American Express Reports Fourth Quarter Earnings Per Share of $2.32 and Full Year EPS of $7.91

Strong 2018 Revenue Growth Reflects Higher Card Member Spending, Loans and Card Fees

American Express Company (NYSE: AXP) today reported fourth-quarter net income of $2.0 billion, or $2.32 per share, compared with a net loss of $1.2 billion, or $1.42 per share, a year ago.

 

(Millions, except percentages and per share amounts)

               
Quarters Ended

December 31,

 

Percentage
Inc/(Dec)

 

  Years Ended

December 31,

 

Percentage
Inc/(Dec)

 

    2018   2017     2018   2017  
Total Revenues Net of Interest Expense   $       10,474   $       9,707   8   $       40,338   $       36,878   9
Net Income (Loss)   $       2,010   $       (1,206)   #   $       6,921   $       2,748   #
Earnings (Loss) Per Common Share – Diluted:                                      

Net Income (Loss) Attributable to Common Shareholders1

  $       2.32   $       (1.42)   #   $       7.91   $       2.99   #
Average Diluted Common Shares Outstanding           852           865   (2)           859           886   (3)
# - Denotes a variance of 100 percent or more.                
 

The current period included $496 million, or $0.58 per share, of certain discrete tax benefits. The year-ago period included a charge of $2.6 billion, or ($2.99) per share, related to the Tax Cuts and Jobs Act (the “Tax Act”).

Fourth-quarter consolidated total revenues net of interest expense were a record $10.5 billion, up 8 percent from $9.7 billion a year ago. Excluding the impact of foreign exchange rates, adjusted revenues net of interest expense grew 10 percent.2 The rise reflected higher Card Member spending, loan volumes and card fees.

Consolidated provisions for losses were $954 million, up 14 percent from $834 million a year ago. The increase reflected growth in the loan portfolio and higher lending write-off rates.

Consolidated expenses were $7.7 billion, up 9 percent from $7.1 billion a year ago. The rise primarily reflected higher rewards and other customer engagement costs, which were partially offset by lower operating expenses.3

The consolidated effective tax rate was (9.8) percent, down substantially from a year ago. The $496 million tax benefit mentioned above reflected changes in the tax method of accounting for certain expenses; the resolution of certain prior years’ tax audits; and an adjustment to the company’s 2017 provisional tax charge related to the Tax Act. The effective tax rate for the quarter excluding these items was 17.3 percent.4

For the full year, the company reported net income of $6.9 billion, compared with net income of $2.7 billion a year ago. Earnings per share were $7.91, compared with $2.99 a year ago.

Revenues net of interest expense for the full year were a record $40.3 billion, up 9 percent (10 percent FX adjusted2) from $36.9 billion a year ago.

Consolidated expenses for the full year increased 8 percent to $28.9 billion from $26.7 billion a year ago.

We continue to see very good returns on the investments we’ve been making to gain share and add scale,” said Stephen J. Squeri, chairman and chief executive officer. “Our growth throughout 2018 was broad-based and well-balanced across geographies and business lines. Card Member spending rose an fx-adjusted 8 percent, lapping a strong year-ago quarter. This was the sixth consecutive quarter with revenue growth of at least 8 percent, and it was driven again by higher Card Member spending, loans and card fees.

“The total revenue we generated in 2018 was well above our initial expectations and gave us the flexibility to make additional investments in the business each quarter. We added 12 million new cards during the year, continued to enhance the range of benefits we offer, and continued to significantly expand the number of merchants in our network. Robust top line growth, consistently good credit quality and the leverage we get from disciplined control of operating expenses delivered strong earnings per share each quarter.

“We remain focused on four strategic priorities:

We’ve made great progress on each of them and feel very good about the competitive advantages that come from our business model.

“Our focus is on continuing to make the investments that can drive higher revenue growth, which is the foundation for consistent, double-digit EPS growth. While there are mixed signals in the political and economic environment, based on what we see in the business we are starting 2019 from a position of strength. We expect full year 2019 revenue growth to be between 8 and 10 percent and EPS to be between $7.85 and $8.35, subject to contingencies.”

Global Consumer Services Group reported fourth-quarter net income of $702 million, up 13 percent from $624 million a year ago.

Total revenues net of interest expense were $5.6 billion, up 11 percent from $5.1 billion a year ago. The rise primarily reflected higher loans, Card Member spending, and card fees.

Provisions for losses totaled $726 million, up 13 percent from $641 million a year ago. The rise primarily reflected growth in the loan portfolio and an increase in the lending write-off rate.

Total expenses were $4.2 billion, up 17 percent from $3.6 billion a year ago. The rise primarily reflected higher rewards and other customer engagement costs and increased operating expenses.

The effective tax rate was 3 percent, down from 27 percent a year ago, reflecting the resolution of certain prior years’ tax items and the reduction in the U.S. federal statutory tax rate.

Global Commercial Services reported fourth-quarter net income of $624 million, up 15 percent from $542 million a year ago.

Total revenues net of interest expense were $3.3 billion, up 8 percent from $3.1 billion a year ago. The increase primarily reflected higher Card Member spending.

Provisions for losses totaled $223 million, up 19 percent from $187 million a year ago, reflecting higher provision across both the charge and lending portfolios, in part driven by growth in receivable and loan balances.

Total expenses were $2.4 billion, up 12 percent from $2.1 billion a year ago. The rise primarily reflected higher rewards and other customer engagement costs and increased operating expenses.

The effective tax rate was 11 percent, down from 29 percent a year ago, reflecting the reduction in the U.S. federal statutory tax rate and the resolution of certain prior years’ tax items.

Global Merchant and Network Services reported fourth-quarter net income of $501 million, up 9 percent from $459 million a year ago.

Total revenues net of interest expense were $1.6 billion, unchanged from a year ago. The current quarter reflected higher Card Member spending, offset by a decrease in the average discount rate and lower revenues from network partners.

Total expenses were $1.0 billion, up 5 percent from $949 million a year ago.

The effective tax rate was 20 percent, down from 31 percent a year ago, reflecting the reduction in the U.S. federal statutory tax rate, and the resolution of certain prior years’ tax items.

Corporate and Other reported fourth-quarter net income of $183 million, compared with a net loss of $2.8 billion a year ago. The current period included a portion of the above-mentioned discrete tax items while the year ago period reflected the impact of the Tax Act.

About American Express

American Express is a globally integrated payments 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, instagram.com/americanexpress, linkedin.com/company/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.

Key links to products, services and corporate responsibility information: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, Accertify, InAuth, corporate card, business travel, and corporate responsibility.

This earnings release should be read in conjunction with the company’s statistical tables for the fourth-quarter 2018, available on the American Express website at http://ir.americanexpress.com and in a Form 8-K filed today with the Securities and Exchange Commission.

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 on the above-mentioned American Express Investor Relations website. A replay of the conference call will be available later today at the same website address.

American Express Company plans to host its annual Investor Day on Wednesday, March 13, 2019 at 9 a.m. (ET). At the meeting, senior executives will discuss key business trends, initiatives and long-term strategies.

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 American Express Company’s current expectations regarding business and financial performance, including management’s outlook for 2019, among other matters, contain words such as “believe,” “expect,” “anticipate,” “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:

A further description of these uncertainties and other risks can be found in American Express Company’s Annual Report on Form 10-K for the year ended December 31, 2017, the company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2018 and the company’s other reports filed with the Securities and Exchange Commission.

     
American Express Company (Preliminary)
Appendix I
Reconciliations of Adjustments
 
 
 
Q4'18
Effective Tax Rate Excluding Discrete Tax Items
Effective tax rate (9.8%)
Discrete tax impacts (X) 27.1%
Effective tax rate excluding discrete tax items 17.3%
 

(X) Reflects changes in the tax method of accounting for certain expenses; the resolution of certain prior years' tax audits, and an adjustment to the Company's 2017 provisional tax charge related to the Tax Act.

___________________________________

1 Represents net income less (i) earnings allocated to participating share awards of $16 million and $2 million for the three months ended December 31, 2018 and 2017, respectively, and $54 million and $21 million for the years ended December 31, 2018 and 2017, respectively, and (ii) dividends on preferred shares of $19 million and $20 million for the three months ended December 31, 2018 and 2017 respectively, and $80 million and $81 million for the years ended December 31, 2018 and 2017, respectively.

2 As reported in this release, FX-adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translations into U.S. dollars (e.g., assumes the foreign exchange rates used to determine results for the three months ended December 31, 2018 apply to the period(s) against which such results are being compared). Management 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.

3 Operating expenses represent salaries and employee benefits, professional services, occupancy and equipment, and other expenses.
4 The effective tax rate excluding certain discrete tax benefits recognized in the fourth quarter of 2018 is a non-GAAP measure. Management believes the effective tax rate excluding these items is useful in evaluating the company’s tax rate for the quarter relative to the full year. See Appendix I for a reconciliation to the effective tax rate on a GAAP basis.
 

Media:
Marina H. Norville, marina.h.norville@aexp.com, +1.212.640.2832
Amelia T. Woltering, amelia.t.woltering@aexp.com, +1.212.640.7034

Investors/Analysts:
Edmund Reese, edmund.reese@aexp.com, +1.212.640.5574
Shreya Patel, shreya.patel@aexp.com, +1.212.640.5574