10-KPeriod: FY2020

AMERICAN EXPRESS CO Annual Report, Year Ended Dec 31, 2020

Filed February 12, 2021For Securities:AXP

Summary

American Express (AXP) reported its 2020 annual results amidst the significant challenges posed by the COVID-19 pandemic. The company experienced a notable decrease in total revenues net of interest expense, down 17% year-over-year, primarily driven by a 19% decline in worldwide billed business. Travel and Entertainment (T&E) spending was particularly hard-hit, decreasing by 61%, while non-T&E spending saw a more modest 1% decline. This revenue impact, coupled with a substantial increase in provisions for credit losses (up 32%), led to a significant 54% drop in net income compared to 2019, with diluted EPS falling to $3.77 from $7.99. Despite the pandemic's impact, American Express maintained strong capital and liquidity positions throughout 2020. The company emphasized its resilience, highlighting progress in supporting colleagues and customers, and a commitment to managing through uncertainty. Looking ahead, American Express is focused on rebuilding growth momentum by investing in its core strategies, including expanding its leadership in premium consumer services, strengthening its commercial payments offerings, enhancing its global network, and further digitizing its customer experience. The company also signaled its intention to resume share repurchases in Q1 2021, subject to regulatory approvals.

Financial Highlights

42 data points
Beta

Revenue

$21.97B

Net Income

$3.13B

14.3% Net Margin

EPS (Diluted)

$3.77

Total Assets

$191.00B

Cash & Equivalents

$32.97B

Free Cash Flow

$4.11B

Financial Statements
Beta
Revenue$21.97B
Interest Expense$2.10B
Net Income$3.13B
EPS (Basic)$3.77
EPS (Diluted)$3.77
Shares Outstanding (Basic)805.00M
Shares Outstanding (Diluted)806.00M

Key Highlights

  • 1Total revenues net of interest expense decreased by 17% to $36.1 billion, largely due to the impact of COVID-19 on consumer and business spending.
  • 2Worldwide billed business declined by 19% to $1.01 trillion, with Travel & Entertainment (T&E) spend down significantly (61%) while non-T&E spend remained relatively stable.
  • 3Provisions for credit losses increased substantially by 32% to $4.73 billion, reflecting a higher reserve build due to the deteriorated macroeconomic outlook.
  • 4Net income saw a significant decrease of 54% year-over-year, falling to $3.14 billion, resulting in diluted EPS of $3.77.
  • 5The company maintained strong capital and liquidity positions, with its Common Equity Tier 1 (CET1) capital ratio at 13.5% as of December 31, 2020, well above regulatory minimums.
  • 6Operating expenses decreased by 14%, driven by lower Card Member rewards and services expenses, partly due to reduced spending volumes.
  • 7American Express plans to resume share repurchases in the first quarter of 2021, subject to regulatory capacity.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted American Express's financial performance in 2020. Travel and Entertainment (T&E) spending, a key revenue driver, was down 61%. This, along with a general slowdown in economic activity, led to a 19% decrease in worldwide billed business and a 17% decrease in total revenues net of interest expense. Consequently, provisions for credit losses increased significantly, and net income dropped by 54% year-over-year.

American Express views 2021 as a transition year, managing through the ongoing effects of the pandemic while focusing on rebuilding growth momentum. Key strategic priorities include expanding its leadership in the premium consumer space, strengthening commercial payments solutions, enhancing its global merchant and network services, and continuing to integrate digital capabilities into its customer experience. The company plans to resume share repurchases in the first quarter of 2021.

American Express significantly increased its provisions for credit losses in 2020, up 32% to $4.73 billion. This increase was primarily driven by a higher reserve build reflecting the deterioration of the global macroeconomic outlook, including higher unemployment and reduced GDP. However, the company also noted improved credit performance and lower outstanding loan and receivable balances, which partially offset the increase in provisions. Write-offs and delinquencies were down year-over-year, attributed to strong risk management practices, government stimulus, and forbearance programs.

American Express maintained strong capital and liquidity levels throughout 2020. Its Common Equity Tier 1 (CET1) capital ratio stood at 13.5% as of December 31, 2020, well above regulatory requirements. The company also reported substantial cash and cash equivalents and investment securities, indicating a robust liquidity position which provides significant flexibility to navigate the uncertain economic environment.