TIDMAMX 
 
 

American Express Company (NYSE: AXP) today reported third-quarter net income of $1.1 billion, up 71 percent from $640 million a year ago. Diluted per share net income was $0.90, up 70 percent from $0.53 a year ago.

 
(Millions, 
except 
per 
share 
amounts) 
                 Quarters Ended         Percentage   Nine Months Ended         Percentage 
                 September 30,          Inc/(Dec)    September 30,             Inc/(Dec) 
                 2010        2009                    2010         2009 
Total            $ 7,033     $ 6,016    17 %         $ 20,497     $ 18,034     14 % 
Revenues 
Net of 
Interest 
Expense1 
Income           $ 1,093     $ 642      70           $ 2,995      $ 1,427      # 
From 
Continuing 
Operations 
Loss             $ -         $ (2    )  -            $ -          $ (13    )   - 
From 
Discontinued 
Operations 
Net              $ 1,093     $ 640      71           $ 2,995      $ 1,414      # 
Income 
Earnings 
Per 
Common 
Share 
- 
Diluted: 
Income           $ 0.90      $ 0.54     67           $ 2.47       $ 0.95       # 
From 
Continuing 
Operations 
Attributable 
to 
Common 
Shareholders2 
Loss             $ -         $ (0.01 )  -            $ -          $ (0.01  )   - 
From 
Discontinued 
Operations 
Net              $ 0.90      $ 0.53     70           $ 2.47       $ 0.94       # 
Income 
Attributable 
to 
Common 
Shareholders2 
Average            1,199       1,181    2  %           1,195        1,166      2  % 
Diluted 
Common 
Shares 
Outstanding 
Return             25.9  %     11.7  %                 25.9   %     11.7   % 
on 
Average 
Equity 
Return             25.6  %     10.4  %                 25.6   %     10.4   % 
on 
Average 
Common 
Equity 
# 
Denotes 
a 
variance 
of more 
than 
100% 
 
 

Consolidated total revenues net of interest expense were $7.0 billion, up 17 percent from $6.0 billion a year ago. The increase reflects the consolidation of securitized cardmember loans and related debt onto the balance sheet in the first quarter3. Revenues also reflect higher cardmember spending and higher travel commissions and fees, offset by lower interest income due to a smaller loan portfolio and lower yields on both the securitized and non-securitized portions of the portfolio.

 

Consolidated provisions for losses totaled $373 million compared to $1.2 billion in the year-ago period, reflecting continued improvement in credit quality for the charge and credit card portfolios3.

 

Consolidated expenses totaled $5.0 billion, up 28 percent from $3.9 billion a year ago, reflecting higher investment in business building initiatives and higher rewards costs.

 

The company's return on average equity (ROE) was 25.9 percent, up from 11.7 percent a year ago.

 

"Cardmember spending rose a strong 14 percent with the largest increases coming from businesses where we've been making significant investments: charge and premium co-brand products, corporate cards and cards issued by our bank partners," said Kenneth I. Chenault, chairman and chief executive officer.

 

"Lending volumes, however, remain below pre-recessionary levels as cardmembers continued to manage their finances carefully and pay down outstanding debt. While this translated into lower net interest income, it also helped to improve our overall risk profile.

 

"Our credit indicators, in fact, continued to lead the market and our write-off rate dropped below 5 percent in September for the first time since early 2008.

 

"Against the backdrop of regulatory and legislative changes that are reshaping the industry, we have been able to improve our competitive position relative to those issuers who rely more heavily on revolving credit and back-end fees.

 

"While we remain cautious about the economic outlook, we plan to capitalize on that advantage by investing to strengthen relationships with high spending cardmembers and the merchants who accept our products."

 

Year-ago results included a non-recurring $180 million ($113 million after-tax) benefit associated with the company's accounting for a net investment in consolidated foreign subsidiaries.

 

The effective tax rate was 33 percent compared to 30 percent in the year-ago quarter.

 

Segment Results

 

U.S. Card Services reported third-quarter net income of $595 million, compared with $158 million a year ago.

 

Total revenues net of interest expense increased 23 percent to $3.7 billion from $3.0 billion. The increase reflects 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 lower interest income due to a smaller loan portfolio and lower yields on the portfolio.

 

Provisions for losses totaled $274 million, down 68 percent from $850 million a year ago. The decline reflects continued improvement in credit quality for the charge and credit card portfolios3.

 

Total expenses increased 26 percent. Marketing, promotion, rewards and cardmember services expenses increased 39 percent from the year-ago period, reflecting increased rewards costs and investments in marketing and promotion. Salaries and employee benefits and other operating expenses increased 12 percent from year-ago levels, primarily reflecting increased technology and partner-related investments.

 

The effective tax rate was 39 percent compared to 28 percent in the year-ago quarter.

 

International Card Services reported third-quarter net income of $153 million, up 15 percent from $133 million a year ago.

 

Total revenues net of interest expense were $1.2 billion, comparable with the year-ago quarter.

 

Provisions for losses totaled $64 million, down 74 percent from $250 million a year ago. The decline reflects continued improvement in credit quality for the charge and credit card portfolios.

 

Total expenses increased 25 percent. Marketing, promotion, rewards and cardmember services expenses increased 42 percent from year-ago levels, reflecting increased investments in marketing and promotion and higher rewards costs. Salaries and employee benefits and other operating expenses increased 13 percent from year-ago levels, primarily reflecting increased technology investments.

 

The effective tax rate was negative 6 percent compared to 2 percent in the year-ago quarter.

 

Global Commercial Services reported third-quarter net income of $159 million, up 56 percent from $102 million a year ago.

 

Total revenues net of interest expense increased 17 percent to $1.1 billion, from $975 million, reflecting increased spending by corporate cardmembers and higher travel commissions and fees.

 

Provisions for losses totaled $22 million, down 45 percent from $40 million a year ago. The decline reflects continued improvement in credit performance.

 

Total expenses increased 12 percent. Marketing, promotion, rewards and cardmember services expenses increased 36 percent from the year-ago period, primarily reflecting higher rewards costs. Salaries and employee benefits and other operating expenses increased 9 percent from the year-ago period.

 

The effective tax rate was 34 percent compared to 31 percent in the year-ago quarter.

 

Global Network & Merchant Services reported third quarter net income of $259 million, up 4 percent from $248 million a year ago.

 

Total revenues net of interest expense increased 15 percent to $1.1 billion, from $976 million, reflecting higher merchant-related revenues driven by an increase in global card billed business, as well as an increase in revenues from Global Network Services' bank partners.

 

Total expenses increased 19 percent. Marketing and promotion expenses increased 32 percent from the year-ago period, reflecting increased network and merchant-related investments. Salaries and employee benefits and other operating expenses increased 14 percent, primarily reflecting increased technology-related and professional service expenses, as well as incremental hiring to support business growth.

 

The effective tax rate was 39 percent compared to 33 percent in the year-ago quarter.

 

Corporate and Other reported third-quarter net expense of $73 million compared with net income of $1 million a year ago. The results for both periods reflect income of $220 million ($136 million after-tax) for the previously announced MasterCard and Visa settlements.

 

The year-ago quarter included the previously mentioned non-recurring $180 million ($113 million after-tax) benefit associated with the company's accounting for a net investment in consolidated foreign subsidiaries, offset by a higher tax expense due primarily to a revision in the company's estimated annual effective tax rate.

 

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 Third 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 third-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.

 

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 the company's expected business and financial performance, among other matters, contain words such as "believe," "expect," "anticipate," "optimistic," "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:

 
 
    -- changes in global economic and business conditions, including consumer 

and business spending, the availability and cost of credit,

unemployment and political conditions, all of which may significantly

affect spending on the Card, delinquency rates, loan balances and

other aspects of our business and results of operations;

 
    -- changes in capital and credit market conditions, which may 

significantly affect the company's ability to meet its liquidity

needs, access to capital and cost of capital, including changes in

interest rates; changes in market conditions affecting the valuation

of our assets; or any reduction in our credit ratings or those of our

subsidiaries, which could materially increase the cost and other terms

of our funding, restrict our access to the capital markets or result

in contingent payments under contracts;

 
    -- litigation, such as class actions or proceedings brought by 

governmental and regulatory agencies (including the lawsuit filed

against the company by the U.S. Department of Justice and certain

state attorneys general), that could result in (i) the imposition of

behavioral remedies against the company or the company's voluntarily

making certain changes to its business practices, the effects of which

in either case could have a material adverse impact on the company's

financial performance; (ii) the imposition of substantial monetary

damages in private actions against the company; and/or (iii) damage to

the company's global reputation and brand;

 
    -- legal and regulatory developments wherever we do business, including 

legislative and regulatory reforms in the United States, such as the

Dodd-Frank Act's stricter regulation of large, interconnected

financial institutions, changes in requirements relating to

securitization and the establishment of the Bureau of Consumer

Financial Protection, which could make fundamental changes to many of

our business practices or materially affect our capital requirements,

results of operations, ability to pay dividends or repurchase our

stock; or actions and potential future actions by the FDIC and credit

rating agencies applicable to securitization trusts, which could

impact the company's ABS program;

 
    -- changes in the substantial and increasing worldwide competition in the 

payments industry, including competitive pressure that may impact the

prices we charge merchants that accept our Cards and the success of

marketing, promotion or rewards programs;

 
    -- changes in technology or in our ability to protect our intellectual 

property (such as copyrights, trademarks, patents and controls on

access and distribution), and invest in and compete at the leading

edge of technological developments across our businesses, including

technology and intellectual property of third parties whom we rely on,

all of which could materially affect our results of operations;

 
    -- data breaches and fraudulent activity, which could damage our brand, 

increase our costs or have regulatory implications, and changes in

regulation affecting privacy and data security under federal, state

and foreign law, which could result in higher compliance and

technology costs to ourselves or our vendors;

 
    -- changes in our ability to attract or retain qualified personnel in the 

management and operation of the company's business, including any

changes that may result from increasing regulatory supervision of

compensation practices;

 
    -- changes in the financial condition and creditworthiness of our 

business partners, such as bankruptcies, restructurings or

consolidations, involving merchants that represent a significant

portion of our business, such as the airline industry, or our partners

in Global Network Services or financial institutions that we rely on

for routine funding and liquidity, which could materially affect our

financial condition or results of operations;

 
    -- uncertainties associated with business acquisitions, including the 

ability to realize anticipated business retention, growth and cost

savings or effectively integrate the acquired business into our

existing operations;

 
    -- changes affecting the success of our reengineering and other cost 

control initiatives, which may result in the company not realizing all

or a significant portion of the benefits that we intend;

 
    -- the effectiveness of the company's risk management policies and 

procedures, including credit risk relating to consumer debt, liquidity

risk in meeting business requirements and operational risks;

 
    -- changes affecting our ability to accept or maintain deposits due to 

market demand or regulatory constraints, such as changes in interest

rates and regulatory restrictions on our ability to obtain deposit

funding or offer competitive interest rates, which could affect our

liquidity position and our ability to fund our business; and

 
    -- factors beyond our control such as fire, power loss, disruptions in 

telecommunications, severe weather conditions, natural disasters,

terrorism, "hackers" or fraud, which could affect travel-related

spending or disrupt our global network systems and ability to process

transactions.

 

A further description of these uncertainties and other risks can be found in the company's Annual Report on Form 10-K for the year ended December 31, 2009, its Quarterly Reports on Form 10-Q for the three months ended March 31 and June 30, 2010, and the company's other reports filed with the SEC.

 

1 Refer to discussion regarding revenue drivers within earnings release.

 

2 Represents income from continuing operations or net income, as applicable, less (i) accelerated preferred dividend accretion of $212 million for the nine months ended September 30, 2009 due to the repurchase of preferred shares from the U.S. Treasury Department, (ii) preferred shares dividends and related accretion of $94 million for the nine months ended September 30, 2009, and (iii) earnings allocated to participating share awards and other items of $13 million and $8 million for the three months ended September 30, 2010 and 2009, respectively, and $38 million and $13 million for the nine months ended September 30, 2010 and 2009, respectively.

 

3 Upon the adoption of new accounting guidance 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.

 
All information in the following tables is presented 
on a basis  prepared in accordance with 
U.S. generally accepted accounting  principles 
(GAAP), unless otherwise indicated. 
 
 
(Preliminary) 
American 
Express 
Company 
Consolidated 
Statements 
of Income 
(Millions) 
                 Quarters Ended                      Nine Months Ended 
                 September 30,         Percentage    September 30,            Percentage 
                 2010      2009        Inc/(Dec)     2010       2009          Inc/(Dec) 
Revenues 
Non-interest 
revenues 
Discount         $ 3,818   $ 3,373     13    %       $ 11,018   $ 9,744       13    % 
revenue 
Net card           527       538       (2  )           1,568      1,602       (2  ) 
fees 
Travel             487       383       27              1,307      1,155       13 
commissions 
and fees 
Other              515       448       15              1,512      1,340       13 
commissions 
and fees 
Securitization     N/A       71        -               N/A        210         - 
income, 
net (A) 
Other              502       449       12              1,413      1,569       (10 ) 
Total              5,849     5,262     11              16,818     15,620      8 
non-interest 
revenues 
Interest 
income 
Interest           1,675     1,059     58              5,107      3,432       49 
and fees 
on loans 
Interest           103       229       (55 )           345        579         (40 ) 
and 
dividends 
on 
investment 
securities 
Deposits           16        9         78              45         48          (6  ) 
with 
banks 
and other 
Total              1,794     1,297     38              5,497      4,059       35 
interest 
income 
Interest 
expense 
Deposits           141       109       29              406        299         36 
Short-term         -         2         -               2          36          (94 ) 
borrowings 
Long-term          469       432       9               1,410      1,310       8 
debt 
and other 
Total              610       543       12              1,818      1,645       11 
interest 
expense 
Net                1,184     754       57              3,679      2,414       52 
interest 
income 
Total              7,033     6,016     17              20,497     18,034      14 
revenues 
net of 
interest 
expense 
Provisions 
for 
losses 
Charge             89        143       (38 )           412        716         (42 ) 
card 
Cardmember         262       989       (74 )           1,490      3,706       (60 ) 
loans 
Other              22        46        (52 )           66         143         (54 ) 
Total              373       1,178     (68 )           1,968      4,565       (57 ) 
provisions 
for 
losses 
Total              6,660     4,838     38              18,529     13,469      38 
revenues 
net of 
interest 
expense 
after 
provisions 
for 
losses 
Expenses 
Marketing          847       504       68              2,244      1,201       87 
and 
promotion 
Cardmember         1,269     983       29              3,685      2,858       29 
rewards 
Cardmember         135       132       2               406        374         9 
services 
Salaries           1,354     1,261     7               3,996      3,884       3 
and 
employee 
benefits 
Professional       701       575       22              1,898      1,693       12 
services 
Occupancy          371       374       (1  )           1,134      1,124       1 
and 
equipment 
Communications     92        105       (12 )           284        315         (10 ) 
Other,             251       (14   )   #               395        140         # 
net 
Total              5,020     3,920     28              14,042     11,589      21 
Pretax             1,640     918       79              4,487      1,880       # 
income 
from 
continuing 
operations 
Income             547       276       98              1,492      453         # 
tax 
provision 
Income             1,093     642       70              2,995      1,427       # 
from 
continuing 
operations 
Loss               -         (2    )   -               -          (13    )    - 
from 
discontinued 
operations, 
net of 
tax 
Net              $ 1,093   $ 640       71            $ 2,995    $ 1,414       # 
income 
Income           $ 1,080   $ 634       70            $ 2,957    $ 1,108       # 
from 
continuing 
operations 
attributable 
to 
common 
shareholders 
(B) 
Net              $ 1,080   $ 632       71            $ 2,957    $ 1,095       # 
income 
attributable 
to 
common 
shareholders 
(B) 
 
 
# - Denotes a variance of more than 100%. 
(A) In accordance with the new GAAP effective 
January 1, 2010,  the Company 
no longer reports securitization income, net in its  income statement. 
(B) Represents income from continuing operations or 
net income,  as applicable, less (i) accelerated 
preferred dividend accretion of  $212 million 
for the nine months ended September 
30, 2009 due to the  repurchase of $3.39 billion 
of preferred shares issued as part of  the 
Capital Purchase Program (CPP), (ii) preferred 
shares dividends  and related accretion 
of $94 million for the nine months ended  September 
30, 2009, and (iii) earnings allocated 
to participating  share awards and other 
items of $13 million and $8 million for 
the  three months ended September 30, 2010 and 
2009, respectively, and  $38 million and 
$13 million for the nine months ended September 
30,  2010 and 2009, respectively. 
 
 
(Preliminary) 
American Express Company 
Condensed Consolidated Balance Sheets 
(Billions) 
                                       September 30,    December 31, 
                                       2010             2009 
Assets 
Cash                                   $ 21             $ 17 
Accounts receivable                      38               38 
Investment securities                    17               24 
Loans                                    53               30 
Other assets                             17               16 
Total assets                           $ 146            $ 125 
Liabilities and Shareholders' Equity 
Customer deposits                      $ 28             $ 26 
Short-term borrowings                    2                2 
Long-term debt                           69               52 
Other liabilities                        31               31 
Total liabilities                        130              111 
Shareholders' equity                     16               14 
Total liabilities and                  $ 146            $ 125 
shareholders' equity 
 
 
(Preliminary) 
American 
Express 
Company 
Financial 
Summary 
(Millions) 
                Quarters Ended                      Nine Months Ended 
                September 30,         Percentage    September 30,            Percentage 
                2010       2009       Inc/(Dec)     2010        2009         Inc/(Dec) 
Total 
revenues 
net of 
interest 
expense 
U.S.            $ 3,664    $ 2,982    23    %       $ 10,847    $ 8,965      21 % 
Card 
Services 
International     1,169      1,157    1               3,416       3,314      3 
Card 
Services 
Global            1,144      975      17              3,250       2,911      12 
Commercial 
Services 
Global            1,118      976      15              3,183       2,749      16 
Network 
& 
Merchant 
Services 
                  7,095      6,090    17              20,696      17,939     15 
Corporate 
& Other, 
including         (62   )    (74   )  (16 )           (199   )    95         # 
adjustments 
and 
eliminations 
CONSOLIDATED    $ 7,033    $ 6,016    17            $ 20,497    $ 18,034     14 
TOTAL 
REVENUES 
NET 
OF 
INTEREST 
EXPENSE 
Pretax 
income 
(loss) 
from 
continuing 
operations 
U.S.            $ 971      $ 218      #             $ 2,476     $ (60    )   # 
Card 
Services 
International     145        136      7               530         236        # 
Card 
Services 
Global            240        148      62              616         364        69 
Commercial 
Services 
Global            422        371      14              1,254       1,123      12 
Network 
& 
Merchant 
Services 
                  1,778      873      #               4,876       1,663      # 
Corporate         (138  )    45       #               (389   )    217        # 
& Other 
PRETAX          $ 1,640    $ 918      79            $ 4,487     $ 1,880      # 
INCOME 
FROM 
CONTINUING 
OPERATIONS 
Net 
income 
(loss) 
U.S.            $ 595      $ 158      #             $ 1,545     $ (2     )   # 
Card 
Services 
International     153        133      15              464         263        76 
Card 
Services 
Global            159        102      56              368         250        47 
Commercial 
Services 
Global            259        248      4               795         737        8 
Network 
& 
Merchant 
Services 
                  1,166      641      82              3,172       1,248      # 
Corporate         (73   )    1        #               (177   )    179        # 
& Other 
Income            1,093      642      70              2,995       1,427      # 
from 
continuing 
operations 
Loss              -          (2    )  -               -           (13    )   - 
from 
discontinued 
operations, 
net of 
tax 
NET             $ 1,093    $ 640      71            $ 2,995     $ 1,414      # 
INCOME 
# 
- Denotes 
a 
variance 
of more 
than 
100%. 
 
 
(Preliminary) 
American 
Express 
Company 
Financial 
Summary 
(continued) 
                Quarters Ended                     Nine Months Ended 
                September 30,         Percentage   September 30,            Percentage 
                2010       2009       Inc/(Dec)    2010       2009          Inc/(Dec) 
EARNINGS 
PER 
COMMON 
SHARE 
BASIC 
Income          $ 0.91     $ 0.54     69 %         $ 2.49     $ 0.95        #  % 
from 
continuing 
operations 
attributable 
to 
common 
shareholders 
Loss              -          -        -              -          (0.01 )     - 
from 
discontinued 
operations 
Net             $ 0.91     $ 0.54     69 %         $ 2.49     $ 0.94        #  % 
income 
attributable 
to 
common 
shareholders 
Average           1,193      1,178    1  %           1,189      1,164       2  % 
common 
shares 
outstanding 
(millions) 
DILUTED 
Income          $ 0.90     $ 0.54     67 %         $ 2.47     $ 0.95        #  % 
from 
continuing 
operations 
attributable 
to 
common 
shareholders 
Loss              -          (0.01 )  -              -          (0.01 )     - 
from 
discontinued 
operations 
Net             $ 0.90     $ 0.53     70 %         $ 2.47     $ 0.94        #  % 
income 
attributable 
to 
common 
shareholders 
Average           1,199      1,181    2  %           1,195      1,166       2  % 
common 
shares 
outstanding 
(millions) 
Cash            $ 0.18     $ 0.18     -  %         $ 0.54     $ 0.54        -  % 
dividends 
declared 
per 
common 
share 
Selected 
Statistical 
Information 
                Quarters Ended                     Nine Months Ended 
                September 30,         Percentage   September 30,            Percentage 
                2010       2009       Inc/(Dec)    2010       2009          Inc/(Dec) 
Return            25.9  %    11.7  %                 25.9  %    11.7  % 
on 
average 
equity 
(A) 
Return            25.6  %    10.4  %                 25.6  %    10.4  % 
on 
average 
common 
equity 
(A) 
Return            33.1  %    13.5  %                 33.1  %    13.5  % 
on 
average 
tangible 
common 
equity 
(A) 
Common            1,204      1,189    1  %           1,204      1,189       1  % 
shares 
outstanding 
(millions) 
Book            $ 13.22    $ 11.72    13 %         $ 13.22    $ 11.72       13 % 
value 
per 
common 
share 
Shareholders'   $ 15.9     $ 13.9     14 %         $ 15.9     $ 13.9        14 % 
equity 
(billions) 
# 
- 
Denotes 
a 
variance 
of more 
than 
100%. 
 
 
(A) Refer to Appendix I for components 
of return on average  equity, return 
on average common equity and return on 
average  tangible common equity. 
 
 

American Express CompanyMedia:Joanna Lambert, 212-640-9668joanna.g.lambert@aexp.comMichael O'Neill, 212-640-5951mike.o'neill@aexp.comorInvestors/Analysts:Toby Willard, 212-640-1958sherwood.s.willardjr@aexp.comRon Stovall, 212-640-5574ronald.stovall@aexp.com

 
 
 
 
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