American Express Reports Record Results for 2003 and Fourth Quarter

Revenues totaled $25.9 billion, up 9 percent from $23.8 billion a year ago. This growth reflects a strong rise in cardmember spending, lending balances and cards-in-force. It also reflects increased revenue from higher asset levels at AEFA. Consolidated expenses totaled $21.6 billion, up 8 percent from $20.1 billion a year ago. This increase primarily reflects higher expenses for marketing, promotion, rewards and cardmember services, human resources and other operating costs. For the fourth quarter, American Express reported EPS before accounting change of $0.60, up 15 percent from $0.52 a year ago. EPS after accounting change was $0.59, up 13 percent. Income before accounting change was $776 million, up 14 percent from $683 million. Net income was $763 million, up 12 percent. In October, the company said that it believed 2003 EPS before accounting change would be at the high end of its previous guidance of $2.26 to $2.29. As noted earlier, EPS for 2003 before accounting change was $2.31. 2003 Results The overall increase in 2003 revenues reflected 8 percent growth at Travel Related Services (TRS), 10 percent growth at AEFA and 7 percent growth at American Express Bank (AEB). More specifically, Discount revenue rose 11 percent, reflecting a 13 percent increase in cardmember spending. Net finance charge revenue increased 12 percent, reflecting continued strong growth in the cardmember lending portfolio. Management and distribution fees rose 7 percent, reflecting in part higher asset levels at AEFA. Insurance and annuity-related revenues rose 12 percent. The overall rise in expenses for 2003 reflected increases of 7 percent at TRS, 12 percent at AEFA and 4 percent at AEB. More specifically, the overall increase reflected: - A 25 percent increase in marketing, promotion, rewards and cardmember services expenses, driven by a 26 percent increase at TRS. - An 11 percent increase in human resources expense, driven by merit increases, employee benefits and management incentives, reflecting in part the decision to expense stock options in 2003. An 8 percent increase in other operating expenses, including an 8 percent increase at TRS. These items were partially offset by a 16 percent decline in interest expense, reflecting a 22 percent decline in charge card interest expense at TRS, and a 3 percent decrease in provision for losses, including an 11 percent decline at TRS. Travel Related Services (TRS) reported record 2003 net income of $2.43 billion, up 14 percent from $2.14 billion a year ago.