AmEx raises revenue forecast due to higher travel spending

American Express credit cards are pictured in this illustration on March 17, 2016. REUTERS/Kay Pfaffenbach/File Photo

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July 22 (Reuters) – American Express (AXP.N)’s quarterly spending jumped to a record high as pandemic-weary travelers shrugged off an increase in airline fares at airports, helping the company raise its annual revenue forecast and lift its stock 5%.

The credit card giant also beat its April-June earnings estimates and joined major US banks including JPMorgan Chase & Co (JPM.N) in highlighting the resilience of consumer spending in the face of an uncertain economic outlook.

However, CEO Steve Squire said the loss rates will slowly rise, although they will still be well below pre-pandemic levels this year.

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The company added $410 million in provisions for credit losses, reflecting a similar increase at major US banks, and said it expects to allocate more money.

“What I’ve seen is a correlation between … people losing their jobs and not being able to pay their bills. And that’s likely to be a problem in the future,” Squire said.

The number of Americans filing for unemployment benefits for the third consecutive week rose last week to an eight-month high, indicating a slowing economy due to higher interest rates and rising inflation.

Travel boom

For now, though, AmEx is benefiting from mobilized demand and the easing of COVID-19 restrictions that have led to the strongest summer travel season since the pandemic began.

Strong consumer spending has been a feature of the company’s earnings for several quarters, said Michael Miller, equity analyst at Morningstar, but the recovery in international and corporate travel was the main driver this time around.

“The growing premium cardholder base is creating a virtuous cycle for American Express,” he added.

The company added 3.2 million new title cards in the quarter ended June 30. Its net income of $2.57 per share beat the $2.41 analysts had expected, according to Refinitiv data.

Competitors Visa and MasterCard report on earnings next week.

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(Covering by Manya Saini and Mihnaz Yasmin in Bengaluru); Edited by Aditya Sony

Our Standards: Thomson Reuters Trust Principles.

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