Credit card issuer AmEx profit tumbles 85 pct as coronavirus-related defaults loom

American Express logo and trading symbol are displayed on a screen at the New York Stock Exchange (NYSE) in New York, US. (Reuters)

Credit card issuer American Express Co reported an 85 percent slump in quarterly profit on Friday after it set aside nearly $628 million to prepare for a flood of potential defaults caused by coronavirus-led layoffs.

Shares were down about 1percent before the bell, even as the groupmanaged to eke out a small profit rather than report a loss as expected by analysts.

The health crisis has hammered economies worldwide and triggered mass layoffs, which in turn made more people default on their bills, hurting credit card issuers.

For more coronavirus news, visit our dedicated page.

AmEx said its consolidated loss provisions stood at $1.6 billion, up from $861 million a year ago, with the increase driven primarily by new reserves created to account for the effects of the pandemic.

JPMorgan Chase & Co and Citigroup, which are among the largest credit card issuers in the world, have created about $18 billion in provisions for potential credit losses.

Read more: How did governments suddenly find the money for a huge coronavirus stimulus?

US consumer spending suffered its sharpest ever drop in April after stay-at-home orders shut down large parts of the economy, but it rebounded in May and June as businesses started to reopen.

Spending by customers using AmEx cards during the quarter dropped 34.2 percent to $205.1 billion, with overseas markets seeing a 25 percent fall, while in the United States, it was down 18 percent.

Net income fell to $257 million, or 29 cents per share, in the second-quarter ended June 30, from $1.76 billion, or $2.07 per share, a year earlier.

For all the latest headlines follow our Google News channel online or via the app

Analysts on average expected a loss 11 cents per share, according to IBES estimates from Refinitiv.

Total revenue, excluding interest expense, fell 29.2 percent to $7.67 billion, a steeper drop than a 24.8 percent decline forecast by analysts.

Rivals Visa and Mastercard are expected to report their quarterly results next week.

Last Update: Friday, 24 July 2020 KSA 16:42 - GMT 13:42