American Express projects strong 2024 profit despite fourth quarter miss

American Express 2024 profit: American Express (AmEx) has forecasted a robust profit for 2024, exceeding analysts' expectations, as it relies on the resilience of its affluent customer base amid heightened interest rates. The anticipation of continued spending from this demographic has propelled AmEx shares nearly 3 per cent higher before the opening bell on Friday.

Despite concerns of a potential recession and reduced consumer spending in 2023, AmEx reported record revenue for the year. The company's ability to navigate economic challenges has been attributed to its affluent customer base, which tends to be less sensitive to inflation and increased borrowing costs, factors that impact customers in lower-income brackets.

AmEx CEO Stephen Squeri expressed confidence in the company's performance, stating, "We have achieved what we set out to do, and we are ahead of where we thought we'd be on our journey."

However, a note of caution emerged as AmEx raised its loan loss provisions in the fourth quarter to $1.44 billion, compared to $1.03 billion a year earlier. The move is a response to the 11 rate hikes by the U.S. Federal Reserve, resulting in more expensive borrowing and an increased risk of defaults, particularly in credit card debt.

For the fourth quarter ending December 31, AmEx posted a profit of $2.62 per share, a slight miss compared to analysts' expectations of $2.64 per share. The total revenue for the quarter rose by 11 per cent to $15.80 billion. For the entire year 2023, AmEx reported a 15 per cent increase in revenue, reaching $60.52 billion.

Looking ahead, AmEx is optimistic about its 2024 prospects, forecasting earnings per share between $12.65 and $13.15, surpassing analysts' estimates of $12.41.

These results come in the wake of positive quarterly results from peer Visa Inc, driven by strong spending on travel and holiday shopping. However, other credit card companies, such as Discover Financial and Capital One, reported lower profits in the quarter due to higher credit loss provisions.

(With Reuters inputs.)