Strong 2019 Revenue
Growth Reflects Higher Card Fee Income, Card Member Spending and
Net Interest Income
American Express Company (NYSE:AXP)
today reported fourth-quarter net income of $1.7 billion, or $2.03
per share, compared with net income of $2.0 billion, or $2.32 per
share, a year ago. The year-ago period included $496 million, or
$0.58 per share, of certain discrete tax benefits.
(Millions, except percentages and
per share amounts)
Quarters Ended
December 31,
Percentage Inc/(Dec)
Years Ended
December 31,
Percentage Inc/(Dec)
2019
2018
2019
2018
Total Revenues Net of Interest Expense
$
11,365
$
10,474
9
$
43,556
$
40,338
8
Net Income
$
1,693
$
2,010
(16)
$
6,759
$
6,921
(2)
Diluted Earnings Per Common Share2
$
2.03
$
2.32
(13)
$
7.99
$
7.91
1
Adjusted Diluted Earnings Per Common
Share1
$
2.03
$
1.74
17
$
8.20
$
7.33
12
Average Diluted Common Shares
Outstanding
816
852
(4)
830
859
(3)
Fourth-quarter consolidated total revenues net of interest
expense were $11.4 billion, up 9 percent from $10.5 billion a year
ago. This growth continued to be driven by a well-balanced mix of
growth in fee, spend and lend revenues, consistent with the high
levels of revenue growth the company has delivered for over two
years.
Consolidated provisions for losses were $1 billion, up 7 percent
from $954 million a year ago.
Consolidated expenses were $8.4 billion, up 9 percent from $7.7
billion a year ago. The rise reflected growth in rewards and other
customer engagement costs, driven primarily by increased Card
Member spending and higher usage of card benefits, as well as
higher operating expenses.3
The consolidated effective tax rate was 14.8 percent, up from
(9.8) percent a year ago. The year-ago period reflected the $496
million tax benefit mentioned above, which resulted from changes in
the tax method of accounting for certain expenses; the resolution
of certain prior years’ tax audits; and an adjustment to the
company’s provisional tax charge related to the Tax Cuts and Jobs
Act.
The current quarter included income tax and other tax-related
benefits that the company employed to fund incremental business
growth initiatives and to improve operating efficiencies.
For the full year, the company reported net income of $6.8
billion, compared with net income of $6.9 billion a year ago.
Earnings per share was $7.99, compared with $7.91 a year ago.
Adjusted earnings per share was $8.20 (excluding the impact of a
litigation-related charge in the first quarter of 2019), compared
with $7.33 a year ago (excluding certain discrete tax benefits in
the fourth quarter of 2018).1
Revenues net of interest expense for the full year were $43.6
billion, up 8 percent (9 percent FX-adjusted4) from $40.3 billion a
year ago.
Consolidated expenses for the full year were $31.6 billion, up 9
percent from $28.9 billion a year ago.
“We once again delivered steady, consistent performance in the
fourth quarter, marking our 10th straight quarter of FX-adjusted
revenue growth at or above 8 percent,” said Stephen J. Squeri,
Chairman and Chief Executive Officer. “These results demonstrate
the success of our strategy to generate sustainable, profitable
growth across the enterprise over the long term.
“During 2019, we added 11.5 million new proprietary cards and
continued to deliver solid billings growth. Almost 70 percent of
our new Card Members are choosing our fee-based products, helping
to drive card fee revenue growth of 17 percent. And, we delivered
solid loan growth while maintaining industry-leading credit
metrics.
“I am also pleased to report that we achieved our goal of
virtual parity merchant coverage in the United States as of
year-end 2019. We set this ambitious goal in 2016 recognizing the
integral role of our merchant network in driving our growth, and we
remain committed to continuing to increase our coverage
globally.
“Across our businesses, we continued to make investments to
increase our share, scale and relevance. In the premium consumer
space, we refreshed a number of our card products and cobrand
portfolios globally, and we applied our successful product strategy
to our business card portfolio with the launch of several small
business Platinum cards and a new Corporate Card program for large
enterprises. In total, we have launched or refreshed over 50
proprietary products globally across our commercial and consumer
businesses in the past two years, resulting in greater engagement
and strong new card acquisitions.
“On the digital front, we are focused on integrating the new
capabilities we recently acquired, and we’re seeing increased
customer engagement across our digital channels. In fact, 81
percent of our active Card Members are digitally engaged with us
either on our app or website.5
“For 2020, we expect revenue growth in the range of 8 to 10
percent on an FX-adjusted basis and earnings of $8.85 - $9.25 per
share. Our consistent performance, along with our continued
investments in product innovation and growth opportunities, gives
us confidence that we have a long runway for steady growth over the
long term.”
Global Consumer Services Group reported fourth-quarter
net income of $846 million, up 21 percent from $702 million a year
ago.
Total revenues net of interest expense were $6.2 billion, up 10
percent from $5.6 billion a year ago. The rise primarily reflected
higher net interest income, Card Member spending and card fees.
Provisions for losses totaled $781 million, up 8 percent from
$726 million a year ago.
Total expenses were $4.4 billion, up 6 percent from $4.2 billion
a year ago. The increase reflected growth in rewards and other
customer engagement costs, driven primarily by higher Card Member
spending and higher usage of card benefits.
The effective tax rate was 13.7 percent, up from 3.4 percent a
year ago.
Global Commercial Services reported fourth-quarter net
income of $617 million, down 1 percent from $624 million a year
ago.
Total revenues net of interest expense were $3.5 billion, up 7
percent from $3.3 billion a year ago. The increase primarily
reflected higher Card Member spending, net interest income and card
fees.
Provisions for losses totaled $235 million, up 5 percent from
$223 million a year ago.
Total expenses were $2.6 billion, up 9 percent from $2.4 billion
a year ago. The rise reflected growth in rewards and other customer
engagement costs, including client incentives, driven by increased
Card Member spending, as well as higher operating expenses.
The effective tax rate was 14.8 percent, up from 10.6 percent a
year ago.
Global Merchant and Network Services reported
fourth-quarter net income of $549 million, up 10 percent from $501
million a year ago.
Total revenues net of interest expense were $1.7 billion, up 3
percent from $1.6 billion a year ago. The rise primarily reflected
increased Card Member spending.
Total expenses were $1 billion, up 2 percent from $995 million a
year ago.
The effective tax rate was 17.1 percent, down from 20 percent a
year ago.
Corporate and Other reported fourth-quarter net loss of
$319 million, compared with net income of $183 million a year ago.
The year-ago period included a portion of the above-mentioned
discrete tax items.
_________________________________
1 Adjusted diluted earnings per common
share, a non-GAAP measure, excludes the impacts of a
litigation-related charge in Q1’19 and certain discrete tax
benefits in Q4’18. See Appendix I for a reconciliation to EPS on a
GAAP basis. Management believes adjusted EPS is useful in
evaluating the ongoing operating performance of the company.
2 Diluted earnings per common share (EPS)
was reduced by the impact of (i) earnings allocated to
participating share awards and other items of $12 million and $16
million for the three months ended December 31, 2019 and 2018,
respectively, and $47 million and $54 million for the years ended
December 31, 2019 and 2018, respectively, and (ii) dividends on
preferred shares of $20 million and $19 million for the three
months ended December 31, 2019 and 2018, respectively, and $81
million and $80 million for the years ended December 31, 2019 and
2018, respectively.
3 Operating expenses represent salaries
and employee benefits, professional services, occupancy and
equipment, and other expenses.
4 As reported in this release, FX-adjusted
information assumes a constant exchange rate between the periods
being compared for purposes of currency translations into U.S.
dollars (e.g., assumes the foreign exchange rates used to determine
results for the year ended December 31, 2019 apply to the period(s)
against which such results are being compared). Management 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.
FX-adjusted revenues constitute non-GAAP measures.
5 Digital Engagement represents Card
Member accounts with spend greater than $0 and at least one
American Express website or mobile app visit vs. all Card Member
accounts with spend greater than $0, for full year 2019.
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: charge and credit cards, business credit cards, travel
services, gift cards, prepaid cards, merchant services, Accertify,
InAuth, corporate card, business travel, and corporate
responsibility.
This earnings release should be read in conjunction with the
company’s statistical tables for the fourth quarter 2019, available
on the American Express 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 fourth-quarter and full-year earnings 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 2020, among other matters,
contain words such as “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 achieve its 2020 earnings per common
share (EPS) outlook and grow earnings in the future, which will
depend in part on revenue growth, credit performance and the
effective tax rate remaining consistent with current expectations,
the company’s ability to control operating expense growth and
generate operating leverage, and the company’s ability to continue
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: issues impacting
brand perceptions and the company’s reputation; 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; the amount and efficacy of investments in
share, scale and relevance; changes in interest rates beyond
current expectations; a greater impact from new or renegotiated
cobrand and other partner agreements than expected, which could be
affected by spending volumes and customer acquisition; 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;
- the ability of the company to achieve its 2020 FX-adjusted
revenue growth outlook and the composition and relative growth of
fee, spend and lend revenues remaining consistent with
expectations, which could be impacted by, among other things,
weakening economic conditions in the United States or
internationally; a decline in consumer confidence impacting the
willingness and ability of Card Members to sustain and grow
spending, pay higher card fees and revolve balances; a slowdown in
corporate spending; growth in Card Member loans and the yield on
Card Member loans not remaining consistent with current
expectations; the average discount rate changing by a greater
amount than expected; Card Members continuing to be attracted to
the company’s premium card products; and the company’s inability to
address competitive pressures and implement its strategies and
business initiatives, including within the premium consumer
segment, commercial payments, the global network and digital
environment;
- changes in the substantial and increasing worldwide competition
in the payments industry, including competitive pressure that may
impact the prices charged to merchants that accept American Express
cards, competition for new and existing cobrand relationships,
competition from new and non-traditional competitors and the
success of marketing, promotion and rewards programs;
- net interest income not growing consistent with current
expectations in 2020, which will be influenced by, among other
things, changes in benchmark interest rates and the company’s cost
of funds, changes in consumer behavior that affect loan balances
(such as paydown rates) and the company’s ability to continue to
grow loans, the company’s Card Member acquisition strategy, pricing
changes, product mix and credit actions, including line size and
other adjustments to credit availability;
- the company’s write-off rates being higher or lower than
current expectations in 2020, which will depend in part on changes
in the level of loan and receivable balances and delinquencies,
macroeconomic factors such as unemployment rates and the volume of
bankruptcies, the mix of balances and the credit performance of
newer vintages and non-card lending products;
- the company’s ability to continue to grow loans in 2020, which
may be affected by increasing competition, brand perceptions and
reputation, the company’s ability to manage risk, the behavior of
Card Members and their actual spending and borrowing patterns, and
the company’s ability to issue new and enhanced card products,
offer attractive non-card lending products, capture a greater share
of existing Card Members’ spending and borrowings, reduce Card
Member attrition and attract new customers;
- the growth of provisions for losses being higher or lower than
current expectations in 2020, which will depend in part on changes
in the level of loan and receivable balances and delinquency and
write-off rates; the impact of new accounting guidance and the
Current Expected Credit Loss (CECL) methodology; collections
capabilities and recoveries of previously written-off loans and
receivables; and macroeconomic factors like unemployment rates and
the volume of bankruptcies;
- the actual amount to be spent on customer engagement in 2020,
which will be based in part on management’s assessment of
competitive opportunities; overall business performance and changes
in macroeconomic conditions; the growth in cost of Card Member
services, which could be impacted by, among other things, the
factors identified in the subsequent paragraph; 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; the costs related to reward point redemptions,
advertising and Card Member acquisition; the company’s ability to
continue to shift Card Member acquisition to digital channels; and
new and renegotiated contractual obligations with business
partners;
- cost of Card Member services not growing consistently with
current expectations in 2020, which could be impacted by the degree
of interest of Card Members in the value proposition offered by the
company; increasing competition, which could result in additional
benefits and services; the company’s ability to enhance card
products and services to make them attractive to Card Members in a
cost-effective manner; and the pace and cost of the expansion of
the company’s global lounge collection;
- the company’s ability to control operating expense growth and
grow operating expenses more slowly than revenues in 2020, which
could be impacted by increases in costs, such as cyber, fraud or
compliance expenses or consulting, legal and other professional
fees, including as a result of increased litigation or internal and
regulatory reviews; higher than expected employee levels; an
inability to innovate efficient channels of customer interactions,
such as chat supported by artificial intelligence, or customer
acquisition; the impact of changes in foreign currency exchange
rates on costs; the payment of civil money penalties, disgorgement,
restitution, non-income tax assessments and litigation-related
settlements; impairments of goodwill or other assets; management’s
decision to increase or decrease spending in such areas as
technology, business and product development, sales force, premium
servicing and digital capabilities; and the level of M&A
activity and related expenses;
- the company’s 2020 tax rate not remaining consistent with
current expectations, which could be impacted by, among other
things, the company’s geographic mix of income, further changes in
tax laws and regulation, unfavorable tax audits and other
unanticipated tax items;
- changes affecting the company’s plans regarding the return of
capital to shareholders through dividends and share repurchases,
which will depend on factors such as capital levels and regulatory
capital ratios and the actual impact of CECL on those ratios;
changes in the stress testing and capital planning process and
approval of the company’s capital plans; the amount of capital
required to support asset growth; the amount the company spends on
acquisitions of companies; the company’s results of operations and
financial condition; and the economic environment and market
conditions in any given period;
- the impacts of CECL not remaining consistent with current
expectations, which could be affected by factors such as portfolio
growth and mix across customer segments, as well as changes to
customer behavior and macro forecast variables;
- the possibility that the company will not execute on its plans
to continue expanding merchant coverage, which will depend in part
on the success of the company, OptBlue merchant acquirers and GNS
partners in signing merchants to accept American Express, which
could be impacted by the value propositions offered by the company
to merchants and merchant acquirers for card acceptance, as well as
the awareness and willingness of Card Members to use American
Express cards at merchants and of those merchants who agree to
accept American Express cards to do so;
- the ability of the company to grow GNS and international SME
billings, which could be impacted by the success of GNS partners in
acquiring Card Members and/or merchants; political or economic
instability; the company’s ability to tailor products and services
to make them attractive to local customers; competitors with more
scale and experience and more established relationships with
relevant customers, regulators and industry participants; and the
willingness and ability of small and mid-sized companies to use
credit and charge cards for procurement and other business
expenditures;
- 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 require the
company to make fundamental changes to many of its business
practices, including its ability to continue certain cobrand and
agent relationships in their current form in the EU; exert further
pressure on the average discount rate and GNS volumes; 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 repurchase stock; or result in harm to
the American Express brand; and
- factors beyond the company’s control such as changes in global
economic and business conditions, consumer and business spending
generally, the availability and cost of capital, unemployment
rates, geopolitical conditions, Brexit, trade policies, foreign
currency rates and interest rates, as well as fire, power loss,
disruptions in telecommunications, severe weather conditions,
natural and man-made disasters, health pandemics or terrorism, 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 its
results of operations or disrupt the company’s 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, 2018, the company’s Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 2019 and the company’s other reports filed with the
Securities and Exchange Commission.
American Express Company
(Preliminary)
Appendix I
Reconciliations of Adjustments
Q4'19
Q4'18
YOY % Change
YTD'19
YTD'18
YOY % Change
Diluted earnings per common
share
$
2.03
$
2.32
(13)
$
7.99
$
7.91
1
Q4'18 discrete tax impacts (1)
-
(0.58)
-
(0.58)
Q1'19 litigation-related charge
(pre-tax)
-
-
0.27
-
Q1’19 tax impact of litigation-related
charge
-
-
(0.06)
-
Total impact of adjustments
-
(0.58)
0.21
(0.58)
Adjusted diluted earnings per common
share
$
2.03
$
1.74
17
$
8.20
$
7.33
12
(1) Q4’18 discrete tax benefits reflect
changes in the tax method of accounting for certain expenses, the
resolution of certain prior years’ tax items and an adjustment to
the company’s 2017 provisional tax charge related to the Tax Cuts
and Jobs Act.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200124005039/en/
Media: Marina H. Norville, marina.h.norville@aexp.com,
+1.212.640.2832 Andrew R. Johnson, andrew.r.johnson@aexp.com,
+1.212.640.8610
Investors/Analysts: Rosie C. Perez,
rosario.c.perez@aexp.com, +1.212.640.5574 Melanie L. Michel,
melanie.l.michel@aexp.com, +1.212.640.5574
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