AmEx revenue drops as virus slows shopping

NEW YORK — American Express Co. saw its first-quarter profits rise sharply, but the company saw a significant drop in revenue as fewer customers used their credit cards and those with balances paid down debt.

The New York-based company said it earned a profit of $2.24 billion, or $2.74 a share, compared with a profit of $367 million, or 41 cents a share, in the same period a year earlier. This quarter’s results included a one-time $675 million benefit from AmEx’s loan-loss reserves. Like other financial companies, AmEx set aside funds to cover potentially bad loans in the pandemic, but as the economy has improved, those funds are coming out of those rainy day funds and returned to shareholders.

Excluding those one-time results, AmEx had earnings of $1.74, which beat the $1.61 per share that analysts were looking for, according to FactSet.

American Express’ bottom line took a hit in the pandemic, with fewer

Americans traveling, dining out, entertaining or shopping. Spending on corporate and individual charge and credit cards has dropped, and those who kept a revolving balance have paid off their debts.

Revenues at AmEx were down 12% from a year earlier. Cardmember spending on AmEx’s network was down 6% from a year earlier, although it has recovered since the early weeks of the recession. AmEx earns a fee for every transaction that runs on its network.

But that decline may be coming to an end, as millions of vaccinations are now being administered daily and coronavirus cases in the U.S. are on a decline. Just in the month of March, AmEx said they saw a 40% increase in travel and entertainment spending — a sign that bored Americans are ready to leave their houses.

Cardmember loans, those keeping a balance, fell by 10%.

AmEx was able to retain most of its existing customers in the pandemic, however. Average number of cards in force was roughly unchanged from a year earlier.