AMERICAN EXPRESS SECOND QUARTER PROFITS RISE 9%, BEAT EXPECTATIONS

What’s happening?

American Express posted a 9% gain in secondquarter profits on Friday, helped by more of its card members carrying a credit card balance and increased spending on its namesake cards.

The New York company said it earned a profit of $1.76 billion, or $2.07 a share. That’s up from earnings of $1.62 billion, or $1.84 a share, in the same period a year earlier. Analysts were looking for AmEx to earn $2.03 a share, according to FactSet.

Why is it happening?

The improving economy has convinced more U.S. consumers to spend and take on increasing amounts of credit card debt, which benefits AmEx’s bottom line. Its card members spent $311.7 billion on its cards worldwide in the quarter, up from $296.5 billion a year earlier. Meanwhile individual U.S. card member spending rose to $5,445 in the quarter, up from $5,275 in 2018.

What’s next?

American Express makes most of its money off of fees it charges merchants to accept their cards. The more money spent by consumers at these merchants, the more AmEx earns in processing fees.

AmEx has also been encouraging its customers to carry a balance, even on its traditional cards that typically had to be paid off at the end of each month. The company had $72.6 billion in loans to customers at the end of the second quarter, up from $66.3 billion a year earlier.

Total revenue for the company, net of interest expense, was $10.84 billion, up from $10 billion a year earlier.