American Express (NYSE:AXP) faces a hit to its Q4 earnings under the ongoing trend of credit normalization, closer to pre-pandemic levels.

The unprecedented fiscal support from government during the onset of the coronavirus crisis had led to a surge in spending and gave consumers a financial cushion, resulting in unusually strong credit quality.

Now the stimulus checks have stopped and consumers’ savings are dwindling.

AXP’s credit card metrics for both U.S. consumers and small businesses normalized in December 2022 from a month before. The delinquency rate of 1.0% increased from 0.90% in November 2022, while net write-offs rose to 1.2% from 1.0%.

Meanwhile, the November 2022 U.S. consumer credit card delinquency rate held steady from the previous month at 0.9%.

The credit card company is scheduled to announce Q4 earnings results on Friday, January 27th, before market open.

The consensus EPS estimate is $2.24 (+2.61% Y/Y) and the consensus revenue estimate is $14.25B (+17.3% Y/Y).

Over the last 2 years, AXP has beaten EPS estimates 100% of the time and has beaten revenue estimates 75% of the time.

Over the last 3 months, EPS estimates have seen 6 upward revisions and 7 downward revisions. Revenue estimates have seen 6 upward revisions and 6 downward revisions.

Recently, Stephens analyst Vincent Caintic downgraded the company to Underweight from Equal-Weight, citing its sensitivity to an economic downturn than relative to peers due to the exceptionally fast loan growth through the pandemic, as well as large commercial exposures and increased millennial concentrations.

AmEx’s loans to consumer card members came in at $72.7B as of Dec. 31, 2022, up from $70.4B as of Nov. 30, 2022, and $68.3B at Oct. 31, 2022.

“Even small increases in losses will have significant impacts to Amex’s capital levels,” Caintic wrote in another note.

Meanwhile, AXP’s peers have shown mixed Q4 performance.

Capital One Financial missed estimates as the lender set aside far more than expected for credit losses.

Bread Financial Holdings reported a beat, while the results of Discover Financial Services benefitted from loan growth and interest rates.

The Wall Street analysts give AXP’s stocks a Hold rating on average, with an average price target of $163.10.

Meanwhile, Seeking Alpha’s Quant Rating system give the stocks a Hold rating.