Oh, who's laughing now, recession? American Express
Net income came in at $640 million, or $0.53 per share, down from $815 million, or $0.70 per share, in the same period last year. The current results were boosted by a one-time $113 million after-tax gain. That in itself doesn't look great, but all the action is in the details:
|
Metric |
Q3 2009 |
Q2 2009 |
Q3 2008 |
|---|---|---|---|
|
30-day delinquencies |
4.0% |
4.3% |
3.8% |
|
Net charge-off rate |
8.6% |
9.7% |
5.7% |
|
Total purchase volume |
$156.6 billion |
$151.4 billion |
$175.5 billion |
|
Average card member spending |
$2,898 |
$2,712 |
$3,049 |
|
Reserves for losses as a percentage of delinquent loans |
264% |
230% |
154% |
This shows a pretty sweet three-way celebration:
- Early stage delinquencies are improving noticeably.
- People are spending more.
- Provisions for losses are both growing and huge.
The uptick in total purchase volume, however slight, isn't just good news for AmEx's card processing unit, but bodes well for Visa
But improvements on the credit-quality side are where investors should focus. Sequential declines in delinquencies led to a huge drop in net charge-offs. Charge-offs are still staggeringly high by any measure, but improvement in early stage delinquencies may hint at continued progress in net losses going forward. Another quarter or two of falling delinquencies could usher in a sizable gift to AmEx's bottom line.
Before you run out and throw a "RIP credit crisis" party, know that AmEx's focus on wealthy consumers puts it in a different league than other lenders. By and large, the credit card industry is still a big, ugly mess.
On that note:
