Shares of credit card and payments company American Express (AXP 2.00%) traded roughly 4.7% lower as of 9:37 a.m. ET today after the company reported earnings for the third quarter of the year.
American Express reported diluted earnings per share (EPS) of $2.47 on total revenue of about $13.56 billion for the third quarter. Earnings beat expectations, while revenue was roughly in line.
Total network volume of $394 billion fell slightly from the previous quarter but is up 19% year over year. American Express also added 3.3 million new cards and about $4.4 billion of loan balances in the quarter, with loan balances now up 31% year over year. Net interest income from its loans jumped 9% in the quarter, as the bank benefited from the higher interest rate environment.
American Express took a provision for credit losses of $778 million the quarter, which is nearly a 90% increase from the second quarter. That includes a $387 million reserve build. Still, probable loan losses of $391 million only rose about $39 million from the prior quarter and 30-day delinquencies rose modestly as well but are still well below pre-pandemic levels.
American Express continues to guide for revenue growth in the full year to be 23% to 25% higher than 2021 and for EPS to be above its initial guidance of $9.25 to $9.65. The company also said it expects "higher than long-term aspirational levels of revenue growth" in 2023. For 2024, the company expects revenue growth of more than 10% and EPS growth in the midteen-percentage range.
Investors might be worried about the provision build or this year's guidance because the average consensus for EPS this year is $9.91.
But the bank still looks to be on solid footing and tends to serve a higher-quality borrower than its competitors so I'm still relatively bullish on the stock.