American Express Company has reported first-quarter net income of $885
million, up 103 percent from $437 million a year ago. Diluted per-share
net income was $0.73, up 135 percent from $0.31.
Consolidated revenues net of interest expense were $6.6 billion, up 11
percent, compared to $5.9 billion in the year-ago period. The increase
was the result of the consolidation of securitized cardmember loans and
related debt onto the balance sheet in the first quarter3. Revenues also
reflect higher cardmember spending, offset by a smaller loan portfolio
and lower yields on both the securitized and non-securitized portions of
the portfolio.
Consolidated provisions for losses totaled $943 million, down 48 percent
compared to $1.8 billion in the year-ago period. The decline reflected
continued improvement in credit quality on the overall portfolio3.
Consolidated expenses totaled $4.4 billion, up from $3.6 billion a year
ago, reflecting higher investment in business building initiatives and
higher rewards costs.
The company’s return on average equity (ROE) was 18.0 percent, up from
16.3 percent a year ago.
During the first quarter, non-U.S. revenue, provision and expenses
comparisons were higher due to the translation effects of a
comparatively weaker U.S. dollar.
âCardmember spending was up 16 percent, rebounding strongly from the
recessionary lows of last year,â said Kenneth I. Chenault, chairman and
chief executive officer. âCredit metrics also continued the improvement
that began in the second half of 2009.â
âThe biggest turnarounds in spending came from corporate cardmembers and
banks who issue cards on our network. Consumer and small business
volumes also rose in part because of strength in travel, entertainment
and other discretionary categories.
âThroughout the industry â and at American Express â we saw further
signs that consumers are managing their post-recessionary finances more
cautiously.
âOur ability to generate strong volumes comes at a time when cardmembers
are paying down their outstanding debt. This compares favorably to the
major issuers who traditionally have had to rely on lending-oriented
customers to generate billed business. At a time when so many consumers
are focused on value, our relative strength also reflects the importance
of pay-in-full charge cards and the appeal of our rewards, customer
service and benefit programs.
âTo help build on our momentum, we increased marketing and promotion
investments back to the pre-recessionary levels. We also made other
substantial investments to further strengthen our competitive position
as we come out of the recession.
âBeyond those specific investments, we are carefully containing
operating expenses not directly tied to growth initiatives.
âDespite the progress we made this quarter, high unemployment levels and
the uncertain legislative environment remain challenges to continued growth.
âHowever, the global economy seems to be poised for continued
improvement and our strong competitive position is yielding high quality
comparative results.â
Segment Results
U.S. Card Services reported first-quarter net income of $428 million
compared with a loss of $7 million a year ago.
Total revenues net of interest expense increased 14 percent to $3.5
billion, from $3.1 billion. The increase was the result of the
consolidation of securitized cardmember loans and related debt onto the
balance sheet in the first quarter3. Revenues also reflect higher
cardmember spending, offset by a smaller loan portfolio and lower yields
on both the securitized and non-securitized portions of the portfolio.
Provisions for losses totaled $687 million, down 50 percent from $1.4
billion in the year-ago period. The decline reflected continued
improvement in credit quality on the overall portfolio3.
Total expenses increased 25 percent. Marketing, promotion, rewards and
cardmember services expenses increased 46 percent from the year-ago
period, driven by higher rewards costs and increased investment spending
on marketing initiatives. Salaries and employee benefits and other
operating expenses increased 2 percent from the year-ago quarter.
International Card Services reported first-quarter net income of $151
million, up from $52 million a year ago.
Total revenues net of interest expense increased 9 percent to $1.1
billion, driven by increased cardmember spending.
Provisions for losses totaled $158 million, down 53 percent from $335
million a year ago, reflecting improved credit performance.
Total expenses increased 17 percent. Marketing, promotion, rewards and
cardmember services expenses increased 36 percent from year-ago levels,
driven by higher rewards costs and increased marketing investments.
Salaries and employee benefits and other operating expenses increased 6
percent from the year-ago quarter.
Global Commercial Services reported first-quarter net income of $92
million, up from $81 million a year ago.
Total revenues net of interest expense increased 9 percent to $1.0
billion, reflecting increased spending by corporate cardmembers and
higher travel commissions and fees.
Provisions for losses totaled $78 million, up 66 percent from $47
million a year ago, reflecting higher volumes and an enhancement to the
reserve methodology.
Total expenses increased 5 percent. Marketing, promotion, rewards and
cardmember services expenses increased 43 percent from the year-ago
period, reflecting higher rewards costs and increased marketing
investments. Salaries and employee benefits and other operating expenses
increased 1 percent from the year-ago quarter.
Global Network& Merchant Services reported first-quarter net income of
$267 million, up from $250 million a year ago.
Total revenues net of interest expense increased 16 percent to $997
million, reflecting higher merchant-related revenues from the rise in
global card billed business, as well as an increase in revenues from
Global Network Servicesâ bank partners.
Total expenses increased 29 percent. Marketing and promotion expenses
increased 159 percent from year-ago levels, driven by increased brand
and merchant-related marketing investments. Salaries and employee
benefits and other operating expenses increased 6 percent from the
year-ago period.
Corporate and Other reported a first-quarter net expense of $53 million,
compared with a net income of $67 million last year, reflecting higher
operating and liquidity expenses. The results for both periods reflected
income of $220 million ($136 million after-tax) for the previously
announced MasterCard and Visa settlements.
American Express is a global services company, providing customers with
access to products, insights and experiences that enrich lives and build
business success. Learn more at www.americanexpress.com and connect with
us on www.facebook.com/americanexpress, www.twitter.com/americanexpress
and www.youtube.com/americanexpress.
* * *
The 2010 First Quarter Earnings Supplement will be available today on
the American Express web site at http://ir.americanexpress.com. An
investor conference call will be held at 5:00 p.m. (ET) today to discuss
first-quarter earnings results. Live audio and presentation slides for
the investor conference call will be available to the general public at
the same web site. A replay of the conference call will be available
later today at the same web site address.
3 Upon the adoption of new accounting standards governing the accounting
for transfers of financial assets and consolidation of variable interest
entities on January 1, 2010, the company began consolidating the assets
and liabilities of its previously unconsolidated American Express Credit
Account Master Trust (Lending Trust). Among the changes arising from the
consolidation of the Lending Trust, expenses related to written-off
securitized cardmember loans moved from revenues net of interest expense
into provisions for losses.
