American Express Company (NYSE: AXP) today reported
second-quarter net income of $257 million, or $0.29 per share,
compared with net income of $1.8 billion, or $2.07 per share, a
year ago.
(Millions, except percentages and
per share amounts)
Quarters Ended
June 30,
Percentage Inc/(Dec)
Six Months Ended June
30,
Percentage Inc/(Dec)
2020
2019
2020
2019
Total Revenues Net of Interest Expense
$ 7,675
$ 10,838
(29)
$ 17,985
$21,202
(15)
Net Income
$ 257
$ 1,761
(85)
$ 624
$3,311
(81)
Diluted Earnings Per Common Share1
$ 0.29
$ 2.07
(86)
$ 0.71
$3.87
(82)
Average Diluted Common Shares
Outstanding
805
836
(4)
807
839
(4)
Second-quarter results continued to be significantly affected by
the impacts of COVID-19.
“While our second quarter results reflect the challenges of the
current environment, we remain confident that our strategy for
navigating this period of uncertainty is the right one,” said
Stephen J. Squeri, Chairman and Chief Executive Officer. “Our
customers continue to be engaged with our products and services; we
have a productive and dedicated workforce; our capital and
liquidity levels remain strong; and we continue to focus on those
areas most critical to our long-term growth.
“Spending volumes, which declined to their lowest point this
quarter in April, gradually improved in May and June, with small
businesses being the most resilient.
“We feel good about our efforts to support our customers as they
navigate unexpected financial challenges during these unprecedented
times. And, we remain confident in our ability to effectively
manage credit risk to achieve the best outcomes for both our
customers and our shareholders.
“In mid-March, we transitioned most of our colleagues to remote
working arrangements. Our frontline colleagues have continued to
maintain historically strong customer satisfaction levels
throughout the period.
“For customers, we enhanced our value propositions on many of
our card products, including adjusting our rewards programs and
adding limited time offers and statement credits in categories that
are relevant for today, such as wireless, streaming services,
business essentials and food delivery. Early results from these
enhancements have been encouraging. We haven’t seen an increase in
total customer attrition levels from prior years. In addition, we
recently launched our largest-ever Shop Small campaign, and have
committed more than $200 million over the next three months to help
jumpstart spending at small merchants in over a dozen countries
globally.
“As we adjust our business to today’s realities, we are also
continuing to invest in areas that are key to our long-term growth.
For consumers, we are developing additional product enhancements to
meet their changing needs. We extended our digital solutions for
our commercial customers with the recent launch of American Express
One AP, our first proprietary accounts payable automation offering.
For our merchant partners, we raised our contactless transaction
thresholds in 60 countries around the world, and we were pleased to
become the first foreign payments network to be licensed to clear
local currency transactions in mainland China.
“Finally, our already strong capital and liquidity positions
improved in the quarter, and we continued to return capital to our
shareholders through dividends.
“All in all, while we can’t predict the future, I remain
confident that the way we are managing the company will enable us
to emerge from the current crisis in a position of strength.
Looking ahead, we will continue to focus on what we can control –
backing our customers, colleagues and communities, while managing
our expenses prudently, and making strategic investments to drive
our growth over the long term.”
Second-quarter consolidated total revenues net of interest
expense were $7.7 billion, down 29 percent from $10.8 billion a
year ago. The quarter primarily reflected a decline in Card Member
spending and a lower average discount rate compared to the prior
year.
Consolidated provisions for losses were $1.6 billion, up from
$861 million a year ago. The increase was primarily driven by a
reserve build of $628 million.2 The reserve build primarily
reflected the deterioration of the global macroeconomic
outlook.
Consolidated expenses were $5.5 billion, down 29 percent from
$7.8 billion a year ago. The decrease primarily reflected
significantly lower customer engagement costs due to the decline in
Card Member spending, as well as lower usage of travel-related Card
Member benefits.
The consolidated effective tax rate was 58.7 percent, up from
20.6 percent a year ago. The increase reflected the impact of
discrete tax items, primarily related to the realizability of
certain foreign deferred tax assets, resulting from cumulative
losses in certain non-U.S. legal entities that were exacerbated by
the impact of COVID-19, and lower overall pretax income.
Global Consumer Services Group reported second-quarter
net income of $527 million, compared with $881 million a year
ago.
Total revenues net of interest expense were $4.6 billion, down
23 percent from $6.0 billion a year ago. The decrease primarily
reflected a decline in Card Member spending and a lower average
discount rate compared to the prior year.
Provisions for losses totaled $886 million, up from $651 million
a year ago. The increase was driven primarily by a reserve
build.
Total expenses were $2.9 billion, down 32 percent from $4.3
billion a year ago. The decrease primarily reflected significantly
lower customer engagement costs due to a decline in Card Member
spending, as well as lower usage of travel-related Card Member
benefits.
Global Commercial Services reported a second-quarter net
loss of ($60) million, compared with net income of $561 million a
year ago.
Total revenues net of interest expense were $2.3 billion, down
from $3.3 billion a year ago, primarily reflecting a decline in
Card Member spending and a lower average discount rate compared to
the prior year.
Provisions for losses totaled $645 million, up from $206 million
a year ago, driven primarily by a reserve build.
Total expenses were $1.6 billion, down 30 percent from $2.4
billion a year ago. The decrease primarily reflected significantly
lower customer engagement costs due to a decline in Card Member
spending.
Global Merchant and Network Services reported
second-quarter net income of $66 million, compared with $564
million a year ago.
Total revenues net of interest expense were $929 million, down
41 percent from $1.6 billion a year ago. The decrease primarily
reflected a decline in Card Member spending and a lower average
discount rate compared to the prior year.
Total expenses were $701 million, down 14 percent from $812
million a year ago, driven by lower network partner payments due to
a decline in Card Member spending.
Corporate and Other reported a second-quarter net loss of
($276) million, compared with a net loss of ($245) million 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 $2
million and $13 million for the three months ended June 30, 2020
and 2019, respectively, and $4 million and $24 million for the six
months ended June 30, 2020 and 2019, respectively, and (ii)
dividends on preferred shares of $17 million and $19 million for
the three months ended June 30, 2020 and 2019, respectively, and
$49 million and $40 million for the six months ended June 30, 2020
and 2019, respectively. 2 Reserve build represents 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. The reserve
build for a period is the amount by which the provisions for credit
losses exceeds 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: 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 second quarter 2020, 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 second-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, among
other matters, contain words such as “believe,” “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:
- a further deterioration in global economic and business
conditions and consumer and business spending generally; an
inability or unwillingness of Card Members to pay amounts owed to
the company; uncertain impacts of, or additional changes in,
monetary, fiscal or tax policy to address the impact of COVID-19,
including the end of programs and funding designed to support the
economy; prolonged measures to contain the spread of COVID-19 or
premature easing of such containment measures, both of which could
further exacerbate the effects on the company’s business activities
and results of operations, Card Members, partners and merchants; an
inability of the company to manage risk in an uncertain and
fast-changing environment; further market volatility, changes in
capital and credit market conditions and the availability and cost
of capital; issues impacting brand perceptions and the company’s
reputation; changes in foreign currency rates and benchmark
interest rates; an inability of business partners to meet their
obligations to the company and the company’s customers due to
slowdowns or disruptions in their businesses, bankruptcy or
liquidation, or otherwise; and pricing changes, product mix and
credit actions, including line size and other adjustments to credit
availability;
- future credit performance, which will depend in part on changes
in consumer behavior that affect loan and receivable balances (such
as paydown rates) and delinquency and write-off rates;
macroeconomic factors such as unemployment rates, GDP and the
volume of bankruptcies; collections capabilities and recoveries of
previously written-off loans and receivables; the enrollment in,
and effectiveness of, hardship programs and troubled debt
restructurings; 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 amount of loans and receivables outstanding being higher or
lower than current expectations, which will depend on the behavior
of Card Members and their actual spending and borrowing patterns,
the company’s ability to manage risk, competition, and the
company’s ability to enhance the Card Member value
proposition;
- the actual amount to be spent on marketing, which will be based
in part on continued changes in macroeconomic conditions and
business performance; management’s assessment of competitive
opportunities and the receptivity of Card Members and prospective
customers to advertising initiatives; and management’s ability to
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 Card Members’ interest in the value propositions
offered by the company; further enhancements to product benefits to
make them attractive to Card Members, potentially in a manner that
is not cost effective; 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; and new and renegotiated
contractual obligations with business partners;
- the ability of the company to reduce its operating expenses,
which could be impacted by, among other things, the company’s
inability to balance expense control and investments in the
business; 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; an inability to innovate efficient
channels of customer interactions, such as chat supported by
artificial intelligence; higher-than-expected cyber, fraud or
compliance expenses or consulting, legal and other professional
fees, including as a result of increased litigation or internal and
regulatory reviews; the level of M&A activity and related
expenses; the payment of civil money penalties, disgorgement,
restitution, non-income tax assessments and litigation-related
settlements; impairments of goodwill or other assets; the impact of
changes in foreign currency exchange rates on costs; and greater
than expected inflation;
- net card fees not growing consistent with current expectations,
which could be impacted by, among other things, the further
deterioration in macroeconomic conditions impacting the ability and
desire of Card Members to pay card fees; higher attrition rates;
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 introducing new benefits and services that are designed
for the current environment;
- a further decline of the average discount rate, including as a
result of further changes in the mix of spending by location and
industry, merchant negotiations (including merchant incentives,
concessions and volume-related pricing discounts), competition,
pricing regulation (including regulation of competitors’
interchange rates) and other factors;
- 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, competition for new and existing cobrand
relationships, competition from new and non-traditional competitors
and the success of marketing, promotion and rewards programs;
- changes affecting the company’s plans regarding the return of
capital to shareholders, including its intention to maintain its
current quarterly common share dividend for the third quarter of
2020, subject to approval by the company’s Board of Directors,
which will depend on factors such as capital levels and regulatory
capital ratios; changes in the stress testing and capital planning
process and approval of the company’s capital plans by the Federal
Reserve; the company’s results of operations and financial
condition; the company’s credit ratings and rating agency
considerations; and the economic environment and market conditions
in any given period;
- 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 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, merchants and other third parties,
including its ability to continue certain cobrand and agent
relationships 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
result in harm to the American Express brand;
- changes in the financial condition and creditworthiness of the
company’s business partners, such as bankruptcies, restructurings
or consolidations, including cobrand partners and merchants that
represent a significant portion of the company’s business, such as
the airline industry, or partners in GNS or financial institutions
that the company relies on for routine funding and liquidity, which
could materially affect the company’s financial condition or
results of operations; and
- factors beyond the company’s control such as outbreaks and
future waves of COVID-19 cases, severe weather conditions, natural
and man-made disasters, power loss, disruptions in
telecommunications, 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 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, 2019, the Quarterly Report on Form
10-Q for the quarter ended March 31, 2020 and the company’s other
reports filed with the Securities and Exchange Commission.
Location: Global
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200724005031/en/
Media Contacts: 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 Contacts: Vivian Y. Zhou,
Vivian.Y.Zhou@aexp.com, +1.212.640.5574 Melanie L. Michel,
Melanie.L.Michel@aexp.com, +1.212.640.5574
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