The FINANCIAL — American Express Company on April 18 reported first-quarter net income of $1.6 billion, up 31 percent from $1.3 billion a year ago. Diluted earnings per share was $1.86, up 38 percent from $1.35 per share a year ago.
First-quarter consolidated total revenues net of interest expense were $9.7 billion, up 12 percent (10 percent FX-adjusted) from $8.7 billion a year ago. The increase showed steady growth across the company’s businesses and reflected higher Card Member spending, loans, and fee income, according to American Express.
Consolidated provisions for losses were $775 million, up 35 percent from $573 million a year ago. The increase, which was in line with the company’s expectations, reflected growth in the loan portfolio and an increase in the lending write-off and delinquency rates.
Consolidated expenses were $6.9 billion, up 9 percent from $6.3 billion a year ago. The rise primarily reflected growth in rewards expenses and other costs associated with increased Card Member spending, higher usage of card benefits, and continued investments in cobrand partnerships. Operating expenses were up 5 percent (approximately 2 percent FX-adjusted) from a year ago, reflecting a number of items, including a loss on a previously announced transaction involving the company’s prepaid operations.
The consolidated effective tax rate was 22 percent, down from 32 percent a year ago. For consolidated results and all segments, the current quarter reflected the reduction in the U.S. federal statutory tax rate as a result of the 2017 Tax Cuts and Jobs Act (the “Tax Act”).
“Our year is off to a good start with double-digit growth in billed business, revenues and earnings,” said Stephen J. Squeri, chairman and chief executive officer. “Card Member spending grew 12 percent, and we acquired 3.5 million new cards across our global issuing business, reflecting in part the recent Hilton portfolio acquisition. Credit indicators are in line with our expectations, and the loan portfolio grew 16 percent.
“Today’s results are showing good returns on the investments we’ve been making to drive growth in the premium sector, with cobrand partners, in our merchant network and with small and mid-sized businesses. We plan to continue these investments this year and support our initiatives with the global brand campaign we launched this month.
“We feel good about our progress but it is still early in the year. Given what we are seeing so far, we expect revenues to be up at least 8 percent this year and EPS to be at the high end of the $6.90 to $7.30 range we set back in January.”
Segment Results
U.S. Consumer Services reported first-quarter net income of $640 million, up 30 percent from $494 million a year ago.
Total revenues net of interest expense were $3.7 billion, up 13 percent from $3.3 billion a year ago. The rise primarily reflected higher loans, increased Card Member spending, and the benefit of the recent acquisition of the Hilton portfolio.
Provisions for losses totaled $423 million, up 44 percent from $294 million a year ago. The rise primarily reflected growth in the loan portfolio and, as expected, an increase in the lending write-off and delinquency rates.
Total expenses were $2.5 billion, up 10 percent from $2.2 billion a year ago. The rise primarily reflected growth in rewards expenses associated with increased Card Member spending, higher usage of card benefits and continued investments in cobrand partnerships.
The effective tax rate was 21 percent, down from 33 percent a year ago.
International Consumer and Network Services reported first-quarter net income of $291 million, up 15 percent from $252 million a year ago.
Total revenues net of interest expense were $1.8 billion, up 12 percent (5 percent FX-adjusted2) from $1.6 billion a year ago. The increase primarily reflected higher Card Member spending and net card fees.
Provisions for losses totaled $108 million, up 64 percent from $66 million a year ago. The rise primarily reflected continued growth in the lending and charge portfolios.
Total expenses were $1.3 billion, up 10 percent (5 percent FX-adjusted2) from $1.2 billion a year ago. The rise primarily reflected higher rewards expenses related to an increase in Card Member spending.
The effective tax rate was 21 percent, down from 28 percent a year ago.
Global Commercial Services reported first-quarter net income of $552 million, up 35 percent from $409 million a year ago.
Total revenues net of interest expense were $3.0 billion, up 9 percent from $2.8 billion a year ago. The increase primarily reflected higher Card Member spending.
Provisions for losses totaled $240 million, up 15 percent from $208 million a year ago, driven primarily by the charge portfolio.
Total expenses were $2.1 billion, up 6 percent from $2.0 billion a year ago. The rise primarily reflected higher rewards expenses and other costs related to an increase in Card Member spending.
The effective tax rate was 23 percent, down from 34 percent a year ago.
Global Merchant Services reported first-quarter net income of $472 million, up 32 percent from $357 million a year ago.
Total revenues net of interest expense were $1.2 billion, up 10 percent from $1.1 billion a year ago. The increase primarily reflected higher Card Member spending, partially offset by a decrease in the average discount rate.
Total expenses were $514 million, up 2 percent from $503 million a year ago.
The effective tax rate was 28 percent, down from 36 percent a year ago.
Corporate and Other reported first-quarter net loss of $321 million compared with net loss of $261 million a year ago, primarily reflecting a transaction involving the company’s prepaid operations.
