After delivering a lower-than-expected decline in their second quarterly profits, American Express shares inched down by more than 1% during Wednesday’s trading.
For the second quarter, American Express announced that its revenues are up by 1% to $8.3 billion beating most analyst estimates that the company’s revenue would stand at around $8.21 billion. AmEx delivered a revenue of $8.24 billion during the same quarter last year. The company’s revenue was expected to have been 8% higher without the sale of its Costco co-branded portfolio to Citigroup last June.
The bank posted an earnings of $1.47 per share compared to most analyst expectations of $1.43 per share. The company’s earnings stood at around $2.10 per share during the same quarter last year.
The company’s operating expenses have risen by 39% this year compared to the previous year, while its consolidated provision for losses has risen by 26% from $463 million in 2016 to $584 million this year. This was due to the loan portfolio’s strong growth and the higher write-off rate in their lending. AmEx’s consolidated expenses were also 21% higher compared to last year from $4.8 billion to $5.8 billion.
American Express has also increased its budget in its rewards program in their efforts to keep their clients from transferring into other banks that also offer huge rewards and loyalty programs to increase their credit card customers. The bank has reportedly used around $1.93 billion during the second quarter for its credit card clientele rewards which was the highest since 2014.
In their earnings report, the company stated that its card member spending has risen by 8% and have recorded 2.7 million new card members all over the globe during the quarter that ended last June. AmEx CFO Jeff Campbell has also stated that card member services costs have jumped by 24% during the second quarter due to the jump in premium travel services and access to airport lounges. Other benefits such as Uber is also included in the company’s platinum card just recently.
According to American Express Chairman and CEO Kenneth Chenault, the company has revamped its focus on its own business aside from keeping co-brand relationships. Chenault also added that they will keep lowering its operating costs and that this will place the company in a stronger position in the coming quarters.
For the company’s full year earnings, American Express has adjusted its forecast from $5.80 per share to $5.60 per share but added that it would still cut around $1 billion from its expenses this 2017. This sent the company’s shares down during Wednesday’s after-hours trading despite a better-than-expected earnings number.