Credit card company American Express (NYSE:AXP) has exceeded quarterly profit estimates after releasing more than $1 billion U.S. of funds it had set aside to cover potential loan losses during the pandemic.
The outlook for credit card companies is improving as government stimulus measures and vaccine rollouts fuel an economic recovery, helping the industry recover from a pandemic-driven slump in non-essential consumer spending.
Consulting firm McKinsey said in a report last month that overall credit-card spending is recovering, with figures for the last six months matching pre-pandemic levels.
In the first quarter of this year, American Express posted a benefit of $675 million U.S. from the release of $1.05 billion U.S. from its loan-loss reserves. The company had built reserves of $1.7 billion U.S. over the past year.
American Express’ net income in the quarter rose to $2.74 U.S. a share from 41 cents U.S. a share a year earlier, beating analysts’ estimates of $1.61 U.S. per share.
The credit card company’s revenue fell 12% to around $9 billion U.S. during the first quarter. Travel and entertainment-related spending on American Express credit cards fell 50% as people continued to stay close to home in the first three months of this year.
However, the company reported that spending on goods and services using American Express cards rose 6% from a year earlier.