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The American Express logo is displayed on a screen at the New York Stock Exchange on Dec. 6, 2017.
Brendan McDermid/Reuters
Credit card issuer American Express Co on Friday warned of a slow recovery in transaction volumes in the near term, after it set aside $1.6 billion for potential credit losses that weighed on its quarterly numbers.
The company said its high exposure to travel and entertainment (T&E) industries, which have been ravaged by the COVID-19 pandemic, has led to a sharp decline in its overall spending volumes, though some other sectors are looking up.
Overall spending volumes were down 20 per cent in mid-July compared with a 40 per cent decline in April, the company said in a post-earnings call.
“(AmEx is) in a tricky situation because they have a large corporate book and a big T&E book and those are the parts in the world’s economies that are weak, and consequently they are growing slower,” Susquehanna Financial Group analyst James Friedman told Reuters.
Consumers and businesses cut their spending on travel and entertainment by 87 per cent in the second quarter, with the overall spending down by more than a third.
The company raised its consolidated loss provisions to $1.6 billion from $861 million a year earlier, in anticipation of a spike in defaults from a wave of layoffs caused by the crisis.
Between leading card issuers JPMorgan Chase & Co and Citigroup, they have set aside about $18 billion in provisions for potential credit losses.
American Express’ total revenue fell 29.2 per cent to $7.67 billion, while net income came in at 29 cents per share, down from $2.07 a year ago.
AmEx shares were down 1.5 per cent on Friday.
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