AmEx Stands Ground Despite Record Q2 Spend; Investor Anxiety High

Card Spending Hits Historic High Amid Steady Forecast

Despite witnessing an all-time high in credit card spending by customers in Q2, American Express (AmEx) opted to leave its annual profit forecast unaltered. This move disheartened investors, pushing the company's shares down 5% on Friday.

Analysts Express Concern Over Potential Slowdown

AmEx's solid performance, bolstered by robust travel and entertainment spending, left executives optimistic about the remainder of the year. However, analysts warned that the company's steady outlook hinted at a possible slowdown. "Results were strong, though spending growth is moderating from unsustainably high rates in 2022," remarked Edward Jones analyst Kyle Sanders.

AmEx Rides Wave of Younger Demographics

The financial giant recorded a surge in Q2 spending to $426.6 billion, a significant achievement despite rapid interest rate hikes by the US central bank. AmEx CEO Stephen Squeri attributed this in part to an evolving customer base. "Our base is changing in terms of more Millennials and Gen Z who will grow with us. And as the economy gets better, we expect the spending to pick up," he said during a call with analysts.

Rising Borrowing Costs Trigger Provisions for Credit Losses

AmEx, foreseeing potential defaults in debt repayments due to increasing borrowing costs, boosted its provisions for credit losses to $1.2 billion from $410 million the previous year. Despite this setback, RBC Capital Markets analysts referred to the provisions as a "modest headwind," considering the second quarter's healthy fundamental trends.

AmEx Reiterates Profit Forecast Amid Market-Beating Profit

Despite the overall strong spending trends across all customer types and regions, AmEx reaffirmed its per-share profit forecast of $11 to $11.40 for 2023, following a market-surpassing profit of $2.89 per share. Justifying the careful outlook, CFO Jeff Campbell mentioned that significant revisions would only be triggered by something "wildly different," like the COVID-19 pandemic of 2020.