American Express Spending Decline Slows in Fourth Quarter

By Allison Prang 

American Express Co. logged a smaller drop in spending in the last quarter of 2020 compared with recent periods, showing potential signs of a recovery amid the Covid-19 pandemic which has kept people at home and damped spending on travel.

Total spending at American Express fell 15% in its fourth quarter from a year earlier. By comparison, spending was down 19% in the third quarter and tanked by more than one-third in the second quarter.

As the world grapples with lockdowns and people stay home during the pandemic, travel and entertainment spending has taken a particularly hard hit, plummeting 65% in the last quarter of 2020. That steep decline improved slightly from the third quarter when that measure of spending fell 69% from a year earlier. In the second quarter of 2020, it plummeted 87%.

Within travel and entertainment, spending on restaurants has been the most resilient during the pandemic, said Chief Financial Officer Jeff Campbell on the company's earnings call, but he noted it decelerated in the last quarter because of dining restrictions and colder weather. Mr. Campbell told analysts that the company expects that by the fourth quarter of 2021, travel and entertainment spending will be around 70% of what it was in the comparable quarter of 2019.

On the company's call, Chief Executive and Chairman Steve Squeri said "I believe that as we get into this summer season, this June, July, August and September, you will see a rush for people to travel."

Spending not related to travel and entertainment rose 4% in the company's fourth quarter year over year, which was slightly better than the 1% gain it posted in the third quarter. It had fallen 13% in the second quarter of 2020. When adjusting for the effects of foreign exchange, the company said online spending and holiday spending increased among its consumer business.

American Express -- similar to many of the country's major banks -- also reported a benefit related to a $674 million reserve release in the quarter. Mr. Campbell said in an interview that the American Express consumer is strong and that measures of credit quality at the company are faring well.

Mr. Campbell said in an interview that the American Express consumer is strong and that measures of credit quality at the company are faring well.

"The health of the consumer when you look at the demographic that we serve is actually remarkably strong and that's why the actual credit metrics that we see in terms of low delinquencies, low levels of write-offs are the lowest we've seen in years," Mr. Campbell said. "You still have a tremendous level of government lockdowns, a tremendous level of border controls...but we see a lot of pent-up demand waiting for the medical situation to get a little bit better."

Overall, American Express's revenue, net of interest expense, was $9.35 billion, down from $11.37 billion in the same period a year earlier. Analysts were expecting $9.34 billion.

The company reported $1.44 billion in profit, down from $1.69 billion. Earnings were $1.76 a share, down from $2.03 a share. Analysts were expecting $1.31 a share, according to FactSet.

Shares of the American Express fell 2.8% Tuesday morning.

(END) Dow Jones Newswires

January 26, 2021 12:39 ET (17:39 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.