While American Express Corporation seemed more optimistic about consumer spending trends, Capital One Financial Corporation is still taking it slow since the latter felt there was a dip in consumer borrowing.
The quarterly results posted by both the companies clearly beat the expectations of financial analysts and showed signs of an improving economy because increasing number of consumers were paying back their debts on time. The reduction in the number of defaulters has given the banks a reason to smile.
Though the quarterly reports by these two credit card majors showed signs of happiness, not all banks shared the same enthusiasm.
Not all credit card companies are seeing the same kind of revival. The losses of American Express began to fall from the second half of the last financial year while those for Capital One started to dwindle in the first quarter of the current financial year.
Sanjay Sakhrani, a financial analyst at Keefe, Bruyette and Woods said that American Express is now more stable than it was in the last couple of years.
Capital One Financial Corporation and American Express set aside a lower amount towards writing off bad loans since the economy is showing signs of improvement. The dwindling unemployment rate and the increase in customer repayment have inspired them to take this step.
As compared to the same time period last year, American Express said that there was an increase of 16% in customer spending. Business outside the United States soared by 27% and helped in posting a huge profit for this quarter.
American Express in now channelizing on making profits through increased transactions than by disbursing loans for making profits. The profits of this bank that stood high through the last decade hit rock bottom when the economy took turn for worse during 2008-09.
As compared to the same quarter for the previous year, shareholder profit of $873 million was posted by American Express which amounted to 73 cents per share. In the first quarter of the previous financial year, it stood at $361 million which amounted to 31 cents per share. A profit of 64 cents a share was the expectation set by the analysts for the current year and AmEx managed to beat the expectations by 9 cents.
The income generated through credit cards showed an increase of 37% and stood at $1,775 billion for Q1.