Millennials', Gen Z's Restaurant And Travel Spending Energizes Amex's Profit

American Express said profit rose to a record level in the third quarter boosted by new accounts and spending by younger customers.

Profit rose 30% in the three months ended in September to $2.45 billion, from $1.88 billion a year earlier, the company said in a statement Friday.

Millennial and Gen Z consumers, or people under 42, are the fastest growing area for the company, Amex said. In the U.S. they increased spending by 18%. They also accounted for more than 60% of new accounts globally.

The younger generations are more willing to pay for the higher-fee credit cards issued by Amex, the company said. Fee-based cards accounted for more than 70% of new accounts in the last card.

The Amex Platinum card, which gives customers access to airport lounges and offers more points, charges an annual fee of $695.

Travel and Entertainment

The company said the overall spending on credit cards increased 9% in the U.S. and 15% in international operations.

The segment leading spending was travel and entertainment. Amex customers spent 13% more than a year ago at restaurants and 12% more with airlines.

"Based on our performance to date, we remain confident in our ability to achieve revenue growth and EPS for the full year consistent with the annual guidance we provided at the start of the year," Chairman and Chief Executive Officer Stephen Squari said in the earnings statement. "We believe we are well positioned as we seek to achieve our long-term growth plan aspirations in 2024 and beyond in a steady-state macro environment."

Strong Consumer

Amex's comments match recent economic data and earnings already reported by other companies.

Delta Air Lines said on Oct. 12 that consumer's interest in air travel is showing strength for the last three months of the year, especially for international flights. The company expects a revenue growth of 9% to 12% in the fourth quarter from a year earlier.

U.S. retail sales rose 0.7% from August, the Commerce Department said Tuesday. Economists surveyed by Reuters expected a gain of 0.3%. Separate surveys conducted by Deloitte and Mastercard showed that U.S. consumers plan to increase spending this holiday season.

Amex customer delinquencies increased from a year ago, but are still below pre-pandemic levels. The 30+ day past-due rate for loans and receivables was at 1.2% from 1.1% in the third quarter of 2022. In the fourth quarter of 2019, the rate was at 1.5%

Amid the year-over-year increase in delinquencies, the company raised the provisions to cover credit losses to $1.23 billion from $778 million just 12 months ago.