By Pallavi Dewan
(Reuters) - Credit card issuer American Express Co (N:AXP) easily topped Wall Street targets for quarterly profit as record investments in card rewards and a strengthening U.S. economy contributed to higher customer spending.
Shares of AmEx, which ended 1.4 percent higher on Wednesday, added another 3.5 percent in after-hours trading.
New York-based AmEx spent a record $2.35 billion in customer rewards during the first three months of the year, seeking to woo more high-spending customers and counter competition from major U.S. banks.
JPMorgan Chase (N:JPM), Citigroup (N:C) and Bank of America (N:BAC), which have all begun offering premium cards, each saw their card businesses grow in the first quarter.
"Today's results are showing good returns on the investments we've been making to drive growth in the premium sector," AmEx Chief Executive Stephen Squeri said in a statement.
Higher marketing expenses are the "table stakes" in the premium card category, analysts at Jefferies Group said last week, forecasting that industry-wide investments will continue to grow because of high competition.
AmEx on Wednesday also said it expects 2018 earnings at the high end of its estimated range of its $6.90 to $7.30 per share. Analysts on average were expecting $7.11 per share, according to Thomson Reuters I/B/E/S.
The company said first-quarter card customer spending increased 3 percent in the United States and 7 percent worldwide.
Consumer spending in the United States rose in January and February.
AmEx's net income rose to $1.63 billion or $1.86 per share in the quarter ended March 31, from $1.25 billion or $1.35 per share a year earlier. Analysts had expected earnings of $1.71 per share.
Total revenue, net of interest expense, climbed 12 percent to $9.72 billion, topping analysts' forecasts of $9.46 billion.
AmEx is confident of resuming stock buybacks in the second half of 2018, Chief Financial Officer Jeffrey Campbell said on a call with analysts.