American Express Co.’s (AXP.N) quest to be accepted everywhere from the corner bodega to the nail salon down the street is paying off.

AmEx, long known for pitching its card to a more-affluent market, boosted its forecast for profit for the year as it trimmed fees to attract smaller businesses. Discount revenue, a measure of fees charged to merchants, surged 8 percent to US$6.2 billion, topping analyst estimates.

Key Insights

• AmEx has cut fees to add more retailers to its network. Its discount rate -- a measure of the fees it charges merchants -- dropped 2 basis points to 2.38 per cent. By next year, it’s hoping to gain parity coverage with Visa and Mastercard, which are each accepted at more than 10 million U.S. locations, compared with 9 million for AmEx.
• AmEx has long been the king of charge cards, which require customers to pay the full balance each month. Now, it’s encouraging customers to borrow more and has seen a surge in loan growth as a result. That’s forced the company to set aside more money to cover bad loans. Provisions during the quarter climbed 6 per cent to US$817 million, below the US$946.5 million average of 17 analyst estimates compiled by Bloomberg.
• AmEx retooled its popular Platinum and Gold card portfolios in a bid for affluent millennial customers. It seems to be working: The firm said this month that Platinum changes led to a 50 per cent year-over-year jump in new accounts and a 20 per cent boost in spending. Rewards costs during the third quarter advanced 11 per cent to US$2.4 billion, in line with the average of three analyst estimates compiled by Bloomberg.

Market Reaction

• AmEx shares rose about 1 per cent to US$103.82 in extended trading in New York after the announcement. The stock had gained 3.6 per cent this year through the close of regular trading, compared with the 5 per cent decline of the S&P 500 Financials Index.

Know More

• Spending on the firm’s cards climbed 8 per cent to US$295 billion, just shy of the US$297.8 billion average of three analyst estimates compiled by Bloomberg.
• The company said it now expects revenue to climb 9 to 10 per cent this year and adjusted earnings to be US$7.30 to US$7.40 a share, compared with its previous forecast of US$6.90 to US$7.30.