American Express: investors should not take fright at provisions
Are loan loss provisions an act of prudence or a red flag? It is a question that divides investors this earnings season.
US credit card giant American Express reported a sharp jump in revenue for the third quarter on Friday. Cardholders have continued to spend big despite concerns over soaring inflation and rising risks of a recession. Overall revenue net of interest expense was up 24 per cent to hit an all-time high of $13.5bn. Executives said they now expect full-year earnings per share to rise above the previous guidance.
Even so, shares in Amex fell 7 per cent, investors perhaps spooked by the company’s $778mn loan loss provision. The hit — which covers current and future loan losses — was above analyst expectations and weighed on profits. Net income rose only 3 per cent despite the big increase in revenue.
This story originally appeared on: Financial Times - Author:Tax Cognition
