10-KPeriod: FY2016

AMERICAN EXPRESS CO Annual Report, Year Ended Dec 31, 2016

Filed February 17, 2017For Securities:AXP

Summary

For the fiscal year ended December 31, 2016, American Express Company (AXP) reported a net income of $5.4 billion, a slight increase from $5.2 billion in 2015, but a decrease from $5.9 billion in 2014. Diluted earnings per share were $5.65, up from $5.05 in 2015. The company experienced a 2% decline in total revenues net of interest expense to $32.1 billion, primarily due to the end of the Costco co-brand partnership in the U.S. and unfavorable foreign currency exchange rates, although adjusted revenues excluding these factors showed growth. Key financial events in 2016 included a $1.1 billion gain from the sale of the Costco co-brand card portfolio and $410 million in net restructuring charges. AXP demonstrated strong capital management, returning $5.5 billion to shareholders through dividends and share repurchases in 2016. The company maintained robust capital ratios well above regulatory requirements, reflecting its ongoing commitment to financial strength. The business segments showed varied performance, with U.S. Consumer Services impacted by portfolio sales, while International Consumer and Network Services and Global Merchant Services showed revenue growth. The company faces intense competition and ongoing regulatory scrutiny, which are key areas of focus for management as it navigates the evolving payments landscape.

Financial Highlights

40 data points
Beta

Revenue

$24.23B

Net Income

$5.38B

22.2% Net Margin

Total Assets

$159.00B

Cash & Equivalents

$25.49B

Free Cash Flow

$6.92B

Financial Statements
Beta
Revenue$24.23B
Operating Income$5.41B
Interest Expense$1.71B
Net Income$5.38B
Shares Outstanding (Basic)933.00M
Shares Outstanding (Diluted)935.00M

Key Highlights

  • 1Net income for 2016 was $5.4 billion, with diluted EPS of $5.65.
  • 2Total revenues net of interest expense decreased 2% to $32.1 billion, impacted by the end of the Costco partnership and FX headwinds.
  • 3A significant gain of $1.1 billion was recognized from the sale of the Costco co-brand card portfolio.
  • 4The company returned $5.5 billion to shareholders through dividends and share repurchases.
  • 5Capital ratios remained strong, exceeding regulatory requirements.
  • 6Marketing and promotion expenses increased by 17% year-over-year, reflecting investments in growth initiatives.
  • 7Provisions for losses on Card Member loans increased by 4% due to higher loan balances and a slight increase in delinquency and write-off rates.

Frequently Asked Questions

The end of the Costco co-brand partnership, particularly the sale of the U.S. portfolio in 2016, significantly impacted American Express's financial results. It led to a 2% decrease in total revenues net of interest expense and a decline in U.S. billed business. However, the company recognized a substantial $1.1 billion gain from the sale of these portfolios.

American Express maintained strong capital levels, well above regulatory requirements. In 2016, the company returned $5.5 billion to shareholders through a combination of $1.1 billion in common stock dividends and $4.4 billion in share repurchases, demonstrating its commitment to shareholder returns.

American Express operates through four main segments: U.S. Consumer Services (USCS), International Consumer and Network Services (ICNS), Global Commercial Services (GCS), and Global Merchant Services (GMS). USCS saw a decrease in non-interest revenue due to lower discount revenue, primarily from the Costco partnership ending. ICNS reported a 3% increase in total revenues net of interest expense driven by growth in proprietary and GNS billed business. GCS's non-interest revenues were relatively flat, impacted by lower Costco-related revenues, while GMS's non-interest revenues decreased 5% due to lower Costco-related revenues and higher contra-revenues.

American Express acknowledges intense competition and emphasizes its differentiated value proposition to card members, merchants, and partners. Its strategy focuses on accelerating revenue growth, optimizing investments, and resetting its cost base. Key initiatives include enhancing premium card portfolios, driving spending through rewards programs, and expanding merchant acceptance, particularly through programs like OptBlue. The company also highlights its 'closed-loop' network and 'spend-centric' business model as competitive advantages.