Diluted per share net income was $0.84, up from $0.09 a year ago. The year-ago results include a per share reduction of $0.18 from a repurchase of preferred shares from the U.S. Department of the Treasury.

Consolidated total revenues net of interest expense were $6.9 billion, up 13 percent from $6.1 billion a year ago. 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 $652 million compared to $1.6 billion in the year-ago period, reflecting continued improvement in credit quality for the charge and credit card portfolios(3).

Consolidated expenses totaled $4.6 billion, up 13 percent from $4.1 billion a year ago, reflecting higher investment in business building initiatives and higher rewards costs.

The company's return on average equity (ROE) was 23.5 percent, up from 13.2 percent a year ago. Return on average common equity (ROCE) was 23.2 percent, up from 12 percent a year ago.

"Cardmember spending rose 16 percent and improved credit indicators continued the year-long trend that began last spring," said Kenneth I. Chenault, chairman and chief executive officer.

"Spending rose across all segments with the largest increases coming from corporate cards, cards issued by our bank partners, charge cards and premium co-brand products where many cardmembers tend to pay in full each month.

"While the economic environment remains uneven, our net income and billed business are back at, or near, their pre-recession levels. Some of the year-over-year improvement represents an initial return on our investments in the business, but the large percentage increases also reflect comparisons with last year's recessionary levels.

"While spending among affluent consumers and businesses remains strong, today's cardmembers are borrowing less and paying down more of their outstanding debt. Over the last several quarters, this has translated into lower interest revenue.

"We remain focused on charge - or pay-in-full - products, fee-based revenues, and on expanding our high quality cardmember base. In all, these factors have helped to improve our risk profile during the past year.

"We remain cautious about the economy and the challenging regulatory environment. We also recognize that the grow-over comparisons will be more difficult in the second half. Nonetheless, there are significant opportunities to build on the momentum of the last year. We plan to maintain our investments in the business at substantial levels, and dedicate resources to select partnerships and acquisitions."

Year-ago results included $182 million ($118 million after-tax) of net reengineering charges and a $211 million ($135 million after-tax) gain on the sale of a portion of the company's equity holding in Industrial and Commercial Bank of China (ICBC).

The effective tax rate of 36 percent for the second quarter of 2010 includes the impact of a $44 million tax-related charge.

Segment Results

U.S. Card Services reported second-quarter net income of $522 million, compared with a loss of $153 million a year ago.

Total revenues net of interest expense increased 27 percent to $3.6 billion from $2.9 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 the portfolio.

Provisions for losses totaled $519 million, down 56 percent from $1.2 billion a year ago. The decline reflected continued improvement in credit quality for the charge and credit card portfolios3.

Total expenses increased 18 percent. Marketing, promotion, rewards and cardmember services expenses increased 36 percent from the year-ago period, reflecting increased investments in marketing and promotion and higher rewards costs. Salaries and employee benefits and other operating expenses decreased 2 percent from year-ago levels, reflecting in part a year-over-year accounting benefit from hedging the company's fixed rate debt.

International Card Services reported second-quarter net income of $160 million, compared to $78 million a year ago.

Total revenues net of interest expense were $1.1 billion, comparable with the year-ago quarter.

Provisions for losses totaled $90 million, down 70 percent from $302 million a year ago. The decline reflected continued improvement in credit quality for the charge and credit card portfolios.

Total expenses increased 10 percent. Marketing, promotion, rewards and cardmember services expenses increased 31 percent from year-ago levels, reflecting increased investments in marketing and promotion and higher rewards costs. Salaries and employee benefits and other operating expenses decreased 3 percent from year-ago levels.

Global Commercial Services reported second-quarter net income of $117 million, compared to $67 million a year ago. Net income in the current quarter reflected the previously discussed $44 million tax-related charge.

Total revenues net of interest expense increased 9 percent to $1.1 billion, from $998 million, reflecting increased spending by corporate cardmembers and higher travel commissions and fees.

Provisions for losses totaled $28 million, down 47 percent from $53 million a year ago. The decline reflected continued improvement in credit performance.

Total expenses decreased 4 percent. Marketing, promotion, rewards and cardmember services expenses increased 45 percent from the year-ago period, primarily reflecting higher rewards costs. Salaries and employee benefits and other operating expenses decreased 9 percent from the year-ago period, which included a net reengineering charge.

Global Network & Merchant Services reported second-quarter net income of $269 million, up 13 percent from $239 million a year ago.

Total revenues net of interest expense increased 17 percent to $1.1 billion, 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 24 percent. Marketing and promotion expenses increased 122 percent from the year-ago period, reflecting increased brand, network and merchant-related investments. Salaries and employee benefits and other operating expenses increased 2 percent.

Corporate and Other reported second-quarter net expense of $51 million compared with net income of $111 million a year ago. The results for both periods reflected income of $220 million ($136 million after-tax) for the previously announced MasterCard and Visa settlements. The second quarter 2009 results also included the ICBC gain discussed previously.

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