The global Covid-19 pandemic battered American Express's corporate card division during the second quarter, with plummeting T&E-related spending dragging the segment to a $60 million net quarterly loss, the company said Friday.
American Express Global Commercial Services reported $82.4 billion in card-billed business for the second quarter, a 36 percent year-over-year decline. Average quarterly cardmember spending dropped an identical 36 percent from the prior year to $5,645, the company said.
Given that Q2 was the first quarter to feel the full brunt of the pandemic's ravaging effect on the global economy, the bleak spending figures came as little surprise to observers or Amex itself. During the company's first-quarter earnings report in April, it projected T&E-related spending volume would plummet by 95 percent year over year in the second quarter.
That prediction turned out to be overly dire, but only slightly; T&E spending was down 87 percent for the second quarter. Meanwhile, airline spending went to essentially nil, with airline-related spending volume comprising 0 percent of billed business on all American Express cards.
Total GCS second-quarter revenue net of interest expense was $2.3 billion, down from $3.3 billion a year ago, primarily reflecting "a decline in card member spending" and a lower average discount rate compared to the prior year, Amex reported. Segment expenses were down 30 percent, to $1.6 billion, primarily reflecting "significantly lower customer engagement costs" due to the spending slowdown. However, factoring in a $645 million provision for credit losses—up from $206 million a year ago—along with other costs, brought GCS's net income into the red for the quarter.
Looking ahead to a potential gradual recovery from the pandemic's shock to the global economy, American Express chairman and CEO Stephen Squeri expressed optimism in noting that overall Amex spending volumes, "which declined to their lowest point this quarter in April, gradually improved in May and June," with small businesses the most resilient in bouncing back.