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

NEW YORK--(BUSINESS WIRE)--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 Shareholders^1	$	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.