American Express continued to dodge the effects of inflation, as its array of card products targeting upscale consumers again produced solid gains in first-quarter revenue and profits. The only blot on the glowing results was ongoing weakness in small-business card growth.

“We continue to attract high-spending, high-credit-quality customers to the franchise,” said Stephen J. Squeri, Amex’s chief executive, in a Friday conference call with analysts after the firm announced its quarterly results. 

Amex added 3.4 million new card accounts during the first quarter, matching its new-account growth during the same period a year earlier. Fee-based cards accounted for 70% of new sign-ups during the quarter, and 60% of new customers are in the Millennial or Gen Z cohort, he said. Spending by these younger adults increased 15% during the quarter, the company said.

But this was tempered by the lagging momentum of the company’s small-business segment. “Spending by U.S. SME card members continued to be soft,” Squeri said.

While Amex’s international small-business card customers are still driving strong growth and credit quality is holding up, overall the sector’s spending growth increased only 1% during the quarter ended Jan. 31, 2024, a trend that has persisted for nearly a year after a burst of post-pandemic growth tapered off in 2022, Squeri said.

“I think interest rates going up did not help, from a small-business perspective … and it’s the larger transactions [where] we’re really seeing organic decline,” he said. 

Overall, Amex’s card spending rose across the board during the quarter, with positive momentum expected to continue throughout the year, Squeri said.

Total billed business for the franchise increased 6%, to $367 billion, compared with $346 billion during the same period a year earlier, with U.S. consumer billed business rising 7%, to $153 billion, compared with $142 billion; commercial services’ bill business rising 1.6%, to $127 billion, from $125 billion and international card services’ billed business up 10%, to $85 billion, from $77 billion, Amex said.

Amex ended the first quarter with $194 billion in total loans, up 12% over $172 billion during the same period a year earlier, with credit quality holding relatively steady. Net write-off rates rose to 2.1%, up 50 basis points from the first quarter of 2023, but still lower than Amex’s pre-pandemic charge-off rate of 2.2%. The delinquency rate for card payments overdue by at least 30 days rose 10 basis points to 1.3% from 1.2% during the same period a year earlier. 

The firm expects to see some “modest” increase in its charge-off rate this year and as a result, Amex continues to gradually increase its credit reserves, which now total $5.4 billion, or 2.9% of total loans and receivables,  Christophe Le Caillec, Amex’s chief financial officer, told analysts.

Operating expenses during the first quarter were $3.6 billion, flat compared with the same period a year earlier, which Le Caillec attributed to discipline in managing overall expenses, while Amex increased its marketing investments to support new and refreshed products.

Revenue during the first quarter rose 11%, to $15.8 billion, slightly beating analysts’ expectations, while net interest income grew 26%, to $3.77 billion. Overall Amex’s profits jumped 34%, to $2.44 billion, up from $1.82 billion a year earlier. 

Amex reiterated its forecast for 11% revenue growth for the full year, and Le Caillec noted that Amex doesn’t foresee a major impact from the Consumer Financial Protection Bureau’s proposed rule capping credit card late fees. “Late fees from our U.S. consumer segment make up less than 1% of our overall revenue,” he said.

Analysts were optimistic about Amex’s ability to deliver on its predictions of strong growth this year.

“We continue to believe American Express has several levers that support its aspirational top-line growth targets that call for double-digit revenue growth, versus upper-single-digit growth in the past,” said analysts at William Blair in a Friday note to investors.