Updated January 26th, 2024 at 17:49 IST
American Express Q4 profit dip as potential loan defaults jump
With the US Federal Reserve implementing eleven rate hikes, borrowing costs have risen, heightening the risk of increased defaults.
American Expres Q4 results: American Express fell short of fourth-quarter profit estimates on January 26, revealing the impact of higher loan loss provisions. The credit card giant anticipated a surge in potential loan defaults, highlighting the financial strain on customers amid elevated interest rates.
With the US Federal Reserve implementing eleven rate hikes, borrowing costs have risen, heightening the risk of increased defaults. This is particularly relevant for credit card debt, which tends to carry higher interest rates compared to other loans. In response to these challenges, lenders, including American Express, are bolstering provisions for potential defaults.
For the fourth quarter, AmEx raised its loan loss provisions to $1.44 billion, marking an increase from $1.03 billion in the same period the previous year. Despite reporting a profit of $2.62 per share for the three months ending on December 31, up from $2.07 per share, the company fell short of analysts' expectations. Analysts had anticipated a profit of $2.64 per share, as per LSEG data.
These results follow Visa Inc's positive quarterly performance driven by robust spending on travel and holiday shopping. In contrast, smaller peers Discover Financial and Capital One experienced reduced profits in the quarter, attributed to higher credit loss provisions.
(With Reuters inputs)
Published January 26th, 2024 at 17:49 IST