AmEx forecasts upbeat 2024 profit as credit card spending stays resilient

By Sri Hari N S and Niket Nishant

(Reuters) - American Express forecast a better-than-expected profit for 2024 on hopes that its affluent customers will be resilient with their spending amid elevated interest rates, sending the company's shares up nearly 3% before the bell on Friday.

The New York-based company also reported record revenue for 2023, a year which many analysts feared could bring in a recession and crimp customer spending.

AmEx, helped by its affluent customer base, has been able to navigate a tricky financial landscape more smoothly compared to some of its peers.

High-earning individuals are less sensitive to inflation and the surge in borrowing costs, which has worried customers in lower-income brackets.

"We have achieved what we set out to do, and we are ahead of where we thought we'd be on our journey," American Express CEO Stephen Squeri said.

However, some caution prevailed, with the credit card giant raising its loan loss provisions in the fourth quarter to $1.44 billion, compared with $1.03 billion a year earlier.

Eleven rate hikes by the U.S. Federal Reserve have made borrowing expensive and increased risks of more defaults, especially as credit card debt is typically costlier than other loans.

AmEx's 2024 forecast would not be impacted even if the aggressive rate cuts that markets are expecting do not materialize, CFO Christophe Le Caillec said.

"We're very much hedged from (the interest rate) standpoint ... entering 2024 with a lot of confidence."

AmEx posted a profit of $2.62 per share for the three months ended Dec. 31, up from $2.07 per share a year earlier.

The company's total revenue for the fourth quarter rose 11% to $15.80 billion. For 2023, its revenue rose 15% to $60.52 billion.

It forecast 2024 earnings per share between $12.65 and $13.15, higher than analysts' estimates of $12.41, according to LSEG data.

Billed business, which represents the transaction values on AmEx cards and other payment products, rose 6% to $379.8 billion in the fourth quarter.

The results come a day after peer Visa Inc posted upbeat quarterly results fueled by strong spending on travel and holiday shopping.

However, smaller peers Discover Financial and Capital One saw lower profits in the quarter due to higher credit loss provisions.

(Reporting by Sri Hari N S and Niket Nishant in Bengaluru; Editing by Shounak Dasgupta)