Net income from the quarter included a gain of $1.1 billion ($677 million after-tax) from the previously announced sale of the company’s Costco U.S. cobrand card portfolio and a $232 million ($151 million after-tax) restructuring charge related to the company’s efforts to reduce its cost base.

Second-quarter consolidated total revenues net of interest expense were $8.2 billion, down 1 percent from $8.3 billion a year ago. Excluding the impact of foreign exchange rates due to the impact of a stronger U.S. dollar on international operations, adjusted revenues increased 1 percent, reflecting higher net card fees and net interest income.2 These benefits were offset in part by lower Costco-related revenues and a decrease in the average discount rate.

Consolidated provisions for losses were $463 million, down 1 percent from $467 million a year ago. Credit quality remained strong during the quarter. The prior period included $57 million of credit costs associated with the cobrand loan portfolio subsequently classified as “Held for Sale” (HFS); the credit costs associated with that portfolio for the current quarter were reported in other operating expenses.

Consolidated expenses were $4.8 billion, down 15 percent from $5.6 billion a year ago. The decrease reflected the gain from the loan portfolio sale, which was reported as an expense reduction. Expenses for the quarter also reflected the previously mentioned restructuring charge, as well as elevated levels of investment spending on growth initiatives. Operating expenses were down 31 percent versus the prior year. Excluding the portfolio sale gain and restructuring charge, adjusted operating expenses were flat.3

The effective tax rate for the quarter was 33 percent, down from 34 percent a year ago.

The company’s return on average equity (ROE) was 26.4 percent, down from 28.1 percent a year ago.

“Operating results were solid this quarter and consistent with the financial outlook we provided earlier in the year,” said Kenneth I. Chenault, chairman and chief executive officer. “We are making good progress on our initiatives to accelerate growth: acquiring 3 million new proprietary cards worldwide; generating additional spending on our global network; expanding merchant coverage; and continuing to meet the borrowing needs of Card Members while maintaining strong credit quality.

“During the quarter, we again made substantial investments in marketing and technology to help grow the business. At the same time, operating expenses continued to be well managed, and we moved forward aggressively with plans to take $1 billion out of our cost base on a run-rate basis by the end of 2017.

“We have returned a record amount of capital to shareholders so far this year, with share repurchases totaling $1.7 billion in the second quarter and a record $2.8 billion year to date. With our completion of the Federal Reserve’s annual stress test, we now plan to increase the quarterly dividend by 10 percent to 32 cents per share and repurchase up to an additional $3.3 billion shares over the next four quarters.

“As expected, the quarter included a substantial gain from the sale of the cobrand loan portfolio and a restructuring charge related to the initiative to reset our expense base. We also continued to see the impact of a lower merchant discount rate and a strong U.S. dollar on our international operations.

“Worldwide billed business grew 3 percent from a year ago. Adjusted for Costco/FX, those volumes rose 8 percent from a year ago. Total loans decreased 13 percent, while adjusted loans rose 13 percent after excluding the "Held for Sale" portfolios and the impact of foreign exchange rates.4 Those adjusted numbers benefited from increased usage of their other American Express Cards by former Costco cobrand Card Members.

“We’re encouraged by progress so far this year and plan to continue spending at elevated levels during the remainder of 2016 in order to capitalize on the opportunities we see in a very competitive marketplace. Notwithstanding that higher level of spending, we expect 2016 results to be at the high end of the range we shared earlier this year.5 Our expectations for 2017 remain unchanged, and we will stay focused on accelerating revenue growth, resetting our cost base and optimizing the investments we’re making in the business.5”

Segment Results

U.S. Consumer Services reported second-quarter net income of $1.1 billion, up 74 percent from $613 million a year ago.

Total revenues net of interest expense decreased 3 percent to $3.2 billion from $3.3 billion a year ago. The decrease primarily reflected the decline in Costco-related revenues from year-ago levels, as well as an increase in cash rebate rewards.

Provisions for losses totaled $237 million, down 2 percent from $243 million a year ago. Credit quality remained strong during the quarter. Certain credit costs associated with the cobrand loan portfolio classified as “Held for Sale” during the quarter were reported in other operating expenses.

Total expenses were $1.3 billion, down 40 percent from $2.1 billion a year ago. The decrease reflected a portion of the gain from the loan portfolio sale, which was reported as an expense reduction. That gain was offset in part by higher levels of investment spending on growth initiatives and a portion of the previously mentioned restructuring charge.

The effective tax rate was 37 percent compared to 35 percent a year ago.

International Consumer and Network Services reported second-quarter net income of $228 million, up 18 percent from $193 million a year ago.

Total revenues net of interest expense were $1.4 billion, up 6 percent (up 11 percent FX-adjusted2) from $1.3 billion a year ago. The increase primarily reflected higher bank partnership revenues and Card Member spending.

Provisions for losses totaled $78 million, up 3 percent from $76 million a year ago.

Total expenses were $1.1 billion, up 4 percent (up 7 percent FX-adjusted2) from $1.0 billion a year ago. The increase reflected higher investment spending on growth initiatives, as well as a portion of the previously mentioned restructuring charge.

The effective tax rate was 17 percent, down from 19 percent a year ago.

Global Commercial Services reported second-quarter net income of $576 million, up 5 percent from $550 million a year ago.

Total revenues net of interest expense were $2.5 billion, unchanged from a year ago.

Provisions for losses totaled $139 million, up 2 percent from $136 million a year ago.

Total expenses were $1.4 billion, down 4 percent from $1.5 billion a year ago. The decrease primarily reflected a portion of the gain from the loan portfolio sale, which was reported as an expense reduction. That benefit was offset in part by a portion of the restructuring charge mentioned earlier and higher levels of investment spending on growth initiatives.

The effective tax rate was 37 percent, up from 35 percent a year ago.

Global Merchant Services reported second-quarter net income of $373 million, up 1 percent from $369 million a year ago.

Total revenues net of interest expense were $1.1 billion, down 3 percent from $1.2 billion a year ago. Higher Card Member spending was offset by a lower average discount rate this quarter.

Total expenses were $547 million, down 7 percent from $586 million a year ago, largely due to the OptBlue program, which represents a growing share of the company’s merchant coverage and does not entail merchant acquirer payments.

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

Corporate and Other reported second-quarter net loss of $229 million compared with net loss of $252 million a year ago.