The FINANCIAL — American Express Company on October 18 reported third-quarter net income of $1.4 billion, up 19 percent from $1.1 billion a year ago.
Diluted earnings per share was $1.50, up 25 percent from $1.20 a year ago.
Third-quarter consolidated total revenues net of interest expense were $8.4 billion, up 9 percent from $7.8 billion a year ago. Excluding the impact of foreign exchange rates, adjusted revenues net of interest expense grew 8 percent.2 Those increases primarily reflected higher net interest income and Card Member spending, partially offset by a lower discount rate, according to American Express.
Consolidated provisions for losses were $769 million, up 53 percent from $504 million a year ago. The rise primarily reflected continued strong growth in the loan portfolio and an expected increase in the lending write-off and delinquency rates.
Consolidated expenses were $5.8 billion, up 6 percent from $5.5 billion last year. The current quarter included higher rewards expenses primarily related to product enhancements and an increase in Card Member spending, partially offset by lower marketing costs. Operating expenses were unchanged from a year ago, reflecting lower technology-related costs, offset by asset impairments and restructuring and other charges in the company’s U.S. Loyalty Coalition and Prepaid businesses. Excluding the asset impairments and other charges in the current year and restructuring charges in both years, adjusted operating expenses declined 4 percent.3
The effective tax rate for the quarter was 26 percent, down from 34 percent a year ago, primarily due to the realization of certain foreign tax credits in the current year and the geographic mix of earnings.
“We are completing a two-year turnaround ahead of plan with strong revenue and earnings growth across all of our business segments,” said Kenneth I. Chenault, chairman and chief executive officer. “We’ve added products and benefits, shown continued strength in acquiring new customers, and expanded our merchant network.
“Loan growth continued to be strong and credit metrics were again in line with our expectations. We’ve contained operating costs and reallocated a significant part of those savings to fund many of the initiatives that are now driving growth across the business. Throughout the turnaround, we’ve dealt effectively with competitive challenges and redesigned our marketing, customer service and risk management capabilities for the digital age.
“We’re starting a new chapter from a position of strength. Based on the momentum in the business, we now expect full year 2017 EPS of $5.80 to $5.90. That’s up from our earlier outlook of $5.60 to $5.80.”
Segment Results
U.S. Consumer Services reported third-quarter net income of $475 million, up 18 percent from $401 million a year ago.
Total revenues net of interest expense were $3.3 billion, up 13 percent from $2.9 billion a year ago. The increase primarily reflected higher net interest income and Card Member spending.
Provisions for losses totaled $459 million, up 67 percent from $275 million a year ago. The rise primarily reflected strong growth in the loan portfolio and an expected increase in the lending write-off and delinquency rates.
Total expenses were $2.1 billion, up 6 percent from $2.0 billion a year ago. The current quarter reflected higher rewards expenses related to product enhancements and an increase in Card Member spending, partially offset by lower technology-related costs and a decline in marketing expenses.
The effective tax rate was 32 percent, down from 35 percent a year ago.
International Consumer and Network Services reported third-quarter net income of $286 million, up 85 percent from $155 million a year ago.
Total revenues net of interest expense were $1.5 billion, up 7 percent (up 6 percent FX-adjusted2) from $1.4 billion a year ago. The increase primarily reflected higher Card Member spending and net interest income.
Provisions for losses totaled $106 million, up 26 percent from $84 million a year ago. The rise primarily reflected continued strong growth in the loan portfolio and an expected increase in the lending write-off rate.
Total expenses were $1.1 billion, down 2 percent (down 3 percent FX-adjusted2) from a year ago. The decrease primarily reflected lower marketing and employee compensation expenses, partially offset by higher rewards costs.
The effective tax rate was 7 percent, down from 25 percent a year ago, due largely to the realization of certain foreign tax credits in the current year and the geographic mix of earnings.
Global Commercial Services reported third-quarter net income of $529 million, up 14 percent from $466 million a year ago.
Total revenues net of interest expense were $2.6 billion, up 6 percent from $2.4 billion a year ago. The increase primarily reflected higher Card Member spending and net interest income.
Provisions for losses totaled $194 million, up 45 percent from $134 million a year ago. The increase primarily reflected strong growth in the loan portfolio and an expected increase in the lending write-off rate.
Total expenses were $1.6 billion, up 3 percent from a year ago. The current quarter reflected higher rewards expenses related to product enhancements and an increase in Card Member spending, partially offset by lower technology-related and marketing expenses.
The effective tax rate was 31 percent, down from 36 percent a year ago, due largely to the geographic mix of earnings.
Global Merchant Services reported third-quarter net income of $368 million, up 3 percent from $359 million a year ago.
Total revenues net of interest expense were $1.2 billion, up 4 percent from $1.1 billion a year ago. The increase primarily reflected higher Card Member spending, partially offset by a lower discount rate.
Total expenses were $628 million, up 20 percent from $525 million a year ago. The increase primarily reflected a portion of the previously-mentioned asset impairments and restructuring and other charges.
The effective tax rate was 29 percent, down from 37 percent a year ago, due largely to the realization of certain foreign tax credits in the current year.
Corporate and Other reported third-quarter net loss of $302 million compared with net loss of $239 million a year ago, reflecting a portion of the previously-mentioned asset impairments and restructuring charges.
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