American Express Profit Soars on Platinum Card Success
The credit card company reported a significant increase in third-quarter profits, largely attributed to customers embracing its revamped, higher-fee Platinum Card.
American Express reported a sharp rise in third-quarter profits, with earnings jumping 28% year-over-year to $3.71 billion, or $5.42 per share. Excluding a one-time gain from the sale of its stake in Global Business Travel Group, the company's adjusted profit was $4.68 per share, surpassing Wall Street expectations.
The financial services giant attributed its profit growth to two key factors: increased spending by its cardmembers and a successful transition of customers to the updated, higher-priced Platinum Card. The annual fee for the Platinum Card was raised from $695 to $895 last year, coinciding with the addition of new member benefits. Despite the price increase, American Express stated that nearly all customers who were transitioned to the higher-fee card have chosen to retain it. This resulted in a net increase of over $400 million in card fees compared to the previous year.
Spending on American Express cards also saw an increase, with the average cardmember spending $6,735 last quarter, a 5% rise from the prior year. This uptick in spending is partly influenced by inflation, particularly in travel and entertainment sectors where AmEx customers tend to focus their spending. For instance, airline fares have risen due to increased fuel costs. However, the company also observed a rise in the number of transactions per cardmember, indicating increased usage.
Based on these performance metrics, American Express has revised its full-year adjusted profit forecast. The company now anticipates earning between $17.60 and $17.90 per share for the year, raising the lower end of its previous projection.