Strong Revenue Growth
Reflects Higher Card Member Spending, Net Interest Income and Card
Fees
American Express Company (NYSE: AXP) today reported
third-quarter net income of $1.8 billion, up 6 percent from $1.7
billion a year ago. Diluted earnings per share was $2.08, up 11
percent from $1.88 per share 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)
2019
2018
2019
2018
Total Revenues Net of Interest Expense
$
10,989
$10,144
8
$
32,191
$
29,864
8
Net Income
$
1,755
$1,654
6
$
5,066
$
4,911
3
Diluted Earnings Per Common Share1
$
2.08
$1.88
11
$
5.95
$
5.59
6
Adjusted Diluted Earnings Per Common
Share2
$
2.08
$1.88
11
$
6.16
$
5.59
10
Average Diluted Common Shares
Outstanding
827
860
(4)
835
861
(3)
Third-quarter consolidated total revenues net of interest
expense were $11.0 billion, up 8 percent from $10.1 billion a year
ago. Excluding the impact of foreign exchange rates, adjusted
revenues net of interest expense grew 9 percent.3 The increases
reflected higher Card Member spending, net interest income and card
fees.
Credit indicators remained strong and consolidated provisions
for losses were $879 million, up 8 percent from $817 million a year
ago. The increase reflected slightly higher net write-offs and
delinquencies.
Consolidated expenses were $7.8 billion, up 9 percent from $7.2
billion a year ago. The rise reflected, in part, growth in rewards
and other customer engagement costs driven by increased Card Member
spending and continued investments in cobrand partnerships.
Operating expenses were up 5 percent from a year ago, driven by
salaries and employee benefits.4
The consolidated effective tax rate was 23 percent, up from 22
percent a year ago.
“Our results continued the steady performance we’ve been
delivering for several years now, marking the 9th straight quarter
of FX-adjusted revenue growth of at least 8 percent,” said Steve
Squeri, chairman and chief executive officer. “I’m pleased with the
breadth and consistency of our revenue growth, driven by a
well-balanced mix of Card Member spending, loans and membership
revenues from our fee-based products, which grew 19 percent and
exceeded $1 billion this quarter for the first time.
“The trends we saw in the business this quarter continue to be
consistent with an economy that continues to grow, albeit at a more
modest pace than last year. FX-adjusted proprietary Card Member
spending rose 7 percent, led by strong consumer growth in both the
U.S. and International markets. Our loan portfolio grew 9 percent,
with over 60 percent of that growth again coming from existing Card
Members. Credit quality metrics remained at industry-leading
levels.
“The disciplined approach we’ve been taking for the past few
years to refresh our products continues to translate into increased
engagement with existing customers and a redefinition of membership
with new benefits, broader access to lifestyle experiences and more
customized rewards. Card Members appreciate the added value we are
providing, which is helping us earn a greater share of their
overall spending and borrowing, while also attracting 2.9 million
new proprietary Card Members to American Express this quarter.
“I feel very good about our ability to continue delivering high
levels of revenue growth and double-digit EPS growth. We are
reaffirming our 2019 EPS guidance range and expect revenue growth
of 8 to 10 percent for the fourth quarter.”5
Global Consumer Services Group reported third-quarter net
income of $857 million, up 10 percent from $779 million a year
ago.
Total revenues net of interest expense were $6.0 billion, up 11
percent from $5.4 billion a year ago. The rise primarily reflected
higher net interest income, Card Member spending and card fees.
Provisions for losses totaled $653 million, up 7 percent from
$609 million a year ago. The increase reflected slightly higher net
lending write-offs and delinquencies.
Total expenses were $4.3 billion, up 11 percent from $3.8
billion a year ago. The rise reflected, in part, growth in rewards
and other customer engagement costs driven by increased Card Member
spending and continued investments in cobrand partnerships.
The effective tax rate was 21 percent, up from 20 percent a year
ago.
Global Commercial Services reported third-quarter net
income of $629 million, up 4 percent from $606 million a year
ago.
Total revenues net of interest expense were $3.4 billion, up 7
percent from $3.2 billion a year ago. The increase primarily
reflected higher Card Member spending.
Provisions for losses totaled $222 million, up 10 percent from
$201 million a year ago. The increase reflected slightly higher
delinquencies and net write-offs.
Total expenses were $2.4 billion, up 8 percent from $2.2 billion
a year ago. The rise reflected, in part, growth in rewards and
other customer engagement costs driven by increased Card Member
spending.
The effective tax rate was 21 percent, down from 22 percent a
year ago.
Global Merchant and Network Services reported
third-quarter net income of $600 million, up 3 percent from $580
million a year ago.
Total revenues net of interest expense were $1.7 billion, up 5
percent from $1.6 billion a year ago. The rise primarily reflected
increased Card Member spending.
Total expenses were $855 million, up 6 percent from $807 million
a year ago. The rise primarily reflected network partner payments
and other business development costs.
The effective tax rate was 25 percent, up from 24 percent a year
ago.
Corporate and Other reported third-quarter net loss of
$331 million, compared with net loss of $311 million a year
ago.
_______________
1 Diluted earnings per common share (EPS)
was reduced by the impact of (i) earnings allocated to
participating share awards and other items of $11 million and $13
million for the three months ended September 30, 2019 and 2018,
respectively, and $35 million and $38 million for the nine months
ended September 30, 2019 and 2018, respectively, and (ii) dividends
on preferred shares of $21 million and $20 million for the three
months ended September 30, 2019 and 2018, respectively, and $61
million for both the nine months ended September 30, 2019 and
2018.
2 Adjusted diluted earnings per common
share, a non-GAAP measure, excludes the impact of a
litigation-related charge in Q1‘19. See Appendix I for a
reconciliation to EPS on a GAAP basis. Management believes adjusted
EPS is useful in evaluating the ongoing operating performance of
the company.
3 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 (e.g., assumes the foreign exchange rates used to determine
results for the three months ended September 30, 2019 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. FX-adjusted revenues constitute non-GAAP
measures.
4 Operating expenses represent salaries
and employee benefits, professional services, occupancy and
equipment, and other expenses.
5 The company's 2019 EPS guidance on a
GAAP basis, which includes the impact of a litigation-related
charge in Q1'19, is between $7.64 and $8.14. The 2019 adjusted EPS
guidance, a non-GAAP measure, is between $7.85 and $8.35 and
excludes the litigation-related charge and any contingencies that
may occur in the fourth quarter. See Appendix I for a
reconciliation. Management believes the presentation of adjusted
EPS guidance is useful in evaluating the ongoing operating
performance of the company.
About American Express
American Express is a globally integrated payments 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, travel
services, gift cards, prepaid cards, merchant services, Accertify,
InAuth, 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 2019, available
on the American Express website at http://ir.americanexpress.com
and in a Form 8-K furnished today with the Securities and Exchange
Commission.
An investor conference call will be held at 8:30 a.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 American Express Company’s current
expectations regarding business and financial performance,
including management’s outlook for 2019, among other matters,
contain words such as “expect,” “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 2019 earnings per common
share (EPS) outlook and fourth quarter 2019 EPS consistent with
expectations and grow earnings per share in the future, which will
depend in part on revenue growth, credit performance and the
effective tax rate remaining consistent with current expectations,
the company’s ability to control operating expense growth and
generate operating leverage, and the company’s ability to continue
executing its share repurchase program; any of which could be
impacted by, among other things, the factors identified in the
subsequent paragraphs as well as the following: issues impacting
brand perceptions and the company’s reputation; the impact of any
future contingencies, including, but not limited to,
restructurings, impairments, changes in reserves, legal costs, the
imposition of fines or civil money penalties and increases in Card
Member reimbursements; the amount and efficacy of investments in
customer engagement; changes in interest rates beyond current
expectations; a greater impact from new or renegotiated cobrand
agreements than expected, which could be affected by spending
volumes and customer acquisition; and 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 ability of the company to achieve its fourth quarter 2019
revenue growth outlook, 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 and revolve balances; a slowdown in corporate spending;
growth in Card Member loans and the yield on Card Member loans not
remaining consistent with current expectations; the average
discount rate changing by a greater amount than expected; the
strengthening of the U.S. dollar beyond expectations; Card Members
continuing to be attracted to the company’s premium card products;
and the company’s inability to address competitive pressures and
implement its strategies and business initiatives, including within
the premium consumer segment, commercial payments, the global
network and digital environment;
- 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 new and existing cobrand relationships,
competition from new and non-traditional competitors and the
success of marketing, promotion and rewards programs;
- the growth of provisions for losses being higher or lower than
current expectations, which will depend in part on changes in the
level of loan and receivable balances and delinquency and write-off
rates; the impact of new accounting guidance and the Current
Expected Credit Loss methodology; newer vintages performing as
expected; credit performance of non-card lending products;
collections capabilities and recoveries of previously written-off
loans and receivables; and macroeconomic factors like unemployment
rates and the volume of bankruptcies;
- cost of Card Member services growing inconsistently from
expectations, which will depend in part on an inability to cost
effectively enhance card products and services; the degree of
interest of Card Members in the value proposition offered by the
company; increasing competition, which could result in additional
benefits and services; the company’s ability to enhance card
products and services to make them attractive to Card Members; and
the pace and cost of the expansion of the company’s global lounge
collection;
- the company’s ability to control operating expense growth,
which could be impacted by increases in costs, such as cyber, fraud
or compliance expenses or consulting, legal and other professional
fees, including as a result of increased litigation or internal and
regulatory reviews; higher than expected employee levels; an
inability to innovate efficient channels of customer interactions,
such as chat supported by artificial intelligence, or customer
acquisition; 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, sales force, premium
servicing and digital capabilities; and the level of M&A
activity and related expenses;
- changes affecting the company’s plans regarding the return of
capital to shareholders through dividends and share repurchases,
which will depend on factors such as capital levels and regulatory
capital ratios; changes in the stress testing and capital planning
process and approval of the company’s capital plans; the amount of
capital required to support asset growth; the amount the company
spends on acquisitions of companies; the company’s results of
operations and financial condition; and the economic environment
and market conditions in any given period;
- the possibility that the company will not execute on its plans
to expand merchant coverage, which will depend in part on the
success of the company, OptBlue merchant acquirers and GNS partners
in signing merchants to accept American Express, which could be
impacted by the value propositions offered by the company to
merchants and merchant acquirers for card acceptance, as well as
the awareness and willingness of Card Members to use American
Express cards at merchants and of those merchants who agree to
accept American Express cards to do so;
- a failure in or breach of the company’s operational or security
systems, processes or infrastructure, or those of third parties,
including as a result of cyberattacks, which could compromise the
confidentiality, integrity, privacy and/or security of data,
disrupt its operations, reduce the use and acceptance of American
Express cards and lead to regulatory scrutiny, litigation,
remediation and response costs, and reputational harm;
- legal and regulatory developments, which could require the
company to make fundamental changes to many of its business
practices, including its ability to continue certain cobrand and
agent relationships in their current form in the EU; 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 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
generally, the availability and cost of capital, unemployment
rates, geopolitical conditions, Brexit, trade policies, foreign
currency rates and interest rates, as well as fire, power loss,
disruptions in telecommunications, severe weather conditions,
natural and man-made disasters, health pandemics or terrorism, any
of which could significantly affect demand for and spending on
American Express cards, delinquency rates, loan and receivable
balances and other aspects of the company’s business 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 American Express Company’s Annual Report on Form 10-K
for the year ended December 31, 2018, the company’s Quarterly
Reports on Form 10-Q for the quarters ended March 31 and June 30,
2019 and the company’s other reports filed with the Securities and
Exchange Commission.
American Express Company
(Preliminary)
Appendix I
Reconciliations of Adjustments
Q3'19 YTD
Q3’18 YTD
Percentage Inc/(Dec)
Diluted earnings per common
share
$5.95
$5.59
6
Q1’19 litigation-related charge
(pre-tax)
0.27
—
Tax impact of litigation-related
charge
(0.06
)
—
Net Impact of Q1’19 litigation-related
charge
0.21
—
Adjusted diluted earnings per
common share
$6.16
$5.59
10
2019 EPS Range
GAAP EPS Outlook
$7.64
$8.14
Q1’19 litigation-related charge
(pre-tax)
0.27
0.27
Tax impact of litigation-related
charge
(0.06
)
(0.06
)
Net Impact of Q1’19 litigation-related
charge
0.21
0.21
Adjusted EPS Outlook
$7.85
$8.35
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191018005217/en/
Media Contacts: Marina H. Norville,
marina.h.norville@aexp.com, +1.212.640.2832 Andrew R. Johnson,
andrew.r.johnson@aexp.com, +1.212.640.8610 Investors/Analysts
Contacts: Rosie C. Perez, rosario.c.perez@aexp.com,
+1.212.640.5574 Melanie L. Michel, melanie.l.michel@aexp.com,
+1.212.640.5574
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