American Express Reports Second-Quarter Revenue of $10.2 Billion and Earnings Per Share of $2.80
American Express (News - Alert) Company (NYSE: AXP) today reported second-quarter net income of $2.3 billion, or $2.80 per share, compared with net income of $257 million, or $0.29 per share, a year ago. The results reflected the impact of $866 million ($658 million after tax) in credit reserve releases2, primarily driven by the company's strong credit performance and continued improvements in the macroeconomic outlook.
"Our strong second quarter results show that the steps we have taken to manage the company through the pandemic and our strategy of investing to rebuild our growth momentum are paying off," said Stephen J. Squeri, Chairman and Chief Executive Officer.
"Demand for our premium, fee-based products continued to be robust, with acquisitions of U.S. Platinum Card Members reaching record levels this quarter. We acquired 2.4 million new proprietary cards in the quarter, while continuing to retain Card Members at rates above pre-pandemic levels.
"We saw Card Member spending accelerate from the prior quarter and exceed pre-pandemic levels in June, with the largest portion of this spending growth coming from Millennial, Gen Z, and small business customers. Global goods and services spending volumes strengthened even further, growing 16 percent on an FX-adjusted basis3 over Q2 2019, even as travel and entertainment spending continued to improve.
"One of our competitive strengths has been to regularly refresh our products with differentiated offerings, leveraging our digital ecosystem and our diverse network of partners. The launch of our U.S. Consumer Platinum Card, with enhanced lifestyle and travel benefits in July, marked the restart of this strategy. Going forward, we will continue to invest to drive innovation for our customers by refreshing other consumer and commercial products and rolling out new digital capabilities.
"As we look ahead, we are increasingly optimistic that the momentum we've generated will continue given the strength we see in our core business, particularly in the U.S., even as the pace of the recovery remains uneven in different regions around the world. Based on current trends, we are confident in our ability to be within the high end of the range of EPS expectations we had for 2020 in 2022."
Second-quarter consolidated total revenues net of interest expense were $10.2 billion, up 33 percent from $7.7 billion a year ago. The quarter primarily reflected growth in Card Member spending, as well as a rise in the average discount rate from increased levels of travel and entertainment spending in the U.S., compared to the prior year.
Consolidated provisions for credit losses resulted in a benefit of $606 million, primarily reflecting the previously mentioned reserve releases and lower net write-offs, compared with a provision expense of $1.6 billion a year ago, which primarily reflected significant credit reserve builds.
Consolidated expenses were $7.9 billion, up 44 percent from $5.5 billion a year ago, reflecting higher customer engagement costs.4 Customer engagement costs were up due to an increase in Card Member spending, higher marketing investments to rebuild growth momentum, and higher usage of travel-related Card Member benefits. Operating expenses were slightly down as a result of gains related to certain Amex Ventures equity investments.5
The consolidated effective tax rate was 22.4 percent, down from 58.7 percent a year ago. The decrease primarily reflected the impact of discrete tax charges and lower pretax income in the prior year.
Global Consumer Services Group reported second-quarter pretax income of $1.9 billion, compared with $843 million a year ago.
Total revenues net of interest expense were $6.0 billion, up 28 percent from $4.7 billion a year ago. The rise primarily reflected an increase in Card Member spending compared to the prior year.
Provisions for credit losses resulted in a benefit of $342 million, primarily reflecting a portion of the previously mentioned reserve releases and lower net write-offs, compared with a provision expense of $887 million a year ago, which primarily reflected significant reserve builds.
Total expenses were $4.5 billion, up 50 percent from $3.0 billion a year ago. The increase primarily reflected higher customer engagement costs due to a rise in Card Member spending, higher marketing investments to rebuild growth momentum, and higher usage of travel-related Card Member benefits.
Global Commercial Services reported second-quarter pretax income of $839 million, compared with a pretax loss of $22 million a year ago.
Total revenues net of interest expense were $3.0 billion, up 35 percent from $2.3 billion a year ago, primarily reflecting a rise in Card Member spending.
Provisions for credit losses resulted in a benefit of $235 million, primarily reflecting a portion of the previously mentioned reserve releases and lower net write-offs, compared with a provision expense of $645 million a year ago, which primarily reflected significant reserve builds.
Total expenses were $2.4 billion, up 49 percent from $1.6 billion a year ago. The increase primarily reflected higher customer engagement costs due to a rise in Card Member spending and higher marketing investments to rebuild growth momentum.
Global Merchant and Network Services reported second-quarter pretax income of $527 million, compared with $188 million a year ago.
Total revenues net of interest expense were $1.2 billion, up 47 percent from $837 million a year ago. The rise reflected an increase in network volumes compared to the prior year.
Total expenses were $728 million, up 16 percent from $625 million a year ago, driven by higher marketing investments.
Corporate and Other reported a second-quarter pretax loss of $308 million, compared with a pretax loss of $387 million a year ago.
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 second quarter 2021, available on the American Express Investor Relations website at http://ir.americanexpress.com and in a Form 8-K furnished today with the Securities and Exchange Commission.
An investor conference call will be held at 8:30 a.m. (ET) today to discuss second-quarter 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.
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, 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, 2020, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and the company's other reports filed with the Securities and Exchange Commission.
1 Diluted earnings per common share (EPS) was reduced by the impact of (i) earnings allocated to participating share awards and other items of $16 million and $2 million for the three months ended June 30, 2021 and 2020, respectively, and $31 million and $4 million for the six months ended June 30, 2021 and 2020, respectively, and (ii) dividends on preferred shares of $15 million and $17 million for the three months ended June 30, 2021 and 2020, respectively, and $29 million and $49 million for the six months ended June 30, 2021 and 2020, respectively.
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