October 19, 2011 04:07 PM Eastern Daylight Time
American Express Reports Third Quarter EPS of $1.03 Up 14% from a Year Ago; Revenues Rise 9% to $7.6 Billion
NEW YORK--(BUSINESS WIRE)--American Express Company (NYSE: AXP) today reported third-quarter net income of $1.2 billion, up 13 percent from $1.1 billion a year ago. Diluted earnings per share was $1.03, up 14 percent from $0.90 a year ago.
(Millions, except per share amounts)
| ||||||||||||||||||||||
| Quarters Ended
September 30,
| Percentage Inc/(Dec) | Nine Months Ended
September 30,
| Percentage Inc/(Dec) | |||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
| Total Revenues Net of Interest Expense | $ | 7,571 | $ | 6,973 | 9 | % | $ | 22,220 | $ | 20,338 | 9 | % | ||||||||||
| Income From Continuing Operations | $ | 1,235 | $ | 1,093 | 13 | % | $ | 3,707 | $ | 2,995 | 24 | % | ||||||||||
Income From Discontinued Operations, net of tax1
| $ | - | $ | - | - | % | $ | 36 | $ | - | # | % | ||||||||||
| Net Income | $ | 1,235 | $ | 1,093 | 13 | % | $ | 3,743 | $ | 2,995 | 25 | % | ||||||||||
| Earnings Per Common Share – Diluted: | ||||||||||||||||||||||
Income From Continuing Operations Attributable to Common Shareholders2
| $ | 1.03 | $ | 0.90 | 14 | % | $ | 3.08 | $ | 2.47 | 25 | % | ||||||||||
Income from Discontinued Operations1
| $ | - | $ | - | - | % | $ | 0.03 | $ | - | # | % | ||||||||||
Net Income Attributable to Common Shareholders2
| $ | 1.03 | $ | 0.90 | 14 | % | $ | 3.11 | $ | 2.47 | 26 | % | ||||||||||
| Average Diluted Common Shares Outstanding | 1,181 | 1,199 | (2 | ) % | 1,191 | 1,195 | - | % | ||||||||||||||
| Return on Average Equity | 27.8 | % | 25.9 | % | 27.8 | % | 25.9 | % | ||||||||||||||
| # Denotes a variance of more than 100 percent | ||||||||||||||||||||||
Consolidated total revenues net of interest expense were $7.6 billion, up 9 percent from $7.0 billion a year ago. The increase largely reflects continued strong growth in cardmember spending across all business segments and net interest income that was level with a year ago, following several quarters of declines.
Consolidated provisions for losses totaled $249 million compared to $373 million in the year-ago period reflecting continued improvement in credit quality.
Overall expense growth slowed significantly from the growth rates of recent quarters. Consolidated expenses totaled $5.6 billion, up 13 percent from $5.0 billion a year ago, reflecting higher rewards costs, which were partially offset by lower marketing and promotion expenses. The increase also reflected investments in certain business building initiatives. Consolidated expenses in the year ago period reflect the receipt of a settlement payment from MasterCard in the amount of $150 million. Consolidated expenses of $5.6 billion in the current period rose 10 percent when compared to adjusted consolidated expenses of $5.1 billion in the year ago period, which excludes the MasterCard settlement payment.3
The company's return on average equity (ROE) was 27.8 percent, up from 25.9 percent a year ago.
“We delivered strong bottom line results across all of our business segments this quarter,” said Kenneth I. Chenault, chairman and chief executive officer. “Revenue growth reflected a continuing return on the investments we’re making to enhance the services we provide consumers, small businesses, merchants and corporate customers.
“Cardmember spending was strong during the period, growing 16 percent to record levels and again outpacing most of the major bank card issuers. Credit quality continued to be excellent, with key lending metrics improving from the historically strong levels we achieved earlier in the year. The growth in operating expenses moderated this quarter, as planned, and we expect to further slow that growth towards the end of this year and into next.
"The overall results are showing the benefit of moves we’ve made to improve our risk profile, capture a greater share of cardmember spending, grow fee-based revenues and build additional flexibility into the way we manage expenses. Those moves have put us in a strong competitive position. They have also generated resources to invest in initiatives that bring customers and merchants more closely together as the worlds of online and offline commerce converge.
“We have been generating strong momentum and plan to continue investing to grow the business. But, against the backdrop of an uncertain economic environment, we are focused on maintaining a strong risk profile and carefully managing expenses.”
Segment Results
U.S. Card Services reported third-quarter net income of $733 million, up 23 percent from $595 million a year ago.
Total revenues net of interest expense increased 6 percent to $3.8 billion from $3.6 billion. Revenue growth reflects higher cardmember spending. Net interest income was unchanged from year ago levels.
Provisions for losses totaled $143 million, down 48 percent from $274 million a year ago. The decline reflects continued improvement in credit quality.
Total expenses increased 7 percent. Marketing, promotion, rewards and cardmember services expenses increased 11 percent from the year-ago period. This increase primarily reflects higher volume-related rewards costs and a small increase in the ultimate redemption rate estimate for the Membership Rewards program. These increases were partially offset by lower marketing and promotion costs. Salaries and employee benefits and other operating expenses decreased 1 percent from year-ago levels.
The effective tax rate was 36.3 percent compared to 38.7 percent in the year-ago quarter.
International Card Services reported third-quarter net income of $221 million, up 53 percent from $144 million a year ago.
Total revenues net of interest expense increased 16 percent to $1.3 billion, from $1.2 billion, reflecting higher cardmember spending and the acquisition of Loyalty Partner in the first quarter of this year. This was partially offset by reduced net interest income due to a lower yield on the loan portfolio.
Provisions for losses totaled $101 million, up 58 percent from $64 million reflecting a reserve release in the year ago period.
Total expenses increased 9 percent. Marketing, promotion, rewards and cardmember services expenses increased 7 percent from year-ago levels, reflecting higher volume-related rewards costs and co-brand expenses. Salaries and employee benefits and other operating expenses increased 11 percent from year-ago levels, in part reflecting expenses related to Loyalty Partner.
The effective tax rate was (16.9) percent compared to (9.9) percent in the year-ago quarter.
Global Commercial Services reported third-quarter net income of $197 million, up 31 percent from $150 million a year ago.
Total revenues net of interest expense increased 5 percent to $1.1 billion, reflecting increased spending by corporate cardmembers, partially offset by lower travel commissions and fees.
Provisions for losses were a credit of $17 million compared with an expense of $21 million a year ago, reflecting changes in estimates for certain credit reserves.
Total expenses increased 6 percent. Marketing, promotion, rewards and cardmember services expenses increased 44 percent from the year-ago period, primarily reflecting higher rewards costs. Salaries and employee benefits and other operating expenses increased 1 percent from the year-ago period.
The effective tax rate was 26.8 percent, compared to 33.6 percent in the year-ago quarter.
Global Network & Merchant Services reported third quarter net income of $332 million, up 32 percent from $252 million a year ago.
Total revenues net of interest expense increased 14 percent to $1.3 billion, from $1.1 billion, reflecting higher merchant-related revenues driven by an increase in total cardmember spending, as well as an increase in revenues from Global Network Services’ bank partners.
Total expenses increased 6 percent. Marketing, promotion, rewards and cardmember services expenses decreased 6 percent from the year-ago period. Salaries and employee benefits and other operating expenses increased 11 percent, reflecting business-building investments.
The effective tax rate was 35.4 percent compared to 38.5 percent in the year-ago quarter.
Corporate and Other reported a third-quarter net loss of $248 million compared with a net loss of $48 million a year ago. The current quarter reflects investments in Enterprise Growth Group initiatives, charges related to legal exposures, and income of $70 million ($43 million after-tax) for the previously announced Visa settlements. The year ago quarter included the same amount from the Visa settlements, as well as $150 million ($93 million after-tax) from a related settlement with MasterCard.
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, andyoutube.com/americanexpress.
