The global Covid-19 pandemic battered American Express's
corporate card division during the second quarter, with plummeting
T&E-related spending dragging the segment to a US$60 million net quarterly
loss, the company said Friday.
American Express Global Commercial Services reported $82.4
billion in card-billed business for the second quarter, a 36 per cent
year-over-year decline. Average quarterly cardmember spending dropped an
identical 36 per cent from the prior year to $5,645, the company said.
Given that Q2 was the first quarter to feel the full brunt
of the pandemic's ravaging effect on the global economy, the bleak spending
figures came as little surprise to observers or Amex itself. During the
company's first-quarter earnings report in April, it projected T&E-related
spending volume would plummet by 95 per cent year over year in the second
quarter.
That prediction turned out to be overly dire, but only
slightly; T&E spending was down 87 per cent for the second quarter.
Meanwhile, airline spending went to essentially nil, with airline-related
spending volume comprising 0 per cent of billed business on all American
Express cards.
Total GCS second-quarter revenue net of interest expense was
$2.3 billion, down from $3.3 billion a year ago, primarily reflecting "a
decline in card member spending" and a lower average discount rate
compared to the prior year, Amex reported. Segment expenses were down 30 per cent
to $1.6 billion, primarily reflecting "significantly lower customer
engagement costs" due to the spending slowdown. However, factoring in a
$645 million provision for credit losses – up from $206 million a year ago – along
with other costs, brought GCS's net income into the red for the quarter.
Looking ahead to a potential gradual recovery from the
pandemic's shock to the global economy, American Express chairman and CEO
Stephen Squeri expressed optimism in noting that overall Amex spending volumes,
"which declined to their lowest point this quarter in April, gradually
improved in May and June", with small businesses the most resilient in
bouncing back.