AmEx Brushes off Inflation Fears As It Reports Big First Quarter Results

American Express Co. reported a strong first quarter early Friday that betokens a return to pre-pandemic performance for the company, though it also confronts questions stemming from emerging inflation and the threat of recession.

AmEx reported overall spending in its crucial travel-and-entertainment business in March reached 99% of the total in March 2019, well before Covid-19 began impacting travel. “Corporate clients have started to show recovery in travel,” said chief financial officer Jeff Campbell during a conference call with equity analysts. 

That March performance represented a marked acceleration for T&E. Restaurants have recovered the most, showing a 19% growth in first-quarter volume compared to the same period in 2019, while lodging and airlines lagged behind in that comparison. Overall, T&E for the quarter was down 12% compared to 2019’s first quarter.

But while T&E is recovering, both Campbell and chief executive Steve Squeri took pains to reassure investors the company’s volume gains have little to do with rising inflation, which reached 8.5% in March. “This is not being driven by inflation,” Squeri said. “Transactions are up. When you book a flight, that’s not inflation. People have not been traveling for two years. There’s tremendous pent-up demand.”

Compared to a year ago, AmEx’s volumes grew in double digits across the board, with a 38% rise for the U.S. consumer category alone (the company does not report absolute figures). This category is AmEx’s largest, accounting for 35% of the company’s business. On the business side, large and global corporate volume, which accounts for 6% of network volume, was up 42%. For U.S. small-and-medium-size businesses, which account for 27% of volume, the rise was 29%. “People are looking to get out and meet customers. We’re seeing conferences come back. Customers are opening up their offices,” said Squeri.

Cardholders and businesses, he said, are normalizing the pandemic. “Covid is not going away,” he said. “We’ll deal with it as we do with the flu.”

While rising inflation is having only a “modest impact” on processing volumes, “we are always planning for what the economic consensus is.” Campbell said. In answer to an analyst’s question about the prospects for a recession following sustained inflation, he added, “We want to make sure we’re positioned for that.”

Certainly, AmEx’s revenue from its discount fee to merchants came in strong, at $6.8 billion in the quarter, up from $5 billion a year ago and from $5.6 billion in the first quarter of 2020, the last full quarter before pandemic restrictions took hold nationwide.

For the quarter, AmEx reported revenue of $11.7 billion, up 29% year-over-year.