American Express Company (NYSE: AXP) today reported
third-quarter net income of $1.8 billion, or $2.27 per share,
compared with net income of $1.1 billion, or $1.30 per share, a
year ago.
(Millions, except percentages and
per share amounts)
Quarters Ended September
30,
Percentage Inc/(Dec)
Nine Months Ended September
30,
Percentage Inc/(Dec)
2021
2020
2021
2020
Total Revenues Net of Interest Expense
$
10,928
$
8,751
25
$
30,235
$
26,736
13
Total Provisions for Credit Losses
$
(191)
$
665
#
$
(1,472)
$
4,841
#
Net Income
$
1,826
$
1,073
70
$
6,341
$
1,697
#
Diluted Earnings Per Common Share1
$
2.27
$
1.30
75
$
7.82
$
2.01
#
Average Diluted Common Shares
Outstanding
787
805
(2)
797
806
(1)
# - Denotes a variance of 100 percent or more.
“Our strong third quarter results once again reflect
accelerating momentum in our core business and outstanding credit
performance, enabled by the strategic decisions we’ve made over the
last several years,” said Stephen J. Squeri, Chairman and Chief
Executive Officer.
“Revenues jumped 25% from a year ago and Card Member spending
accelerated from the previous quarter, reaching record highs for
the third quarter. The growth was powered by consumer and small
business spending on goods and services, which grew 19% over Q3
2019 on an FX-adjusted basis. We also saw a continued rebound in
travel and entertainment spending, with restaurant spending notably
resilient, growing above pre-pandemic levels in the quarter.
“The strategic investments we’ve made over the past year,
particularly those to attract new Millennial and Gen Z customers
and expand our leadership position with small businesses, are
helping fuel the strong momentum we’re seeing in spending, customer
acquisition, engagement, and retention. Spending by Millennial and
Gen Z Card Members grew 38% above Q3 2019 levels on an FX-adjusted
basis. We acquired 2.6 million new proprietary cards in Q3, with
acquisitions of our U.S. consumer and small business Platinum and
Gold Cards reaching all-time highs while our Card Member retention
and satisfaction metrics are better than pre-pandemic levels.
“We’re operating from a position of strength, and we see more
opportunity ahead to drive sustainable, long-term growth. With the
progress we’ve made against our key priorities this year, we remain
confident in our ability to be within the high end of the range of
the EPS expectations we had for 2020 in 2022.”
Third-quarter consolidated total revenues net of interest
expense were $10.9 billion, up 25 percent from $8.8 billion a year
ago. The quarter primarily reflected growth in Card Member
spending, as well as a rise in the average discount rate resulting
from the change in the mix of spending driven by increased levels
of travel and entertainment spending, compared to the prior
year.
Consolidated provisions for credit losses resulted in a benefit
of $191 million, compared with a provision expense of $665 million
a year ago. The change in provisions primarily reflected credit
reserve releases of $393 million and lower net write-offs in the
current quarter.
Consolidated expenses were $8.7 billion, up 29 percent from $6.7
billion a year ago, reflecting higher customer engagement costs.
Customer engagement costs were up due to an increase in Card Member
spending, higher marketing investments to continue building growth
momentum, and higher usage of travel-related Card Member benefits.
Operating expenses were slightly higher as a result of increased
salary and benefits, partially offset by gains related to certain
Amex Ventures equity investments.
The consolidated effective tax rate was 25.5 percent, up from
21.3 percent a year ago. The increase primarily reflected changes
in the level and geographic mix of pretax income and discrete tax
charges in the current quarter.
Global Consumer Services Group reported third-quarter
pretax income of $1.5 billion, compared with $1.1 billion a year
ago.
Total revenues net of interest expense were $6.4 billion, up 21
percent from $5.3 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 $126
million, primarily reflecting a portion of the previously mentioned
reserve releases and lower net write-offs, compared with a
provision expense of $411 million a year ago.
Total expenses were $5.0 billion, up 34 percent from $3.8
billion a year ago. The increase primarily reflected higher
customer engagement costs due to a rise in Card Member spending,
higher marketing investments to continue building growth momentum,
and higher usage of travel-related Card Member benefits.
Global Commercial Services reported third-quarter pretax
income of $718 million, compared with $272 million a year ago.
Total revenues net of interest expense were $3.2 billion, up 28
percent from $2.5 billion a year ago, primarily reflecting a rise
in Card Member spending.
Provisions for credit losses resulted in a benefit of $67
million, primarily reflecting a portion of the previously mentioned
reserve releases and lower net write-offs, compared with a
provision expense of $250 million a year ago.
Total expenses were $2.6 billion, up 29 percent from $2.0
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 continue building growth
momentum.
Global Merchant and Network Services reported
third-quarter pretax income of $529 million, compared with $326
million a year ago.
Total revenues net of interest expense were $1.3 billion, up 28
percent from $1.0 billion a year ago. The rise reflected an
increase in network volumes compared to the prior year.
Total expenses were $779 million, up 13 percent from $691
million a year ago, driven by higher marketing investments.
Corporate and Other reported a third-quarter pretax loss
of $285 million, compared with a pretax loss of $359 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: personal cards, business cards, travel services, gift
cards, prepaid cards, merchant services, Accertify, Kabbage, Resy,
corporate card, business travel, diversity and inclusion, corporate
responsibility 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 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 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, 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, 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 on Goods & Services, and the general public
feeling comfortable traveling, shopping and dining out again;
credit performance and reserve levels; identifying attractive
investment opportunities to continue building growth momentum,
including customer 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 deterioration in global economic and business
conditions; consumer and business spending not growing in line with
expectations, including Goods & Services spending not
continuing to show strong growth and Travel & Entertainment
spending not reaching 80 percent of 2019 levels by the fourth
quarter of 2021; an inability or unwillingness of Card Members to
pay amounts owed to the company; the termination of government
support and relief programs; 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 delinquency and
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); 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 the
macroeconomic and competitive environment 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,
salary and benefit expenses to attract and retain talent; costs due
to new hybrid working arrangements; supply chain issues;
higher-than-expected inflation; 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; 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; and the impact of changes in foreign currency exchange
rates on costs;
- 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 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;
- 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; 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 Reports on Form
10-Q for the quarters ended March 31 and June 30, 2021 and the
company’s other reports filed with the Securities and Exchange
Commission.
Notes:
1 Diluted earnings per common share (EPS) was reduced by the
impact of (i) earnings allocated to participating share awards and
other items of $14 million and $7 million for the three months
ended September 30, 2021 and 2020, respectively, and $45 million
and $10 million for the nine months ended September 30, 2021 and
2020, respectively, and (ii) dividends on preferred shares of $20
million and $16 million for the three months ended September 30,
2021 and 2020, respectively, and $49 million and $65 million for
the nine months ended September 30, 2021 and 2020, respectively,
and (iii) an equity-related adjustment of $9 million related to the
redemption of preferred shares for the three and nine months ended
September 30, 2021.
As used in this release:
- Customer engagement costs represent the aggregate of Card
Member rewards, Card Member services, and marketing and business
development 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, 2021 apply to the period(s) against which such
results are being compared).
- Operating expenses represent salaries and employee benefits,
professional services, data processing and equipment, and other,
net.
- 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211022005042/en/
Media Contacts: Leah M. Gerstner,
Leah.M.Gerstner@aexp.com, +1.212.640.3174 Andrew R. Johnson,
Andrew.R.Johnson@aexp.com, +1.212.640.8610 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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