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American Express responded to the stresses from the decline in cobrand business with record ad spending and a focus on digital delivery to lure new customers and expand relationships with existing accounts.
It appears as though that strategy is starting to pay off, as Amex attracted 2.6 million new cardholders in the first quarter of 2017, with 60% of these new accounts coming through digital channels, the company reported April 19.
"Digital has become an important strategy for acquisition of new card members, particularly the millennial customers," said Jeff Campbell, executive vice president and chief financial officer during American Express' first quarter earnings conference call.
The American Express building stands along Avenue Reforma in Mexico City, Mexico, on Monday, May 4, 2009. Mexican President Felipe Calderon said that the country will beat the outbreak of swine flu that has caused 26 deaths and may return to normal on May 6 after taking unprecedented action to curb the spread of the disease. Photographer: Susana Gonzalez/Bloomberg News
SUSANA GONZALEZ/BLOOMBERG NEWS
American Express has focused on Internet of Things technology, participating in distributed ledger initiatives and accelerating its embrace of contactless payment technology such as host card emulation, both of which are key to supporting emerging mobile payments apps and e-commerce. Amex as also supported the expansion of third party mobile payments apps in Canada.
"We talk a lot about the nature of our closed loop network, which allows us to be adept at working in the social media field. We have been at the forefront of bringing digital, social and payments together," Campbell said, noting partnerships with companies such as Airbnb, Twitter and Facebook to appeal to mobile-savvy and younger consumers. "We are looking to build lasting relationships, not just the 'next thing' for six months."
The moves followed the hit Amex suffered following the lost of Costco's cobrand business in 2016, which sparked an accelerated embrace of digital payments. Amex senses a corner has been turned, and it's now working to lower marketing spending and operating expenses, setting a goal to remove $1 billion from the company's top line, a goal that will also rely on using lower-cost digital and social channels. "We expect that year-over-year decline in operating expense to become larger toward the end of 2017," Campbell said.
For the quarter ending March 31, Amex reported revenue of $7.89 billion, or a decline of 2.5% over the prior year. That's better than the $7.79 billion estimate from a Bloomberg survey of 21 analysts. Net income dropped 13% to $1.23 billion, or $1.34 per share; from $1.43 billion, or $1.45 per share, from the prior year. The drop was due to the lingering impact of the loss of Costco. Excluding Costco, revenue increased 6.22%.
Rewards expense increased 6%, Amex reported. The company is trying to rein in that expense through initiatives such as suppressing the number of people who apply specifically for the sign on bonus.
"I would expect see rewards cost go up over the next couple of quarters, but it's mostly [Platinum cards]. We are encouraged with the trend that we have seen in business metrics over the past few quarters," Campbell said, affirming the company's overall financial outlook for the rest of the year.
The auto lender's earnings outpaced Wall Street's expectations. But shrinking car inventories at dealerships, which stemmed from new tariffs, put a dent in Ally's lending.
The Columbus, Ohio-based regional bank also benefited from strong performances by several legacy business lines, including auto, mortgages and SBA lending.
The Dallas-based lender, which reported a year-over-year decline in earnings, is anticipating increased loan activity and deposit growth later in the year.
With the passage of the bill, large banks are looking into their own stablecoins or partnering with the sector, while concerns linger about state regulation, the separation of banking and commerce and the disintermediation of the banking system.
The banking subsidiary of Western Alliance Bancorporation is discarding six brand names to unify under the Western Alliance Bank moniker; longtime JPMorgan advisor Vishal Idnani will join Western Alliance as its next CFO; First Community in Lexington, South Carolina, will acquire Signature Bank of Georgia; and more in this week's banking news roundup.
