TIDMAMX
American Express Company (NYSE: AXP) today reported
fourth-quarter net income of $1.1 billion, up 48 percent from $716
million a year ago. Diluted earnings per share was $0.88, up 47
percent from $0.60 a year ago. The results include $113 million
($74 million after-tax) of previously announced restructuring and
other reengineering costs. Excluding these costs, adjusted diluted
earnings per share was $0.941.
(Millions,
except
per
share
amounts)
Quarters Ended Percentage Years Ended Percentage
December 31, Inc/(Dec) December 31, Inc/(Dec)
2010 2009 2010 2009
Total $ 7,322 $ 6,489 13 % $ 27,819 $ 24,523 13 %
Revenues
Net of
Interest
Expense2
Income $ 1,062 $ 710 50 $ 4,057 $ 2,137 90
From
Continuing
Operations
Income $ - $ 6 - $ - $ (7 ) -
(Loss)
From
Discontinued
Operations
Net $ 1,062 $ 716 48 $ 4,057 $ 2,130 90
Income
Earnings
Per
Common
Share
-
Diluted:
Income $ 0.88 $ 0.59 49 $ 3.35 $ 1.54 #
From
Continuing
Operations
Attributable
to
Common
Shareholders3
Income $ - $ 0.01 - $ - $ - -
(Loss)
From
Discontinued
Operations
Net $ 0.88 $ 0.60 47 $ 3.35 $ 1.54 #
Income
Attributable
to
Common
Shareholders3
Average 1,194 1,184 1 % 1,195 1,171 2 %
Diluted
Common
Shares
Outstanding
Return 27.5 % 14.6 % 27.5 % 14.6 %
on
Average
Equity
Return 27.2 % 13.6 % 27.2 % 13.6 %
on
Average
Common
Equity
#
Denotes
a
variance
of more
than
100%
Consolidated total revenues net of interest expense were $7.3
billion, up 13 percent from $6.5 billion a year ago. The increase
largely reflects the consolidation of securitized cardmember loans
and related debt onto the balance sheet in the first quarter4.
Revenues also reflect higher cardmember spending and higher travel
commissions and fees, partially offset by lower interest income due
to a smaller loan portfolio, and lower yields on the portfolio.
Consolidated provisions for losses totaled $239 million compared
to $748 million in the year-ago period4, reflecting continued
improvement in credit quality.
Consolidated expenses totaled $5.6 billion, up 17 percent from
$4.8 billion a year ago, reflecting the decision to invest
significantly in business building initiatives, as well as higher
volume-related rewards costs and the previously discussed
restructuring charges.
The company's return on average equity (ROE) was 27.5 percent,
up from 14.6 percent a year ago.
"Continued investments in the business helped to generate higher
consumer, small business and corporate card spending while
expanding the use of our products online," said Kenneth I.
Chenault, chairman and chief executive officer. "With cardmember
spending up 15 percent this period, we reached all-time records for
the quarter and the full year."
"Credit indicators strengthened and the amount we needed to set
aside for problem loans declined significantly from a year ago.
Unemployment levels and housing remain a concern, but other aspects
of the economy continue to show signs of improvement.
"Against this backdrop, strong billings and credit quality gives
us the flexibility to continue with substantial investments in
marketing and infrastructure to build revenues and operate more
efficiently in a marketplace being transformed by digital
technologies.
"While we continue to retain the flexibility to scale back our
investments as business conditions change, the progress we made
during 2010 has put us in a strong competitive position for the
next phase of the economic recovery."
Segment Results
U.S. Card Services reported fourth-quarter net income of $701
million, up 70 percent from $413 million a year ago.
Total revenues net of interest expense increased 18 percent to
$3.8 billion from $3.2 billion. The increase largely reflects the
consolidation of securitized cardmember loans and related debt onto
the balance sheet in the first quarter4.Revenues also reflect
higher cardmember spending, partially offset by lower interest
income due to a smaller loan portfolio and lower yields on the
portfolio.
Provisions for losses totaled $111 million, down 68 percent from
$346 million a year ago4. The decline reflects continued
improvement in credit quality.
Total expenses increased 18 percent. Marketing, promotion,
rewards and cardmember services expenses increased 16 percent from
the year-ago period, reflecting increased investments in marketing
and promotion and volume-related rewards costs. Salaries and
employee benefits and other operating expenses increased 22 percent
from year-ago levels, primarily reflecting the previously discussed
restructuring and other reengineering costs, and various technology
and business building investments.
The effective tax rate was 34 percent compared to 36 percent in
the year-ago quarter.
International Card Services reported fourth-quarter net income
of $102 million, up 48 percent from $69 million a year ago.
Total revenues net of interest expense increased 2 percent to
$1.2 billion reflecting higher cardmember spending, partially
offset by lower interest income due to smaller lending balances and
yield.
Provisions for losses totaled $80 million, down 75 percent from
$324 million a year ago. The decline reflects continued improvement
in credit quality.
Total expenses increased 23 percent. Marketing, promotion,
rewards and cardmember services expenses increased 22 percent from
year-ago levels, reflecting higher volume-related rewards costs and
increased investments in marketing and promotion. Salaries and
employee benefits and other operating expenses increased 23 percent
from year-ago levels, primarily reflecting the previously discussed
restructuring and other reengineering costs, and various sales
force and business building investments.
The effective tax rate was 6 percent compared to negative 73
percent in the year-ago quarter. The tax rates in both periods
primarily reflect the impact of recurring tax benefits on varying
levels of performance.
Global Commercial Services reported fourth-quarter net income of
$106 million, up 6 percent from $100 million a year ago.
Total revenues net of interest expense increased 7 percent to
$1.2 billion, from $1.1 billion, reflecting increased spending by
corporate cardmembers and higher travel commissions and fees.
Provisions for losses totaled $30 million, down 19 percent from
$37 million a year ago.
Total expenses increased 9 percent. Marketing, promotion,
rewards and cardmember services expenses increased 14 percent from
the year-ago period, primarily reflecting higher volume-related
rewards costs. Salaries and employee benefits and other operating
expenses increased 9 percent from the year-ago period, primarily
reflecting higher volume-related expenses and various business
building investments.
The effective tax rate was 27 percent compared to 29 percent in
the year-ago quarter.
Global Network & Merchant Services reported fourth quarter
net income of $268 million, up 34 percent from $200 million a year
ago.
Total revenues net of interest expense increased 15 percent to
$1.2 billion, from $1.0 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 16 percent. Marketing, promotion,
rewards and cardmember services expenses decreased 17 percent from
the year-ago period. Salaries and employee benefits and other
operating expenses increased 30 percent, primarily reflecting the
previously mentioned restructuring and other reengineering costs,
and various technology and business-building investments.
The effective tax rate was 32 percent compared to 38 percent in
the year-ago quarter.
Corporate and Other reported fourth-quarter net loss of $115
million compared with net loss of $72 million a year ago. The
results for both periods reflect income of $220 million ($136
million after-tax) for the previously announced MasterCard and Visa
settlements.
American Express is a global services company, providing
customers with access to products, insights and experiences that
enrich lives and build business success. Learn more at
www.americanexpress.com and connect with us on
www.facebook.com/americanexpress, www.twitter.com/americanexpress
and www.youtube.com/americanexpress.
The 2010 Fourth Quarter Earnings Supplement will be available
today on the American Express web site at
http://ir.americanexpress.com. An investor conference call will be
held at 5:00 p.m. (ET) today to discuss fourth-quarter earnings
results. Live audio and presentation slides for the investor
conference call will be available to the general public at the same
web site. A replay of the conference call will be available later
today at the same web site address.
Cautionary Note Regarding Forward-Looking Statements
This release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
which are subject to risks and uncertainties. The forward-looking
statements, which address the company's expected business and
financial performance, among other matters, contain words such as
"believe," "expect," "estimate," "anticipate," "optimistic,"
"intend," "plan," "aim," "will," "may," "should," "could," "would,"
"likely," and similar expressions. Readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. The company
undertakes no obligation to update or revise any forward-looking
statements. Factors that could cause actual results to differ
materially from these forward-looking statements, include, but are
not limited to, the following:
-- changes in global economic and business conditions, including consumer
and business spending, the availability and cost of credit,
unemployment and political conditions, all of which may
significantly
affect spending on the Card, delinquency rates, loan balances
and
other aspects of our business and results of operations;
-- changes in capital and credit market conditions, which may
significantly affect the company's ability to meet its
liquidity
needs, access to capital and cost of capital, including changes
in
interest rates; changes in market conditions affecting the
valuation
of our assets; or any reduction in our credit ratings or those
of our
subsidiaries, which could materially increase the cost and other
terms
of our funding, restrict our access to the capital markets or
result
in contingent payments under contracts;
-- litigation, such as class actions or proceedings brought by
governmental and regulatory agencies (including the lawsuit
filed
against the Company by the U.S. Department of Justice and
certain
state attorneys general), that could result in (i) the
imposition of
behavioral remedies against the Company or the Company's
voluntarily
making certain changes to its business practices, the effects of
which
in either case could have a material adverse impact on the
Company's
financial performance; (ii) the imposition of substantial
monetary
damages in private actions against the Company; and/or (iii)
damage to
the Company's global reputation and brand;
-- legal and regulatory developments wherever we do business, including
legislative and regulatory reforms in the United States, such as
the
Dodd-Frank Act's stricter regulation of large,
interconnected
financial institutions, changes in requirements relating to
securitization and the establishment of the Bureau of
Consumer
Financial Protection, which could make fundamental changes to
many of
our business practices or materially affect our capital
requirements,
results of operations, ability to pay dividends or repurchase
our
stock; or actions and potential future actions by the FDIC and
credit
rating agencies applicable to securitization trusts, which
could
impact the company's ABS program;
-- changes in the substantial and increasing worldwide competition in the
payments industry, including competitive pressure that may
impact the
prices we charge merchants that accept our Cards and the success
of
marketing, promotion or rewards programs;
-- changes in technology or in our ability to protect our intellectual
property (such as copyrights, trademarks, patents and controls
on
access and distribution), and invest in and compete at the
leading
edge of technological developments across our businesses,
including
technology and intellectual property of third parties whom we
rely on,
all of which could materially affect our results of
operations;
-- data breaches and fraudulent activity, which could damage our brand,
increase our costs or have regulatory implications, and changes
in
regulation affecting privacy and data security under federal,
state
and foreign law, which could result in higher compliance and
technology costs to ourselves or our vendors;
-- changes in our ability to attract or retain qualified personnel in the
management and operation of the company's business, including
any
changes that may result from increasing regulatory supervision
of
compensation practices;
-- changes in the financial condition and creditworthiness of our
business partners, such as bankruptcies, restructurings or
consolidations, involving merchants that represent a
significant
portion of our business, such as the airline industry, or our
partners
in Global Network Services or financial institutions that we
rely on
for routine funding and liquidity, which could materially affect
our
financial condition or results of operations;
-- uncertainties associated with business acquisitions, including the
ability to realize anticipated business retention, growth and
cost
savings or effectively integrate the acquired business into
our
existing operations;
-- changes affecting the success of our reengineering and other cost
control initiatives, which may result in the company not
realizing all
or a significant portion of the benefits that we intend;
-- the actual amount to be spent by the Company on investments in the
business, including on marketing, promotion, rewards and
cardmember
services and certain other operating expenses, which will be
based in
part on management's assessment of competitive opportunities and
the
Company's performance and the ability to control and manage
operating,
infrastructure, advertising and promotion expenses as business
expands
or changes;
-- the effectiveness of the company's risk management policies and
procedures, including credit risk relating to consumer debt,
liquidity
risk in meeting business requirements and operational risks;
-- changes affecting our ability to accept or maintain deposits due to
market demand or regulatory constraints, such as changes in
interest
rates and regulatory restrictions on our ability to obtain
deposit
funding or offer competitive interest rates, which could affect
our
liquidity position and our ability to fund our business; and
-- factors beyond our control such as fire, power loss, disruptions in
telecommunications, severe weather conditions, natural
disasters,
terrorism, "hackers" or fraud, which could affect
travel-related
spending or disrupt our global network systems and ability to
process
transactions.
A further description of these uncertainties and other risks can
be found in the company's Annual Report on Form 10-K for the year
ended December 31, 2009, its Quarterly Reports on Form 10-Q for the
three months ended March 31, June 30, and September 30, 2010, and
the company's other reports filed with the SEC.
1 Management believes the adjusted earnings per share, which is
a non-GAAP measure, provides a useful metric to evaluate the
ongoing operating performance of the company.
2 Refer to discussion regarding revenue drivers within the
earnings release.
3 Represents income from continuing operations or net income, as
applicable, less (i) accelerated preferred dividend accretion of
$212 million for the twelve months ended December 31, 2009 due to
the repurchase of preferred shares from the U.S. Treasury
Department, (ii) preferred shares dividends and related accretion
of $94 million for the twelve months ended December 31, 2009, and
(iii) earnings allocated to participating share awards and other
items of $12 million and $9 million for the three months ended
December 31, 2010 and 2009, respectively, and $51 million and $22
million for the twelve months ended December 31, 2010 and 2009,
respectively.
4 Upon the adoption of new accounting guidance governing the
accounting for transfers of financial assets and consolidation of
variable interest entities on January 1, 2010, the company began
consolidating the assets and liabilities of its previously
unconsolidated American Express Credit Account Master Trust
(Lending Trust). Among the changes arising from the consolidation
of the Lending Trust, expenses related to written-off securitized
cardmember loans moved from revenues net of interest expense into
provisions for losses.
All information in the following tables is presented on a basis
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), unless otherwise indicated.
(Preliminary)
American
Express
Company
Consolidated
Statements
of Income
(Millions)
Quarters Ended Years Ended
December 31, Percentage December 31, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
Revenues
Non-interest
revenues
Discount $ 4,093 $ 3,645 12 % $ 15,111 $ 13,389 13 %
revenue
Net card 534 549 (3 ) 2,102 2,151 (2 )
fees
Travel 472 439 8 1,779 1,594 12
commissions
and fees
Other 519 438 18 2,031 1,778 14
commissions
and fees
Securitization N/A 190 - N/A 400 -
income,
net (A)
Other 514 518 (1 ) 1,927 2,087 (8 )
Total 6,132 5,779 6 22,950 21,399 7
non-interest
revenues
Interest
income
Interest 1,676 1,036 62 6,783 4,468 52
and fees
on loans
Interest 98 225 (56 ) 443 804 (45 )
and
dividends
on
investment
securities
Deposits 21 11 91 66 59 12
with
banks
and other
Total 1,795 1,272 41 7,292 5,331 37
interest
income
Interest
expense
Deposits 140 126 11 546 425 28
Short-term 1 1 - 3 37 (92 )
borrowings
Long-term 464 435 7 1,874 1,745 7
debt
and other
Total 605 562 8 2,423 2,207 10
interest
expense
Net 1,190 710 68 4,869 3,124 56
interest
income
Total 7,322 6,489 13 27,819 24,523 13
revenues
net of
interest
expense
Provisions
for
losses
Charge 183 141 30 595 857 (31 )
card
Cardmember 37 560 (93 ) 1,527 4,266 (64 )
loans
Other 19 47 (60 ) 85 190 (55 )
Total 239 748 (68 ) 2,207 5,313 (58 )
provisions
for
losses
Total 7,083 5,741 23 25,612 19,210 33
revenues
net of
interest
expense
after
provisions
for
losses
Expenses
Marketing 810 713 14 3,054 1,914 60
and
promotion
Cardmember 1,344 1,178 14 5,029 4,036 25
rewards
Cardmember 155 143 8 561 517 9
services
Salaries 1,570 1,196 31 5,566 5,080 10
and
employee
benefits
Professional 908 715 27 2,806 2,408 17
services
Occupancy 428 495 (14 ) 1,562 1,619 (4 )
and
equipment
Communications 99 99 - 383 414 (7 )
Other, 292 241 21 687 381 80
net
Total 5,606 4,780 17 19,648 16,369 20
Pretax 1,477 961 54 5,964 2,841 #
income
from
continuing
operations
Income 415 251 65 1,907 704 #
tax
provision
Income 1,062 710 50 4,057 2,137 90
from
continuing
operations
Income - 6 - - (7 ) -
(Loss)
from
discontinued
operations,
net of
tax
Net $ 1,062 $ 716 48 $ 4,057 $ 2,130 90
income
Income $ 1,050 $ 701 50 $ 4,006 $ 1,809 #
from
continuing
operations
attributable
to
common
shareholders
(B)
Net $ 1,050 $ 707 49 $ 4,006 $ 1,802 #
income
attributable
to
common
shareholders
(B)
# - Denotes a variance of more than 100%.
(A) In accordance with the new GAAP effective
January 1, 2010, the Company
no longer reports securitization income, net in its income statement.
(B) Represents income from continuing operations or
net income, as applicable, less (i) accelerated
preferred dividend accretion of $212 million
for the twelve months ended December
31, 2009 due to the repurchase of $3.39 billion
of preferred shares issued as part
of the Capital Purchase Program (CPP), (ii)
preferred shares dividends and related
accretion of $94 million for the twelve months
ended December 31, 2009, and (iii) earnings
allocated to participating share awards and
other items of $12 million and $9 million
for the three months ended December 31, 2010
and 2009, respectively, and $51 million and
$22 million for the twelve months ended December
31, 2010 and 2009, respectively.
(Preliminary)
American Express Company
Condensed Consolidated Balance Sheets
(Billions)
December 31, December 31,
2010 2009
Assets
Cash $ 17 $ 17
Accounts receivable 40 38
Investment securities 14 24
Loans 58 30
Other assets 18 16
Total assets $ 147 $ 125
Liabilities and Shareholders' Equity
Customer deposits $ 30 $ 26
Short-term borrowings 3 2
Long-term debt 66 52
Other liabilities 32 31
Total liabilities 131 111
Shareholders' Equity 16 14
Total liabilities and $ 147 $ 125
shareholders' equity
(Preliminary)
American
Express
Company
Financial
Summary
(Millions)
Quarters Ended Years Ended
December 31, Percentage December 31, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
Total
revenues
net of
interest
expense
U.S. $ 3,769 $ 3,188 18 % $ 14,616 $ 12,153 20 %
Card
Services
International 1,234 1,215 2 4,650 4,529 3
Card
Services
Global 1,152 1,072 7 4,402 3,983 11
Commercial
Services
Global 1,190 1,031 15 4,373 3,780 16
Network
&
Merchant
Services
7,345 6,506 13 28,041 24,445 15
Corporate
& Other,
including (23 ) (17 ) 35 (222 ) 78 #
adjustments
and
eliminations
CONSOLIDATED $ 7,322 $ 6,489 13 $ 27,819 $ 24,523 13
TOTAL
REVENUES
NET
OF
INTEREST
EXPENSE
Pretax
income
(loss)
from
continuing
operations
U.S. $ 1,061 $ 646 64 $ 3,537 $ 586 #
Card
Services
International 108 40 # 638 276 #
Card
Services
Global 145 141 3 761 505 51
Commercial
Services
Global 395 322 23 1,649 1,445 14
Network
&
Merchant
Services
1,709 1,149 49 6,585 2,812 #
Corporate (232 ) (188 ) 23 (621 ) 29 #
& Other
PRETAX $ 1,477 $ 961 54 $ 5,964 $ 2,841 #
INCOME
FROM
CONTINUING
OPERATIONS
Net
income
(loss)
U.S. $ 701 $ 413 70 $ 2,246 $ 411 #
Card
Services
International 102 69 48 566 332 70
Card
Services
Global 106 100 6 474 350 35
Commercial
Services
Global 268 200 34 1,063 937 13
Network
&
Merchant
Services
1,177 782 51 4,349 2,030 #
Corporate (115 ) (72 ) 60 (292 ) 107 #
& Other
Income 1,062 710 50 4,057 2,137 90
from
continuing
operations
Income - 6 - - (7 ) -
(Loss)
from
discontinued
operations,
net of
tax
NET $ 1,062 $ 716 48 $ 4,057 $ 2,130 90
INCOME
#
- Denotes
a
variance
of more
than
100%.
(Preliminary)
American
Express
Company
Financial
Summary
(continued)
Quarters Ended Years Ended
December 31, Percentage December 31, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
EARNINGS
PER
COMMON
SHARE
BASIC
Income $ 0.88 $ 0.59 49 % $ 3.37 $ 1.55 # %
from
continuing
operations
attributable
to
common
shareholders
Income - 0.01 - - (0.01 ) -
(Loss)
from
discontinued
operations
Net $ 0.88 $ 0.60 47 % $ 3.37 $ 1.54 # %
income
attributable
to
common
shareholders
Average 1,188 1,179 1 % 1,188 1,168 2 %
common
shares
outstanding
(millions)
DILUTED
Income $ 0.88 $ 0.59 49 % $ 3.35 $ 1.54 # %
from
continuing
operations
attributable
to
common
shareholders
Income - 0.01 - - - -
(Loss)
from
discontinued
operations
Net $ 0.88 $ 0.60 47 % $ 3.35 $ 1.54 # %
income
attributable
to
common
shareholders
Average 1,194 1,184 1 % 1,195 1,171 2 %
common
shares
outstanding
(millions)
Cash $ 0.18 $ 0.18 - % $ 0.72 $ 0.72 - %
dividends
declared
per
common
share
Selected
Statistical
Information
Quarters Ended Years Ended
December 31, Percentage December 31, Percentage
2010 2009 Inc/(Dec) 2010 2009 Inc/(Dec)
Return 27.5 % 14.6 % 27.5 % 14.6 %
on
average
equity
(A)
Return 27.2 % 13.6 % 27.2 % 13.6 %
on
average
common
equity
(A)
Return 35.1 % 17.6 % 35.1 % 17.6 %
on
average
tangible
common
equity
(A)
Common 1,197 1,192 - % 1,197 1,192 - %
shares
outstanding
(millions)
Book $ 13.56 $ 12.08 12 % $ 13.56 $ 12.08 12 %
value
per
common
share
Shareholders' $ 16.2 $ 14.4 13 % $ 16.2 $ 14.4 13 %
equity
(billions)
# - Denotes a variance
of more than 100%.
(A) Refer to Appendix I for components
of return on average equity, return
on average common equity and return on
average tangible common equity.
Media:
Joanna Lambert, 212-640-9668
joanna.g.lambert@aexp.com
Mike O'Neill, 212-640-5951
mike.o'neill@aexp.com
or
Investors/Analysts:
Toby Willard, 212-640-1958
sherwood.s.willardjr@aexp.com
Ron Stovall, 212-640-5574
ronald.stovall@aexp.com
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