Third-quarter Earnings
Per Share Increased 9% To $2.47
Card Member Spending Up
21%, Driven By Continued Momentum Across Goods & Services And
Travel & Entertainment Spending
Credit Metrics Reflect
Strength Of Premium Customer Base
American Express Company (NYSE: AXP) today reported
third-quarter net income of $1.9 billion, or $2.47 per share,
compared with net income of $1.8 billion, or $2.27 per share, a
year ago.
($ in millions, except per share amounts, and
where indicated)
Quarters Ended
September 30,
Percentage
Inc/(Dec)
Nine Months Ended
September 30,
Percentage
Inc/(Dec)
2022
2021
2022
2021
Total Network Volumes (Billions)
$394.4
$330.7
19
$1,139.5
$916.1
24
Total Revenues Net of Interest Expense
$13,556
$10,928
24
$38,686
$30,235
28
Total Provisions for Credit Losses
$778
$(191)
#
$1,155
$(1,472)
#
Net Income
$1,879
$1,826
3
$5,942
$6,341
(6)
Diluted Earnings Per Common Share1
$2.47
$2.27
9
$7.77
$7.82
(1)
Average Diluted Common Shares
Outstanding
749
787
(5)
753
797
(6)
# - Denotes a variance of 100 percent or
more.
“We had a strong third quarter with revenues growing 24 percent
year-over-year, reaching a record high for the second quarter in a
row,” said Stephen J. Squeri, Chairman and Chief Executive
Officer.
“We continued to see high levels of customer engagement,
acquisitions and loyalty across our premium Card Member base, with
overall spending up 21 percent (24 percent on an FX-adjusted
basis), driven by growth in both Goods & Services and Travel
& Entertainment spending.
“The demand for travel has exceeded our expectations throughout
the year, with spending on T&E increasing 57 percent from a
year earlier and T&E spending volumes in our international
markets surpassing pre-pandemic levels for the first time this
quarter, both on an FX-adjusted basis.
“We continue to attract new, premium customers through our
differentiated value propositions, experiences and services. We
added 3.3 million proprietary cards in the quarter, and saw
acquisitions of U.S. Consumer Platinum and Gold cards and U.S.
Business Platinum cards each hit record highs. Millennials and Gen
Z customers – our fastest growing demographic – are powering this
growth and comprised more than 60 percent of our consumer
proprietary card acquisitions in the quarter.
“Our credit metrics also remained strong even as we steadily
rebuild loan balances, with delinquencies and write-offs continuing
to be low. We have not seen changes in the spending behaviors of
our customers, but we are mindful of the mixed signals in the
broader economy and have plans in place to pivot should the
operating environment change dramatically, as we have done in the
past.
“The strength of our results, combined with the many
opportunities we see for our business, reinforce our confidence in
our ability to achieve our long-term growth plan aspirations.”
Third-quarter consolidated total revenues net of interest
expense were $13.6 billion, up 24 percent from $10.9 billion a year
ago. The increase was primarily driven by increased Card Member
spending.
Consolidated provisions for credit losses were $778 million,
compared with a benefit of $191 million a year ago. The change
reflected a reserve build of $387 million, primarily driven by
growth in Card Member loans and changes in macroeconomic forecasts,
compared with a $393 million reserve release a year ago, as well as
higher net write-offs in the current quarter. Credit metrics
remained strong in the current quarter.
Consolidated expenses were $10.3 billion, up 19 percent from
$8.7 billion a year ago. The increase primarily reflected higher
customer engagement costs, driven by a 19 percent increase in
network volumes and higher usage of travel-related benefits.
Operating expenses also increased, primarily reflecting higher
compensation costs, as well as a net loss on Amex Ventures
investments in the current quarter compared with a net gain a year
ago.
The consolidated effective tax rate was 23.6 percent, down from
25.5 percent a year ago, primarily reflecting changes in the
geographic mix of pretax income.
Based on the company’s performance to date, it continues to
expect full-year revenue growth of 23% to 25% and now expects to be
above its original full-year EPS guidance range of $9.25 to
$9.65.
Segment Results
As previously announced, effective for the third quarter of
2022, the company realigned its reportable operating segments to
reflect organizational changes announced during the second quarter
of 2022. Prior periods have been revised to conform to the new
operating segments, which are as follows:
- U.S. Consumer Services, which issues a wide range of
proprietary consumer cards and provides services to U.S. consumers,
including travel and lifestyle services as well as banking and
non-card financing products.
- Commercial Services, which issues a wide range of
proprietary corporate and small business cards and provides
services to U.S. businesses, including payment and expense
management, banking and non-card financing products. Commercial
Services also issues proprietary corporate cards and provides
services to select global corporate clients.
- International Card Services, which issues a wide range
of proprietary consumer, small business and corporate cards outside
the United States. International Card Services also provides
services to international customers, including travel and lifestyle
services, and manages certain international joint ventures and our
loyalty coalition businesses.
- Global Merchant and Network Services, which operates a
global payments network that processes and settles card
transactions, acquires merchants and provides multi-channel
marketing programs and capabilities, services and data analytics,
leveraging our global integrated network. Global Merchant and
Network Services manages our partnership relationships with
third-party card issuers (including our network partnership
agreements in China), merchant acquirers and a prepaid reloadable
and gift card program manager, licensing the American Express brand
and extending the reach of the global network.
Corporate functions and certain other businesses and operations
are included in Corporate and Other.
U.S. Consumer Services reported third-quarter pretax
income of $1.31 billion, compared with $1.25 billion a year
ago.
Total revenues net of interest expense were $6.2 billion, up 27
percent from $4.9 billion a year ago. The increase was primarily
driven by increased Card Member spending.
Provisions for credit losses were $403 million, compared with a
benefit of $119 million a year ago. The change reflected a reserve
build of $203 million, compared with a $223 million reserve release
a year ago, as well as higher net write-offs in the current
quarter.
Total expenses were $4.5 billion, up 20 percent from $3.8
billion a year ago, primarily reflecting higher customer engagement
costs, which were driven by higher billed business and increased
usage of travel-related benefits. Operating expenses also
increased, primarily reflecting higher technology, servicing and
compensation costs.
Commercial Services reported third-quarter pretax income
of $774 million, compared with $699 million a year ago.
Total revenues net of interest expense were $3.5 billion, up 23
percent from $2.8 billion a year ago. The increase was primarily
driven by increased Card Member spending.
Provisions for credit losses were $196 million, compared with a
benefit of $67 million a year ago. The change reflected a reserve
build of $106 million, compared with a $94 million reserve release
a year ago, as well as higher net write-offs in the current
quarter.
Total expenses were $2.5 billion, up 14 percent from $2.2
billion a year ago, primarily reflecting higher customer engagement
costs, which were driven by higher network volumes.
International Card Services reported third-quarter pretax
income of $166 million, compared with $269 million a year ago.
Results for this segment were significantly impacted by the
strength of the U.S. dollar during the quarter.
Total revenues net of interest expense were $2.3 billion, up 19
percent (34 percent FX-adjusted) from $1.9 billion a year ago. The
increase was primarily driven by increased Card Member spending and
foreign exchange conversion fee revenue.
Provisions for credit losses were $176 million, compared with a
benefit of $6 million a year ago. The change reflected a reserve
build of $77 million, compared with a $69 million reserve release a
year ago, as well as higher net write-offs in the current
quarter.
Total expenses were $1.9 billion, up 17 percent from $1.6
billion a year ago, primarily reflecting higher customer engagement
costs, which were driven by higher network volumes and increased
usage of travel-related benefits. Operating expenses also
increased, primarily reflecting higher technology, servicing and
compensation costs.
Global Merchant and Network Services reported
third-quarter pretax income of $792 million, compared with $513
million a year ago.
Total revenues net of interest expense were $1.7 billion, up 26
percent from $1.3 billion a year ago, primarily reflecting an
increase in network volumes.
Total expenses were $870 million, up 8 percent from $809 million
a year ago, primarily reflecting higher network volumes in the
current quarter and a release of reserves in the prior year for
merchant exposure associated with Card Member travel-related
purchases earlier in the COVID-19 pandemic.
Corporate and Other reported a third-quarter pretax loss
of $582 million, compared with a pretax loss of $282 million a year
ago. The decline was primarily driven by a net loss on Amex
Ventures investments in the current quarter compared with a net
gain a year ago.
____________________ 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 for both
the three months ended September 30, 2022 and 2021, and $45 million
for both the nine months ended September 30, 2022 and 2021, (ii)
dividends on preferred shares of $14 million and $20 million for
the three months ended September 30, 2022 and 2021, respectively,
and $43 million and $49 million for the nine months ended September
30, 2022 and 2021, respectively, and (iii) an equity-related
adjustment of $9 million related to the redemption of preferred
shares for both the three months and nine months ended September
30, 2021.
As used in this release:
- Card Member spending (billed business) represents transaction
volumes, including cash advances, on payment products issued by
American Express.
- Customer engagement costs represent the aggregate of Card
Member rewards, business development, Card Member services, and
marketing 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, 2022 apply to the period against which such results
are being compared). FX-adjusted revenues and expenses constitute
non-GAAP measures. The company believes the presentation of
information on an FX-adjusted basis is helpful to investors by
making it easier to compare the company’s performance in one period
to that of another period without the variability caused by
fluctuations in currency exchange rates.
- Network volumes represent the total of billed business and
processed volumes.
- 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.
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 2022, 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,
including management’s outlook for 2022, expectations for 2023 and
aspirations for 2024 and beyond, among other matters, contain words
such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,”
“will,” “may,” “should,” “could,” “would,” “likely,” “continue” 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 achieve its 2022 earnings per common
share (EPS) outlook, grow earnings in the future and execute on its
growth plan, which will depend in part on revenue growth, credit
performance and the effective tax rate remaining consistent with
current expectations and the company’s ability to continue
investing at high levels in areas that can drive sustainable growth
(including its brand, value propositions, customers, colleagues,
technology and coverage), controlling operating expenses,
effectively managing risk and executing its share repurchase
program, any of which could be impacted by, among other things, the
factors identified in the subsequent paragraphs as well as the
following: macroeconomic conditions, such as recession risks,
effects of inflation, labor shortages, supply chain issues, higher
interest rates and energy costs and the continued effects of the
pandemic; the military conflict between Russia and Ukraine and
related geopolitical impacts; issues impacting brand perceptions
and the company’s reputation; the impact of any future
contingencies, including, but not limited to, restructurings,
investment gains or losses, impairments, changes in reserves, legal
costs and settlements, the imposition of fines or civil money
penalties and increases in Card Member remediation; impacts related
to new or renegotiated cobrand and other partner agreements; 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
Card Members, partners and merchants;
- the company’s ability to achieve its 2022 revenue growth
outlook, its revenue growth expectations for 2023 and its revenue
growth aspirations for 2024 and beyond, which could be impacted by,
among other things, the factors identified above and in the
subsequent paragraphs as well as the following: a deterioration in
macroeconomic conditions; consumer and business spending volumes,
including in T&E categories and by large and global corporate
clients, not growing in line with expectations; the strengthening
of the U.S. dollar beyond expectations; an inability to address
competitive pressures, invest with a longer-term view and implement
strategies and business initiatives, including within the premium
consumer space, commercial payments, the global merchant network
and digital environment; uncertainty regarding the continued spread
of COVID-19 (including new variants) and the availability,
distribution and use of effective treatments and vaccines;
prolonged measures to contain the spread of COVID-19 (including
travel restrictions), concern of the possible imposition of further
containment measures and health concerns associated with the
pandemic continuing to affect customer behaviors and travel
patterns and demand, any of which could further exacerbate the
effects on economic activity and travel-related revenues; and
merchant discount rates changing by a greater or lesser amount than
expected;
- net card fees not performing consistently with expectations,
which could be impacted by, among other things, a deterioration in
macroeconomic conditions impacting the ability and desire of Card
Members to pay card fees; higher Card Member attrition rates; the
pace of Card Member acquisition activity; and the company’s
inability to address competitive pressures, develop attractive
value propositions and implement its strategy of refreshing card
products and enhancing benefits and services;
- net interest income and the growth rate of loans outstanding
being higher or lower than expectations, which could be impacted
by, among other things, the behavior of Card Members and their
actual spending, borrowing and paydown patterns; the company’s
ability to effectively manage risk and enhance Card Member value
propositions; changes in benchmark interest rates; changes in
capital and credit market conditions and the availability and cost
of capital; credit actions, including line size and other
adjustments to credit availability; the yield on Card Member loans
not remaining consistent with current expectations; and the
effectiveness of the company’s strategies to capture a greater
share of existing Card Members’ spending and borrowings, and
attract new, and retain existing, customers;
- future credit performance, the level of future delinquency and
write-off rates and the amount and timing of future 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 ability and
willingness of Card Members to pay amounts owed to the company,
particularly as forbearance and government support programs end;
the enrollment in, and effectiveness of, financial relief programs
and the performance of accounts as they exit from such programs;
collections capabilities and recoveries of previously written-off
loans and receivables; 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;
- the actual amount the company spends on marketing in 2022 and
beyond, which will be based in part on continued changes in the
macroeconomic and competitive environment and business performance;
the effectiveness of management’s investment optimization process,
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
company’s ability to balance expense control and investments in the
business; and management’s ability to drive increases in revenues
and 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), the redemption of rewards
and offers (including travel redemptions) and usage of
travel-related benefits; the costs related to reward point
redemptions; higher-than-expected customer remediation expenses;
inflation; further enhancements to product benefits to make them
attractive to Card Members and prospective customers, potentially
in a manner that is not cost effective; new and renegotiated
contractual obligations with business partners; and the pace and
cost of the expansion of the company’s global lounge
collection;
- the company’s ability to control operating expenses and the
actual amount spent on operating expenses in 2022 and beyond, which
could be impacted by, among other things, salary and benefit
expenses to attract and retain talent, including with respect to an
increased colleague headcount; a persistent inflationary
environment; 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 and the willingness of
Card Members to self-service and address issues through digital
channels; the company’s ability to increase automation more
generally and leverage and grow its scale; restructuring activity;
supply chain issues; 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; information or cyber security incidents; the payment of
civil money penalties, disgorgement, restitution, non-income tax
assessments and litigation-related settlements; the performance of
Amex Ventures investments; impairments of goodwill or other assets;
and the impact of changes in foreign currency exchange rates on
costs;
- 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 affecting the company’s plans regarding the return of
capital to shareholders, 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; results of operations and financial condition;
credit ratings and rating agency considerations; and the economic
environment and market conditions in any given period;
- 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 desirability of the company’s premium
card products, competition for new and existing cobrand
relationships, competition from new and non-traditional competitors
and the success of marketing, promotion and rewards programs;
- 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 the company’s 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; 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 a further
escalation of the military conflict between Russia and Ukraine,
future waves of COVID-19 cases, the severity and contagiousness of
new variants, 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, 2021, Quarterly Reports on Form
10-Q for the quarters ended March 31 and June 30, 2022 and the
company’s other reports filed with the Securities and Exchange
Commission.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221021005021/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: Kerri S. Bernstein,
Kerri.S.Bernstein@aexp.com, +1.212.640.5574 Michelle A. Scianni,
Michelle.A.Scianni@aexp.com, +1.212.640.5574
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