from $1.2 billion.
Total card billed business for the international segment rose 8.1%, to $30.7 billion from $28.4 billion. Cardholders spent an average of $2,927 per month, up 7% from $2,735.
Outstanding international card loans rose 1.2%, to $8.6 billion from $8.5 billion. The charge-off rate on outstanding receivables fell 110 basis points, to 2.1% from 3.2%.
Basic cards in force internationally rose less than 1%, to 10.5 million from 10.4 million.
In Global Commercial Services, net income declined 3.8%, to $177 million from $184 million, while revenue rose 5.5%, to $1.16 billion from $1.1 billion.
The unit's total charge card billed business rose 13.1%, to $41.4 billion from $36.6 billion. Cardholders on average spent $5,920 per month, up 14.4% from $5,175.
Total receivables rose 15%, to $15.3 billion from $13.3 billion. The charge-off rate rose incrementally to 0.08% from 0.06%.
Basic cards in force declined 1.4%, to 7 million from 7.1 million a year earlier.
Global Network & Merchant Services income rose 14.1%, to $357 million from $313 million, with revenues up 9.1%, to $1.2 billion from $1.1 billion.
Card-billed business for the unit rose 14.1%, to $357 million from $313 million a year earlier.
On other fronts, Amex continues to invest in its digital-payment operations, including Serve, its digital wallet, and other emerging and mobile-payment enterprises, Henry told analysts, although he declined to specify results from the niche.
Last year, Amex concentrated on signing distribution deals for Serve, Henry said. "And this year, it's all about executing against those distribution deals so that we can bring customers onto the Serve platform," he said, noting Amex is so far not "sharing metrics" on sales success.
"At some point in the future we will," Henry promised.
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