American Express Co.’s third-quarter profit rose only marginally as card member spending growth remained muted for the second quarter in a row.
The slowing growth echoes that of other large credit card issuers. U.S. credit card volume growth decelerated both at Bank of America and U.S. Bancorp, which reported results earlier on Wednesday.
Amex’s U.S. card holders, mostly affluent consumers, reined in their spending in the quarter.
Card member spending in the United States rose 8 per cent in the quarter. That figure, though up from the second quarter, is still below the double-digit growth the company had posted for the nine preceding quarters.
“It represents slower growth than we were generating earlier in the year,” chief executive officer Kenneth Chenault said in a statement.
American Express, which has a market value of more than $66-billion (U.S.), is looking to expand its market beyond the affluent, for whom there is stiff competition in the card market.
The company has teamed up with Wal-Mart Stores Inc., the world’s largest retailer, to offer a prepaid debit card to target lower-income shoppers who may not have bank accounts.
The move gives Amex access to tens of million of new consumers as technology moves more of their transactions from cash to digital payments.
The slowing card spending translated into muted earnings growth.
Amex’s profit rose just 1 per cent $1.25-billion, or $1.09 per share from a year earlier.
Revenue grew at the slowest rate in 11 quarters. Total revenue, net of interest expense, was $7.86-billion, up 4 per cent.
Analysts on average had expected the company to earn $1.09 per share, on revenue of $7.90-billion, according to Thomson Reuters I/B/E/S.
The company has the lowest delinquency rate among the large credit card companies, including JPMorgan Chase, Discover Financial, Capital One, Bank of America and Citigroup.
But it set aside $479-million to cover future bad loans, reflecting its larger lending portfolio, 92 per cent more than it had provisioned last year.
The large increase also reflects a $421-million reserve release in the year-ago quarter.
“We didn’t have the same benefit from substantial reserve releases as last year when write-offs and delinquencies were declining at a faster rate,” Mr. Chenault said.
American Express, which lends directly to consumers and also competes with Visa Inc. and MasterCard Inc. to process credit card transactions, said global network and merchant services revenue grew 5 per cent to $1.3-billion.
Shares of the company, which have risen more than 24 per cent so far this year, were down about 1 per cent at $58.80 after the bell.
They closed at $59.37 on Wednesday on the New York Stock Exchange.