Consumer and commercial spending (at least from smaller firms) surged in the second quarter of this year, American Express said – and in many categories, spending has rebounded above pre-pandemic levels. Especially among younger consumers.
On the conference call with analysts, management also discussed fee-based offerings – notably, the Platinum Card that was introduced earlier in the year. Management projected that global consumer spend might be 95 percent of pre-pandemic levels by the end of the year.
In terms of headline numbers, the company’s $2.80 a share in net income was leagues above the $1.63 that had been expected by the Street. In part, that earnings beat came as the company reversed $866 million of reserves into earnings. Net revenues came in at $10.2 billion, up from the pandemic-pressured revenues of $7.7 billion last year and better than the $9.6 billion the Street had expected.
The earnings presentation that accompanied results showed that the company acquired 2.4 million new proprietary cards in the quarter, and the company said that it retained card members at rates above pre-pandemic levels.
Total net revenues for the consumer group were up 28 percent year on year to $6 billion. Global commercial services, as a segment, reported net revenues were up 35 percent year on year to $3 billion.
Drilling down into results and commentary on the call, spending on goods and services, which is 82 percent of the billed business, was up 16 percent from 2019 levels and 31 percent year on year. Travel and entertainment was down 60 percent from 2019 and down 50 percent from last year. That led to an overall decline in billed business of 12 percent from 2019, and 9 percent declines from last year.
Management said that travel and entertainment spend outside the U.S. is recovering at slower rates than inside the U.S., as vaccination rates are lower internationally, and depending on the region, there may still be government restrictions in place.
Management noted on the call that consumer spending in the U.S. is being led by the millennials and Generation Z cohorts, with total spend from those demographics surging 30 percent from 2019.
CEO Steve Squeri also said on the call that SMB spending has exceeded pre-pandemic levels. B2B spending was up 18 percent versus the pre-pandemic 2019 levels in the quarter.
CFO Jeff Campbell said that total T&E spending reached 70 percent of 2019 levels in June, and should be at 80 percent of those levels by the end of the year.
Overall, in summing up the rebound, Squeri said that “a lot of this pent-up demand … is coming from existing cardholders.”
“Consumers like to consume,” Squeri said at another point in the call, “and given opportunities to consume,” they will — particularly amid higher savings rates and the wealth accumulation tied to stock market gains. “That bodes well for us as we think about spending going forward,” he added.
Questions from analysts noted the competitive environment marked by the emergence of FinTechs – and Squeri said that the overall visibility for SMBs in international markets remains limited at the moment (in previous years, that business had been growing at a high-double-digit teens rate).
“In the United States, we continue to grow,” Squeri added. June was one of the company’s best “acquisition” months (for cards) in the history of its small business programs. He pointed to last month’s launch of Kabbage Checking for small business owners as one example of competitiveness and digital initiative. “You’ll see Kabbage being the landing point for small businesses, and the way you want to think about this is FinTech with scale,” he said.
Amex acquired 2.4 million new proprietary cards in the quarter and saw member retention “at rates above pre-pandemic levels.” Spending accelerated relative to the prior quarter and exceeded pre-pandemic levels in June, per the release and management commentary.