American Express Company (NYSE: AXP) today reported
second-quarter net income of $2.3 billion, or $2.80 per share,
compared with net income of $257 million, or $0.29 per share, a
year ago. The results reflected the impact of $866 million ($658
million after tax) in credit reserve releases2, primarily driven by
the company’s strong credit performance and continued improvements
in the macroeconomic outlook.
(Millions, except percentages and
per share amounts)
Quarters Ended
June 30,
Percentage Inc/(Dec)
Six Months Ended
June 30,
Percentage Inc/(Dec)
2021
2020
2021
2020
Total Revenues Net of Interest Expense
$
10,243
$
7,675
33
$
19,307
$
17,985
7
Total Provisions for Credit Losses
$
(606
)
$
1,555
#
$
(1,281
)
$
4,176
#
Net Income
$
2,280
$
257
#
$
4,515
$
624
#
Diluted Earnings Per Common Share1
$
2.80
$
0.29
#
$
5.54
$
0.71
#
Average Diluted Common Shares
Outstanding
802
805
(0)
803
807
(0)
# - Denotes a variance of 100 percent or
more.
“Our strong second quarter results show that the steps we have
taken to manage the company through the pandemic and our strategy
of investing to rebuild our growth momentum are paying off,” said
Stephen J. Squeri, Chairman and Chief Executive Officer.
“Demand for our premium, fee-based products continued to be
robust, with acquisitions of U.S. Platinum Card Members reaching
record levels this quarter. We acquired 2.4 million new proprietary
cards in the quarter, while continuing to retain Card Members at
rates above pre-pandemic levels.
“We saw Card Member spending accelerate from the prior quarter
and exceed pre-pandemic levels in June, with the largest portion of
this spending growth coming from Millennial, Gen Z, and small
business customers. Global goods and services spending volumes
strengthened even further, growing 16 percent on an FX-adjusted
basis3 over Q2 2019, even as travel and entertainment spending
continued to improve.
“One of our competitive strengths has been to regularly refresh
our products with differentiated offerings, leveraging our digital
ecosystem and our diverse network of partners. The launch of our
U.S. Consumer Platinum Card, with enhanced lifestyle and travel
benefits in July, marked the restart of this strategy. Going
forward, we will continue to invest to drive innovation for our
customers by refreshing other consumer and commercial products and
rolling out new digital capabilities.
“As we look ahead, we are increasingly optimistic that the
momentum we’ve generated will continue given the strength we see in
our core business, particularly in the U.S., even as the pace of
the recovery remains uneven in different regions around the world.
Based on current trends, we are confident in our ability to be
within the high end of the range of EPS expectations we had for
2020 in 2022.”
Second-quarter consolidated total revenues net of interest
expense were $10.2 billion, up 33 percent from $7.7 billion a year
ago. The quarter primarily reflected growth in Card Member
spending, as well as a rise in the average discount rate from
increased levels of travel and entertainment spending in the U.S.,
compared to the prior year.
Consolidated provisions for credit losses resulted in a benefit
of $606 million, primarily reflecting the previously mentioned
reserve releases and lower net write-offs, compared with a
provision expense of $1.6 billion a year ago, which primarily
reflected significant credit reserve builds.
Consolidated expenses were $7.9 billion, up 44 percent from $5.5
billion a year ago, reflecting higher customer engagement costs.4
Customer engagement costs were up due to an increase in Card Member
spending, higher marketing investments to rebuild growth momentum,
and higher usage of travel-related Card Member benefits. Operating
expenses were slightly down as a result of gains related to certain
Amex Ventures equity investments.5
The consolidated effective tax rate was 22.4 percent, down from
58.7 percent a year ago. The decrease primarily reflected the
impact of discrete tax charges and lower pretax income in the prior
year.
Global Consumer Services Group reported second-quarter
pretax income of $1.9 billion, compared with $843 million a year
ago.
Total revenues net of interest expense were $6.0 billion, up 28
percent from $4.7 billion a year ago. The rise primarily reflected
an increase in Card Member spending compared to the prior year.
Provisions for credit losses resulted in a benefit of $342
million, primarily reflecting a portion of the previously mentioned
reserve releases and lower net write-offs, compared with a
provision expense of $887 million a year ago, which primarily
reflected significant reserve builds.
Total expenses were $4.5 billion, up 50 percent from $3.0
billion a year ago. The increase primarily reflected higher
customer engagement costs due to a rise in Card Member spending,
higher marketing investments to rebuild growth momentum, and higher
usage of travel-related Card Member benefits.
Global Commercial Services reported second-quarter pretax
income of $839 million, compared with a pretax loss of $22 million
a year ago.
Total revenues net of interest expense were $3.0 billion, up 35
percent from $2.3 billion a year ago, primarily reflecting a rise
in Card Member spending.
Provisions for credit losses resulted in a benefit of $235
million, primarily reflecting a portion of the previously mentioned
reserve releases and lower net write-offs, compared with a
provision expense of $645 million a year ago, which primarily
reflected significant reserve builds.
Total expenses were $2.4 billion, up 49 percent from $1.6
billion a year ago. The increase primarily reflected higher
customer engagement costs due to a rise in Card Member spending and
higher marketing investments to rebuild growth momentum.
Global Merchant and Network Services reported
second-quarter pretax income of $527 million, compared with $188
million a year ago.
Total revenues net of interest expense were $1.2 billion, up 47
percent from $837 million a year ago. The rise reflected an
increase in network volumes compared to the prior year.
Total expenses were $728 million, up 16 percent from $625
million a year ago, driven by higher marketing investments.
Corporate and Other reported a second-quarter pretax loss
of $308 million, compared with a pretax loss of $387 million a year
ago.
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.
Source: American Express Company
Location: Global
This earnings release should be read in conjunction with the
company’s statistical tables for the second quarter 2021, 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 second-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, among
other matters, contain words such as “believe,” “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 be within the high end of the range of
the original earnings per common share (EPS) expectations it had
for 2020 in 2022 and for the company to resume its financial growth
algorithm beyond 2022, which will depend in part on spending
volumes and therefore on economies continuing to re-open,
vaccination rates increasing, travel restrictions lifting,
consumers continuing to spend online and the general public feeling
comfortable traveling, shopping and dining out again; credit
performance and reserve levels; identifying attractive investment
opportunities to further build growth momentum, including retention
and acquisition efforts; the company’s ability to control operating
expenses; the effective tax rate remaining consistent with current
levels; and the company’s ability to continue its share repurchase
program; any of which could be impacted by, among other things, the
factors identified in the subsequent paragraphs;
- the company’s volumes, revenue growth and EPS for 2021 and
beyond, which could be impacted by, among other things, uncertainty
regarding the continued spread of COVID-19 (including new variants)
and the availability, distribution and use of effective treatments
and vaccines; a further deterioration in global economic and
business conditions; consumer and business spending not growing in
line with expectations, including goods and services spending not
continuing to grow and travel and entertainment spending not
rebounding to around 80 percent of 2019 levels by the end of 2021;
an inability or unwillingness of Card Members to pay amounts owed
to the company; insufficient government support and relief programs
to address the ongoing impact of the pandemic; prolonged measures
to contain the spread of COVID-19 (including travel restrictions)
or premature easing of such containment measures, both of which
could further exacerbate the effects on business activity and the
company’s Card Members, partners and merchants; health concerns
associated with the pandemic continuing to affect consumer
behavior, spending levels and preferences, and travel patterns and
demand even after government restrictions are lifted and economies
re-open; an inability of the company to effectively manage risk in
an uncertain environment; market volatility, changes in capital and
credit market conditions and the availability and cost of capital;
issues impacting brand perceptions and the company’s reputation;
the amount and efficacy of investments in share, scale and
relevance; an inability of business partners to meet their
obligations to the company and the company’s customers due to
slowdowns or disruptions in their businesses, bankruptcy or
liquidation, or otherwise; 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; 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;
- future credit performance, the level of future write-off rates
and the amount and timing of future credit reserve builds and
releases, which will depend in part on changes in consumer behavior
that affect loan and receivable balances (such as paydown and
revolve rates) and delinquency rates; macroeconomic factors such as
unemployment rates, GDP and the volume of bankruptcies; the
performance of accounts as they graduate and exit from financial
relief programs; collections capabilities and recoveries of
previously written-off loans and receivables; the enrollment in,
and effectiveness of, hardship programs and troubled debt
restructurings; continued government support for the economy; and
governmental actions that provide forms of relief with respect to
certain loans and fees, such as limiting debt collections efforts
and encouraging or requiring extensions, modifications or
forbearance;
- net interest income and the growth rate of loans outstanding
being higher or lower than current expectations, which will depend
on the behavior of Card Members and their actual spending,
borrowing and paydown patterns; government stimulus, liquidity and
financial strength in the company’s customer base and the
availability of forbearance programs; the company’s ability to
effectively manage risk and enhance Card Member value propositions;
changes in interest rates and the company’s cost of funds; credit
actions, including line size and other adjustments to credit
availability; and the effectiveness of the company’s strategies to
capture a greater share of existing Card Members’ spending and
borrowings, reduce Card Member attrition and attract new
customers;
- the actual amount to be spent on marketing in 2021 and beyond,
which will be based in part on continued changes in macroeconomic
conditions and business performance; 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 pace at which
the company winds down its value injections efforts; the company’s
ability to balance expense control and investments in the business;
and management’s ability to realize efficiencies and optimize
investment spending;
- 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) and the redemption of
rewards and offers (including travel redemptions); the costs
related to reward point redemptions; Card Members’ interest in the
value propositions offered by the company; further enhancements to
product benefits to make them attractive to Card Members,
potentially in a manner that is not cost effective; and new and
renegotiated contractual obligations with business partners;
- the ability of the company to control its operating expenses
and the actual amount the company spends on operating expenses in
2021 and beyond, which could be impacted by, among other things,
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, such as chat supported by
artificial intelligence; restructuring activity; fraud costs;
information security or compliance expenses or consulting, legal
and other professional services fees, including as a result of
litigation or internal and regulatory reviews; the level of M&A
activity and related expenses; the payment of civil money
penalties, disgorgement, restitution, non-income tax assessments
and litigation-related settlements; impairments of goodwill or
other assets; the impact of changes in foreign currency exchange
rates on costs; and higher-than-expected inflation;
- net card fees not performing consistent with current
expectations, which could be impacted by, among other things, the
further deterioration in macroeconomic conditions impacting the
ability and desire of Card Members to pay card fees; higher Card
Member attrition rates; Card Members continuing to be attracted to
the company’s premium card products and the pace of Card Member
acquisition activity; and the company’s inability to address
competitive pressures and implement its strategies and business
initiatives, including introducing new and enhanced benefits and
services that are designed for the current environment;
- the average discount rate not performing consistent with
current expectations, including as a result of further changes in
the mix of spending by location and industry (including the level
of T&E spending), merchant negotiations (including merchant
incentives, concessions and volume-related pricing discounts),
competition, pricing regulation (including regulation of
competitors’ interchange rates) and other factors;
- the company’s 2021 tax rate not remaining consistent with
current levels, which could be impacted by, among other things,
changes in tax laws and regulation, the company’s geographic mix of
income, unfavorable tax audits and other unanticipated tax
items;
- 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 ability of the company to maintain the
Platinum card franchise’s leadership in the premium space,
competition for new and existing cobrand relationships, competition
from new and non-traditional competitors and the success of
marketing, promotion and rewards programs;
- changes affecting the company’s plans regarding the return of
capital to shareholders, including the level of share repurchases
over the next several quarters, which will depend on factors such
as capital levels and regulatory capital ratios; changes in the
stress testing and capital planning process and new guidance from
the Federal Reserve; the company’s results of operations and
financial condition; the company’s credit ratings and rating agency
considerations; and the economic environment and market conditions
in any given period;
- the company’s ability to increase Card Member acquisition
activities, provide additional value to Card Members and refresh
its premium products, which will be impacted in part by
competition, brand perceptions and reputation, and the ability of
the company to develop and market value propositions that appeal to
Card Members and new customers and offer attractive services and
rewards programs, which will depend in part on ongoing investments
in Card Member acquisition efforts, addressing changing customer
behaviors, new product innovation and development, and enrollment
processes, including through digital channels, and infrastructure
to support new products, services and benefits;
- the ability of the company to grow commercial payments,
including through cash flow and supplier payment solutions, which
will depend in part on competition, the willingness and ability of
companies to use such solutions for procurement and other business
expenditures, the ability of the company to offer attractive value
propositions to potential customers, the company’s ability to
enhance and expand its payment and lending solutions, and the
company’s ability to integrate Kabbage's digital capabilities and
continue the rollout of the Kabbage platform to the company’s small
business customers;
- the possibility that the company will not execute on its plans
to expand merchant coverage and improve perceptions of 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 whether Card
Members experience welcome acceptance for American Express
cards;
- 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 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 and U.K.; exert
further pressure on the average discount rate 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 civil
money penalties; materially affect capital or liquidity
requirements, results of operations or ability to pay dividends; or
result in harm to the American Express brand;
- changes in the financial condition and creditworthiness of the
company’s business partners, such as bankruptcies, restructurings
or consolidations, including of cobrand partners and merchants that
represent a significant portion of the company’s business, such as
the airline industry, or partners in GNS or financial institutions
that the company relies on for routine funding and liquidity, which
could materially affect the company’s financial condition or
results of operations; and
- factors beyond the company’s control such as continued waves of
COVID-19 cases, whether and when populations achieve herd immunity,
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 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, 2020, the Quarterly Report on Form
10-Q for the quarter ended March 31, 2021 and the company’s other
reports filed with the Securities and Exchange Commission.
1 Diluted earnings per common share (EPS) was reduced by the
impact of (i) earnings allocated to participating share awards and
other items of $16 million and $2 million for the three months
ended June 30, 2021 and 2020, respectively, and $31 million and $4
million for the six months ended June 30, 2021 and 2020,
respectively, and (ii) dividends on preferred shares of $15 million
and $17 million for the three months ended June 30, 2021 and 2020,
respectively, and $29 million and $49 million for the six months
ended June 30, 2021 and 2020, respectively. 2 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. 3 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 (i.e. assumes the foreign exchange rates used to
determine results for the three months ended June 30, 2021 apply to
the period(s) against which such results are being compared). 4
Customer engagement costs represent the aggregate of Card Member
rewards, Card Member services, and marketing and business
development expenses. 5 Operating expenses represent salaries and
employee benefits, professional services, data processing and
equipment, and other, net.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210723005072/en/
Media Contacts: Leah M. Gerstner,
Leah.M.Gerstner@aexp.com, +1.212.640.3174 Azar Boehm,
Azar.Boehm@aexp.com, +1.212.225.4052 Investors/Analysts
Contacts: Vivian Y. Zhou, Vivian.Y.Zhou@aexp.com,
+1.212.640.5574 Melanie L. Michel, Melanie.L.Michel@aexp.com,
+1.212.640.5574
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