First-quarter consolidated total revenues net of interest expense were $8.1 billion, up 2 percent from $8.0 billion a year ago. FX-adjusted consolidated total revenues increased 4 percent, reflecting a rise in net interest income, Card Member spending and net card fees.2

Consolidated provisions for losses were $434 million, up 3 percent from $420 million a year ago. The current quarter reflected the accounting for certain cobrand loan portfolios as “held for sale,” where credit costs are now reported in other operating expenses. The increase from last year was also impacted by a smaller reserve release than a year ago.

Consolidated expenses were $5.5 billion, up 5 percent, from $5.2 billion a year ago. The current quarter’s expenses included:

• A $118 million increase in marketing and promotion costs to support initiatives to grow the business;
• An $84 million ($55 million after-tax) restructuring charge;
• A $63 million increase in rewards expenses, driven primarily by higher Card Member spending; and
• A benefit of $127 million ($79 million after-tax) from a gain on the sale of the JetBlue cobrand portfolio, which was reported in other operating expenses.

The effective tax rate for the quarter was 35 percent, up from 34 percent a year ago.

The company's return on average equity (ROE) was 23.6 percent, down from 29.0 percent a year ago.

“First quarter results were in line with the financial outlook we provided last month at our Investor Day,” said Kenneth I. Chenault, chairman and chief executive officer. “Despite strong competition throughout the payments industry, we generated a 4 percent increase in FX-adjusted revenues.2 Those revenues reflected strong, underlying growth in our lending portfolio, along with higher Card Member spending and fee income. Our 6 percent rise in Card Member spending was partially offset by a lower merchant discount rate and the higher costs associated with cash back rewards.

“Investment spending was up significantly and reflected initiatives to grow the business by expanding our Card Member base and gaining a greater share of their overall spending and borrowing. We added 3 million new proprietary cards this quarter, with almost two thirds of the consumer acquisitions coming through digital channels. Our underlying loan portfolio grew 11 percent and credit metrics remained excellent.

“In addition, we continued to make very good progress on expanding our merchant network here in the United States and internationally. Operating expenses continued to be well managed and the restructuring charge this quarter reflected an initial phase of actions to take $1 billion out of our cost base by 2017. Our priorities for this year and next continue to be accelerating revenue growth, resetting our cost base and optimizing the investments we’re making in the business.

“Given the actions we are taking and the strength of our business model, I believe our outlook for 2016 of EPS between $5.40 to $5.70 and EPS of at least $5.60 in 2017 remains appropriate. And, as we said last month at Investor Day, this outlook excludes the impact of restructuring charges or other contingencies.”

Segment Results

As previously announced, effective for the first quarter of 2016, the company realigned its segment presentation to reflect the organizational changes announced during the fourth quarter of 2015. Prior periods have been restated to conform to the new reportable operating segments, which are as follows:

• U.S. Consumer Services, including the proprietary U.S. Consumer Card Services business and travel services in the United States.
• International Consumer and Network Services, including the proprietary International Consumer Card Services business, Global Network Services business and travel services outside the United States.
• Global Commercial Services, including the proprietary Global Corporate Payments business, small business services businesses in the United States and internationally, merchant financing products and foreign exchange services operations.
• Global Merchant Services, including the Global Merchant Services business and the Global Loyalty Coalition businesses.

Corporate functions and certain other businesses and operations are included in Corporate and Other.

U.S. Consumer Services reported first-quarter net income of $694 million, up 5 percent from $659 million a year ago.

Total revenues net of interest expense increased 3 percent to $3.3 billion from $3.2 billion a year ago. The rise primarily reflected higher net interest income from growth in the loan portfolio.

Provisions for losses totaled $190 million, down 2 percent from $193 million a year ago. The decrease resulted from the previously mentioned accounting for certain cobrand loans as “held for sale.” That impact was partially offset by higher loan balances, excluding the “held for sale” loans in both periods.

Total expenses were $2 billion, up 2 percent from a year ago. The current quarter reflected higher marketing, rewards and Card Member services costs, partially offset by the previously mentioned gain on the sale of the JetBlue cobrand portfolio.

The effective tax rate was 36 percent, down from 37 percent a year ago.

International Consumer and Network Services reported first-quarter net income of $188 million, down 5 percent from $197 million a year ago. The decline reflected the impact of the stronger U.S. dollar.

Total revenues net of interest expense were $1.3 billion, down 1 percent compared to a year ago. FX-adjusted revenues increased 8 percent, primarily reflecting higher Card Member spending and an increase in net card fees.2

Total expenses were $987 million, up 1 percent from $977 million a year ago. FX-adjusted expenses increased 6 percent.2 The current quarter’s expenses reflected higher marketing and rewards costs.

The effective tax rate was 26 percent, down from 30 percent a year ago.

Global Commercial Services reported first-quarter net income of $485 million, down 6 percent from $517 million a year ago.

Total revenues net of interest expense were $2.4 billion, up 2 percent compared to a year ago.The increase reflected higher net interest income and Card Member spending.

Provisions for losses totaled $160 million, up 6 percent from $151 million a year ago, primarily driven by higher merchant financing loan balances and delinquencies, partially offset by lower write-offs in the Card Member receivables portfolio.

Total expenses were $1.5 billion, up 7 percent from $1.4 billion a year ago. The current quarter’s expenses reflected higher rewards and investment spending, primarily on technology development.

The effective tax rate was 36 percent, down from 37 percent a year ago.

Global Merchant Services reported first-quarter net income of $357 million, down 3 percent from $369 million a year ago. The decline reflected the impact of the stronger U.S. dollar.

Total revenues net of interest expense were $1.1 billion, down 3 percent compared to a year ago. FX-adjusted revenues were flat compared to a year ago.2 The current quarter’s revenues were impacted by a lower net merchant discount rate, which offset the benefit of higher Card Member spending.

Total expenses were $521 million, down 3 percent from $537 million a year ago. FX-adjusted expenses decreased 2 percent.2 The decrease reflected lower merchant acquirer payments related to OptBlue, the company’s initiative to expand merchant coverage in the United States.

The effective tax rate was 38 percent, up from 37 percent a year ago.

Corporate and Other reported first-quarter net loss of $298 million, compared to a net loss of $217 million a year ago.