First-quarter profit at American Express fell as the New York-based credit card company had to aggressively market to keep customers after losing lucrative exclusive contracts with Costco and JetBlue. However, AmEx’s bottom line still beat analysts’ expectations as customers spent more on its credit cards and the company added new card accounts.
AmEx on Wednesday said it earned a profit of $1.39 billion, or $1.45 a share, in the first quarter, after payments to preferred shareholders. That was down from $1.51 billion, or $1.49 per share, in the same period a year earlier. The results exceeded Wall Street’s expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of $1.36 per share.
“Despite strong competition throughout the payments industry, we generated a 4% increase in FX-adjusted revenues,” AmEx’s chairman and chief executive Kenneth I. Chenault said in a press release. “Those revenues reflected strong, underlying growth in our lending portfolio, along with higher card member spending and fee income.”
Customers spent $253.8 billion on their cards in the quarter, up 6% adjusting for currency fluctuations.
Expenses rose 5% to $5.47 billion, as the company continued to invest heavily on marketing and promotions to keep the customers it had under the JetBlue and Costco credit card programs, trying to retain those customers by selling them new AmEx-branded cards. The company added roughly 5.4 million new credit card accounts in the United States, helping revenue to rise 2% to $8.09 billion in the quarter.
“AmEx lost its exclusive contract with Costco early last year to Visa and Citigroup, which was a major blow to the company since it represented a sizable chunk of AmEx’s total card spending and loans,” the Associated Press wrote via ABC News.
AmEx reaffirmed its full-year guidance, saying it still expects to earn $5.40 to $5.70 a share in 2016 and at least $5.60 per share in 2017.