Despite high interest rates and inflation, American Express (AXP, Financial) has consistently reported strong quarterly earnings. In 1Q25, the company exceeded EPS expectations, driven by a 7% growth in billed business (FX-adjusted). This performance follows a trend set by other banks, such as JPMorgan Chase (JPM, Financial) and Bank of America (BAC, Financial), which reported healthy consumer spending growth of 7% and 4% respectively in Q1.
What distinguishes AXP is its younger, affluent customer base. Approximately 35% of its U.S. spending comes from Millennials and Gen Z, with average household incomes exceeding $400,000 for premium products like Amex Platinum. This demographic mix provides AXP with resilience against economic fluctuations and supports strong credit quality.
- Provision for credit losses decreased by $100 million year-over-year to $1.2 billion, with a stable net write-off rate of 2.1%. In contrast, BAC's credit losses rose by $200 million to $1.5 billion, and net charge-offs increased by over 80% to $1.5 billion.
- AXP saw an 11% year-over-year increase in Travel & Experiences (T&E) spending, surpassing overall card spending. This growth is driven by Millennials and Gen Z, who prioritize experiential purchases.
- The company added 3.4 million new cards in the quarter, maintaining strong retention rates. Although specific retention figures weren't disclosed, CEO Stephen Squeri noted improved retention compared to 2024, indicating high customer engagement and loyalty. Demand for premium cards, which generate higher fee income, remains strong.
- Consolidated expenses rose by 10% year-over-year to $12.5 billion, due to higher variable customer engagement costs linked to increased card member spending. These expenses include rewards, business development, and card member services, driven by rising travel-related benefits usage and reward redemptions.
AXP's robust 1Q25 results highlight healthy spending growth from younger customers with premium products, while maintaining strong credit quality in a volatile macro environment. The company reiterated its FY25 outlook, anticipating revenue growth of 8-10% and EPS between $15.00 and $15.50, despite rising expenses and macroeconomic challenges.
