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American Express CEO: ‘I do not see’ a recession

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Yahoo Finance Live anchors discuss second-quarter earnings for American Express as well as CEO Stephen Squeri’s recession expectations.

Video Transcript

- Also a couple of movers here on the platform, first American Express. This was quite the quarter premarket from American Express, card members' spending up 30%. I mean huge, huge quarter for this company.

Now, I caught up with American Express CEO Steven Squeri on the phone ahead of the show. He told me, he's like, I'm not seeing anything in my numbers to suggest a recession is coming, anything is imminent, which is a complete different tone compared to what we heard from the folks at AT&T yesterday, saying that consumers are delaying their bills 30%. And I get where Squeri is coming from. And there's this comment to us earlier this morning.

I get where he's coming from. When your card members' spending is up 30% in a quarter, that is really good. That's just a really good quarter.

- The environment of revenge spending as well. And I think the shift that we need to monitor among consumers is how they're using their cards to spend among travel, among entertainment as well. And some of the purchases that they may be making where they are less comfortable saying, I'll pay for it right now, and saying instead, I'm going to pay for this over time and just push off those payments.

If that becomes more of a day-in, day-out type of purchase that they use that card for, that's where I think it starts to show up in the consumer confidence. We've already seen it show up already. But for where they're using their cards and how often they're using their cards and deciding that similar to the BNPL type of stature that a lot of people are taking on over the course of the pandemic, saying, I'll just pay for this later, I think that's where we get into a little bit more of a headwind risk among consumers and where they're actually seeing the tightening of their own budgets also matriculate into how they're using their cards and the frequency.

- Do we know what percentage of their customers roll their balance every month and whether--

- He did not get into--

- --that's going-- and whether it's going down or up? I mean, they must release those numbers, right?

- But he did say that he's not seeing a pickup in delinquencies or people taking longer to pay their bills.

- Right, it's not-- it's not the same as delinquencies, though, right? I mean, you can let it ride if you have a credit card for quite a long time if you pay off the minimum balance or even more than that if you're not paying off the entire balance. So I'm just wondering if the percentage of the credit card bill paying being paid off every month is rising, falling, staying the same. What's happening with that? I mean, these numbers just--

- They raised their outlook.

- These numbers just don't make sense to me.

- No, I told Steve that. I'm like, Steve, you had our whole newsroom buzzing, because this was a quarter that was just, wow. And immediately now you're thinking we might get some good quarters over the next two weeks from the hotel players. If travel and entertainment were that good, maybe the hotel players had a pretty good quarter. Maybe some of the higher-end restaurants were having a good day.

- Well, having a good quarter, fine. But continuing to have, that's what's confusing to me.

- Well, he's betting on it. He's out here raising this guidance by almost 5 points.

- We've been talking about what's happening at airports. We've been talking about what's happening at restaurants. People are out there right now.

The concern is that that's going to roll over as the economy rolls over and as people start-- the trips that people are taking for now, they've already paid for, right? Or they've already planned them. They're just now taking them. So you would think that there would then be-- if inflation continues to go up at the same pace now, if there's all of this chatter out here and it's hitting consumer confidence about a potential recession now, then that would affect things three to six months from now. So the fact that American Express is out here raising its forecast for the full year-- and presumably that's not just because they beat this past quarter. That's interesting and confusing.

- And that is right. And, as always, you're on the mark, Julie, because he did say future bookings were strong, which was quite telling.

- Right. That's what I'm saying. And that's why they raised their outlook by almost five points.

- And similarly to that, because we see higher fares across the airlines right now, that demand is going to remain strong. And the number of partners that a company like American Express has with regards to their rewards programs, people are going to continue to swipe the card or book the travel in advance using the card, knowing that they're going to get the rewards later on, cash in on the points. So in a type of pullback or at least a more conscious spending environment as well, that's where consumers typically lean into any type of rewards that they're going to be able to take as well over an extended period of time. And that's where American Express perhaps could be pricing in that demand.

- And I just want to give him quick, one more shout-out, Squeri a shout-out. He told us that All Markets Summit last year, he's like, Brian, I'm not getting into crypto. I'm not doing it yet. And he's been proven correct. I got to give Stephen a shout-out, because he nailed it there. And I told him that, too.

- Yeah, I mean, he certainly wasn't alone. Most corporations in the US did not get into crypto.

- But still, the other card players started to dabble.

- It is a very--

- Card players started to dabble in it.

- Eh, it's a-- oh, in terms of having a platform for it?

- Yes.

- But having the platform, what's-- I mean--

- That makes owning and touching it.

- But there's not much downside in having a platform. It's one thing-- I don't know. Anyway, the other thing I was going to say is that Amex, obviously, is the higher-end consumer as well, right? Still isn't that how their demographic skews? So maybe that also will tell us something about what's going on.

- Yeah, he actually-- man, you must have listened to our call, because actually said, we don't have the same customers AT&T. So that's what he told me. So yeah.

- Yes, because we heard from AT&T--

- They're corporate partners.

- --that they were seeing some lateness, which we're going to get to in just a moment.