American Express Company (NYSE: AXP) is showing why its customer base is said to be the best in the credit card industry as far as credit metrics are concerned. The gains of the last two years have been slowing, but we saw an uptick for the better for American Express as far as its earnings metrics are concerned.
It is possible that this is just a seasonal bump up ahead of the summer and ahead of what was the Memorial Day holiday. It could also just mean that consumers are carrying higher balances and being less delinquent. We are tracking the U.S. metrics on the U.S. Card Services as of the end of May.
For May 2012, the total loans outstanding balance was $52.6 billion, up from $51.7 billion in April and up from $51.4 billion in March. The average loan balances, which is where AmEx tallies much of the interest rates, was up to $52.0 billion in May. That compares to $51.6 billion in April and $51.6 billion in March.
Here is where the metrics are improving that will add directly to AmEx’s bottom line. The 30-days past due loans as a percentage of the total fell to only 1.2% from 1.3% in both April and March. Another improvement was seen in the net write-off rate down to 2.2% from a level of 2.4% in each of the prior two months.
If AmEx is seeing loan balances rise while its 30-days past due and its net write-offs are dropping, that is another move in the right direction for AmEx and its shareholders. These monthly readings do not assure performance gains by any means, but AmEx shares are up 0.8% at $55.50 against a 52-week range of $41.30 to $61.42. AmEx also trades at almost 13-times 2012 expected earnings and it pays 1.5% for a dividend yield.
JON C. OGG