TIDMAMX
American Express Company (NYSE: AXP) today reported
third-quarter net income of $1.1 billion, up 71 percent from $640
million a year ago. Diluted per share net income was $0.90, up 70
percent from $0.53 a year ago.
(Millions,
except
per
share
amounts)
Quarters Ended Percentage Nine Months Ended Percentage
September 30, Inc/(Dec) September 30, Inc/(Dec)
2010 2009 2010 2009
Total $ 7,033 $ 6,016 17 % $ 20,497 $ 18,034 14 %
Revenues
Net of
Interest
Expense1
Income $ 1,093 $ 642 70 $ 2,995 $ 1,427 #
From
Continuing
Operations
Loss $ - $ (2 ) - $ - $ (13 ) -
From
Discontinued
Operations
Net $ 1,093 $ 640 71 $ 2,995 $ 1,414 #
Income
Earnings
Per
Common
Share
-
Diluted:
Income $ 0.90 $ 0.54 67 $ 2.47 $ 0.95 #
From
Continuing
Operations
Attributable
to
Common
Shareholders2
Loss $ - $ (0.01 ) - $ - $ (0.01 ) -
From
Discontinued
Operations
Net $ 0.90 $ 0.53 70 $ 2.47 $ 0.94 #
Income
Attributable
to
Common
Shareholders2
Average 1,199 1,181 2 % 1,195 1,166 2 %
Diluted
Common
Shares
Outstanding
Return 25.9 % 11.7 % 25.9 % 11.7 %
on
Average
Equity
Return 25.6 % 10.4 % 25.6 % 10.4 %
on
Average
Common
Equity
#
Denotes
a
variance
of more
than
100%
Consolidated total revenues net of interest expense were $7.0
billion, up 17 percent from $6.0 billion a year ago. The increase
reflects the consolidation of securitized cardmember loans and
related debt onto the balance sheet in the first quarter3. Revenues
also reflect higher cardmember spending and higher travel
commissions and fees, offset by lower interest income due to a
smaller loan portfolio and lower yields on both the securitized and
non-securitized portions of the portfolio.
Consolidated provisions for losses totaled $373 million compared
to $1.2 billion in the year-ago period, reflecting continued
improvement in credit quality for the charge and credit card
portfolios3.
Consolidated expenses totaled $5.0 billion, up 28 percent from
$3.9 billion a year ago, reflecting higher investment in business
building initiatives and higher rewards costs.
The company's return on average equity (ROE) was 25.9 percent,
up from 11.7 percent a year ago.
"Cardmember spending rose a strong 14 percent with the largest
increases coming from businesses where we've been making
significant investments: charge and premium co-brand products,
corporate cards and cards issued by our bank partners," said
Kenneth I. Chenault, chairman and chief executive officer.
"Lending volumes, however, remain below pre-recessionary levels
as cardmembers continued to manage their finances carefully and pay
down outstanding debt. While this translated into lower net
interest income, it also helped to improve our overall risk
profile.
"Our credit indicators, in fact, continued to lead the market
and our write-off rate dropped below 5 percent in September for the
first time since early 2008.
"Against the backdrop of regulatory and legislative changes that
are reshaping the industry, we have been able to improve our
competitive position relative to those issuers who rely more
heavily on revolving credit and back-end fees.
"While we remain cautious about the economic outlook, we plan to
capitalize on that advantage by investing to strengthen
relationships with high spending cardmembers and the merchants who
accept our products."
Year-ago results included a non-recurring $180 million ($113
million after-tax) benefit associated with the company's accounting
for a net investment in consolidated foreign subsidiaries.
The effective tax rate was 33 percent compared to 30 percent in
the year-ago quarter.
Segment Results
U.S. Card Services reported third-quarter net income of $595
million, compared with $158 million a year ago.
Total revenues net of interest expense increased 23 percent to
$3.7 billion from $3.0 billion. The increase reflects the
consolidation of securitized cardmember loans and related debt onto
the balance sheet in the first quarter3. Revenues also reflect
higher cardmember spending, offset by lower interest income due to
a smaller loan portfolio and lower yields on the portfolio.
Provisions for losses totaled $274 million, down 68 percent from
$850 million a year ago. The decline reflects continued improvement
in credit quality for the charge and credit card portfolios3.
Total expenses increased 26 percent. Marketing, promotion,
rewards and cardmember services expenses increased 39 percent from
the year-ago period, reflecting increased rewards costs and
investments in marketing and promotion. Salaries and employee
benefits and other operating expenses increased 12 percent from
year-ago levels, primarily reflecting increased technology and
partner-related investments.
The effective tax rate was 39 percent compared to 28 percent in
the year-ago quarter.
International Card Services reported third-quarter net income of
$153 million, up 15 percent from $133 million a year ago.
Total revenues net of interest expense were $1.2 billion,
comparable with the year-ago quarter.
Provisions for losses totaled $64 million, down 74 percent from
$250 million a year ago. The decline reflects continued improvement
in credit quality for the charge and credit card portfolios.
Total expenses increased 25 percent. Marketing, promotion,
rewards and cardmember services expenses increased 42 percent from
year-ago levels, reflecting increased investments in marketing and
promotion and higher rewards costs. Salaries and employee benefits
and other operating expenses increased 13 percent from year-ago
levels, primarily reflecting increased technology investments.
The effective tax rate was negative 6 percent compared to 2
percent in the year-ago quarter.
Global Commercial Services reported third-quarter net income of
$159 million, up 56 percent from $102 million a year ago.
Total revenues net of interest expense increased 17 percent to
$1.1 billion, from $975 million, reflecting increased spending by
corporate cardmembers and higher travel commissions and fees.
Provisions for losses totaled $22 million, down 45 percent from
$40 million a year ago. The decline reflects continued improvement
in credit performance.
Total expenses increased 12 percent. Marketing, promotion,
rewards and cardmember services expenses increased 36 percent from
the year-ago period, primarily reflecting higher rewards costs.
Salaries and employee benefits and other operating expenses
increased 9 percent from the year-ago period.
The effective tax rate was 34 percent compared to 31 percent in
the year-ago quarter.
Global Network & Merchant Services reported third quarter
net income of $259 million, up 4 percent from $248 million a year
ago.
Total revenues net of interest expense increased 15 percent to
$1.1 billion, from $976 million, reflecting higher merchant-related
revenues driven by an increase in global card billed business, as
well as an increase in revenues from Global Network Services' bank
partners.
Total expenses increased 19 percent. Marketing and promotion
expenses increased 32 percent from the year-ago period, reflecting
increased network and merchant-related investments. Salaries and
employee benefits and other operating expenses increased 14
percent, primarily reflecting increased technology-related and
professional service expenses, as well as incremental hiring to
support business growth.
The effective tax rate was 39 percent compared to 33 percent in
the year-ago quarter.
Corporate and Other reported third-quarter net expense of $73
million compared with net income of $1 million a year ago. The
results for both periods reflect income of $220 million ($136
million after-tax) for the previously announced MasterCard and Visa
settlements.
The year-ago quarter included the previously mentioned
non-recurring $180 million ($113 million after-tax) benefit
associated with the company's accounting for a net investment in
consolidated foreign subsidiaries, offset by a higher tax expense
due primarily to a revision in the company's estimated annual
effective tax rate.
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
www.americanexpress.com and connect with us on
www.facebook.com/americanexpress, www.twitter.com/americanexpress
and www.youtube.com/americanexpress.
The 2010 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.
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 the company's expected business and
financial performance, among other matters, contain words such as
"believe," "expect," "anticipate," "optimistic," "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:
-- changes in global economic and business conditions, including consumer
and business spending, the availability and cost of credit,
unemployment and political conditions, all of which may
significantly
affect spending on the Card, delinquency rates, loan balances
and
other aspects of our business and results of operations;
-- changes in capital and credit market conditions, which may
significantly affect the company's ability to meet its
liquidity
needs, access to capital and cost of capital, including changes
in
interest rates; changes in market conditions affecting the
valuation
of our assets; or any reduction in our credit ratings or those
of our
subsidiaries, which could materially increase the cost and other
terms
of our funding, restrict our access to the capital markets or
result
in contingent payments under contracts;
-- litigation, such as class actions or proceedings brought by
governmental and regulatory agencies (including the lawsuit
filed
against the company by the U.S. Department of Justice and
certain
state attorneys general), that could result in (i) the
imposition of
behavioral remedies against the company or the company's
voluntarily
making certain changes to its business practices, the effects of
which
in either case could have a material adverse impact on the
company's
financial performance; (ii) the imposition of substantial
monetary
damages in private actions against the company; and/or (iii)
damage to
the company's global reputation and brand;
-- legal and regulatory developments wherever we do business, including
legislative and regulatory reforms in the United States, such as
the
Dodd-Frank Act's stricter regulation of large,
interconnected
financial institutions, changes in requirements relating to
securitization and the establishment of the Bureau of
Consumer
Financial Protection, which could make fundamental changes to
many of
our business practices or materially affect our capital
requirements,
results of operations, ability to pay dividends or repurchase
our
stock; or actions and potential future actions by the FDIC and
credit
rating agencies applicable to securitization trusts, which
could
impact the company's ABS program;
-- changes in the substantial and increasing worldwide competition in the
payments industry, including competitive pressure that may
impact the
prices we charge merchants that accept our Cards and the success
of
marketing, promotion or rewards programs;
-- changes in technology or in our ability to protect our intellectual
property (such as copyrights, trademarks, patents and controls
on
access and distribution), and invest in and compete at the
leading
edge of technological developments across our businesses,
including
technology and intellectual property of third parties whom we
rely on,
all of which could materially affect our results of
operations;
-- data breaches and fraudulent activity, which could damage our brand,
increase our costs or have regulatory implications, and changes
in
regulation affecting privacy and data security under federal,
state
and foreign law, which could result in higher compliance and
technology costs to ourselves or our vendors;
-- changes in our ability to attract or retain qualified personnel in the
management and operation of the company's business, including
any
changes that may result from increasing regulatory supervision
of
compensation practices;
-- changes in the financial condition and creditworthiness of our
business partners, such as bankruptcies, restructurings or
consolidations, involving merchants that represent a
significant
portion of our business, such as the airline industry, or our
partners
in Global Network Services or financial institutions that we
rely on
for routine funding and liquidity, which could materially affect
our
financial condition or results of operations;
-- uncertainties associated with business acquisitions, including the
ability to realize anticipated business retention, growth and
cost
savings or effectively integrate the acquired business into
our
existing operations;
-- changes affecting the success of our reengineering and other cost
control initiatives, which may result in the company not
realizing all
or a significant portion of the benefits that we intend;
-- the effectiveness of the company's risk management policies and
procedures, including credit risk relating to consumer debt,
liquidity
risk in meeting business requirements and operational risks;
-- changes affecting our ability to accept or maintain deposits due to
market demand or regulatory constraints, such as changes in
interest
rates and regulatory restrictions on our ability to obtain
deposit
funding or offer competitive interest rates, which could affect
our
liquidity position and our ability to fund our business; and
-- factors beyond our control such as fire, power loss, disruptions in
telecommunications, severe weather conditions, natural
disasters,
terrorism, "hackers" or fraud, which could affect
travel-related
spending or disrupt our global network systems and ability to
process
transactions.
A further description of these uncertainties and other risks can
be found in the company's Annual Report on Form 10-K for the year
ended December 31, 2009, its Quarterly Reports on Form 10-Q for the
three months ended March 31 and June 30, 2010, and the company's
other reports filed with the SEC.
1 Refer to discussion regarding revenue drivers within earnings
release.
2 Represents income from continuing operations or net income, as
applicable, less (i) accelerated preferred dividend accretion of
$212 million for the nine months ended September 30, 2009 due to
the repurchase of preferred shares from the U.S. Treasury
Department, (ii) preferred shares dividends and related accretion
of $94 million for the nine months ended September 30, 2009, and
(iii) earnings allocated to participating share awards and other
items of $13 million and $8 million for the three months ended
September 30, 2010 and 2009, respectively, and $38 million and $13
million for the nine months ended September 30, 2010 and 2009,
respectively.
3 Upon the adoption of new accounting guidance governing the
accounting for transfers of financial assets and consolidation of
variable interest entities on January 1, 2010, the company began
consolidating the assets and liabilities of its previously
unconsolidated American Express Credit Account Master Trust
(Lending Trust). Among the changes arising from the consolidation
of the Lending Trust, expenses related to written-off securitized
cardmember loans moved from revenues net of interest expense into
provisions for losses.
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.
(Preliminary)
American
Express
Company
Consolidated
Statements
of Income
(Millions)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
Revenues
Non-interest
revenues
Discount $ 3,818 $ 3,373 13 % $ 11,018 $ 9,744 13 %
revenue
Net card 527 538 (2 ) 1,568 1,602 (2 )
fees
Travel 487 383 27 1,307 1,155 13
commissions
and fees
Other 515 448 15 1,512 1,340 13
commissions
and fees
Securitization N/A 71 - N/A 210 -
income,
net (A)
Other 502 449 12 1,413 1,569 (10 )
Total 5,849 5,262 11 16,818 15,620 8
non-interest
revenues
Interest
income
Interest 1,675 1,059 58 5,107 3,432 49
and fees
on loans
Interest 103 229 (55 ) 345 579 (40 )
and
dividends
on
investment
securities
Deposits 16 9 78 45 48 (6 )
with
banks
and other
Total 1,794 1,297 38 5,497 4,059 35
interest
income
Interest
expense
Deposits 141 109 29 406 299 36
Short-term - 2 - 2 36 (94 )
borrowings
Long-term 469 432 9 1,410 1,310 8
debt
and other
Total 610 543 12 1,818 1,645 11
interest
expense
Net 1,184 754 57 3,679 2,414 52
interest
income
Total 7,033 6,016 17 20,497 18,034 14
revenues
net of
interest
expense
Provisions
for
losses
Charge 89 143 (38 ) 412 716 (42 )
card
Cardmember 262 989 (74 ) 1,490 3,706 (60 )
loans
Other 22 46 (52 ) 66 143 (54 )
Total 373 1,178 (68 ) 1,968 4,565 (57 )
provisions
for
losses
Total 6,660 4,838 38 18,529 13,469 38
revenues
net of
interest
expense
after
provisions
for
losses
Expenses
Marketing 847 504 68 2,244 1,201 87
and
promotion
Cardmember 1,269 983 29 3,685 2,858 29
rewards
Cardmember 135 132 2 406 374 9
services
Salaries 1,354 1,261 7 3,996 3,884 3
and
employee
benefits
Professional 701 575 22 1,898 1,693 12
services
Occupancy 371 374 (1 ) 1,134 1,124 1
and
equipment
Communications 92 105 (12 ) 284 315 (10 )
Other, 251 (14 ) # 395 140 #
net
Total 5,020 3,920 28 14,042 11,589 21
Pretax 1,640 918 79 4,487 1,880 #
income
from
continuing
operations
Income 547 276 98 1,492 453 #
tax
provision
Income 1,093 642 70 2,995 1,427 #
from
continuing
operations
Loss - (2 ) - - (13 ) -
from
discontinued
operations,
net of
tax
Net $ 1,093 $ 640 71 $ 2,995 $ 1,414 #
income
Income $ 1,080 $ 634 70 $ 2,957 $ 1,108 #
from
continuing
operations
attributable
to
common
shareholders
(B)
Net $ 1,080 $ 632 71 $ 2,957 $ 1,095 #
income
attributable
to
common
shareholders
(B)
# - Denotes a variance of more than 100%.
(A) In accordance with the new GAAP effective
January 1, 2010, the Company
no longer reports securitization income, net in its income statement.
(B) Represents income from continuing operations or
net income, as applicable, less (i) accelerated
preferred dividend accretion of $212 million
for the nine months ended September
30, 2009 due to the repurchase of $3.39 billion
of preferred shares issued as part of the
Capital Purchase Program (CPP), (ii) preferred
shares dividends and related accretion
of $94 million for the nine months ended September
30, 2009, and (iii) earnings allocated
to participating share awards and other
items of $13 million and $8 million for
the three months ended September 30, 2010 and
2009, respectively, and $38 million and
$13 million for the nine months ended September
30, 2010 and 2009, respectively.
(Preliminary)
American Express Company
Condensed Consolidated Balance Sheets
(Billions)
September 30, December 31,
2010 2009
Assets
Cash $ 21 $ 17
Accounts receivable 38 38
Investment securities 17 24
Loans 53 30
Other assets 17 16
Total assets $ 146 $ 125
Liabilities and Shareholders' Equity
Customer deposits $ 28 $ 26
Short-term borrowings 2 2
Long-term debt 69 52
Other liabilities 31 31
Total liabilities 130 111
Shareholders' equity 16 14
Total liabilities and $ 146 $ 125
shareholders' equity
(Preliminary)
American
Express
Company
Financial
Summary
(Millions)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
Total
revenues
net of
interest
expense
U.S. $ 3,664 $ 2,982 23 % $ 10,847 $ 8,965 21 %
Card
Services
International 1,169 1,157 1 3,416 3,314 3
Card
Services
Global 1,144 975 17 3,250 2,911 12
Commercial
Services
Global 1,118 976 15 3,183 2,749 16
Network
&
Merchant
Services
7,095 6,090 17 20,696 17,939 15
Corporate
& Other,
including (62 ) (74 ) (16 ) (199 ) 95 #
adjustments
and
eliminations
CONSOLIDATED $ 7,033 $ 6,016 17 $ 20,497 $ 18,034 14
TOTAL
REVENUES
NET
OF
INTEREST
EXPENSE
Pretax
income
(loss)
from
continuing
operations
U.S. $ 971 $ 218 # $ 2,476 $ (60 ) #
Card
Services
International 145 136 7 530 236 #
Card
Services
Global 240 148 62 616 364 69
Commercial
Services
Global 422 371 14 1,254 1,123 12
Network
&
Merchant
Services
1,778 873 # 4,876 1,663 #
Corporate (138 ) 45 # (389 ) 217 #
& Other
PRETAX $ 1,640 $ 918 79 $ 4,487 $ 1,880 #
INCOME
FROM
CONTINUING
OPERATIONS
Net
income
(loss)
U.S. $ 595 $ 158 # $ 1,545 $ (2 ) #
Card
Services
International 153 133 15 464 263 76
Card
Services
Global 159 102 56 368 250 47
Commercial
Services
Global 259 248 4 795 737 8
Network
&
Merchant
Services
1,166 641 82 3,172 1,248 #
Corporate (73 ) 1 # (177 ) 179 #
& Other
Income 1,093 642 70 2,995 1,427 #
from
continuing
operations
Loss - (2 ) - - (13 ) -
from
discontinued
operations,
net of
tax
NET $ 1,093 $ 640 71 $ 2,995 $ 1,414 #
INCOME
#
- Denotes
a
variance
of more
than
100%.
(Preliminary)
American
Express
Company
Financial
Summary
(continued)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
EARNINGS
PER
COMMON
SHARE
BASIC
Income $ 0.91 $ 0.54 69 % $ 2.49 $ 0.95 # %
from
continuing
operations
attributable
to
common
shareholders
Loss - - - - (0.01 ) -
from
discontinued
operations
Net $ 0.91 $ 0.54 69 % $ 2.49 $ 0.94 # %
income
attributable
to
common
shareholders
Average 1,193 1,178 1 % 1,189 1,164 2 %
common
shares
outstanding
(millions)
DILUTED
Income $ 0.90 $ 0.54 67 % $ 2.47 $ 0.95 # %
from
continuing
operations
attributable
to
common
shareholders
Loss - (0.01 ) - - (0.01 ) -
from
discontinued
operations
Net $ 0.90 $ 0.53 70 % $ 2.47 $ 0.94 # %
income
attributable
to
common
shareholders
Average 1,199 1,181 2 % 1,195 1,166 2 %
common
shares
outstanding
(millions)
Cash $ 0.18 $ 0.18 - % $ 0.54 $ 0.54 - %
dividends
declared
per
common
share
Selected
Statistical
Information
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
Return 25.9 % 11.7 % 25.9 % 11.7 %
on
average
equity
(A)
Return 25.6 % 10.4 % 25.6 % 10.4 %
on
average
common
equity
(A)
Return 33.1 % 13.5 % 33.1 % 13.5 %
on
average
tangible
common
equity
(A)
Common 1,204 1,189 1 % 1,204 1,189 1 %
shares
outstanding
(millions)
Book $ 13.22 $ 11.72 13 % $ 13.22 $ 11.72 13 %
value
per
common
share
Shareholders' $ 15.9 $ 13.9 14 % $ 15.9 $ 13.9 14 %
equity
(billions)
#
-
Denotes
a
variance
of more
than
100%.
(A) Refer to Appendix I for components
of return on average equity, return
on average common equity and return on
average tangible common equity.
American Express CompanyMedia:Joanna Lambert,
212-640-9668joanna.g.lambert@aexp.comMichael O'Neill,
212-640-5951mike.o'neill@aexp.comorInvestors/Analysts:Toby Willard,
212-640-1958sherwood.s.willardjr@aexp.comRon Stovall,
212-640-5574ronald.stovall@aexp.com
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