American Express: Rebound In (Non-T&E) Consumer Spend — Online Retail Up 20 Pct

American Express posted Q3 results Friday (Oct. 23) that showed a rebound in spending across consumer and commercial segments from lows seen in the spring amid the pandemic’s heights. The firm especially saw gains in non-travel and expense card-not-present activity related to categories such as retail.

CEO Steve Squeri said in remarks that accompanied the earnings release that overall spending volumes have been steadily growing off of their April nadir. “In fact, we had positive year-over-year growth in non-T&E spending, which has long accounted for the large majority of our overall volumes,” he said.

Drilling down into supplemental earnings materials, the company said its proprietary-billed business — defined as activities including cash advances across proprietary cards — totaled about 86 percent of total billings. CFO Jeffrey Campbell said on the company’s earnings call that non-T&E spending accounted for 88 percent of that segment.

Getting a bit more granular, American Express said consumer spending accounted for 53 percent of total proprietary-billed business during the quarter, while small and medium-sized businesses (SMBs) accounted for 40 percent and large corporates made up the remainder.

CNP And Retail Spend 

AmEx also provided details on the channels customers used during the quarter in order to transact.

For non-T&E spend, global consumer online spending rose 20 percent year on year, while offline spending was down 13 percent. Similarly, commercial online spend was up 1 percent year on year, while offline commercial spending fell 9 percent.

In terms of industry spend, retail spending made up 36 percent of Q3’s total (up 3 percent year on year), but retail offline spend was down 10 percent.

All told, the company said that total ending loans were $73.1 billion for the quarter, down from $88.1 billion from a year ago. Card member loans also dropped to $432 million from $499 million in the second quarter.

However, loss metrics improved quarter to quarter, as net write-offs came in at 2.5 percent vs. 2.8 percent in the second quarter. Card member loans 30 days past due likewise fell to 1.2 percent from 1.6 percent.

With a nod to loan balances, CFO Campbell said on the call that “based on what we see today, if you assume some continued improvement in spending levels, I would expect this quarter to be the low point for loan balances, and [we’re] looking forward for those balances to start to grow modestly.”

CEO Squeri added that “AP automation volumes continued their rapid growth, although from a small base, doubling since last year’s third quarter, as more businesses adopted digital payment solutions.”

He also told analysts that 80 percent of the SMB volume (in spend) came from non-T&E spending. The company added that corporate-card spend has fared relatively better than corporate T&E, due to inroads American Express has made into B2B spend.

Look For ‘Selective’ Investments 

Squeri said that as the macro environment continues to improve (with uncertainty as to how entrenched that improvement might be), Amex will “selectively invest for the long-term.” He cited the recent acquisition deal for Kabbage, along with Amex’s move to cement relationships with key digital partners WeChat and Alipay.

“We’re currently working to develop debit capabilities on our network to capture some of the significant debit usage within China,” Squeri added.

As has been seen with other financial services firms, AmEx also said its outlook for credit losses improved during Q3. Provisions for credit losses declined to $665 million during the quarter, down from $879 million a year ago.

All in, American Express earned $1.30 a share — four pennies lower than analysts’ consensus estimates. Revenues fell 20 percent year over year to $8.8 billion, but that was higher than the $8.7 billion consensus forecast from analysts.