Record Card Member
Spending Driven by Robust Travel and Entertainment
Rebound
Excellent Credit
Performance Reflects Strength of Premium Customer Base
Second-Quarter Earnings
Per Share Was $2.57
American Express Company (NYSE: AXP) today reported
second-quarter net income of $2.0 billion, or $2.57 per share,
compared with net income of $2.3 billion, or $2.80 per share, a
year ago.
($ in millions, except per share
amounts, and where indicated)
Quarters Ended June
30,
Percentage Inc/(Dec)
Six Months Ended June
30,
Percentage Inc/(Dec)
2022
2021
2022
2021
Total Network Volumes (Billions)
$ 394.8
$316.1
25
$ 745.1
$ 585.4
27
Total Revenues Net of Interest Expense
$ 13,395
$10,243
31
$ 25,130
$19,307
30
Total Provisions for Credit Losses
$ 410
$(606)
#
$ 377
$ (1,281)
#
Net Income
$ 1,964
$2,280
(14)
$ 4,063
$4,515
(10)
Diluted Earnings Per Common Share1
$ 2.57
$2.80
(8)
$ 5.30
$5.54
(4)
Average Diluted Common Shares
Outstanding
753
802
(6)
756
803
(6)
# - Denotes a variance of 100 percent or
more.
“We had an outstanding second quarter, with record levels of
revenue and Card Member spending, reflecting the strength of our
global customer base and continued momentum across our business,”
said Stephen J. Squeri, Chairman and Chief Executive Officer.
“Card Member spending was up 30 percent from a year earlier on
an FX-adjusted basis, driven by the robust rebound in global Travel
and Entertainment spending, which surpassed pre-pandemic levels for
the first time in April and was led by strong growth in consumer
and SME spending and a significant uptick in corporate travel.
Goods and Services spending, which is the largest category of
spending on our network, continued its strong growth in the
quarter, and spending by Millennial and Gen Z Card Members
increased 48 percent on an FX-adjusted basis over last year.
“We added 3.2 million new proprietary cards in the quarter,
driven by continued strong demand for our premium products.
Acquisitions of our U.S. Consumer Platinum, Gold and Delta co-brand
Cards each reached all-time highs in the quarter, and we have
maintained high levels of customer retention. Our credit
performance remains exceptional, with delinquencies and write-offs
near historical lows.
“We have been able to deliver exceptional results while
navigating a complex macroeconomic environment because of a number
of factors, including the scale and strength of our global customer
base, the decisions we made through the pandemic and recovery to
support our customers and seize on growth opportunities, and our
continued focus on enhancing our value propositions and bringing
new customers into the franchise. As we look ahead, we remain
confident in our ability to successfully execute against our
long-term growth plan aspirations.”
Second-quarter consolidated total revenues net of interest
expense were $13.4 billion, up 31 percent from $10.2 billion a year
ago. The increase primarily reflected growth in Card Member
spending compared to the prior year.
Consolidated provisions for credit losses were $410 million,
compared with a benefit of $606 million a year ago. The change
primarily reflected a small net reserve build in the current
quarter compared with a $866 million reserve release a year ago.
Credit metrics remained near historic lows in the current
quarter.
Consolidated expenses were $10.4 billion, up 32 percent from
$7.9 billion a year ago. Customer engagement costs increased,
primarily driven by a 25 percent increase in network volumes and
higher usage of travel-related benefits. Operating expenses also
increased, reflecting net gains on Amex Ventures investments in the
prior year and increased compensation costs.
The consolidated effective tax rate was 22.8 percent, up from
22.4 percent a year ago.
Based on performance to date, the company is raising its
full-year revenue growth guidance from a range of 18% to 20% to a
range of 23% to 25%; the company is maintaining its full-year EPS
guidance range of $9.25 to $9.65.
Global Consumer Services Group reported second-quarter
pretax income of $1.4 billion, compared with $1.9 billion a year
ago.
Total revenues net of interest expense were $7.8 billion, up 29
percent from $6.0 billion a year ago. The increase primarily
reflected growth in Card Member spending compared to the prior
year.
Provisions for credit losses were $275 million, compared with a
benefit of $343 million a year ago. The change primarily reflected
a small net reserve build in the current quarter compared with a
reserve release of $579 million a year ago.
Total expenses were $6.1 billion, up 35 percent from $4.5
billion a year ago, reflecting higher customer engagement costs
primarily driven by increased network volumes and higher usage of
travel-related benefits. Operating expenses were also higher as a
result of increased compensation, technology and servicing-related
costs.
Global Commercial Services reported second-quarter pretax
income of $817 million, compared with $835 million a year ago.
Total revenues net of interest expense were $4.0 billion, up 30
percent from $3.0 billion a year ago. The increase primarily
reflected growth in Card Member spending compared to the prior
year.
Provisions for credit losses were $131 million, compared with a
benefit of $236 million a year ago. The change primarily reflected
a small reserve build in the current quarter compared with a
reserve release a year ago.
Total expenses were $3.0 billion, up 24 percent from $2.4
billion a year ago, reflecting higher customer engagement costs
primarily driven by increased network volumes. Operating expenses
were also higher primarily as a result of increased compensation,
technology and servicing-related costs.
Global Merchant and Network Services reported
second-quarter pretax income of $815 million, compared with $527
million a year ago.
Total revenues net of interest expense were $1.6 billion, up 32
percent from $1.2 billion a year ago, primarily reflecting an
increase in network volumes compared to the prior year.
Total expenses were $800 million, up 10 percent from $728
million a year ago, primarily reflecting 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 second-quarter pretax loss
of $493 million, compared with a pretax loss of $306 million a year
ago. The decline was primarily driven by net gains on Amex Ventures
investments in the prior year.
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 second 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 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,
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” 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 the continued effects of the pandemic; Russia’s
invasion of 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 demand in T&E categories, not growing in line with
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; 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; 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 Report on Form 10-Q
for the quarter ended March 31, 2022 and the company’s other
reports filed with the Securities and Exchange Commission.
_______________________
1 Diluted earnings per common share (EPS)
was reduced by the impact of (i) earnings allocated to
participating share awards and other items of $15 million and $16
million for the three months ended June 30, 2022 and 2021,
respectively, and $31 million for both the six months ended June
30, 2022 and 2021, and (ii) dividends on preferred shares of $15
million for both the three months ended June 30, 2022 and 2021, and
$29 million for both the six months ended June 30, 2022 and
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 June 30,
2022 apply to the period against which such results are being
compared).
- 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.
- SME refers to small and mid-sized businesses with less than
$300 million in annual revenues.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220722005018/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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