American Express sees profit growth in Q3 driven by increased spending from cardholders.

NEW YORK — American Express reported a stronger-than-expected profit for the third quarter, driven by robust spending habits of its cardholders, many of whom are carrying balances.

For the quarter ending September 30, the company posted a profit of $2.51 billion, translating to earnings of $3.49 per share. This is an increase from last year’s profit of $2.45 billion, or $3.30 per share.

The earnings surpassed the forecast of $3.27 per share projected by analysts from Zacks Investment Research.

Revenue for the company reached $16.64 billion, aligning with the expectations of Wall Street.

American Express benefitted significantly from its card members, who are generally more affluent and less vulnerable to economic shifts. Even amidst some economic challenges and rising inflation, spending on their cards remained strong.

During the last quarter, customers charged $387.3 billion to their American Express cards, reflecting a 6% increase compared to the same time last year. Merchants incur a fee for accepting these cards, which typically ranges between 2% to 4%, depending on the industry and size of the business.

Additionally, many American Express cardholders are retaining balances, with reported card member loans amounting to $134.5 billion—an increase of 14% from the previous year.

This growth in card member loans contributed to an interest income of $6.15 billion for the quarter, marking a 17% rise year over year.

Steve Squeri, Chairman and CEO, noted that enhancements in popular spending categories, particularly dining, are driving growth among millennial and Gen Z consumers. These young consumers account for 80% of new accounts on the U.S. Consumer Gold Card and are the company’s fastest-growing demographic in the nation.

In a positive turn, American Express has also revised its earnings outlook for the entire year, now anticipating earnings between $13.75 and $14.05 per share, up from a previous estimate of $13.30 to $13.80. Analysts surveyed by FactSet predict earnings of $13.24 per share for the year.

However, shares of American Express saw a decline of 2.5% prior to the market opening on Friday.