American Express Company (NYSE: AXP) today reported
third-quarter net income of $1.1 billion, or $1.30 per share,
compared with net income of $1.8 billion, or $2.08 per share, a
year ago.
(Millions, except percentages and
per share amounts)
Quarters Ended September
30,
Percentage Inc/(Dec)
Quarters Ended June
30,
Percentage Inc/(Dec)
2020
2019
2020
2019
Total Revenues Net of Interest Expense
$8,751
$10,989
(20)
$7,675
$10,838
(29)
Total Provisions for Credit Losses
$665
$879
(24)
$1,555
$861
81
Net Income
$1,073
$1,755
(39)
$257
$1,761
(85)
Diluted Earnings Per Common Share1
$1.30
$2.08
(38)
$0.29
$2.07
(86)
Average Diluted Common Shares
Outstanding
805
827
(3)
805
836
(4)
“While our business continues to be significantly affected by
the impacts of the pandemic, our third quarter results have
increased our confidence that our strategy for managing through the
current environment is the right one,” said Stephen J. Squeri,
Chairman and Chief Executive Officer.
“Since the lows of mid-April, we have seen a steady recovery in
our overall spending volumes. In fact, we had positive
year-over-year growth in non-T&E spending, which has long
accounted for the large majority of our overall volumes. While
credit remains strong, with delinquencies and net write-offs at the
lowest levels we have seen in a few years, we remain cautious about
the direction of the pandemic and its impacts on the economy, which
is reflected in our reserve levels.
“The investments we have made to enhance our value propositions
have yielded strong results, driving spending and loyalty, and our
voluntary attrition rates on our proprietary products remain lower
than last year. We’re also expanding our largest ever Shop Small
campaign to support small merchants in 18 countries and
territories. In addition, we have begun to selectively increase our
customer acquisition activities while continuing to invest for the
long term, such as expanding our commercial offerings through our
recent acquisition of financial technology company Kabbage, as well
as officially launching our network in mainland China.
Additionally, we have maintained a robust liquidity position and
capital ratios well above targets.
“We recognize that the road ahead continues to be uncertain, but
we are confident that the steps we are taking will enable us to
exit this crisis in a strong position and maximize value for our
stakeholders over the long term.”
Third-quarter consolidated total revenues net of interest
expense were $8.8 billion, down 20 percent from $11.0 billion a
year ago. The quarter primarily reflected declines in Card Member
spending and the average discount rate compared to the prior
year.
Consolidated provisions for credit losses were $665 million,
down 24 percent from $879 million a year ago. The decrease
primarily reflected a modest reserve release2 and lower net
write-offs. Total credit reserve levels at the end of the third
quarter were generally consistent with second-quarter levels.
Consolidated expenses were $6.7 billion, down 14 percent from
$7.8 billion a year ago. The decrease primarily reflected
significantly lower customer engagement costs due to the decline in
Card Member spending and lower usage of travel-related Card Member
benefits, partially offset by investments in value proposition
enhancements for many of the company’s card products, as well as
expenses related to the largest ever Shop Small campaign.
The consolidated effective tax rate was 21.3 percent, down from
22.6 percent a year ago.
Global Consumer Services Group reported third-quarter net
income of $855 million, compared with $991 million a year ago.
Total revenues net of interest expense were $5.2 billion, down
16 percent from $6.2 billion a year ago. The decrease primarily
reflected declines in Card Member spending and loan volumes
compared to the prior year.
Provisions for credit losses totaled $412 million, down 37
percent from $653 million a year ago. The decrease primarily
reflected a modest reserve release and lower net write-offs.
Total expenses were $3.7 billion, down 14 percent from $4.3
billion a year ago. The decrease primarily reflected significantly
lower customer engagement costs due to a decline in Card Member
spending and lower usage of travel-related Card Member benefits,
partially offset by investments in the previously mentioned value
proposition enhancements and expenses related to the Shop Small
campaign.
Global Commercial Services reported third-quarter net
income of $220 million, compared with net income of $568 million a
year ago.
Total revenues net of interest expense were $2.5 billion, down
23 percent from $3.3 billion a year ago, primarily reflecting a
decline in Card Member spending.
Provisions for credit losses totaled $250 million, up 13 percent
from $222 million a year ago, driven by a slight reserve build.
Total expenses were $2.0 billion, down 14 percent from $2.4
billion a year ago. The decrease primarily reflected lower client
incentives and other customer engagement costs due to a decline in
Card Member spending.
Global Merchant and Network Services reported
third-quarter net income of $263 million, compared with $523
million a year ago.
Total revenues net of interest expense were $1.1 billion, down
27 percent from $1.6 billion a year ago. The decrease primarily
reflected declines in Card Member spending and the average discount
rate compared to the prior year.
Total expenses were $780 million, down 8 percent from $845
million a year ago, driven by lower network partner payments due to
a decline in Card Member spending.
Corporate and Other reported a third-quarter net loss of
($265) million, compared with a net loss of ($327) 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 $7 million and $11 million for the three months
ended September 30, 2020 and 2019, respectively, and $2 million and
$13 million for the three months ended June 30, 2020 and 2019,
respectively, and (ii) dividends on preferred shares of $16 million
and $21 million for the three months ended September 30, 2020 and
2019, respectively, and $17 million and $19 million for the three
months ended June 30, 2020 and 2019, respectively.
2 Reserve build (release) represents the portion of the
provisions for credit losses for the period related to increasing
or decreasing reserves for credit losses as a result of, among
other things, changes in volumes, macroeconomic outlook, portfolio
composition and credit quality of portfolios. Reserve build
represents the amount by which the provisions for credit losses
exceeds net write-offs, while reserve release represents the amount
by which net write-offs exceed the provisions for credit
losses.
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.
Location: Global
This earnings release should be read in conjunction with the
company’s statistical tables for the third quarter 2020, available
on the American Express Investor Relations 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 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, among
other matters, contain words such as “believe,” “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:
- uncertainty regarding the duration, extent and severity of the
pandemic; a further deterioration in global economic and business
conditions and consumer and business spending generally; an
inability or unwillingness of Card Members to pay amounts owed to
the company; insufficient governmental stimulus and relief programs
to address the impact of the pandemic; prolonged measures to
contain the spread of COVID-19 or premature easing of such
containment measures, both of which could further exacerbate the
effects on business activity and the company’s Card Members,
partners and merchants; health concerns associated with the
pandemic continuing to affect consumer behavior, spending levels
and preferences, and travel patterns and demand even after
government restrictions are lifted and economies reopen; an
inability of the company to manage risk in an uncertain
environment; market volatility, changes in capital and credit
market conditions and the availability and cost of capital; issues
impacting brand perceptions and the company’s reputation; and an
inability of business partners to meet their obligations to the
company and the company’s customers due to slowdowns or disruptions
in their businesses, bankruptcy or liquidation, or otherwise;
- future credit performance, which will depend in part on
macroeconomic factors such as unemployment rates, GDP and the
volume of bankruptcies; collections capabilities; the enrollment
in, and effectiveness of, hardship programs and troubled debt
restructurings; the availability of government stimulus programs
for borrowers; and governmental actions that provide forms of
relief with respect to certain loans and fees, such as limiting
debt collections efforts and encouraging or requiring extensions,
modifications or forbearance;
- net interest income and the amount of loans outstanding being
higher or lower than current expectations, which will depend on the
behavior of Card Members and their actual spending and borrowing
patterns, the company’s ability to manage risk and enhance the Card
Member value propositions, and changes in interest rates and the
company’s cost of funds;
- the actual amount to be spent on marketing, which will be based
in part on continued changes in macroeconomic conditions and
business performance; management’s assessment of competitive
opportunities and the receptivity of Card Members and prospective
customers to advertising initiatives; and management’s ability to
realize efficiencies and optimize investment spending;
- the actual amount to be spent on Card Member rewards and
services and business development, and the relationship of these
variable customer engagement costs to revenues, which could be
impacted by Card Members’ interest in the value propositions
offered by the company; further enhancements to product benefits to
make them attractive to Card Members, potentially in a manner that
is not cost effective; Card Member behavior as it relates to their
spending patterns (including the level of spend in bonus
categories) and the redemption of rewards and offers (including
travel redemptions); the costs related to reward point redemptions;
and new and renegotiated contractual obligations with business
partners;
- the ability of the company to control its operating expenses,
which could be impacted by, among other things, the company’s
inability to balance expense control and investments in the
business; management’s decision to increase or decrease spending in
such areas as technology, business and product development, sales
force, premium servicing and digital capabilities depending on
overall business performance; an inability to innovate efficient
channels of customer interactions, such as chat supported by
artificial intelligence; restructuring activity;
higher-than-expected cyber, fraud or compliance expenses or
consulting, legal and other professional fees, including as a
result of increased litigation or internal and regulatory reviews;
the level of M&A activity and related expenses; the payment of
civil money penalties, disgorgement, restitution, non-income tax
assessments and litigation-related settlements; impairments of
goodwill or other assets; the impact of changes in foreign currency
exchange rates on costs; and greater than expected inflation;
- net card fees not growing consistent with current expectations,
which could be impacted by, among other things, the further
deterioration in macroeconomic conditions impacting the ability and
desire of Card Members to pay card fees; higher attrition rates;
Card Members continuing to be attracted to the company’s premium
card products and the pace of Card Member acquisition activity; and
the company’s inability to address competitive pressures and
implement its strategies and business initiatives, including
introducing new and enhanced benefits and services that are
designed for the current environment;
- a further decline of the average discount rate, including as a
result of further 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) and other factors;
- changes in the substantial and increasing worldwide competition
in the payments industry, including competitive pressure that may
materially 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;
- changes affecting the company’s plans regarding the return of
capital to shareholders, including its intention to maintain its
current quarterly common share dividend for the fourth quarter of
2020, subject to approval by the company’s Board of Directors,
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 by the Federal
Reserve; the company’s results of operations and financial
condition; the company’s credit ratings and rating agency
considerations; and the economic environment and market conditions
in any given period;
- 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 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
Card Members, partners, merchants and other third parties,
including its ability to continue certain cobrand and agent
relationships 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
result in harm to the American Express brand;
- changes in the financial condition and creditworthiness of the
company’s business partners, such as bankruptcies, restructurings
or consolidations, including cobrand partners and merchants that
represent a significant portion of the company’s business, such as
the airline industry, or partners in GNS or financial institutions
that the company relies on for routine funding and liquidity, which
could materially affect the company’s financial condition or
results of operations; and
- factors beyond the company’s control such as resurgences of
COVID-19 cases, severe weather conditions, natural and man-made
disasters, power loss, disruptions in telecommunications, 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
results of operations or disrupt its 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, 2019, the Quarterly Reports on Form
10-Q for the quarters ended March 31 and June 30, 2020 and the
company’s other reports filed with the Securities and Exchange
Commission.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201023005038/en/
Media: Andrew R. Johnson, Andrew.R.Johnson@aexp.com,
+1.212.640.8610 Jocelyn F. Seidenfeld,
Jocelyn.F.Seidenfeld@aexp.com, +1.212.640.0555
Investors/Analysts: Vivian Y. Zhou, Vivian.Y.Zhou@aexp.com,
+1.212.640.5574 Melanie L. Michel, Melanie.L.Michel@aexp.com,
+1.212.640.5574
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