22 November 2014

American Express Q4 net income doubles

17 January 2014  |  1137 views  |  0 Source: American Express

American Express Company (AXP) today reported fourth-quarter net income of $1.3 billion, up from $637 million a year ago. Diluted earnings per share rose to $1.21, from $0.56 a year ago.

Excluding expenses associated with the merchant litigation settlement agreement announced in late December, fourth-quarter adjusted net income was $1.3 billion, or $1.25 per share.2

The year-ago quarter included three significant items: a restructuring charge; an expense associated with higher estimated redemptions of Membership Rewards points; and the impact of Card Member reimbursements.

Consolidated total revenues net of interest expense rose to $8.5 billion in the fourth quarter, from $8.1 billion a year ago, representing a 5 percent increase (6 percent when adjusted for foreign currency translations3). The increase reflected higher Card Member spending and higher net interest income.

Consolidated provisions for losses totaled $528 million, down 17 percent from $638 million a year ago. This decrease reflected lower net write offs and a modest reserve release this quarter, compared with a modest increase in reserves last year. Credit indicators improved further from historically strong levels reported in prior quarters.

Consolidated expenses totaled $6.0 billion, down 8 percent from $6.6 billion a year ago. The decrease reflected the three year-ago items mentioned above. Adjusted for foreign currency translations, consolidated total expenses were down 7 percent from a year ago.3

The effective tax rate for the quarter was 34 percent, up from 31 percent from a year ago.

The company's return on average equity (ROE) was 27.8 percent, up from 23.1 percent a year ago.

"Fourth quarter results reflected a healthy increase in billed business in the U.S. and internationally," said Kenneth I. Chenault, chairman and chief executive officer. "We ended the year on a strong note, with Card Member spending up 8 percent despite mixed reports during the holiday shopping season.

"Credit quality indicators are at historically strong levels and, while many consumers are still cautious about taking on additional debt, we again saw a modest increase in Card Member loans this quarter.

"The settlement agreement we reached last month addresses merchant concerns while helping to ensure that American Express Card Members are treated fairly at the point of sale. The agreement, which is subject to court approval, would limit our exposure to future legal claims and allow us to stay focused on helping merchants build their business and strengthen relationships with their customers."

Mr. Chenault said, "Serving Card Members and merchants through a diversified, spend-centric business has allowed us to generate consistent revenue increases at a time when top line growth is still under pressure in parts of the financial services industry.

"Controlling operating expenses,4" he added, "remains a top priority, and the restructuring we began a year ago allowed us to more than meet the goal we set for 2013.

"We enter 2014 with good momentum and the flexibility to make investments aimed at building on the strength of our performance during the past several years."

For the full year, the company reported net income of $5.4 billion, up 20 percent from $4.5 billion a year ago. Diluted earnings per share rose to $4.88, up 25 percent from $3.89 a year ago.

Revenues net of interest expense for the full year increased 4 percent (5 percent FX adjusted3) to $33.0 billion from $31.6 billion a year ago. Consolidated expenses totaled $23.0 billion, down 1 percent from a year ago. Adjusted for foreign currency translations, expenses were unchanged from a year ago.3

Segment Results

U.S. Card Services reported fourth-quarter net income of $864 million, up from $423 million a year ago.

Total revenues net of interest expense increased 8 percent to $4.4 billion from $4.1 billion a year ago. The rise reflected a 9 percent increase in Card Member spending and higher net interest income. Revenues in the year-ago period reflected the impact of Card Member reimbursements mentioned above.

Provisions for losses totaled $346 million, down 27 percent from $477 million a year ago. The decrease reflected the benefit of lower net write-offs and a reserve release in the current quarter.

Total expenses decreased 8 percent to $2.8 billion from $3.0 billion a year ago, which included the rewards charges and a portion of the restructuring charge mentioned above.

The effective tax rate was 33 percent compared to 31 percent a year ago.

International Card Services reported fourth-quarter net income of $103 million, up 8 percent from $95 million a year ago.

Total revenues net of interest expense increased 2 percent (7 percent FX adjusted3) to $1.4 billion. The increase primarily reflected higher Card Member spending and higher net card fees.

Provisions for losses totaled $120 million, up 21 percent from $99 million a year ago. The increase reflected higher net write offs and a reserve build in the current quarter.

Total expenses increased 1 percent (5 percent FX adjusted3) to $1.2 billion. The increase primarily reflected higher rewards costs, partially offset by a decline in operating expenses from year-ago levels which included a portion of the restructuring charge mentioned above.

The effective tax rate was 5 percent compared to 14 percent a year ago.

Global Commercial Services reported fourth-quarter net income of $182 million, up from $65 million a year ago.

Total revenues net of interest expense increased 2 percent to $1.2 billion. The increase primarily reflected higher Card Member spending.

Total expenses decreased 13 percent (12 percent FX adjusted3) to $910 million from $1.0 billion a year ago. The decline primarily reflected lower operating expenses related to the restructuring charge in the year-ago period mentioned above.

The effective tax rate was 37 percent compared to 54 percent from a year ago. The year-ago quarter's higher tax rate reflected lower tax benefits from the restructuring charge in certain international markets.

Global Network & Merchant Services reported fourth-quarter net income of $399 million, up 13 percent from $354 million a year ago.

Total revenues net of interest expense increased 4 percent (6 percent FX adjusted3) to $1.4 billion. The increase primarily reflected higher merchant-related revenues driven by an increase in global Card Member spending.

Total expenses decreased 1 percent to $801 million from $812 million a year ago. The year-ago period included a portion of the previously mentioned restructuring charge, and the current quarter reflected higher operating expenses driven by the merchant litigation settlement. Adjusted for foreign currency translations, expenses were unchanged from a year ago.3

The effective tax rate was 37 percent compared to 36 percent a year ago.

Corporate and Other reported fourth-quarter net loss of $240 million compared with net loss of $300 million in the year-ago period. The year-ago quarter included a portion of the restructuring charge mentioned above.

Full figures available here

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