American Express Reports First Quarter EPS of $1.34

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The FINANCIAL — American Express Company on April 19 reported first-quarter net income of $1.2 billion, down 13 percent from $1.4 billion in the year-ago quarter, which included certain subsequently discontinued cobrand partnerships. Diluted earnings per share was $1.34, down 8 percent from $1.45 a year ago.

First-quarter consolidated total revenues net of interest expense were $7.9 billion, down 2 percent from $8.1 billion a year ago. That compared to a year-over-year decline of 4 percent in the prior quarter. Excluding last year’s Costco-related business and the impact of foreign exchange rates, adjusted revenues net of interest expense grew 7 percent.1  That is up from a year-over-year increase of 6 percent in the prior quarter.1 Those increases primarily reflected higher adjusted Card Member spending and adjusted net interest income, according to  American Express.

Consolidated provisions for losses were $573 million, up 32 percent from $434 million a year ago. The increase primarily reflected higher loans, receivables and write-offs.

Consolidated expenses were $5.5 billion, up 1 percent from a year ago. The current quarter reflected higher rewards expenses related to recent product enhancements. The prior year included a benefit of $127 million ($79 million after-tax) from a gain on the sale of the JetBlue cobrand portfolio and an $84 million ($55 million after-tax) restructuring charge.

The effective tax rate for the quarter was 32 percent, down from 35 percent a year ago, due largely to the geographic mix of earnings and certain discrete tax items in the current quarter.

The company’s return on average equity (ROE) was 25.1 percent, up from 23.6 percent a year ago.

“Our first quarter performance marks a good start to the year with momentum in the consumer and commercial businesses in the U.S. and in key markets internationally,” said Kenneth I. Chenault, chairman and chief executive officer.  “The results reflect many of the investments we’ve been making to grow the business, plus continued progress in reducing operating expenses.

“Card Member spending grew 8 percent, adjusted for changes in foreign exchange rates and Costco-related business that was included in the prior year. Loans were up 11 percent and credit indicators remained best in class.

“We acquired 2.6 million new cards across our global issuing businesses during the quarter and continued to broaden our reach among millennials with an expanded merchant network and enhanced benefits and services to earn a greater share of their wallet.

“The last couple of years have been an important transition period, and we’ve entered 2017 stronger, more focused and more resilient. There is still work to do, but our underlying performance this quarter gives me added confidence in our ability to deliver our 2017 EPS outlook of $5.60 -$5.80 and position American Express for sustainable growth in the years ahead.”

Segment Results

U.S. Consumer Services reported first-quarter net income of $469 million, down 32 percent from $694 million a year ago. The year-ago period included Costco-related revenues and expenses. 

Total revenues net of interest expense decreased 8 percent to $3.0 billion, from $3.3 billion a year ago. 

Provisions for losses totaled $294 million, up 55 percent from $190 million a year ago.  The increase primarily reflected higher loans and write-offs. 

Total expenses were $2.0 billion, up 1 percent from a year ago.  The year-ago quarter included Costco-related rewards, offset in part by the above-mentioned JetBlue gain. Rewards expenses in the current quarter included costs related to recent product enhancements

The effective tax rate was 33 percent compared to 36 percent a year ago.

International Consumer and Network Services reported first-quarter net income of $218 million, up 16 percent from $188 million a year ago.

Total revenues net of interest expense were $1.4 billion, up 5 percent (up 6 percent FX-adjusted2) from a year ago. The increase primarily reflected higher Card Member spending, net card fees and loans.

Provisions for losses totaled $66 million, down 7 percent from $71 million a year ago.

Total expenses were $1.0 billion, up 3 percent (up 4 percent FX-adjusted2) from a year ago.  The increase primarily reflected rewards costs, driven by higher Card Member spending.

The effective tax rate was 25 percent, compared to 26 percent a year ago.

Global Commercial Services reported first-quarter net income of $418 million, down 14 percent from $485 million a year ago.  The year-ago period included Costco-related revenues and expenses. 

Total revenues net of interest expense were $2.5 billion, up 3 percent from $2.4 billion a year ago, primarily reflecting higher Card Member spending. 

Provisions for losses totaled $208 million, up 30 percent from $160 million a year ago. The increase primarily reflected higher receivables, loans and write-offs, as well as a slight increase in delinquencies.

Total expenses were $1.6 billion, up 10 percent from $1.5 billion a year ago.  The increase primarily reflected higher rewards expenses, largely driven by recent product enhancements and higher Card Member spending.

The effective tax rate was 34 percent, down from 36 percent a year ago.

Global Merchant Services reported first-quarter net income of $363 million, up 2 percent from $357 million a year ago. 

Total revenues net of interest expense were $1.1 billion, down 2 percent from a year ago.  The year-ago period included Costco-related revenues. 

Total expenses were $505 million, down 3 percent from $521 million a year ago.  The decrease reflected lower marketing spending.

The effective tax rate was 36 percent, down from 38 percent from a year ago.

Corporate and Other reported first-quarter net loss of $231 million compared with net loss of $298 million a year ago. 

 

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