What led to the significant increase in provisions for losses?

The provisions for losses increased by 93% to $1.89 billion primarily due to higher cardmember lending provisions. This reflects a deteriorating credit environment in the U.S., leading to increased write-off and delinquency rates, as well as higher loan and business volumes.

What is the outlook for American Express's full-year earnings per share (EPS) growth?

American Express revised its full-year EPS growth forecast downwards. Initially expecting 4-6% growth, the company now anticipates slower growth due to further credit deterioration and moderating U.S. spending observed in June. The company is implementing re-engineering efforts to reduce costs and offset some of these impacts.

What is the status of the settlements with Visa and MasterCard?

American Express reached settlement agreements with both Visa and MasterCard, expected to total up to $4.05 billion. The company received $70 million from Visa in both the first and second quarters of 2008, meeting performance criteria. The MasterCard settlement includes quarterly payments starting in Q3 2008, and both are subject to ongoing performance criteria within the U.S. Global Network Services business. These payments are recognized in 'Other, net' expenses.

AXP 10-Q Quarterly Report Q2 FY2008 — Revenue, Net Income, EPS

Q: How has the acquisition of GE's Corporate Payment Services (CPS) business impacted the results?

The acquisition of CPS, completed on March 28, 2008, for $2.3 billion, contributed to higher 'Other revenues' and is being integrated into the Global Commercial Services and U.S. Card Services segments. While it added to revenue streams, the related expenses were also incurred, and the acquisition did not have a significant impact on overall results for the reported quarters.

Summary

American Express Company (AXP) reported its second-quarter 2008 financial results, facing a challenging economic environment. Net income for the quarter decreased by 38% to $653 million, or $0.56 per diluted share, compared to the prior year. This decline was attributed to increased provisions for losses, reflecting a deteriorating credit environment, particularly in the U.S. cardmember lending portfolio, and a charge to the fair value of the company's interest-only strip. Despite these headwinds, total revenues grew 8% year-over-year, driven by robust performance in discount revenue, net card fees, and travel commissions and fees, indicating continued customer spending. The company also highlighted progress on its acquisition of GE's Corporate Payment Services (CPS) business and significant litigation settlements with Visa and MasterCard, which will provide substantial future payments. Looking ahead, American Express revised its full-year EPS growth forecast downwards from 4-6% due to the increasing U.S. cardmember lending write-off rates and weakening consumer spending observed in June. The company is intensifying cost-cutting measures to mitigate these impacts. While the credit environment presents challenges, the company's diversified business segments and strong cardmember loyalty continue to drive revenue growth, albeit at a slower pace. Investors should monitor credit loss trends and the effectiveness of cost-reduction initiatives.

Financial Highlights

25 data points

Beta

Net Income

$653.00M

EPS (Diluted)

$0.56

Cash & Equivalents

$20.09B

Free Cash Flow

$7.56B

Financial Statements

Beta

Operating Income	$774.00M
Interest Expense	$903.00M
Net Income	$653.00M
EPS (Basic)	$0.56
EPS (Diluted)	$0.56
Shares Outstanding (Basic)	1.15B
Shares Outstanding (Diluted)	1.16B

Key Highlights

1Net income for the quarter decreased by 38% to $653 million ($0.56/share) compared to Q2 2007, impacted by higher credit loss provisions.
2Total revenues increased by 8% to $8.34 billion, driven by strong growth in discount revenue and net card fees.
3Provisions for losses surged by 93% to $1.89 billion, primarily due to increased cardmember lending provisions reflecting a challenging U.S. credit environment.
4The company revised its full-year EPS growth outlook downward from 4-6% due to further credit deterioration and moderating U.S. spending in June.
5Completed the acquisition of GE's Corporate Payment Services (CPS) business for $2.3 billion in March 2008.
6Received $70 million from Visa in both Q1 and Q2 2008, meeting performance criteria for settlement payments, with significant further payments expected from Visa and MasterCard.
7Card billed business grew 12% globally, indicating resilient customer spending despite economic concerns.

AMERICAN EXPRESS CO Quarterly Report for Q2 Ended Jun 30, 2008

Summary

Financial Highlights

Key Highlights

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