American Express (NYSE:AXP)
Historical Stock Chart
From May 2019 to May 2024
Revenues Rise 9%
Full Year 2017 EPS Guidance Raised to
$5.80-$5.90
American Express Company (NYSE:AXP) today reported third-quarter
net income of $1.4 billion, up 19 percent from $1.1 billion a year ago.
Diluted earnings per share was $1.50, up 25 percent from $1.20 a year
ago.
(Millions, except percentages and per share amounts)
Quarters Ended
September 30,
Percentage
Inc/(Dec)
Nine Months Ended
September 30,
Percentage
Inc/(Dec)
2017
2016
2017
2016
Total Revenues Net of Interest Expense
$
8,436
$
7,774
9
$
24,632
$
24,097
2
Net Income
$
1,356
$
1,142
19
$
3,933
$
4,583
(14
)
Earnings Per Common Share – Diluted:
Net Income Attributable to Common Shareholders1
$
1.50
$
1.20
25
$
4.30
$
4.76
(10
)
Average Diluted Common Shares Outstanding
881
923
(5
)
892
943
(5
)
Third-quarter consolidated total revenues net of interest expense were
$8.4 billion, up 9 percent from $7.8 billion a year ago. Excluding the
impact of foreign exchange rates, adjusted revenues net of interest
expense grew 8 percent.2 Those increases primarily reflected
higher net interest income and Card Member spending, partially offset by
a lower discount rate.
Consolidated provisions for losses were $769 million, up 53 percent from
$504 million a year ago. The rise primarily reflected continued strong
growth in the loan portfolio and an expected increase in the lending
write-off and delinquency rates.
Consolidated expenses were $5.8 billion, up 6 percent from $5.5 billion
last year. The current quarter included higher rewards expenses
primarily related to product enhancements and an increase in Card Member
spending, partially offset by lower marketing costs. Operating expenses
were unchanged from a year ago, reflecting lower technology-related
costs, offset by asset impairments and restructuring and other charges
in the company’s U.S. Loyalty Coalition and Prepaid businesses.
Excluding the asset impairments and other charges in the current year
and restructuring charges in both years, adjusted operating expenses
declined 4 percent.3
The effective tax rate for the quarter was 26 percent, down from 34
percent a year ago, primarily due to the realization of certain foreign
tax credits in the current year and the geographic mix of earnings.
“We are completing a two-year turnaround ahead of plan with strong
revenue and earnings growth across all of our business segments,” said
Kenneth I. Chenault, chairman and chief executive officer. “We’ve added
products and benefits, shown continued strength in acquiring new
customers, and expanded our merchant network.
“Loan growth continued to be strong and credit metrics were again in
line with our expectations. We’ve contained operating costs and
reallocated a significant part of those savings to fund many of the
initiatives that are now driving growth across the business. Throughout
the turnaround, we’ve dealt effectively with competitive challenges and
redesigned our marketing, customer service and risk management
capabilities for the digital age.
“We’re starting a new chapter from a position of strength. Based on the
momentum in the business, we now expect full year 2017 EPS of $5.80 to
$5.90. That’s up from our earlier outlook of $5.60 to $5.80.”
Segment Results
U.S. Consumer Services reported third-quarter net income of $475
million, up 18 percent from $401 million a year ago.
Total revenues net of interest expense were $3.3 billion, up 13 percent
from $2.9 billion a year ago. The increase primarily reflected higher
net interest income and Card Member spending.
Provisions for losses totaled $459 million, up 67 percent from $275
million a year ago. The rise primarily reflected strong growth in the
loan portfolio and an expected increase in the lending write-off and
delinquency rates.
Total expenses were $2.1 billion, up 6 percent from $2.0 billion a year
ago. The current quarter reflected higher rewards expenses related to
product enhancements and an increase in Card Member spending, partially
offset by lower technology-related costs and a decline in marketing
expenses.
The effective tax rate was 32 percent, down from 35 percent a year ago.
International Consumer and Network Services reported
third-quarter net income of $286 million, up 85 percent from $155
million a year ago.
Total revenues net of interest expense were $1.5 billion, up 7 percent
(up 6 percent FX-adjusted2) from $1.4 billion a year ago. The
increase primarily reflected higher Card Member spending and net
interest income.
Provisions for losses totaled $106 million, up 26 percent from $84
million a year ago. The rise primarily reflected continued strong growth
in the loan portfolio and an expected increase in the lending write-off
rate.
Total expenses were $1.1 billion, down 2 percent (down 3 percent
FX-adjusted2) from a year ago. The decrease primarily
reflected lower marketing and employee compensation expenses, partially
offset by higher rewards costs.
The effective tax rate was 7 percent, down from 25 percent a year ago,
due largely to the realization of certain foreign tax credits in the
current year and the geographic mix of earnings.
Global Commercial Services reported third-quarter net income of
$529 million, up 14 percent from $466 million a year ago.
Total revenues net of interest expense were $2.6 billion, up 6 percent
from $2.4 billion a year ago. The increase primarily reflected higher
Card Member spending and net interest income.
Provisions for losses totaled $194 million, up 45 percent from $134
million a year ago. The increase primarily reflected strong growth in
the loan portfolio and an expected increase in the lending write-off
rate.
Total expenses were $1.6 billion, up 3 percent from a year ago. The
current quarter reflected higher rewards expenses related to product
enhancements and an increase in Card Member spending, partially offset
by lower technology-related and marketing expenses.
The effective tax rate was 31 percent, down from 36 percent a year ago,
due largely to the geographic mix of earnings.
Global Merchant Services reported third-quarter net income of
$368 million, up 3 percent from $359 million a year ago.
Total revenues net of interest expense were $1.2 billion, up 4 percent
from $1.1 billion a year ago. The increase primarily reflected higher
Card Member spending, partially offset by a lower discount rate.
Total expenses were $628 million, up 20 percent from $525 million a year
ago. The increase primarily reflected a portion of the
previously-mentioned asset impairments and restructuring and other
charges.
The effective tax rate was 29 percent, down from 37 percent a year ago,
due largely to the realization of certain foreign tax credits in the
current year.
Corporate and Other reported third-quarter net loss of $302
million compared with net loss of $239 million a year ago, reflecting a
portion of the previously-mentioned asset impairments and restructuring
charges.
About American Express
American Express is a global services company, providing customers with
access to products, insights and experiences that enrich lives and build
business success. Learn more at americanexpress.com,
and connect with us on facebook.com/americanexpress,
instagram.com/americanexpress,
linkedin.com/company/american-express,twitter.com/americanexpress,
and youtube.com/americanexpress.
Key links to products, services and corporate responsibility
information: charge
and credit cards, business
credit cards, Plenti
rewards program, travel
services, gift
cards, prepaid
cards, merchant
services, Accertify,
corporate
card, business
travel, and corporate
responsibility.
This earnings release should be read in conjunction with the
company’s statistical tables for the third-quarter 2017, available on
the American Express website at http://ir.americanexpress.com
and in a Form 8-K filed today with the Securities and Exchange
Commission.
An investor conference call will be held at 5:00 p.m. (ET) today to
discuss third-quarter earnings results. Live audio and presentation
slides for the investor conference call will be available to the general
public on the above-mentioned American Express Investor Relations
website. A replay of the conference call will be available later today
at the same website address.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which are subject
to risks and uncertainties. The forward-looking statements, which
address the Company’s expected business and financial performance and
which include management’s outlook for 2017, among other matters,
contain words such as “believe,” “expect,” “estimate,” “anticipate,”
“intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,”
“likely” and similar expressions. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
of the date on which they are made. The Company undertakes no obligation
to update or revise any forward-looking statements. Factors that could
cause actual results to differ materially from these forward-looking
statements, include, but are not limited to, the following:
-
the Company’s ability to achieve its 2017 earnings per common share
outlook, which will depend in part on the following: revenues growing
consistently with current expectations, which could be impacted by,
among other things, the factors identified in the subsequent bullet;
credit performance remaining consistent with current expectations; the
level of spend in bonus categories on rewards-based and/or cash-back
cards and redemptions of Card Member rewards and offers; the impact of
any future contingencies, including, but not limited to,
litigation-related settlements, judgments or expenses, the imposition
of fines or civil money penalties, an increase in Card Member
reimbursements, restructurings, impairments and changes in reserves;
the ability to continue to realize benefits from restructuring actions
and operating leverage at levels consistent with current expectations;
the amount the Company spends on Card Member engagement and the
Company’s ability to drive growth from such investments; changes in
interest rates beyond current expectations (including the impact of
hedge ineffectiveness and deposit rate increases); the impact of
regulation and litigation, which could affect the profitability of the
Company’s business activities, limit the Company’s ability to pursue
business opportunities, require changes to business practices or alter
the Company’s relationships with partners, merchants and Card Members;
the Company’s tax rate remaining in line with current expectations,
which could be impacted by, among other things, the Company’s
geographic mix of income being weighted more to higher tax
jurisdictions than expected, changes in tax laws and regulation and
unfavorable tax audits and other unanticipated tax items; write-downs
of deferred tax assets as a result of tax law or other changes; the
impact of accounting changes and reclassifications; and the Company’s
ability to continue executing its share repurchase program;
-
the ability of the Company to grow revenues net of interest expense,
which could be impacted by, among other things, weakening economic
conditions in the United States or internationally, a decline in
consumer confidence impacting the willingness and ability of Card
Members to sustain and grow spending, continued growth of Card Member
loans, a greater erosion of the average discount rate than expected,
the strengthening of the U.S. dollar, a greater impact on discount
revenue from cash back and cobrand partner and client incentive
payments, more cautious spending by large and global corporate Card
Members, the willingness of Card Members to pay higher card fees, and
lower spending on new cards acquired than estimated; and will depend
on factors such as the Company’s success in addressing competitive
pressures and implementing its strategies and business initiatives,
including growing profitable spending from existing and new Card
Members, increasing penetration among middle market and small business
clients, expanding the Company’s international footprint and
increasing merchant acceptance;
-
changes in the substantial and increasing worldwide competition in the
payments industry, including competitive pressure that may impact the
prices charged to merchants that accept American Express cards,
competition for cobrand relationships and the success of marketing,
promotion or rewards programs;
-
the Company’s rewards expense and cost of Card Member services growing
inconsistently from expectations, which will depend in part on Card
Member behavior as it relates to their spending patterns and actual
usage and redemption of rewards, as well as the degree of interest of
Card Members in the value proposition offered by the Company;
increasing competition, which could result in greater rewards
offerings; the Company’s ability to enhance card products and services
to make them attractive to Card Members; and the amount the Company
spends on the promotion of enhanced services and rewards categories
and the success of such promotion;
-
the actual amount to be spent on marketing and promotion, which will
be based in part on management’s assessment of competitive
opportunities; overall business performance and changes in
macroeconomic conditions; the actual amount of advertising and Card
Member acquisition costs; competitive pressures that may require
additional expenditures; the Company’s ability to continue to shift
Card Member acquisition to digital channels; contractual obligations
with business partners and other fixed costs and prior commitments;
management’s ability to identify attractive investment opportunities
and make such investments, which could be impacted by business,
regulatory or legal complexities; and the Company’s ability to realize
efficiencies, optimize investment spending and control expenses to
fund such spending;
-
the ability of the Company to reduce its overall cost base by $1
billion on a run rate basis by the end of 2017, which will depend in
part on the timing and financial impact of reengineering plans, which
could be impacted by factors such as the Company’s inability to
mitigate the operational and other risks posed by potential staff
reductions, the Company’s inability to develop and implement
technology resources to realize cost savings and underestimating
hiring and other employee needs; the ability of the Company to reduce
annual operating expenses, which could be impacted by, among other
things, the factors identified below; the ability of the Company to
optimize marketing and promotion expenses, which could be impacted by
the factors identified in the preceding bullet;
-
the ability to reduce annual operating expenses, which could be
impacted by the need to increase significant categories of operating
expenses, such as consulting or professional fees, including as a
result of increased litigation, compliance or regulatory-related costs
or fraud costs; the ability of the Company to develop, implement and
achieve substantial benefits from reengineering plans; higher than
expected employee levels; the impact of changes in foreign currency
exchange rates on costs; the payment of civil money penalties,
disgorgement, restitution, non-income tax assessments and
litigation-related settlements; impairments of goodwill or other
assets; management’s decision to increase or decrease spending in such
areas as technology, business and product development and sales
forces; greater than expected inflation; the Company’s ability to
balance expense control and investments in the business; the impact of
accounting changes and reclassifications; and the level of M&A
activity and related expenses;
-
the Company’s delinquency and write-off rates and growth of provisions
for losses being higher than current expectations, which will depend
in part on changes in the level of loan balances and delinquencies,
mix of loan balances, loans and receivables related to new Card
Members and other borrowers performing as expected, credit performance
of new and enhanced lending products, unemployment rates, the volume
of bankruptcies and recoveries of previously written-off loans;
-
the Company’s ability to execute against its lending strategy to grow
loans, which may be affected by increasing competition, brand
perceptions and reputation, the Company’s ability to manage risk in a
growing Card Member loan portfolio, and the behavior of Card Members
and their actual spending and borrowing patterns, which in turn may be
driven by the Company’s ability to issue new and enhanced card
products, offer attractive non-card lending products, capture a
greater share of existing Card Members’ spending and borrowings,
reduce Card Member attrition and attract new customers;
-
the growth in net interest income slowing more than expected, which
will be impacted by the growth and mix of Card Member and other loans,
which will depend in part on the factors identified in the preceding
bullet, and the Company’s net interest yield on Card Member loans,
which will be influenced by, among other things, interest rates,
changes in consumer behavior that affect loan balances, such as
paydown rates, the Company’s Card Member acquisition strategy, product
mix, cost of funds, credit actions, including line size and other
adjustments to credit availability, potential pricing changes and
deposit rates, which could be impacted by, among other things, the
factors identified in the subsequent bullet;
-
the Company’s deposit rates increasing faster or slower than current
expectations due to changes in the Company’s funding mix, market
pressures, regulatory constraints or changes in benchmark interest
rates, which could affect the Company’s net interest yield and funding
costs;
-
the possibility that the Company will not execute on its plans to
significantly increase merchant coverage, which will depend in part on
the success of OptBlue merchant acquirers in signing merchants to
accept American Express, which could be impacted by the pricing set by
the merchant acquirers, the value proposition offered to small
merchants and the efforts of OptBlue merchant acquirers to sign
merchants for American Express acceptance, as well as the awareness
and willingness of Card Members to use American Express cards at small
merchants and of those merchants to accept American Express cards;
-
the ability of the Company to capture commercial spending, which will
depend in part on the willingness and ability of companies to use
credit and charge cards for procurement and other business
expenditures, perceived or actual difficulties and costs related to
setting up card-based B2B payment platforms, the ability of the
Company to offer attractive value propositions and card products to
potential customers, competition, the Company’s ability to enhance and
expand its payment solutions, and the effectiveness of the Company’s
marketing and promotion of its corporate payment solutions and small
business card products to potential customers;
-
the ability of the Company to grow internationally, including the
growth of international proprietary and GNS billed business, which
could be impacted by regulation and business practices, such as those
capping interchange or other fees, favoring local competitors or
prohibiting or limiting foreign ownership of certain businesses; the
Company’s ability to partner with additional GNS issuers as a result
of regulation or otherwise and the success of GNS partners in
acquiring Card Members and/or merchants; political or economic
instability, which could affect lending and other commercial
activities; the Company’s ability to tailor products and services to
make them attractive to local customers; and competitors with more
scale and experience and more established relationships with relevant
customers, regulators and industry participants;
-
the Company’s ability to attract and retain Card Members, including
within the premium space, which will be impacted in part by
competition, brand perceptions (including perceptions related to
merchant coverage) and reputation and the ability of the Company to
develop and market value propositions that appeal to Card Members and
new customers and offer attractive services and rewards programs,
which will depend in part on ongoing investment in marketing and
promotion expenses, new product innovation and development, Card
Member acquisition efforts and enrollment processes, including through
digital channels, and infrastructure to support new products, services
and benefits;
-
the ability of the Company to maintain and expand its presence in the
digital payments space, which will depend on the Company’s success in
evolving its products and processes for the digital environment,
offering attractive value propositions to Card Members to incentivize
the use of and enhance satisfaction with the Company’s digital
channels and the Company’s products as a means of payment through
online and mobile channels, building partnerships and executing
programs with other companies, and utilizing digital capabilities that
can be leveraged for future growth;
-
the ability of the Company to innovate and introduce new network
features and offer expanded products and services to GNS partners,
which will depend in part on the ability of the Company to update its
systems and platforms, the amount the Company invests in the network,
and technological developments relating to fraud protection support,
marketing insights and digital connections;
-
the erosion of the average discount rate by a greater amount than
anticipated, including as a result of a greater shift of existing
merchants into the OptBlue program, changes in the mix of spending by
location and industry, merchant negotiations (including merchant
incentives, concessions and volume-related pricing discounts),
competition, pricing regulation (including regulation of competitors’
interchange rates in the European Union and elsewhere) and other
factors;
-
changes affecting the ability or desire of the Company to return
capital to shareholders through dividends and share repurchases, which
will depend on factors such as approval of the Company’s capital plans
by its primary regulators, the amount the Company spends on
acquisitions of companies and the Company’s results of operations and
capital needs and economic environment in any given period;
-
uncertainty relating to the ultimate outcome of the antitrust lawsuit
filed against the Company by the U.S. Department of Justice and
certain state attorneys general, including the review of the case by
the U.S. Supreme Court and the impact on existing private merchant
cases and potentially additional litigation and/or arbitrations;
-
legal and regulatory developments, including with regard to broad
payment system regulatory regimes, actions by the CFPB and other
regulators and the stricter regulation of financial institutions,
which could require the Company to make fundamental changes to many of
its business practices, including our ability to continue certain GNS
and other partnerships; exert further pressure on the average discount
rate and GNS volumes; result in increased costs related to regulatory
oversight, litigation-related settlements, judgments or expenses,
restitution to Card Members or the imposition of fines or civil money
penalties; materially affect capital or liquidity requirements,
results of operations, or ability to pay dividends or repurchase of
stock; or result in harm to the American Express brand; and
-
factors beyond the Company’s control such as changes in global
economic and business conditions, consumer and business spending, the
availability and cost of capital, unemployment rates, geopolitical
conditions (including potential impacts resulting from the U.S.
Administration and the proposed exit of the U.K. from the European
Union), foreign currency rates and interest rates, as well as fire,
power loss, disruptions in telecommunications, severe weather
conditions, natural disasters (including further impacts from the
recent hurricanes in Texas, Florida and Puerto Rico), health
pandemics, terrorism, cyber attacks or fraud, any of which could
significantly affect demand for and spending on American Express
cards, delinquency rates, loan balances and other aspects of the
Company and its results of operations or disrupt the Company’s global
network systems and ability to process transactions.
A further description of these uncertainties and other risks can be
found in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2016, the Company’s Quarterly Reports on Form 10-Q for the
quarters ended March 31 and June 30, 2017 and the Company’s other
reports filed with the Securities and Exchange Commission.
American Express Company
(Preliminary)
Appendix I
Reconciliations of Adjustments
(Millions, except percentages and where indicated)
YOY % Change
Q3'17
Q3'16
Adjusted Operating Expenses
Operating expenses (A)
$
2,763
$
2,761
-
U.S. Loyalty Coalition and Prepaid charges (pre-tax) (B)
(155
)
Q3'16 Restructuring charge (pre-tax)
(44
)
Adjusted Operating Expenses
$
2,608
$
2,717
(4
)
(A) Operating expenses represent salaries and employee
benefits, professional services, occupancy and equipment,
communications, and other, net.(B) Includes asset
impairments and restructuring and other charges.
1 Represents net income less (i) earnings allocated to
participating share awards of $11 million and $9 million for the three
months ended September 30, 2017 and 2016, respectively, and $32 million
and $37 million for the nine months ended September 30, 2017 and 2016,
respectively, and (ii) dividends on preferred shares of $21 million for
both the three months ended September 30, 2017 and 2016, and $61 million
for both the nine months ended September 30, 2017 and 2016.
2 As reported in this release, FX-adjusted information
assumes a constant exchange rate between the periods being compared for
purposes of currency translations into U.S. dollars (i.e., assumes the
foreign exchange rates used to determine results for the three months
ended September 30, 2017 apply to the period(s) against which such
results are being compared). Management believes the presentation of
information on an FX-adjusted basis is helpful to investors by making it
easier to compare the company’s performance in one period to that of
another period without the variability caused by fluctuations in
currency exchange rates.
3 Operating expenses represent salaries and employee
benefits, professional services, occupancy and equipment,
communications, and other, net. Adjusted operating expenses is a
non-GAAP measure. Management believes adjusted operating expenses is a
useful metric for evaluating the company’s ongoing performance and cost
reduction efforts. See Appendix I for a reconciliation to operating
expenses on a GAAP basis.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171018006426/en/
Media:Marina H. Norville, +1.212.640.2832marina.h.norville@aexp.comORInvestors/Analysts:Toby
Willard, +1.212.640.5574sherwood.s.willardjr@aexp.comorShreya
Patel, +1.212.640.5574shreya.patel@aexp.com