6 Takeaways From the Amex Earnings Call (Including Card Refreshes)

American Express Reports 2020 First Quarter Earnings

American Express reported earnings this morning, reporting Q1 net profit of $367 million compared with net profit of $1.6 billion a year ago – a substantial decline mostly due to the ongoing COVID-19 situation. Their revenue of $10.3 billion for Q1 was only the slightest bit lower than the same period last year ($10.36 billion).

While I don’t expect my readers have substantial interest in the details of the earnings or the conference call, I do think you might find a few items specifically interesting.

Card Refreshes Coming Starting Early May

While the card refreshes overall had been ongoing ever since they nailed the relaunch of the Amex Gold card, we have a bit more insight on what may be next.  American Express Chairman and CEO Stephen J. Squeri answered one analyst’s question about Amex being perhaps too reliant on the travel customer as follows:

“And what you’ll see coming out in early May is actual product refreshes to a number of our products, which will infuse additional value in addition to the value that a card may have. So, if you look at our Platinum Card, where you have fine hotels and resorts and you have Uber credits and you have other travel benefits and lounges and so forth, you will see other enhancements there from wireless to streaming to maybe some other types of travel credits, which can be used in the future over a time period.”

He also pointed out that the co-brand cards with travel partners are not overly affected by all of this because, just because you have a Hilton or a Delta card, ”less than 10% of that spending is actually at those properties for those particular things.”

Additional Benefits for “Stay-at-Home”

The slides from the presentation had this interesting tidbit:

•  Adding a range of offers, credits and rewards for a variety of “stay at home” services for both consumers and small businesses

We’ll have to wait and see what this entails, but I take it to mean that they recognize that if it’s potentially going to be 12-18 months before we can get back to a true “normal” – meaning that we have a treatment or vaccine (or both) – then cardmembers will need statement credit offers that can actually be used. You can’t use your airline incidental credits from the Amex Platinum or Gold cards or your Hilton Aspire $250 resort credit or your Bonvoy Brilliant $300 hotel credit when you can’t travel.

What this means exactly remains to be seen, but I could see that, given that they already have a relationship with GrubHub, adding that credit to the Platinum card (as an example).

Later on in the call, Squeri gets a second question about the perks and benefits tied to travel cards and impact on someone wanting to have and use that card. Squeri responded: “I think what you’ll see in the coming weeks is you’ll see other benefits that will be added to those cards to sort of balance out the value. I mean, look, we’re very focused on it. Obviously, if you go in a blog, [the] blog is very focused on what is the value that you get for what you’re paying, and so you’ll see enhancements to those cards that are not specifically either air or hotel related, and in particular, to those cards where fees were raised. And so, you’ll see extensions on benefits, but you’ll also see other things that are non-hotel, non-air-related, which will provide more utility to the card in general. I mean, people have those cards to accumulate points for hotel stays, for airline and for so forth, but I think, as I said and you just pointed out again, 90% of that spend is in other areas. And so, what we’ll do is, we’ll enhance those products so that the value propositions are more in an equilibrium to what the environment is today.”

845,000 Accounts Have Enrolled in the Customer Pandemic Relief Program (CPR)

This program offers 1-3 months of payment deferrals, waivers on interest and certain fees, and protection from credit bureau reporting (as delinquent).

When you think about all the talk we’ve had here and in the group lately around all of the card issuers clamping down on eligibility for new cards, this is why. It’s not you – it’s the current credit market.

While this program is great for customers in need, it also helps them avoid full-on defaults by giving customers some breathing room. Win-win.

Card Fee Revenue is up by 18%

You certainly noticed all of the fee increases in the last year. While it’s frustrating for all of us, this has undoubtedly helped Amex’s balance sheet now when charge volume is down and defaults will be increasing. From the presentation:

“Net Card Fees: Increased 18% versus Q1’19, driven primarily by growth in the Platinum, Delta and Gold portfolios, as well as growth in certain key international countries relative to Q1’19.”

The Delta co-brand relaunch has resulted in less rewards for cardmembers

“In January 2020, we re-launched our Delta cobrand products following the renewal extending our cobrand relationship with Delta Air Lines on March 31, 2019. The contract renewal included new pricing terms, some of which became effective upon contract signing and others that were tied to the product re- launch. These pricing changes, as well as changes in the expense classification of certain benefits with the re-launch, resulted in higher Marketing and business development, lower Card Member rewards and lower Card Member services expenses, as compared to the prior year.”

Bolding mine. Interesting.

A Risk to Amex is How Well We Spend on Bonus Categories and Redeem Rewards

This is from their “Forward Looking Statements”