American Express Third Quarter EPS up 15% to $1.25; Revenues, Card Member Spending and Loans Continue to Grow

Business Wire

NEW YORK--(BUSINESS WIRE)--

American Express Company (AXP) today reported third-quarter net income of $1.4 billion, up 9 percent from a year ago. Diluted earnings per share was $1.25, up 15 percent from $1.09 a year ago.

(Millions, except percentages and per share amounts)

       
Quarters Ended Percentage Nine Months Ended Percentage

September 30,

Inc/(Dec)

September 30,

Inc/(Dec)

2013

 

2012

2013

 

2012

Total Revenues Net of Interest Expense $ 8,301 $ 7,862 6 % $ 24,427 $ 23,414 4 %
Net Income $ 1,366 $ 1,250 9 % $ 4,051 $ 3,845 5 %
Earnings Per Common Share – Diluted:

Net Income Attributable to Common Shareholders1

$ 1.25 $ 1.09 15 % $ 3.67 $ 3.31 11 %
Average Diluted Common Shares Outstanding 1,081 1,132 (5 )% 1,094 1,149 (5 )%
Return on Average Equity 24.3 % 26.3 % 24.3 % 26.3 %
 

Consolidated total revenues net of interest expense rose 6 percent to $8.3 billion in the third quarter, from $7.9 billion a year ago. The increase was driven by a rise in Card Member spending and higher net interest income that reflected lower funding costs and growth in Card Member loans.

Adjusted for foreign currency translations, consolidated total revenues net of interest expense rose 7 percent from a year ago.2

Consolidated provisions for losses totaled $492 million, up 3 percent from $479 million a year ago. This increase reflects lower reserve releases from a year ago, partially offset by the benefit of lower net write-offs in the current quarter. Credit indicators continued to be at historically strong levels.

Consolidated expenses totaled $5.8 billion, up 5 percent from $5.5 billion last year. The increase primarily reflects a rise in rewards and marketing costs, as well as higher operating expenses.3

Adjusted for foreign currency translations, consolidated total expenses were up 6 percent from a year ago.2

The effective tax rate was 32 percent, down from 33 percent from a year ago.

The company's return on average equity (ROE) was 24.3 percent, down from 26.3 percent a year ago.

“Despite an uncertain environment, we generated a healthy increase in revenues and stronger Card Member spending across all regions this quarter,” said Kenneth I. Chenault, chairman and chief executive officer. “Spending on our global network rose 7 percent (9 percent adjusted for currency translations) and Card Member loans continued the modest growth rates we have been seeing for the past several quarters.

“Credit quality indicators remained at historically strong levels,” said Mr. Chenault. “And, year to date, we are delivering on the annual targets we set to contain operating costs.

“The combination of top-line growth, credit quality, a strong capital position and continued vigilance on expenses produced a 15 percent increase in earnings per share. It also gave us the flexibility to make substantial investments this quarter in marketing and other initiatives to position our business for the years ahead.”

Segment Results

U.S. Card Services reported third-quarter net income of $782 million, up 12 percent from $699 million a year ago.

Total revenues net of interest expense increased 6 percent to $4.3 billion, from $4.1 billion a year ago. The increase reflects an 8 percent increase in Card Member spending and a rise in net interest income, driven primarily by 4 percent growth in average Card Member loans.

Provisions for losses totaled $331 million, down 2 percent from $339 million a year ago.

Total expenses increased 4 percent to $2.7 billion from a year ago, primarily reflecting higher rewards and marketing expenses, partially offset by lower operating expenses.

The effective tax rate remained unchanged from the year-ago period at 38 percent.

International Card Services reported third-quarter net income of $142 million, down 13 percent from $164 million a year ago.

Total revenues net of interest expense increased 3 percent to $1.4 billion. The increase primarily reflects an increase in commissions and fees and net card fees. Adjusted for foreign currency translations, revenues rose 8 percent from a year ago.2

Provisions for losses totaled $113 million, up 36 percent from $83 million a year ago. The increase reflects higher net write-offs and a reserve build in the current quarter.

Total expenses increased 3 percent to $1.1 billion primarily reflecting higher rewards and marketing expenses. Adjusted for foreign currency translations, expenses increased 7 percent from a year ago.2

The effective tax rate was 24 percent compared to 21 percent a year ago.

Global Commercial Services reported third-quarter net income of $261 million, up 43 percent from $183 million a year ago.

Total revenues net of interest expense increased 6 percent to $1.2 billion, reflecting higher Card Member spending and a rise in travel commissions and fees.

Total expenses decreased 1 percent to $844 million, reflecting lower operating expenses, partially offset by higher rewards costs.

The effective tax rate was 23 percent compared to 33 percent from a year ago. The current quarter benefited from a reserve release in the global business travel organization.

Global Network & Merchant Services reported third-quarter net income of $391 million, up 9 percent from $360 million a year ago.

Total revenues net of interest expense increased 5 percent to $1.4 billion from $1.3 billion a year ago, reflecting higher merchant-related revenues driven by an increase in global Card Member spending, as well as an increase in revenues from Global Network Services’ bank partners. Adjusted for foreign currency translations, revenues rose 7 percent from a year ago.2

Total expenses increased 4 percent to $758 million from $731 million a year ago, reflecting an increase in operating and marketing expenses. Adjusted for foreign currency translations, expenses rose 6 percent from a year ago.2

The effective tax rate remained unchanged from a year ago at 36 percent.

Corporate and Other reported third-quarter net loss of $210 million compared with net loss of $156 million in the year-ago period. The current period reflected, in part, higher investments in Enterprise Growth Group initiatives.

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, foursquare.com/americanexpress, linkedin.com/companies/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.

Key links to products and services: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, business travel, and corporate card

The 2013 Third Quarter Earnings Supplement will be available today on the American Express web site at http://ir.americanexpress.com. 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 at the same web site. A replay of the conference call will be available later today at the same web site address.

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the company’s expected business and financial performance and are subject to risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements due to a variety of factors, including those contained in the company's Annual Report on Form 10-K for the year ended December 31, 2012, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 and the company’s other filings with the Securities and Exchange Commission. 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.

1 Represents net income less earnings allocated to participating share awards of $12 million and $14 million for the three months ended September 30, 2013 and 2012, respectively, and $36 million and $42 million for the nine months ended September 30, 2013 and 2012, respectively.

2 As reported in this release, FX adjusted information, which constitute non-GAAP financial measures, assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the three months ended September 30, 2013 apply to the period(s) against which such results are being compared). The company 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 include salaries and employee benefits, professional services, occupancy and equipment, communications and other, net.

All information in the following tables is presented on a basis prepared in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise indicated. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

(Preliminary)

American Express Company

Consolidated Statements of Income

           
(Millions)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2013 2012 Inc/(Dec) 2013 2012 Inc/(Dec)
 
Revenues
Non-interest revenues
Discount revenue $ 4,659 $ 4,425 5

 %

$ 13,826 $ 13,164 5

 %

Net card fees 658 633 4 1,958 1,858 5
Travel commissions and fees 490 465 5 1,422 1,437 (1 )
Other commissions and fees 610 581 5 1,788 1,739 3
Other   601     577   4   1,705     1,781   (4 )
Total non-interest revenues   7,018     6,681   5   20,699     19,979   4
Interest income
Interest on loans 1,698 1,658 2 5,003 4,851 3
Interest and dividends on investment securities 48 60 (20 ) 153 193 (21 )
Deposits with banks and other   21     21   -   67     73   (8 )
Total interest income   1,767     1,739   2   5,223     5,117   2
Interest expense
Deposits 111 118 (6 ) 332 362 (8 )
Long-term debt and other   373     440   (15 )   1,163     1,320   (12 )
Total interest expense   484     558   (13 )   1,495     1,682   (11 )
Net interest income   1,283     1,181   9   3,728     3,435   9
Total revenues net of interest expense   8,301     7,862   6   24,427     23,414   4
Provisions for losses
Charge card 194 190 2 590 531 11
Card Member loans 282 264 7 921 753 22
Other   16     25   (36 )   71     68   4
Total provisions for losses   492     479   3   1,582     1,352   17
Total revenues net of interest expense after provisions for losses   7,809     7,383   6   22,845     22,062   4
 
Expenses
Marketing and promotion 827 764 8 2,234 2,168 3
Card Member rewards 1,619 1,496 8 4,740 4,425 7
Card Member services 197 201 (2 ) 579 575 1
Salaries and employee benefits 1,544 1,516 2 4,702 4,687 -
Professional services 793 690 15 2,272 2,092 9
Occupancy and equipment 462 453 2 1,394 1,337 4
Communications 94 93 1 282 284 (1 )
Other, net   269     300   (10 )   734     972   (24 )

Total

  5,805     5,513   5   16,937     16,540   2
Pretax income 2,004 1,870 7 5,908 5,522 7
Income tax provision   638     620   3   1,857     1,677   11
Net income $ 1,366   $ 1,250   9 $ 4,051   $ 3,845   5
Net income attributable to common shareholders (A) $ 1,354   $ 1,236   10 $ 4,015   $ 3,803   6
Effective tax rate 31.8 % 33.2 % 31.4 % 30.4 %
 

(A) Represents net income, less earnings allocated to participating share awards of $12 million and $14 million for the three months ended September 30, 2013 and 2012, respectively, and $36 million and $42 million for the nine months ended September 30, 2013 and 2012, respectively.

 
(Preliminary)    

American Express Company

Condensed Consolidated Balance Sheets

 
(Billions)
 
September 30, December 31,
2013 2012
 
Assets
Cash & cash equivalents $ 22 $ 22
Accounts receivable 46 46
Investment securities 5 6
Loans 62 64
Other assets   15   15
Total assets $ 150 $ 153
 
Liabilities and Shareholders' Equity
Customer deposits $ 42 $ 40
Short-term borrowings 3 3
Long-term debt 53 59
Other liabilities   33   32
Total liabilities   131   134
 
Shareholders' Equity   19   19
Total liabilities and shareholders' equity $ 150 $ 153
 
(Preliminary)            

American Express Company

Financial Summary

 
(Millions)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2013 2012 Inc/(Dec) 2013 2012 Inc/(Dec)
 

Total revenues net of interest expense

U.S. Card Services $ 4,286 $ 4,055 6

 %

$ 12,607 $ 11,976 5

 %

International Card Services 1,356 1,313 3 3,972 3,909 2
Global Commercial Services 1,221 1,156 6 3,615 3,534 2
Global Network & Merchant Services   1,379     1,310   5   4,066     3,881   5
8,242 7,834 5 24,260 23,300 4
Corporate & Other   59     28  

#

  167     114   46
 
CONSOLIDATED TOTAL REVENUES NET OF INTEREST EXPENSE $ 8,301   $ 7,862   6 $ 24,427   $ 23,414   4
 

Pretax income (loss)

U.S. Card Services $ 1,257 $ 1,128 11 $ 3,702 $ 3,457 7
International Card Services 186 207 (10 ) 535 549 (3 )
Global Commercial Services 341 275 24 957 818 17
Global Network & Merchant Services   608     561   8   1,837     1,662   11
2,392 2,171 10 7,031 6,486 8
Corporate & Other   (388 )   (301 ) 29   (1,123 )   (964 ) 16
 
PRETAX INCOME $ 2,004   $ 1,870   7 $ 5,908   $ 5,522   7
 

Net income (loss)

U.S. Card Services $ 782 $ 699 12 $ 2,329 $ 2,169 7
International Card Services 142 164 (13 ) 528 539 (2 )
Global Commercial Services 261 183 43 678 579 17
Global Network & Merchant Services   391     360   9   1,176     1,089   8
1,576 1,406 12 4,711 4,376 8
Corporate & Other   (210 )   (156 ) 35   (660 )   (531 ) 24
 
NET INCOME $ 1,366   $ 1,250   9 $ 4,051   $ 3,845   5
 
# - Denotes a variance of more than 100 percent.
 
(Preliminary)            

American Express Company

Financial Summary (continued)

 
 
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2013 2012 Inc/(Dec) 2013 2012 Inc/(Dec)
EARNINGS PER COMMON SHARE
 
BASIC
Net income attributable to common shareholders $ 1.26   $ 1.10   15

 %

$ 3.69   $ 3.33   11

 %

 
Average common shares outstanding (millions)   1,074     1,126   (5 )%   1,087     1,143   (5 )%
 
DILUTED
Net income attributable to common shareholders $ 1.25   $ 1.09   15

 %

$ 3.67   $ 3.31   11

 %

 
Average common shares outstanding (millions)   1,081     1,132   (5 )%   1,094     1,149   (5 )%
 
Cash dividends declared per common share $ 0.23   $ 0.20   15

 %

$ 0.66   $ 0.60   10

 %

 
 

Selected Statistical Information

 
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
  2013     2012   Inc/(Dec)   2013     2012   Inc/(Dec)
 
Return on average equity (A) 24.3 % 26.3 % 24.3 % 26.3 %
Return on average common equity (A) 24.1 % 26.0 % 24.1 % 26.0 %
Return on average tangible common equity (A) 30.6 % 33.5 % 30.6 % 33.5 %
Common shares outstanding (millions) 1,071 1,122 (5 )% 1,071 1,122 (5 )%
Book value per common share $ 17.94 $ 17.37 3

 %

$ 17.94 $ 17.37 3

 %

Shareholders' equity (billions) $ 19.2 $ 19.5 (1 )% $ 19.2 $ 19.5 (1 )%

 

(A) Refer to Appendix I for components of return on average equity, return on average common equity and return on average tangible common equity, a non-GAAP measure.

 
(Preliminary)          

American Express Company

Components of Return on Average Equity (ROE), Return on Average Common Equity (ROCE),

and Return on Average Tangible Common Equity (ROTCE)

Appendix I

 
(Millions)
For the Twelve Months Ended
September 30, June 30, March 31, December 31, September 30,
2013 2013 2013 2012 2012
 

ROE

 
Net income $ 4,688 $ 4,572 $ 4,506 $ 4,482 $ 5,037
Average shareholders' equity $ 19,289 $ 19,372 $ 19,426 $ 19,425 $ 19,145
Return on average equity (A) 24.3 % 23.6 % 23.2 % 23.1 % 26.3 %
 

Reconciliation of ROCE and ROTCE

 
Net income $ 4,688 $ 4,572 $ 4,506 $ 4,482 $ 5,037
Earnings allocated to participating share awards and other   43     45     46     49     56  
Net income attributable to common shareholders $ 4,645   $ 4,527   $ 4,460   $ 4,433   $ 4,981  
 
Average shareholders' equity $ 19,289   $ 19,372   $ 19,426   $ 19,425   $ 19,145  
Average common shareholders' equity $ 19,289   $ 19,372   $ 19,426   $ 19,425   $ 19,145  
Average goodwill and other intangibles   4,091     4,128     4,181     4,232     4,272  
Average tangible common shareholders' equity $ 15,198   $ 15,244   $ 15,245   $ 15,193   $ 14,873  
Return on average common equity (A) 24.1 % 23.4 % 23.0 % 22.8 % 26.0 %
Return on average tangible common equity (B) 30.6 % 29.7 % 29.3 % 29.2 % 33.5 %

 

(A) Return on average equity and return on average common equity are calculated by dividing one year period net income/net income attributable to common shareholders by one year average total shareholders’ equity/average common shareholders' equity, respectively.

 

(B) Return on average tangible common equity, a non-GAAP measure, is computed in the same manner as return on average common equity except the computation of average tangible common shareholders' equity, a non-GAAP measure, excludes from average total shareholders' equity, average goodwill and other intangibles. The Company believes that return on average tangible common equity is a useful measure of the profitability of its business.

Contact:
Media Contacts:
Marina Norville, +1.212.640.2832
marina.h.norville@aexp.com
or
Mike O'Neill, +1.212.640.5951
mike.o'neill@aexp.com
or
Investors/Analysts Contacts:
Ken Paukowits, +1.212.640.6348
ken.f.paukowits@aexp.com
or
Rick Petrino, +1.212.640.5574
richard.petrino@aexp.com

Rates

View Comments (0)