American Express Reports Record Third Quarter Earnings Of $770 Million

Tuesday 28 October 2003 01:33 CET | News

American Express has reported record net income of $770 million for the third quarter, up 12 percent from $687 million a year ago. Diluted earnings per share (EPS) rose to $0.59, up 13 percent from $0.52.

The companys return on equity was 20.4 percent. Revenues on a GAAP basis totaled $6.4 billion, up nine percent from $5.9 billion a year ago. This growth reflects a rise in cards-in-force, average cardmember spending and lending balances. It also reflects increased revenue from higher asset levels at American Express Financial Advisors (AEFA). Consolidated expenses on a GAAP basis totaled $5.4 billion, up eight percent from $4.9 billion a year ago. This increase primarily reflects higher marketing, promotion, rewards and cardmember services expenses, as well as higher human resources expense. Third Quarter Results/GAAP Basis The third quarter revenue growth from year-ago levels reflected increases of eight percent at Travel Related Services (TRS) and 10 percent at AEFA. Revenue at American Express Bank (AEB) was essentially unchanged. More specifically, - Discount revenue increased 13 percent, reflecting a 15 percent rise in cardmember spending. - Net finance charge revenue increased 18 percent, reflecting continued strong growth in the cardmember lending portfolio. - Net securitization income rose 10 percent, primarily reflecting a higher level of securitized lending balances in this portfolio. - Management and distribution fees rose 10 percent, reflecting in part higher asset levels at AEFA. - Insurance and annuity-related revenues rose 14 percent. The rise in third quarter expenses from a year ago reflected increases of seven percent at TRS and 10 percent at AEFA, slightly offset by a one percent decrease at AEB. More specifically, the overall increase reflected: - A 26 percent increase in marketing, promotion, rewards and cardmember services expenses, driven by a 25 percent increase at TRS. - A five percent increase in other operating expenses, including an eight percent increase at TRS. - A 10 percent increase in human resources expense, reflecting merit increases, employee benefits and management incentives. Total staffing levels were essentially unchanged from the year-ago period. These items were slightly offset by a 10 percent decline in interest expense, reflecting a 25 percent decline in charge card interest expense at TRS. Travel Related Services (TRS) reported net income of $606 million for the third quarter, up 10 percent from $553 million a year ago. The following discussion of third quarter results presents TRS segment results on a managed basis, as if there had been no cardmember lending securitization transactions. This is the basis used by management to evaluate operations and is consistent with industry practice. For further information about managed basis and reconciliation of GAAP and managed TRS information, see the Managed Basis section below. The AEFA, AEB and Corporate and Other sections below are presented on a GAAP basis. Total net revenues increased seven percent from the year-ago period, reflecting continued strong growth in spending and borrowing on American Express cards. This strength in the card business was partially offset by continued weakness in the travel and Travelers Cheque businesses. Record cardmember spending contributed to a 13 percent rise in discount revenue. The spending increase reflected growth in the number of American Express Cards, higher average cardmember spending and the continued benefit of rewards programs. The higher cardmember spending was driven by strong growth in retail and everyday spending, and by a notable improvement in the traditional travel and entertainment category. Net finance charge revenue increased eight percent, reflecting 14 percent growth in loan balances offset in part by a lower net interest yield. Net card fees increased primarily as a result of a higher number of cards-in-force. Total expenses increased six percent. In line with the plans announced at mid-year,

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Categories: Payments & Commerce | Payments General
Countries: World
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