American Express (Amex) is positioning the slow recovery of small businesses, four years after the pandemic hit, as an economic trend rather than requiring a fundamental pivot in its strategy. Amex reported revenue of $15.8 billion for the quarter ending December 31, up 11% from a year earlier. U.S. small network payment volume growth, representing about a quarter of Amex’s overall volume, grew at 1% in the fourth quarter. Small businesses, hit hard during the pandemic, continue to face challenges such as supply chain issues, inflation, labor shortages, and higher interest rates.
Amex CEO Steve Squeri noted that small businesses list their top problems as inflation, quality of labor, and taxes. Despite challenges, Amex remains patient for a small business recovery and focuses on providing financial services to this segment through American Express Business Blueprint, resulting from its Kabbage acquisition in 2020. The company’s strategies also include improving connections to fintechs and expanding its acceptance among merchants outside the U.S. Amex forecasted earnings per share of $12.65 to $13.15 for 2024, affirming its forward-looking revenue growth of 10% and mid-teens earnings per share growth.
While Amex’s customers are generally more affluent and less exposed to economic concerns, the company increased its loan loss provisions in the fourth quarter. Delinquencies were reported at 1.38%, and Amex projected a modest increase in loan loss provisions in the next year. Despite these challenges, analysts at HSBC reiterated their Buy rating for Amex, highlighting its attractive economic model and strong competitive position in the premium cards space.
The slow recovery of small businesses continues to be an industry-wide phenomenon, and Amex emphasises patience and readiness to support these businesses when they are ready. Card acquisition in the small business segment has remained strong for Amex, and credit quality has held up, providing optimism for the future recovery of this market segment.
