Strong Revenue Growth
Reflects Higher Card Member Spending, Loans and Card
Fees
Company Reaffirms 2019
Outlook
American Express Company (NYSE: AXP) today reported
second-quarter net income of $1.8 billion, up 9 percent from $1.6
billion a year ago. Diluted earnings per share was $2.07, up 13
percent from $1.84 per share a year ago.
(Millions, except percentages and
per share amounts)
Quarters Ended
June 30,
Percentage Inc/(Dec)
Six Months Ended June
30,
Percentage Inc/(Dec)
2019
2018
2019
2018
Total Revenues Net of Interest Expense
$
10,838
$
10,002
8
$
21,202
$
19,720
8
Net Income
$
1,761
$
1,623
9
$
3,311
$
3,257
2
Diluted Earnings Per Common Share1
$
2.07
$
1.84
13
$
3.87
$
3.70
5
Adjusted Diluted Earnings Per Common
Share2
$
2.07
$
1.84
13
$
4.07
$
3.70
10
Average Diluted Common Shares
Outstanding
836
862
(3)
839
862
(3)
Second-quarter consolidated total revenues net of interest
expense were $10.8 billion, up 8 percent from $10.0 billion a year
ago. Excluding the impact of foreign exchange rates, adjusted
revenues net of interest expense grew 10 percent.3 The increases
reflected higher Card Member spending, loans and card fees.
Consolidated provisions for losses were $861 million, up 7
percent from $806 million a year ago. The increase reflected higher
net lending write-offs driven by loan growth.
Consolidated expenses were $7.8 billion, up 9 percent from $7.1
billion a year ago. The rise reflected, in part, growth in rewards
and other customer engagement costs driven by increased Card Member
spending, higher usage of card benefits and continued investments
in cobrand partnerships. Operating expenses were up 7 percent from
a year ago.4
The consolidated effective tax rate was 21 percent, down from 22
percent a year ago.
“We continued the broad-based momentum throughout our business
with the eighth straight quarter of FX-adjusted revenue growth at 8
percent or better,” said Steve Squeri, chairman and chief executive
officer. “Once again, our performance was driven by a well-balanced
mix of spending volumes, lending income and card fees.
“FX-adjusted Card Member spending was up 7 percent, led by
consumers. This spending is occurring against the backdrop of an
economy that is growing at a steady, but modest pace relative to
2018. Total loans grew 11 percent, with over 60 percent of that
increase coming from our existing customers. Credit performance
continued at industry-leading levels.
“We continued to enhance the benefits and services we offer and
that helped us add 2.9 million new proprietary cards this quarter.
Nearly 70 percent of those new consumer cards we acquired this
quarter carry an annual fee – a strong sign that Card Members
appreciate and are willing to pay for premium value.
“I feel very good about the power of our business model and our
returns on the investments we’ve been making to drive share, scale
and relevance. Given this quarter’s solid results, and all that
we’ve achieved during the first half of the year, we are
reaffirming our 2019 financial guidance of 8 to 10 percent revenue
growth and full-year results that are in line with our EPS
range.5”
The company also plans to continue returning a significant
portion of the capital it generates to shareholders and expects to
increase the regular quarterly dividend on its common shares
outstanding to 43 cents per share from 39 cents beginning with the
third quarter 2019, subject to approval by the company’s board of
directors.
Global Consumer Services Group reported second-quarter
net income of $738 million, down 4 percent from $770 million a year
ago.
Total revenues net of interest expense were $5.8 billion, up 10
percent from $5.3 billion a year ago. The rise primarily reflected
higher loans, Card Member spending and card fees.
Provisions for losses totaled $650 million, up 15 percent from
$565 million a year ago. The increase reflected higher net lending
write-offs driven by loan growth.
Total expenses were $4.3 billion, up 13 percent from $3.8
billion a year ago. The rise reflected, in part, growth in rewards
expenses and other customer engagement costs driven by increased
Card Member spending, higher usage of card benefits and continued
investments in cobrand partnerships.
The effective tax rate was 19 percent, down from 20 percent a
year ago.
Global Commercial Services reported second-quarter net
income of $644 million, up 14 percent from $564 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 $206 million, down 12 percent from
$235 million a year ago. The decrease reflected higher net losses
in the prior year, largely in the charge card portfolio, partially
offset by growth in loans and receivables.
Total expenses were $2.4 billion, up 7 percent from $2.2 billion
a year ago. The rise reflected, in part, growth in rewards expenses
and other customer engagement costs driven by increased Card Member
spending, higher usage of card benefits and continued investments
in cobrand partnerships.
The effective tax rate was 20 percent, down from 21 percent a
year ago.
Global Merchant and Network Services reported
second-quarter net income of $632 million, up 16 percent from $543
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 increase reflected higher
worldwide Card Member spending.
Total expenses were $823 million, down 2 percent from $838
million a year ago.
The effective tax rate was 25 percent, down from 27 percent a
year ago.
Corporate and Other reported second-quarter net loss of
$253 million, unchanged from a year ago.
________________________
Notes:
- Diluted earnings per common share (EPS) was reduced by the
impact of (i) earnings allocated to participating share awards and
other items of $13 million and $12 million for the three months
ended June 30, 2019 and 2018, respectively, and $24 million and $25
million for the six months ended June 30, 2019 and 2018,
respectively, and (ii) dividends on preferred shares of $19 million
and $20 million for the three months ended June 30, 2019 and 2018,
respectively, and $40 million and $41 million for the six months
ended June 30, 2019 and 2018, respectively.
- 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.
- 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 June 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.
- Operating expenses represent salaries and employee benefits,
professional services, occupancy and equipment, and other
expenses.
- 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. 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 second 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 second-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 outlook, 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 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 as well as in macroeconomic factors like unemployment rates
and the volume of bankruptcies, newer vintages performing as
expected, credit performance of non-card lending products,
collections capabilities and recoveries of previously written-off
loans and receivables, and the implementation of new accounting
guidance;
- 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 actual amount to be spent on marketing and business
development, as well as the timing of any such spending, which will
be based in part on management’s assessment of competitive
opportunities; overall business performance, corporate and GNS
billings and changes in macroeconomic conditions; costs related to
advertising and Card Member acquisition; the company’s ability to
continue to shift Card Member acquisition to digital channels;
contractual obligations with business partners and other fixed
costs and commitments, including as a result of partnership
renegotiations; 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 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;
- the ability of the company to increase Card Member engagement
with the Amex app and expand contactless capabilities, which will
depend on the company’s success in evolving its systems and
platforms, introducing new features and offering attractive value
propositions to Card Members to incentivize the use of and enhance
satisfaction with the company’s digital channels and contactless
payments, successfully integrating acquired platforms, and building
partnerships and executing programs with other companies, all of
which will be impacted by investment levels, new product innovation
and infrastructure development;
- 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
Appendix I
Reconciliations of Adjustments
Q2'19
YTD
Q2’18 YTD
Percentage Inc/(Dec)
Diluted earnings per common
share
$3.87
$3.70
5
Litigation-related charge
(pre-tax)
0.26
—
Tax impact of litigation-related
charge
(0.06)
—
Net Impact of Q1’19 litigation-related
charge(a)
0.20
—
Adjusted diluted earnings per common
share
$4.07
$3.70
10
2019 EPS Range
GAAP EPS Outlook
$7.64
$8.14
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(a)
0.21
0.21
Adjusted EPS Outlook
$7.85
$8.35
a The difference between the net impact of the Q1’19
litigation-related charge on Q2’19 YTD EPS and the 2019 GAAP EPS
Outlook is due to the average common shares outstanding for each
respective period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190719005166/en/
Media: Marina H. Norville, marina.h.norville@aexp.com,
+1.212.640.2832
Investors/Analysts: 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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