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American Express reported a 30% increase in revenue, but the net income was affected by provisions for credit losses

Autor: Financial Market
Timp de citit: 2 minute

American Express Company (NYSE: AXP) today reported second-quarter net income of $2.0 billion, or $2.57 per share, compared with net income of $2.3 billion, or $2.80 per share, a year ago.

Second-quarter consolidated total revenues net of interest expense were $13.4 billion, up 31 percent from $10.2 billion a year ago. The increase primarily reflected growth in Card Member spending compared to the prior year.

Consolidated provisions for credit losses were $410 million, compared with a benefit of $606 million a year ago. The change primarily reflected a small net reserve build in the current quarter compared with a $866 million reserve release a year ago. Credit metrics remained near historic lows in the current quarter.

Consolidated expenses were $10.4 billion, up 32 percent from $7.9 billion a year ago. Customer engagement costs increased, primarily driven by a 25 percent increase in network volumes and higher usage of travel-related benefits. Operating expenses also increased, reflecting net gains on Amex Ventures investments in the prior year and increased compensation costs.

The consolidated effective tax rate was 22.8 percent, up from 22.4 percent a year ago. Based on performance to date, the company is raising its full-year revenue growth guidance from a range of 18% to 20% to a range of 23% to 25%; the company is maintaining its full-year EPS
guidance range of $9.25 to $9.65.

Global Consumer Services Group reported second-quarter pretax income of $1.4 billion, compared with $1.9 billion a year ago. Total revenues net of interest expense were $7.8 billion, up 29 percent from $6.0 billion a year ago. The increase primarily reflected growth in Card Member spending compared to the prior year.

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Provisions for credit losses were $275 million, compared with a benefit of $343 million a year ago. The change primarily reflected a small net reserve build in the current quarter compared with a reserve release of $579 million a year ago.

Total expenses were $6.1 billion, up 35 percent from $4.5 billion a year ago, reflecting higher customer engagement costs primarily driven by increased network volumes and higher usage of travel-related benefits. Operating expenses were also higher as a result of increased compensation, technology and servicing-related costs.

Global Commercial Services reported second-quarter pretax income of $817 million, compared with $835 million a year ago. Total revenues net of interest expense were $4.0 billion, up 30 percent from $3.0 billion a year ago. The increase primarily reflected growth in Card Member spending compared to the prior year.

Provisions for credit losses were $131 million, compared with a benefit of $236 million a year ago. The change primarily reflected a small reserve build in the current quarter compared with a reserve release a year ago.

Total expenses were $3.0 billion, up 24 percent from $2.4 billion a year ago, reflecting higher customer engagement costs primarily driven by increased network volumes. Operating expenses were also higher primarily as a result of increased compensation, technology and
servicing-related costs.