American Express exceeds profit expectations on robust spending

American Express AXP surpassed Wall Street estimates for second-quarter profit on Friday, fueled by resilient spending from its affluent cardholders.

The beat underscores how the credit card giant's focus on wealthy customers has helped insulate it from the effects of waning consumer confidence, which is more pronounced among lower-income households.

While not representative of the broader economy, AmEx's numbers offer valuable insight into evolving trends around travel and discretionary spending, especially among the most creditworthy borrowers.

Big banks said earlier this week that consumers remain in good financial shape despite high borrowing costs, trade policy uncertainty and a job market where companies are increasingly cautious about hiring.

Excluding one-time items, AmEx earned $4.08 per share for the three months ended June 30, compared with the $3.89 per share analysts were expecting, according to estimates compiled by LSEG.

Total revenue rose 9% to $17.9 billion, also above the $17.7 billion analysts were expecting.

Still, the New York-based company boosted its provisions for credit losses to $1.4 billion from $1.3 billion a year earlier. It also noted softer airline spending amid ongoing economic uncertainty.

Its shares fell nearly 2%. They have gained 6.3% so far this year, compared with a 7% jump in the benchmark S&P 500 index SPX.

"We encourage investors to add to the shares given the valuation discount to the market," William Blair analysts wrote in a note.

Competition in the high-end credit card space is heating up. Citigroup C said on Tuesday it will launch a new premium credit card, Citi Strata Elite, later this quarter to boost its appeal among affluent customers.

But AmEx Chief Financial Officer Christophe Le Caillec said competition was welcome, as it encourages more customers to explore premium options. When they do, he said he believes they will choose American Express.

"We've been in that space for decades and we have built assets that our competitors do not have," he told Reuters.

AmEx will also roll out updates to its Platinum cards later this year for consumers and businesses in the United States, making its "largest investment ever in a card refresh".

What sets AmEx apart is also its ownership of Resy and Tock, platforms that offer cardholders privileged access to 27,000 restaurants, Le Caillec said.