American Express Company (AXP) today reported first-quarter net income of $1.4 billion, up from $1.3 billion a year ago. Diluted earnings per share rose 16 percent to $1.33, from $1.15 a year ago.
Consolidated total revenues net of interest expense rose to $8.2 billion in the quarter, up 4 percent (5 percent when adjusted for foreign currency translations2) from $7.9 billion a year ago. The increase reflected higher Card Member spending and higher net interest income.
Consolidated provisions for losses totaled $485 million, up 17 percent from $416 million a year ago. The increase reflected a larger reserve release a year ago, offset, in part, by the benefit of lower net write-offs this quarter.
Consolidated expenses totaled $5.5 billion, down 1 percent from $5.6 billion a year ago. The decrease reflected a 4 percent decline in operating expenses3, partially offset by higher rewards costs. Adjusted for foreign currency translations, consolidated total expenses were unchanged from a year ago.2
The effective tax rate for the quarter was 35 percent, up from 33 percent from a year ago.
The company's return on average equity (ROE) was 28.3 percent, up from 23.2 percent a year ago.
"We are off to a good start to 2014, thanks to disciplined expense control, credit metrics near their historic low, higher revenues and a strong balance sheet that allows us to return a substantial amount of capital to shareholders," said Kenneth I. Chenault, chairman and chief executive officer.
"Earnings per share exceeded our long-term target, and the overall performance reflected our ability to manage the business in a way that delivers bottom-line results.
"Card Member spending was up 6 percent globally (7 percent adjusted for foreign currency translations), with higher volumes in the U.S. and internationally. While consumers remain cautious about taking on additional debt, we continued to see a modest increase in Card Member loan balances.
"During the quarter, we launched new initiatives to expand card acceptance among smaller merchants, capture a greater share of U.S. consumers' everyday spending and extend our loyalty coalition business into Italy. These initiatives are aimed at helping us reach additional segments of the market. They put us in a stronger position to grow over the medium and long term and are making the American Express brand more welcoming and inclusive.
"Once again, we performed very well in the Federal Reserve's annual stress test. The results provide us with the flexibility to move forward with plans to increase the quarterly dividend by 13 percent and repurchase up to $4.4 billion of shares this year and an additional $1.0 billion during the first quarter of 2015. Our plan remains focused on balancing three priorities: supporting growth strategies, maintaining strong capital ratios and returning a substantial level of capital to our shareholders."
Segment Results
U.S. Card Services reported first-quarter net income of $876 million, up 9 percent from $804 million a year ago.
Total revenues net of interest expense increased 5 percent to $4.3 billion from $4.1 billion a year ago. The rise reflected a 7 percent increase in Card Member spending and higher net interest income.
Provisions for losses totaled $342 million, up 18 percent from $290 million a year ago. The increase reflected a larger reserve release a year ago, offset, in part, by the benefit of lower net write-offs this year.
Total expenses increased 1 percent to $2.5 billion.
The effective tax rate was 38 percent compared to 37 percent a year ago.
International Card Services reported first-quarter net income of $159 million, down 11 percent from $178 million a year ago.
Total revenues net of interest expense were $1.4 billion, up 3 percent (7 percent FX adjusted2) from a year ago. The increase primarily reflected higher Card Member spending and higher revenues from the Loyalty Partner business.
Total expenses were $1.1 billion, up 2 percent (5 percent FX adjusted2) from a year ago. The increase primarily reflected higher marketing and promotion and rewards costs, partially offset by a decline in operating expenses.
The effective tax rate was 22 percent compared to 8 percent a year ago due to certain tax benefits related to foreign operations last year.
Global Commercial Services reported first-quarter net income of $184 million, down 4 percent from $191 million a year ago.
Total revenues net of interest expense were $1.2 billion, up 3 percent (4 percent FX adjusted2) from a year ago. The increase primarily reflected higher Card Member spending, partially offset by lower travel commissions and fees.
Total expenses increased 2 percent (3 percent FX adjusted2) to $871 million from $852 million a year ago. The rise primarily reflected costs related to the planned joint venture for the Global Business Travel division.
The effective tax rate was 35 percent compared to 33 percent from a year ago.
Global Network & Merchant Services reported first-quarter net income of $443 million, up 19 percent from $373 million a year ago.
Total revenues net of interest expense increased 5 percent (7 percent FX adjusted2) to $1.4 billion from $1.3 billion a year ago. The increase primarily reflected higher merchant-related revenues driven by an increase in global Card Member spending, as well as an increase in revenues from Global Network Services' bank partners.
Total expenses decreased 8 percent (7 percent FX adjusted2) to $647 million from $702 million a year ago, primarily reflecting lower operating expenses.
The effective tax rate was 37 percent compared to 36 percent a year ago.
Corporate and Other reported first-quarter net loss of $230 million compared with net loss of $266 million in the year-ago period.