American Express (NYSE:AXP) delivered an upbeat first-quarter report on Wednesday, which sent the shares of the company up by more than 2% upon market open.
Earnings Results
The company’s positive first quarter profit was led by the increased spending in AmEx’s credit card members. According to American Express chief executive Kenneth Chenault, card member spending has risen by 8% adjusted by changes in foreign exchange rates. Overall, the company was able to record 1.7 million new card members across the U.S. from both businesses and personal holders and 2.6 million globally during the quarter slightly beating growth from the previous quarter.
Chenault also added that the positive earnings result was due to the investments the company has been taking to further support the growth of the business and their successful progress in reducing their operating expenses.
The loans sector of the business has also grown by 11% over half of the growth coming from existing customers or members.
Despite beating analysts’ expectation of $1.28 earnings per share, the company still reported losses in their net income coming from $1.4 billion last year. AmEx’s EPS came in $1.34 with a net income of $1.2 billion.
Revenues also declined by 2% compared to the same quarter last year to $7.9 billion, which still beat forecasts of $7.79 billion in revenue.
Analysts commended the bank for having sustained such performance in the midst of rising competition with more competitors offering higher rewards, especially for premium customers. AmEx, for instance, raised its Platinum card rewards to compete against a much higher-end market, particularly JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C). Aside from the additional rewards, AmEx also boosted its efforts and spending in promotions and marketing.
“Our first quarter performance marks a good start to the year with momentum in the consumer and commercial businesses in the US and in key markets internationally,” said Chenault
AmEx To Further Cut Costs
The financial services company which attributed most of their spending success to their operating expense cutting intends to further curb costs in other areas. This would allow them to raise their margins and make meeting its full-year profit forecasts easier.
AmEx chief financial officer Jeffrey Campbell said on a call with analysts on Wednesday that the company expects its earnings per share and net income to rise due to the continuation of their cost-reducing measures. Campbell previously mentioned in the previous earnings call that the company’s earnings and revenue for the year would be “uneven.”