NEW YORK — American Express saw its profits rise sharply in the third quarter as the credit card giant successfully transitioned the vast majority of its cardholders to the new, higher-fee Platinum card while its affluent customers continued to spend aggressively on their cards.
The New York-based company reported earnings of $3.71 billion on Friday, up 28% from a year ago, or $5.42 per share. Excluding a one-time gain from AmEx’s sale of its stake in Global Business Travel Group, the company posted quarterly profit of $4.68 per share. This figure exceeds Wall Street estimates.
AmEx’s revenue and profits have grown thanks to a combination of customers charging more on their cards and spending more to have an AmEx card. Last year, AmEx updated its Platinum card, adding several new benefits for cardholders while increasing the annual fee from $695 to $895. Reviews of the update were generally positive at the time. However, the bigger question for Wall Street was whether AmEx cardholders, even with its wealthiest customer base, would be willing to stomach a $200 hike in the card’s price.
So far, AmEx says almost all customers who were transferred to the higher-fee Platinum card have decided to keep the card. Net card fees, which include annual fees on cards like Platinum, increased by more than $400 million from the previous year.
The company also continues to see an increase in the amount spent on cards. The average AmEx customer spent $6,735 on their cards last quarter, or $2,245 per month. This is an increase of 5% compared to last year.
Some of this higher spending is likely linked to inflation, Christophe Le Caillec, AmEx’s chief financial officer, said in an interview. AmEx customers are investing heavily in travel and entertainment spending, and for example, airfares have risen sharply from a year ago due to rising fuel prices and other inflationary pressures. However, the company is also seeing an increase in the number of transactions per cardholder.
The company now expects to report adjusted earnings of between $17.60 and $17.90 per share for the full year, raising the lower end of its forecast which was previously $17.30 to $17.90 per share.
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