NEW YORK (AP) -- Credit card giant American Express posted a 34% jump in its first quarter profits on Friday, helped by more customers spending on its namesake cards as well as more customers keeping a balance on the cards.
The New York-based company said it earned $2.44 billion in the first three months of the year, or $3.33 a share, up from $1.82 billion, or $2.40 a share, a year earlier. The results exceeded Wall Street's expectations, who were looking for roughly $2.95 a share in profits for the quarter.
The jump in profits for AmEx came largely from higher cardmember spending on their accounts as well as more balances collecting interest. The company had $15.8 billion in revenue in the quarter, up 11% from a year earlier.
AmEx customers spent $419.2 billion on their cards in the quarter, up 5% from a year earlier. AmEx takes a small percentage of each transaction spent on their cards as a fee from merchants, which was its primary business model for decades.
But AmEx is now also bringing hefty amounts of interest income, earned on customers who keep a balance and revolve on their accounts now. The company earned $5.06 billion in interest income last quarter on loans to cardmembers, up 28% from a year earlier. Roughly a third of AmEx's revenue now comes from interest income.
The company added 3.4 million new cardmembers in the quarter, with roughly 7 out of every 10 new customers picking up a credit card that has an annual fee attached to it. AmEx executives point to the higher use of fee-based products as a sign that its customers see the value in the card despite the fee.
"We continue to attract high-spending, high credit-quality customers to the franchise," said Steve Squeri, AmEx's chairman and CEO, in a statement.
As more customers keep a balance, AmEx is seeing some customers fall behind on payments. The company's charge-offs and 30-day delinquencies have continued to creep higher post-pandemic. But AmEx's charge off rates are roughly half of what its competition like Capital One, Discover and Chase are facing at the moment.
