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Cardmember Spending and Loan Portfolio Grow as Credit Quality Remains Strong
NEW YORK--()--American Express Company (NYSE: AXP) today reported third-quarter net income of $1.3 billion, up 1 percent from a year ago. Diluted earnings per share was $1.09, up 6 percent from $1.03 a year ago.
(Millions, except percentages and per share amounts)
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Quarters Ended
September 30,
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Percentage
Inc/(Dec)
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Nine Months Ended
September 30,
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Percentage
Inc/(Dec)
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2012
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2011
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2012
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2011
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| Total Revenues Net of Interest Expense | $ | 7,862 | $ | 7,571 | 4 | % | $ | 23,441 | $ | 22,220 | 5 | % | ||||||||||||||||
| Income From Continuing Operations | $ | 1,250 | $ | 1,235 | 1 | % | $ | 3,845 | $ | 3,707 | 4 | % | ||||||||||||||||
Income From Discontinued Operations, net of tax1
| - | - | - | - | $ | 36 | # | |||||||||||||||||||||
| Net Income | $ | 1,250 | $ | 1,235 | 1 | % | $ | 3,845 | $ | 3,743 | 3 | % | ||||||||||||||||
| Earnings Per Common Share – Diluted: | ||||||||||||||||||||||||||||
Income From Continuing Operations Attributable to Common Shareholders2
| $ | 1.09 | $ | 1.03 | 6 | % | $ | 3.31 | $ | 3.08 | 7 | % | ||||||||||||||||
| Income From Discontinued Operations1 | - | - | - | - | $ | 0.03 | # | |||||||||||||||||||||
| Net Income Attributable to Common Shareholders2 | $ | 1.09 |
$
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1.03
| 6 | % | $ | 3.31 | $ | 3.11 | 6 | % | ||||||||||||||||
| Average Diluted Common Shares Outstanding | 1,132 | 1,181 | (4 | )% | 1,149 | 1,191 | (4 | )% | ||||||||||||||||||||
| Return on Average Equity | 26.3 | % | 27.8 | % | 26.3 | % | 27.8 | % | ||||||||||||||||||||
# Denotes a variance of more than 100 percent
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Consolidated total revenues net of interest expense rose 4 percent to $7.9 billion in the third quarter, from $7.6 billion a year ago. The increase was driven by a rise in cardmember spending and higher net interest income that reflected growth in the cardmember loan portfolio.
Adjusted for foreign currency translations, consolidated total revenues net of interest expense rose 5 percent from a year ago.3
Consolidated provisions for losses totaled $479 million, up 92 percent from $249 million a year ago. This increase reflects substantially lower reserve releases than the year ago period, partially offset by lower net write-offs in the current quarter. Credit indicators continued to be at historically strong levels.
Consolidated expenses totaled $5.5 billion, down 2 percent from $5.6 billion last year. The decrease reflects lower salaries and employee benefits costs and lower rewards expenses. Year ago expenses were reduced by the receipt of the Visa settlement totaling $70 million.
Adjusted for foreign currency translations, consolidated total expenses are down 1 percent from a year ago.3
The effective tax rate was 33 percent, up from 28 percent in the year ago quarter. The year ago tax rate reflected the realization of certain foreign tax credits.
The company's return on average equity (ROE) was 26.3 percent, down from 27.8 percent a year ago.
“We generated solid results this quarter against the backdrop of a very uneven global economy,” said Kenneth I. Chenault, chairman and chief executive officer. “Bottom line results were driven by higher revenues and lower expenses, a combination that reflects ongoing efforts to contain operating costs while maintaining a substantial level of investment in our marketing and rewards programs.
“Cardmember spending rose 8 percent in the U.S. from a year ago and 6 percent globally (8 percent fx-adjusted). That’s a healthy pace in the current environment and an improvement from earlier in the quarter. Nonetheless, it represents slower growth than we were generating earlier in the year, a trend that we’re seeing among major card issuers.
“Credit quality remained at the historically strong levels, but we didn’t have the same benefit from substantial reserve releases as last year when write-offs and delinquencies were declining at a faster rate.
“We continue to see many growth opportunities as new technologies drive the migration of global payments from cash and checks towards plastic and digital transactions. We are strengthening traditional products that deliver value to cardmembers and drive business for merchants. At the same time, we are also moving to broadening our franchise with the extension of our Loyalty Partner business into new markets like Mexico and the recently announced partnership with Walmart to reach new segments of the U.S. market that are looking for an alternative to traditional debit cards and checking accounts.
“Taking full advantage of these and other opportunities, particularly in a slow growth economy, will continue to require rigorous cost containment to help ensure that we have the investment resources needed to continue to deliver on our growth objectives.”
Segment Results
U.S. Card Services reported third-quarter net income of $699 million, down 5 percent from $733 million a year ago.
Total revenues net of interest expense increased 6 percent to $4.1 billion from $3.8 billion. Revenues reflect an 8 percent increase in cardmember spending and a rise in net interest income, driven primarily by a 5 percent growth in average cardmember loans.
Provisions for losses totaled $339 million, up from $143 million a year ago. The increase primarily reflects lower reserve releases than the year ago period, partially offset by lower net write-offs in the current quarter.
Total expenses increased 2 percent from the year ago period, primarily reflecting higher operating expenses,4 partially offset by lower rewards-related costs.
The effective tax rate was 38 percent compared to 36 percent in the year-ago period.
International Card Services reported third-quarter net income of $164 million, down 26 percent from $221 million a year ago.
Total revenues net of interest expense decreased 3 percent to $1.3 billion. Adjusted for foreign currency translations, revenues rose 2 percent from a year ago.3
Provisions for losses totaled $83 million, down 18 percent from $101 million a year ago.
Total expenses decreased 3 percent primarily reflecting lower operating expenses. Adjusted for foreign currency translations, expenses were unchanged from a year ago.3
The effective tax rate was 21 percent compared to (17) percent in the year ago period, which reflected the realization of certain foreign tax credits last year.
Global Commercial Services reported third-quarter net income of $183 million, down 7 percent from $197 million a year ago.
Total revenues net of interest expense increased 2 percent to $1.2 billion, reflecting higher cardmember spending, partially offset by lower travel commissions and fees. Adjusted for foreign currency translations, revenues rose 5 percent from a year ago.3
Provisions for losses totaled $32 million compared with a credit of $17 million a year ago, which included reserve releases last year.
Total expenses decreased 3 percent, reflecting lower operating expenses as well as lower costs for marketing, promotion, rewards and cardmember services expenses. Adjusted for foreign currency translations, expenses were down 1 percent compared to a year ago.3
The effective tax rate was 33 percent compared to 27 percent in the year ago period. The year ago tax rate reflected the realization of certain foreign tax credits.
Global Network & Merchant Services reported third-quarter net income of $360 million, up 8 percent from $332 million a year ago.
Total revenues net of interest expense increased 5 percent to $1.3 billion, reflecting higher merchant-related revenues driven by an increase in global cardmember spending. Adjusted for foreign currency translations, revenues rose 7 percent from the year ago quarter.3
Total expenses increased 2 percent. An increase in operating expenses was partially offset by lower marketing, promotion, rewards and cardmember services expenses. Adjusted for foreign currency translations, expenses rose 4 percent from a year ago.3
The effective tax rate was 36 percent compared to 35 percent in the year ago period.
Corporate and Other reported third-quarter net loss of $156 million compared with net loss of $248 million in the year ago period. The year ago period reflected a number of items including charges related to legal exposures and $70 million ($43 million after-tax) benefit from the Visa settlement.
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.
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