THIRD-QUARTER EARNINGS PER SHARE ROSE 34% TO
RECORD $3.30
STRONG RESULTS DRIVEN BY CONTINUED GROWTH IN
CARD MEMBER SPENDING AND BEST-IN-CLASS CREDIT PERFORMANCE
MOMENTUM SUPPORTS COMPANY’S LONG-TERM GROWTH
PLAN
American Express Company (NYSE: AXP):
($ in millions, except per share
amounts, and where indicated)
Quarters Ended
September 30,
Percentage
Inc/(Dec)
Nine Months Ended
September 30,
Percentage
Inc/(Dec)
2023
2022
2023
2022
Total Network Volumes (Billions)
$420.2
$394.4
7%
$1,245.7
$1,139.5
9%
Total Revenues Net of Interest Expense
$15,381
$13,556
13%
$44,716
$38,686
16%
Total Provisions for Credit Losses
$1,233
$778
58%
$3,486
$1,155
#
Net Income
$2,451
$1,879
30%
$6,441
$5,942
8%
Diluted Earnings Per Common Share1
$3.30
$2.47
34%
$8.59
$7.77
11%
Average Diluted Common Shares
Outstanding
733
749
(2)%
739
753
(2)%
# - Denotes a variance of 100 percent or
more.
American Express Company (NYSE: AXP) today reported
third-quarter net income of $2.5 billion, or $3.30 per share,
compared with net income of $1.9 billion, or $2.47 per share, a
year ago.
“We reported another quarter of record revenues and earnings per
share, which increased 13 percent and 34 percent, respectively,
from a year earlier, reflecting the continued momentum we have
built in our business over the last few years,” said Stephen J.
Squeri, Chairman and CEO.
“Overall Card Member spending was strong and credit performance
remained best-in-class, reflecting our premium global customer
base. Total Card Member spending was up 7 percent from a year
earlier on an FX-adjusted basis, with spending by our U.S. consumer
Card Members up 9 percent and spending in our International Card
Services segment up 15 percent on an FX-adjusted basis. Travel and
Entertainment spending remained robust, increasing 13 percent on an
FX-adjusted basis. Restaurant spending was again one of our
fastest-growing T&E categories, and our Resy restaurant
platform continued to generate high levels of user engagement,
marking another quarter of record reservations.
“The investments we have made in our value propositions are
driving brand relevance across generations, with Millennial and Gen
Z consumers remaining our fastest-growing consumer cohort. Spending
by these customers was up 18 percent in the U.S. from a year
earlier, and they accounted for more than 60 percent of all new
consumer account acquisitions globally. Demand for our premium
products remains high, with acquisitions on fee-based cards
accounting for more than 70 percent of all new account acquisitions
in the quarter.
“Based on our performance to date, we remain confident in our
ability to achieve revenue growth and EPS for the full year
consistent with the annual guidance we provided at the start of the
year. We believe we are well positioned as we seek to achieve our
long-term growth plan aspirations in 2024 and beyond in a
steady-state macro environment.”
Third-quarter consolidated total revenues net of interest
expense were $15.4 billion, up 13 percent from $13.6 billion a year
ago. The increase was primarily driven by higher average loan
volumes and increased Card Member spending.
Credit metrics remained strong in the current quarter, with net
write-off and delinquency rates for total Card Member loans and
receivables below pre-pandemic levels. Consolidated provisions for
credit losses were $1.2 billion, compared with $778 million a year
ago. The increase reflected higher net write-offs, partially offset
by a lower net reserve build of $321 million, compared with a
reserve build of $387 million a year ago.
Consolidated expenses were $11.0 billion, up 7 percent from
$10.3 billion a year ago. The increase primarily reflected higher
customer engagement costs, which were driven by higher network
volumes and increased usage of travel-related benefits, partially
offset by lower marketing expenses. Operating expenses also
increased, primarily driven by increased compensation costs.
The consolidated effective tax rate was 20.9 percent, down from
23.6 percent a year ago, primarily reflecting discrete tax benefits
in the current quarter and changes in the geographic mix of
income.
U.S. Consumer Services reported third-quarter pretax
income of $1.6 billion, compared with $1.3 billion a year ago.
Total revenues net of interest expense were $7.2 billion, up 16
percent from $6.2 billion a year ago. The increase was primarily
driven by higher average loan volumes and increased Card Member
spending.
Provisions for credit losses were $752 million, compared with
$403 million a year ago. The increase reflected higher net
write-offs and a higher reserve build of $279 million, compared
with a reserve build of $203 million a year ago.
Total expenses were $4.9 billion, up 8 percent from $4.5 billion
a year ago, primarily reflecting higher customer engagement costs,
which were driven by higher network volumes and increased usage of
travel-related benefits, partially offset by lower marketing
expenses. Operating expenses also increased in the quarter,
primarily reflecting higher service costs.
Commercial Services reported third-quarter pretax income
of $852 million, compared with $774 million a year ago.
Total revenues net of interest expense were $3.7 billion, up 7
percent from $3.5 billion a year ago. The increase was driven in
part by higher average loan volumes.
Provisions for credit losses were $323 million, compared with
$196 million a year ago. The increase reflected higher net
write-offs, partially offset by a lower net reserve build of $81
million, compared with a reserve build of $106 million a year
ago.
Total expenses were $2.6 billion, up 2 percent from $2.5 billion
a year ago, primarily driven by higher operating expenses,
reflecting higher service costs.
International Card Services reported third-quarter pretax
income of $387 million, compared with $166 million a year ago.
Total revenues net of interest expense were $2.6 billion, up 17
percent (12 percent FX-adjusted) from $2.3 billion a year ago. The
increase was primarily driven by increased Card Member spending and
higher card fee revenue.
Provisions for credit losses were $154 million, compared with
$176 million a year ago. The decrease reflected a net reserve
release of $40 million in the current quarter, compared with a
reserve build of $77 million a year ago, partially offset by higher
net write-offs.
Total expenses were $2.1 billion, up 10 percent from $1.9
billion a year ago, primarily reflecting higher customer engagement
costs, driven by higher network volumes and increased usage of
travel-related benefits, partially offset by lower marketing
costs.
Global Merchant and Network Services reported
third-quarter pretax income of $986 million, compared with $792
million a year ago.
Total revenues net of interest expense were $1.9 billion, up 11
percent from $1.7 billion a year ago, primarily reflecting higher
merchant-related revenues.
Total expenses were $859 million, down 1 percent from $870
million a year ago, primarily reflecting lower customer engagement
costs.
Corporate and Other reported a third-quarter pretax loss
of $709 million, compared with a pretax loss of $582 million a year
ago.
____________________ 1 Diluted earnings per common share (EPS)
was reduced by the impact of (i) earnings allocated to
participating share awards of $19 million and $14 million for the
three months ended September 30, 2023 and 2022, respectively, and
$50 million and $45 million for the nine months ended September 30,
2023 and 2022, respectively, and (ii) dividends on preferred shares
of $14 million for both the three months ended September 30, 2023
and 2022, and $43 million for both the nine months ended September
30, 2023 and 2022.
As used in this release:
- Card Member spending (billed business) represents transaction
volumes, including cash advances, on payment products issued by
American Express.
- Customer engagement costs represent the aggregate of Card
Member rewards, business development, Card Member services, and
marketing expenses.
- 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, 2023 apply to the period against which such results
are being compared). FX-adjusted revenues and expenses constitute
non-GAAP measures. 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.
- Network volumes represent the total of billed business and
processed volumes.
- Operating expenses represent salaries and employee benefits,
professional services, data processing and equipment, and other,
net. Operating expenses for our reportable segments reflect both
costs incurred directly within each segment, as well as allocated
service costs, which primarily reflect salaries and benefits
associated with our technology and customer servicing groups, and
overhead expenses.
- Reserve releases and reserve builds represent 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
releases represent the amount by which net write-offs exceed the
provisions for credit losses. Reserve builds represent the amount
by which the provisions for credit losses exceed net
write-offs.
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, X.com/americanexpress, and
youtube.com/americanexpress.
Key links to products, services and corporate sustainability
information: personal cards, business cards and services, travel
services, gift cards, prepaid cards, merchant services, Accertify,
Business Blueprint, Resy, corporate card, business travel,
diversity and inclusion, corporate sustainability and
Environmental, Social, and Governance reports.
Source: American Express Company
Location: Global
This earnings release should be read in conjunction with the
company’s statistical tables for the third quarter 2023, 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,
including management’s outlook for 2023 and aspirations for 2024
and beyond, among other matters, contain words such as “believe,”
“expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,”
“should,” “could,” “would,” “likely,” “continue” 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 2023 earnings per common
share (EPS) outlook and its longer-term EPS growth aspirations for
2024 and beyond, which will depend in part on revenue growth,
credit performance and the effective tax rate remaining consistent
with current expectations and the company’s ability to continue
investing at high levels in areas that can drive sustainable growth
(including its brand, value propositions, customers, colleagues,
technology and coverage), controlling operating expenses,
effectively managing risk and 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: fiscal and monetary policies (including government
shutdowns) and macroeconomic conditions, such as recession risks,
effects of inflation, changes in interest rates, labor shortages
and strikes or higher rates of unemployment, energy costs and the
continued effects of the pandemic; geopolitical instability,
including the ongoing Ukraine and Israel wars; the impact of any
future contingencies, including, but not limited to,
restructurings, investment gains or losses, impairments, changes in
reserves, legal costs and settlements, the imposition of fines or
monetary penalties and increases in Card Member remediation; issues
impacting brand perceptions and the company’s reputation; impacts
related to new or renegotiated cobrand and other partner
agreements; 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 Card Members, partners and
merchants;
- the company’s ability to achieve its 2023 revenue growth
outlook and its longer-term revenue growth aspirations for 2024 and
beyond, and the sustainability of the company’s future growth,
which could be impacted by, among other things, the factors
identified above and in the subsequent paragraphs, as well as the
following: spending volumes not being consistent with expectations,
including T&E spend growing slower than expected, further
slowing in spend by U.S. small and mid-sized enterprise or U.S.
large and global corporate customers, or a general slowdown or
increase in volatility in consumer and business spending volumes;
the strengthening of the U.S. dollar beyond expectations; an
inability to address competitive pressures, innovate and expand our
products and services, leverage the advantages of the company’s
differentiated business model and implement strategies and business
initiatives, including within the premium consumer space,
commercial payments and the global merchant network; the effects of
the end of the moratorium on student loan repayments; the impact of
the decommissioning of one of the company’s alternative payment
solutions; and merchant discount rates changing by a greater or
lesser amount than expected;
- net card fees not performing consistently with expectations,
which could be impacted by, among other things, a deterioration in
macroeconomic conditions impacting the ability and desire of Card
Members to pay card fees; higher Card Member attrition rates; the
pace of Card Member acquisition activity, particularly with respect
to fee-based products; and the company’s inability to address
competitive pressures, develop attractive value propositions and
implement its strategy of refreshing card products and enhancing
benefits and services;
- net interest income, the effects of interest rates and the
growth rate of loans and Card Member receivables outstanding, and
the portion of which that is interest bearing, being higher or
lower than expectations, which could be impacted by, among other
things, the behavior and financial strength of Card Members and
their actual spending, borrowing and paydown patterns; the
company’s ability to effectively manage risk and enhance Card
Member value propositions; changes in benchmark interest rates,
including where such changes affect the company’s assets or
liabilities differently than expected; changes in capital and
credit market conditions and the availability and cost of capital;
credit actions, including line size and other adjustments to credit
availability; the yield on Card Member loans not remaining
consistent with current expectations; the company’s deposit levels
or the interest rates it offers on deposits changing from current
expectations; and the effectiveness of the company’s strategies to
capture a greater share of existing Card Members’ spending and
borrowings, and attract new, and retain existing, customers;
- future credit performance, the level of future delinquency,
reserve and write-off rates and the amount and timing of future
reserve builds and releases, which will depend in part on
macroeconomic factors such as unemployment rates, GDP and the
volume of bankruptcies; the ability and willingness of Card Members
to pay amounts owed to the company; changes in consumer behavior
that affect loan and receivable balances (such as paydown and
revolve rates); the credit profiles of new customers acquired; the
enrollment in, and effectiveness of, financial relief programs and
the performance of accounts as they exit from such programs;
collections capabilities and recoveries of previously written-off
loans and receivables; and governmental actions providing forms of
relief with respect to certain loans and fees, and the termination
of such actions;
- 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 continued changes in macroeconomic conditions and Card
Member behavior as it relates to their spending patterns (including
the level of spend in bonus categories), the redemption of rewards
and offers (including travel redemptions) and usage of
travel-related benefits; the costs related to reward point
redemptions; further enhancements to product benefits to make them
attractive to Card Members and prospective customers, potentially
in a manner that is not cost effective; new and renegotiated
contractual obligations with business partners; and the pace and
cost of the expansion of the company’s global lounge
collection;
- the actual amount the company spends on marketing in 2023 and
beyond, which will be based in part on continued changes in the
macroeconomic and competitive environment and business performance;
management’s decisions regarding the timing of spending on
marketing and the effectiveness of management’s investment
optimization process, management’s identification and assessment of
attractive investment opportunities and the receptivity of Card
Members and prospective customers to advertising and customer
acquisition initiatives; the company’s ability to realize marketing
efficiencies, optimize investment spending and drive increases in
revenue; and the company’s ability to balance expense control and
investments in the business;
- the company’s ability to control operating expenses, including
relative to future revenue growth, and the actual amount spent on
operating expenses in 2023 and beyond, which could be impacted by,
among other things, salary and benefit expenses to attract and
retain talent; a persistent inflationary environment; the company’s
ability to realize operational efficiencies, including through
automation; 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; the company’s ability to innovate
efficient channels of customer interactions and the willingness of
Card Members to self-service and address issues through digital
channels; restructuring activity; supply chain issues; fraud costs;
compliance expenses or consulting, legal and other professional
services fees, including as a result of litigation or internal and
regulatory reviews; regulatory assessments; the level of M&A
activity and related expenses; information or cyber security
incidents; the payment of fines, penalties, disgorgement,
restitution, non-income tax assessments and litigation-related
settlements; the performance of Amex Ventures and other of the
company’s investments; impairments of goodwill or other assets; and
the impact of changes in foreign currency exchange rates on
costs;
- the company’s tax rate not remaining consistent with
expectations, which could be impacted by, among other things,
further changes in tax laws and regulation, the company’s
geographic mix of income, unfavorable tax audits and other
unanticipated tax items;
- changes affecting the company’s plans regarding the return of
capital to shareholders, which will depend on factors such as the
company’s capital levels and regulatory capital ratios; changes in
the stress testing and capital planning process and new rulemakings
and guidance from the Federal Reserve and other banking regulators,
including changes to regulatory capital requirements, such as final
rules resulting from the Basel III rule proposal; results of
operations and financial condition; credit ratings and rating
agency considerations; and the economic environment and market
conditions in any given period;
- 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, the desirability of the company’s premium
card products, competition for new and existing cobrand
relationships, competition from new and non-traditional competitors
and the success of marketing, promotion and rewards programs;
- 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 the company’s 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 or conduct
business in certain jurisdictions; 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 relationships in the EU; exert further
pressure on merchant discount rates and the company’s GNS business;
result in increased costs related to regulatory oversight,
litigation-related settlements, judgments or expenses, restitution
to Card Members or the imposition of fines or monetary penalties;
materially affect capital or liquidity requirements, results of
operations or ability to pay dividends; or result in harm to the
American Express brand; and
- factors beyond the company’s control such as further
escalations of the Ukraine and Israel wars and other military
conflicts, adverse developments affecting third parties, including
other financial institutions, the severity and contagiousness of
new COVID-19 variants, severe weather conditions, natural
disasters, power loss, disruptions in telecommunications, terrorism
and other catastrophic events, any of which could significantly
affect demand for and spending on American Express cards,
delinquency rates, loan and receivable balances, deposit levels 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, 2022, Quarterly Reports on Form
10-Q for the quarters ended March 31 and June 30, 2023 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/20231020542039/en/
Media Contacts: Giovanna Falbo, Giovanna.Falbo@aexp.com,
+1.212.640.0327 Andrew R. Johnson, Andrew.R.Johnson@aexp.com,
+1.212.640.8610
Investors/Analysts Contacts: Kartik Ramachandran,
Kartik.Ramachandran@aexp.com, +1.212.640.5574 Michelle A. Scianni,
Michelle.A.Scianni@aexp.com, +1.212.640.5574
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