Amex quarterly profit plunges 76% on $1.7bn reserve build

Total revenue for the quarter fell to $10.3bn from $10.4bn a year earlier

American Express is offering perks to small businesses to encourage spending. AFP

American Express, one of the top global payments companies, posted a 76 per cent drop in quarterly profit on Friday, as it set aside $1.7 billion (Dh6.23bn) to brace itself against potential non-payments due to a wave of coronavirus-led layoffs.

The pandemic has hammered the global economy, hurting consumers' ability to make payments on their credit cards. The lockdowns around the world are also hitting transaction volume as people stay at home.

"In light of the current environment, we are aggressively reducing costs across the enterprise", said chief executive Stephen Squeri, adding that the deterioration in the economy due to the virus accelerated in April and has dramatically impacted its volumes.

However, shares of the company were up nearly 2 per cent, as it kept a tight lid on costs to weather the impact of the pandemic on its business.

Total expenses were down 5 per cent at $7.2bn, due to lower operating expenses in the reported quarter. Amex spent $2.39bn on card member rewards, down 2 per cent from a year earlier.

The company's net income fell to $367 million, or 41 cents per share, in the quarter ended March 31 from $1.55bn, or $1.80 per share, a year earlier.

Consolidated provisions for losses rose to $2.6bn from $809m in the year-ago period.

Total revenue, excluding interest expense, fell to $10.3bn from $10.4bn.