AmEx Gets Reprieve After JPMorgan Sapphire Reserve Fee Hike

(Bloomberg) -- American Express Co. has high hopes for 2020, predicting earnings that surpassed many analysts’ expectations and prospects for “more rational” competition from its biggest rivals.

After sweetening the bonuses on some of its most popular products, including the Green card, AmEx said overall rewards costs climbed 8% to $2.72 billion during the fourth quarter. That was less than the $2.76 billion average of analysts surveyed by Bloomberg.

“I do think the environment, while still very competitive, perhaps has become a little more rational” on rewards spending, Chief Financial Officer Jeff Campbell said in an interview. “But what’s more important for us -- and what’s trickier for our competitors to replicate -- are things like our global lounge collections, the global travel benefits.”

Earlier this month, JPMorgan Chase & Co. said it would raise the annual fee on its popular Chase Sapphire Reserve card to $550 a year. That followed a move last year by Citigroup Inc., the world’s largest credit-card issuer, to discontinue free trip insurance and price-protection guarantees on all its U.S. cards.

The changes could help ease pressure on expenses at AmEx, which retooled its Green card in October to add points for spending on all travel, including transit. The company has also been adding perks to its app after buying the restaurant reservation firm Resy and investing in technology to make it easier for customers to use cards online.

AmEx said it expects per-share profit of $8.85 to $9.25 this year, compared with the $8.95 that analysts in a Bloomberg survey were expecting. The firm forecast revenue would rise 8% to 10% for the year.

The improved outlook helped boost AmEx’s shares 3.9% to a record $136.55 at 10 a.m. in New York, the biggest intraday gain in more than a year.

Discover Warning

In recent years, “virtually every quarter, some issuer was launching a new, rich rewards program,” Discover Financial Services Chief Executive Officer Roger Hochschild said in an interview. “Now, you’re starting to see marginal cutbacks -- rewards structures getting a little cheaper, annual fees going up for some players.”

Discover slumped 7.2% after warning investors late Thursday that it would spend more cultivating its brand and investing in technology this year. Full-year operating expenses are likely to be $4.7 billion to $4.9 billion, up from $4.4 billion in 2019.

While the company is no longer going to give formal guidance for rewards, it expects its overall annual rewards rate -- which was 1.33% in 2019 -- will continue to climb by two to three basis points a year.

©2020 Bloomberg L.P.

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