The increase in reserves to cover non-reimbursements on credit cards resulted in a 76% drop in profit in the first quarter.
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American Express (AmEx) saw its profit shrink by 76% in the first quarter after having to increase the reserves intended to cover the non-reimbursements on its credit cards because of the deterioration of the economic situation, which also lowered the expenses paid with his cards.
The first two months of the year had been good, “but we are in a different world now,” said company CEO Stephen Squeri in a statement.
“The deterioration of the economy under the pressure of the impact of COVID-19, which began in the first quarter and accelerated in April, has strongly affected our volumes,” he explained: the volumes of ” purchases made with AmEx cards in retail stores, restaurants and on e-commerce platforms have decreased.
The group’s net profit was $ 367 million from January to March, compared to $ 1.55 billion at the same time in 2019.
AmEx notably had to increase the provisions intended to cover losses in the event of non-reimbursements on its credit cards by $ 1.7 billion to bring them to $ 2.6 billion.
Revenue was $ 10.3 billion, down 1% from a year ago and slightly less than the $ 10.65 billion expected by analysts.
The group is carrying out “significant cost reductions” but has promised that it will not cut positions this year in order to be able to support its customers during the recovery.
He also claims to have offered several short-term and long-term assistance programs for individuals and small businesses using his services “to help them weather the storm.”
The group has also raised the threshold for contactless payments in stores in several countries.
Spending fell 5% to $ 7.2 billion, due in part to a drop in offers and promotions designed to retain customers.
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