American Express Fourth Quarter EPS Rises to $1.21 from $0.56 Last Year;

Revenues and Loans Increase as Card Member Spending Ends Year on Strong Note;

Credit Indicators Remain at Historical Lows;

Operating Expenses Well Contained in the Quarter

NEW YORK--()--

American Express Company (NYSE:AXP) today reported fourth-quarter net income of $1.3 billion, up from $637 million a year ago. Diluted earnings per share rose to $1.21, from $0.56 a year ago. Excluding expenses associated with the merchant litigation settlement agreement announced in late December, fourth-quarter adjusted net income was $1.3 billion, or $1.25 per share.2

 
 

(Millions, except percentages and per share amounts)

                   

Quarters Ended
December 31,

Percentage
Inc/(Dec)

Years Ended
December 31,

Percentage
Inc/(Dec)

       

2013

2012

2013

2012

Total Revenues Net of Interest Expense $ 8,547 $ 8,141 5 % $ 32,974 $ 31,555 4 %
Net Income $ 1,308 $ 637 # $ 5,359 $ 4,482 20 %
Earnings Per Common Share – Diluted:

Net Income Attributable to Common Shareholders1

$ 1.21 $ 0.56 # $ 4.88 $ 3.89 25 %
Average Diluted Common Shares Outstanding 1,073 1,116 (4 )% 1,089 1,141 (5 )%

Return on Average Equity

27.8 % 23.1 %

 

27.8 % 23.1 %

# Denotes a variance of more than 100%

 
 

The year-ago quarter included three significant items: a restructuring charge; an expense associated with higher estimated redemptions of Membership Rewards points; and the impact of Card Member reimbursements.

Consolidated total revenues net of interest expense rose to $8.5 billion in the fourth quarter, from $8.1 billion a year ago, representing a 5 percent increase (6 percent when adjusted for foreign currency translations3). The increase reflected higher Card Member spending and higher net interest income.

Consolidated provisions for losses totaled $528 million, down 17 percent from $638 million a year ago. This decrease reflected lower net write offs and a modest reserve release this quarter, compared with a modest increase in reserves last year. Credit indicators improved further from historically strong levels reported in prior quarters.

Consolidated expenses totaled $6.0 billion, down 8 percent from $6.6 billion a year ago. The decrease reflected the three year-ago items mentioned above. Adjusted for foreign currency translations, consolidated total expenses were down 7 percent from a year ago.3

The effective tax rate for the quarter was 34 percent, up from 31 percent from a year ago.

The company's return on average equity (ROE) was 27.8 percent, up from 23.1 percent a year ago.

“Fourth quarter results reflected a healthy increase in billed business in the U.S. and internationally," said Kenneth I. Chenault, chairman and chief executive officer. “We ended the year on a strong note, with Card Member spending up 8 percent despite mixed reports during the holiday shopping season.

“Credit quality indicators are at historically strong levels and, while many consumers are still cautious about taking on additional debt, we again saw a modest increase in Card Member loans this quarter.

“The settlement agreement we reached last month addresses merchant concerns while helping to ensure that American Express Card Members are treated fairly at the point of sale. The agreement, which is subject to court approval, would limit our exposure to future legal claims and allow us to stay focused on helping merchants build their business and strengthen relationships with their customers.”

Mr. Chenault said, “Serving Card Members and merchants through a diversified, spend-centric business has allowed us to generate consistent revenue increases at a time when top line growth is still under pressure in parts of the financial services industry.

“Controlling operating expenses,4” he added, “remains a top priority, and the restructuring we began a year ago allowed us to more than meet the goal we set for 2013.

“We enter 2014 with good momentum and the flexibility to make investments aimed at building on the strength of our performance during the past several years.”

For the full year, the company reported net income of $5.4 billion, up 20 percent from $4.5 billion a year ago. Diluted earnings per share rose to $4.88, up 25 percent from $3.89 a year ago.

Revenues net of interest expense for the full year increased 4 percent (5 percent FX adjusted3) to $33.0 billion from $31.6 billion a year ago. Consolidated expenses totaled $23.0 billion, down 1 percent from a year ago. Adjusted for foreign currency translations, expenses were unchanged from a year ago.3

Segment Results

U.S. Card Services reported fourth-quarter net income of $864 million, up from $423 million a year ago.

Total revenues net of interest expense increased 8 percent to $4.4 billion from $4.1 billion a year ago. The rise reflected a 9 percent increase in Card Member spending and higher net interest income. Revenues in the year-ago period reflected the impact of Card Member reimbursements mentioned above.

Provisions for losses totaled $346 million, down 27 percent from $477 million a year ago. The decrease reflected the benefit of lower net write-offs and a reserve release in the current quarter.

Total expenses decreased 8 percent to $2.8 billion from $3.0 billion a year ago, which included the rewards charges and a portion of the restructuring charge mentioned above.

The effective tax rate was 33 percent compared to 31 percent a year ago.

International Card Services reported fourth-quarter net income of $103 million, up 8 percent from $95 million a year ago.

Total revenues net of interest expense increased 2 percent (7 percent FX adjusted3) to $1.4 billion. The increase primarily reflected higher Card Member spending and higher net card fees.

Provisions for losses totaled $120 million, up 21 percent from $99 million a year ago. The increase reflected higher net write offs and a reserve build in the current quarter.

Total expenses increased 1 percent (5 percent FX adjusted3) to $1.2 billion. The increase primarily reflected higher rewards costs, partially offset by a decline in operating expenses from year-ago levels which included a portion of the restructuring charge mentioned above.

The effective tax rate was 5 percent compared to 14 percent a year ago.

Global Commercial Services reported fourth-quarter net income of $182 million, up from $65 million a year ago.

Total revenues net of interest expense increased 2 percent to $1.2 billion. The increase primarily reflected higher Card Member spending.

Total expenses decreased 13 percent (12 percent FX adjusted3) to $910 million from $1.0 billion a year ago. The decline primarily reflected lower operating expenses related to the restructuring charge in the year-ago period mentioned above.

The effective tax rate was 37 percent compared to 54 percent from a year ago. The year-ago quarter’s higher tax rate reflected lower tax benefits from the restructuring charge in certain international markets.

Global Network & Merchant Services reported fourth-quarter net income of $399 million, up 13 percent from $354 million a year ago.

Total revenues net of interest expense increased 4 percent (6 percent FX adjusted3) to $1.4 billion. The increase primarily reflected higher merchant-related revenues driven by an increase in global Card Member spending.

Total expenses decreased 1 percent to $801 million from $812 million a year ago. The year-ago period included a portion of the previously mentioned restructuring charge, and the current quarter reflected higher operating expenses driven by the merchant litigation settlement. Adjusted for foreign currency translations, expenses were unchanged from a year ago.3

The effective tax rate was 37 percent compared to 36 percent a year ago.

Corporate and Other reported fourth-quarter net loss of $240 million compared with net loss of $300 million in the year-ago period. The year-ago quarter included a portion of the restructuring charge mentioned above.

About American Express

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 americanexpress.com and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/companies/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.

Key links to products and services: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, business travel, and corporate card

The 2013 Fourth Quarter/Full Year 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.

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the company’s expected business and financial performance and are subject to risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements due to a variety of factors, including those contained in the company's Annual Report on Form 10-K for the year ended December 31, 2012, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013 and the company’s other filings with the Securities and Exchange Commission. 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.

1 Represents net income less earnings allocated to participating share awards of $11 million and $7 million for the three months ended December 31, 2013 and 2012, respectively, and $47 million and $49 million for the twelve months ended December 31, 2013 and 2012, respectively.

2 Management believes adjusted net income and adjusted earnings per share, which are non-GAAP measures, provide useful metrics to evaluate the ongoing operating performance of the company. See Appendix V in the selected statistical tables for a reconciliation of adjusted net income and adjusted earnings per share.

3 As reported in this release, FX adjusted information, which constitute non-GAAP financial measures, assumes a constant exchange rate between the periods being compared for purposes of currency translations into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the three months ended December 31, 2013 apply to the period(s) against which such results are being compared). The company believes the presentation of information on an FX adjusted basis is helpful to investors by making it easier to compare the company’s performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.

4 Operating expenses include salaries and employee benefits, professional services, occupancy and equipment, communications and other, net.

 
 
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. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.
                                   
 
(Preliminary)

American Express Company

Consolidated Statements of Income

 
(Millions)
Quarters Ended Years Ended
December 31, Percentage
Inc/(Dec)
December 31, Percentage
Inc/(Dec)
2013 2012 2013 2012
 
Revenues
Non-interest revenues
Discount revenue $ 4,869 $ 4,575 6 % $ 18,695 $ 17,739 5 %
Net card fees 673 648 4 2,631 2,506 5
Travel commissions and fees 491 503 (2 ) 1,913 1,940 (1 )
Other commissions and fees 626 578 8 2,414 2,317 4
Other   569     644   (12 )   2,274     2,425   (6 )
Total non-interest revenues   7,228     6,948   4   27,927     26,927   4
Interest income
Interest on loans 1,715 1,660 3 6,718 6,511 3
Interest and dividends on investment securities 48 53 (9 ) 201 246 (18 )
Deposits with banks and other   19     24   (21 )   86     97   (11 )
Total interest income   1,782     1,737   3   7,005     6,854   2
Interest expense
Deposits 110 118 (7 ) 442 480 (8 )
Long-term debt and other   353     426   (17 )   1,516     1,746   (13 )
Total interest expense   463     544   (15 )   1,958     2,226   (12 )
Net interest income   1,319     1,193   11   5,047     4,628   9
Total revenues net of interest expense   8,547     8,141   5   32,974     31,555   4
Provisions for losses
Charge card 199 211 (6 ) 789 742 6
Card Member loans 308 396 (22 ) 1,229 1,149 7
Other   21     31   (32 )   92     99   (7 )
Total provisions for losses   528     638   (17 )   2,110     1,990   6
Total revenues net of interest expense after provisions for losses   8,019     7,503   7   30,864     29,565   4
 
Expenses
Marketing and promotion 809 722 12 3,043 2,890 5
Card Member rewards 1,717 1,857 (8 ) 6,457 6,282 3
Card Member services 188 197 (5 ) 767 772 (1 )
Salaries and employee benefits 1,489 1,910 (22 ) 6,191 6,597 (6 )
Professional services 830 871 (5 ) 3,102 2,963 5
Occupancy and equipment 510 486 5 1,904 1,823 4
Communications 97 99 (2 ) 379 383 (1 )
Other, net   399     432   (8 )   1,133     1,404   (19 )
Total   6,039     6,574   (8 )   22,976     23,114   (1 )
Pretax income 1,980 929 # 7,888 6,451 22
Income tax provision   672     292   #   2,529     1,969   28
Net income $ 1,308   $ 637   # $ 5,359   $ 4,482   20
Net income attributable to common shareholders (A) $ 1,297   $ 630   # $ 5,312   $ 4,433   20
Effective tax rate 33.9 % 31.4 % 32.1 % 30.5 %
 
# - Denotes a variance of more than 100 percent.
 
(A) Represents net income, less earnings allocated to participating share awards of $11 million and $7 million for the three months ended December 31, 2013 and 2012, respectively, and $47 million and $49 million for the twelve months ended December 31, 2013 and 2012, respectively.
 
 
(Preliminary)

American Express Company

Condensed Consolidated Balance Sheets

 
(Billions)
 
December 31, December 31,
2013 2012
 
Assets
Cash & cash equivalents $ 19 $ 22
Accounts receivable 47 46
Investment securities 5 6
Loans 67 64
Other assets   15     15  
Total assets $ 153   $ 153  
 
Liabilities and Shareholders' Equity
Customer deposits $ 42 $ 40
Short-term borrowings 5 3
Long-term debt 55 59
Other liabilities   32     32  
Total liabilities   134     134  
 
Shareholders' Equity   19     19  
Total liabilities and shareholders' equity $ 153   $ 153  
 
 
(Preliminary)

American Express Company

Financial Summary

 
(Millions)
Quarters Ended Years Ended
December 31, Percentage
Inc/(Dec)
December 31, Percentage
Inc/(Dec)
2013 2012 2013 2012
 

Total revenues net of interest expense

U.S. Card Services $ 4,388 $ 4,070 8 % $ 16,995 $ 16,046 6 %
International Card Services 1,429 1,397 2 5,401 5,306 2
Global Commercial Services 1,238 1,215 2 4,853 4,749 2
Global Network & Merchant Services   1,447     1,390   4   5,513     5,271   5
8,502 8,072 5 32,762 31,372 4
Corporate & Other   45     69   (35 )   212     183   16
 
CONSOLIDATED TOTAL REVENUES NET OF INTEREST EXPENSE $ 8,547   $ 8,141   5 $ 32,974   $ 31,555   4
 

Pretax income (loss)

U.S. Card Services $ 1,292 $ 612 # $ 4,994 $ 4,069 23
International Card Services 108 110 (2 ) 643 659 (2 )
Global Commercial Services 287 142 # 1,244 960 30
Global Network & Merchant Services   632     557   13   2,469     2,219   11
2,319 1,421 63 9,350 7,907 18
Corporate & Other   (339 )   (492 ) (31 )   (1,462 )   (1,456 ) -
 
PRETAX INCOME $ 1,980   $ 929   # $ 7,888   $ 6,451   22
 

Net income (loss)

U.S. Card Services $ 864 $ 423 # $ 3,193 $ 2,592 23
International Card Services 103 95 8 631 634 -
Global Commercial Services 182 65 # 860 644 34
Global Network & Merchant Services   399     354   13   1,575     1,443   9
1,548 937 65 6,259 5,313 18
Corporate & Other   (240 )   (300 ) (20 )   (900 )   (831 ) 8
 
NET INCOME $ 1,308   $ 637   # $ 5,359   $ 4,482   20
 
# - Denotes a variance of more than 100 percent.
 
 
(Preliminary)

American Express Company

Financial Summary (continued)

 
 
Quarters Ended Years Ended
December 31, Percentage
Inc/(Dec)
December 31, Percentage
Inc/(Dec)
2013 2012 2013 2012
EARNINGS PER COMMON SHARE
 
BASIC
Net income attributable to common shareholders $ 1.22   $ 0.57   # $ 4.91   $ 3.91   26 %
 
Average common shares outstanding (millions)   1,067     1,110   (4 ) %   1,082     1,135   (5 ) %
 
DILUTED
Net income attributable to common shareholders $ 1.21   $ 0.56   # $ 4.88   $ 3.89   25 %
 
Average common shares outstanding (millions)   1,073     1,116   (4 ) %   1,089     1,141   (5 ) %
 
Cash dividends declared per common share $ 0.23   $ 0.20   15 % $ 0.89   $ 0.80   11 %
 
 

Selected Statistical Information

 
Quarters Ended Years Ended
December 31, Percentage
Inc/(Dec)
December 31, Percentage
Inc/(Dec)
2013 2012 2013 2012
 
Return on average equity (A) 27.8 % 23.1 % 27.8 % 23.1 %
Return on average common equity (A) 27.6 % 22.8 % 27.6 % 22.8 %
Return on average tangible common equity (A) 34.9 % 29.2 % 34.9 % 29.2 %
Common shares outstanding (millions) 1,064 1,105 (4 ) % 1,064 1,105 (4 ) %
Book value per common share $ 18.32 $ 17.09 7 % $ 18.32 $ 17.09 7 %
Shareholders' equity (billions) $ 19.5 $ 18.9 3 % $ 19.5 $ 18.9 3 %
 
# - Denotes a variance of more than 100 percent.
 
(A) Refer to Appendix I for components of return on average equity, return on average common equity and return on average tangible common equity, a non-GAAP measure.
           
 
(Preliminary)

American Express Company

Components of Return on Average Equity (ROE), Return on Average Common Equity (ROCE),

and Return on Average Tangible Common Equity (ROTCE)

Appendix I

 
(Millions)
For the Twelve Months Ended
December 31, September 30, June 30, March 31, December 31,
2013 2013 2013 2013 2012
 

ROE

 
Net income $ 5,359 $ 4,688 $ 4,572 $ 4,506 $ 4,482
Average shareholders' equity $ 19,254 $ 19,289 $ 19,372 $ 19,426 $ 19,425
Return on average equity (A) 27.8 % 24.3 % 23.6 % 23.2 % 23.1 %
 

Reconciliation of ROCE and ROTCE

 
Net income $ 5,359 $ 4,688 $ 4,572 $ 4,506 $ 4,482
Earnings allocated to participating share awards and other   47     43     45     46     49  
Net income attributable to common shareholders $ 5,312   $ 4,645   $ 4,527   $ 4,460   $ 4,433  
 
Average shareholders' equity $ 19,254   $ 19,289   $ 19,372   $ 19,426   $ 19,425  

Average common shareholders' equity

$ 19,254   $ 19,289   $ 19,372   $ 19,426   $ 19,425  
Average goodwill and other intangibles   4,055     4,091     4,128     4,181     4,232  
Average tangible common shareholders' equity $ 15,199   $ 15,198   $ 15,244   $ 15,245   $ 15,193  
Return on average common equity (A) 27.6 % 24.1 % 23.4 % 23.0 % 22.8 %
Return on average tangible common equity (B) 34.9 % 30.6 % 29.7 % 29.3 % 29.2 %
 
(A) Return on average equity and return on average common equity are calculated by dividing one year period net income/net income attributable to common shareholders by one year average total shareholders’ equity/average common shareholders' equity, respectively.
 
(B) Return on average tangible common equity, a non-GAAP measure, is computed in the same manner as return on average common equity except the computation of average tangible common shareholders' equity, a non-GAAP measure, excludes from average total shareholders' equity, average goodwill and other intangibles. The Company believes that return on average tangible common equity is a useful measure of the profitability of its business.
 
 
           
(Preliminary)

American Express Company

Net Income and EPS Reconciliation

Appendix V

 
(Millions, except per share amounts)

Quarter Ended
December 31, 2013

Year Ended
December 31, 2013
 

Net income:

 
Reported Net income $ 1,308 $ 5,359
 
Q4'13 Merchant Litigation Settlement (after-tax) $ 41 $ 41
 
Adjusted Net income (A) $ 1,349 $ 5,400
 

Diluted EPS:

 
Reported Net income attributable to common shareholders $ 1.21 $ 4.88
 
Q4'13 Merchant Litigation Settlement (after-tax) $ 0.04 $ 0.03
 
Adjusted Net income attributable to common shareholders (A) $ 1.25 $ 4.91
 
(A) Adjusted net income and adjusted net income attributable to common shareholders, which are non-GAAP measures, represent net income excluding the impact of the merchant litigation settlement recognized in Q4’13. The Company believes adjusted net income and adjusted net income attributable to common shareholders provide useful metrics to evaluate the ongoing operating performance of the Company.
 
 

Media Contacts:
Marina H. Norville, +1-212-640-2832
marina.h.norville@aexp.com
or
Mike O’Neill, +1-212-640-5951
mike.o’neill@aexp.com
or
Investors/Analysts Contacts:
Ken Paukowits, +1-212-640-6348
ken.f.paukowits@aexp.com
or
Rick Petrino, +1-212-640-5574
richard.petrino@aexp.com

Short Name: American Exp.Co
Category Code: FR
Sequence Number: 404754
Time of Receipt (offset from UTC): 20140116T172820+0000

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