American Express’ Australian business delivered one of its strongest years of growth in 2022, as demand for its charge card and consumer loan products soared to record levels.
American Express Australia Limited posted an after-tax loss of A$5.1 million over the 12 months to the end of December 2022, a material improvement on the $58.5 million negative bottom line recorded in 2021.
On a pre-tax basis the company posted an operating profit of $9.1 million compared to a pre-tax loss of $22.3 million in 2021.
The improved result was attributable to a 34 per cent surge in top-line revenue to $1.46 billion that was underpinned by a revival in corporate demand for charge card services.
According to disclosures in the subsidiary’s full year accounts lodged with ASIC last week, the value of receivables generated through the charge card business soared by 30 per cent to $3.17 billion in 2022.
Demand for charge card services, including corporate travel and purchasing management, has recovered strongly since the Australian economy started to emerge from Covid-induced restrictions in the middle of 2021.
Charge cards are used by small and large companies to manage cashflow.
The high margin consumer loans operation grew even faster than the charge card business, albeit off a lower base.
AMEX Australia was sitting on consumer loans worth $1.1 billion at the end of December – up almost $500 million or 80 per cent compared to the end of 2021.
An AMEX spokeswoman highlighted the pre-tax performance of the Australian subsidiary.
“American Express Australia Limited's profitable performance in 2022 is a reflection of the significant investment we made in our colleagues, customers and brand, as well as pandemic recovery tailwinds,” the spokeswoman said.
“However, we had a tax expense in 2022 which resulted in an after tax loss.”
Charge card expert Grant Halverson described AMEX’s Australian growth as “strong” and noted that the quality of the financial performance was “clean” given that it did not result in a big rise in net credit losses.
“The majority of the growth is coming from corporate cards, which is the hidden jewel in the AMEX crown,” he said.
“AMEX Australia is now second only to Commonwealth Bank in terms of how much cardholders spend on the credit and charge cards they issue.
“Total spending on AMEX cards grew by more than $16 billion last year, which is the equivalent of all spending in the buy now pay later market.”
Halverson expects AMEX to continue expanding its charge card business in 2023 but probably at a more modest rate.
AMEX Australia did not disclose the credit loss rate on its total receivables book, which stood at $6.37 billion on 31 December.
However, it is likely to have been modest after the company booked a net writeback of $700,000 on credit provisions made in previous years.
AMEX also increased its local credit card receivables to $1.8 billion last year, but the growth was relatively modest compared to the blistering growth recorded in the charge card and consumer loan segments.
The credit card business, which was stymied a few years ago by regulatory changes, expanded total receivables at the end of December by $134 million or 8 per cent.
While AMEX has managed to take advantage of the renewed demand for charge cards in Australia in the last 18 months, it is not clear whether low-profile rival Diners Club has also benefited.
The bank is yet to comment on what its strategic intentions are for Diners’ charge card operation.
“NAB should be fast-tracking the rollout of the Diners business because there is clearly solid corporate demand for charge cards,” Halverson said.
“Diners Club is a major point of difference between NAB and the other major banks.
“NAB’s challenge is to get Diners off the Citibank system in Singapore.
“How long that takes will be critical for repositioning the business.”