01—Abstract
Summary
Summary of the 10-Q filed April 27, 2017. Cited figures are marked; the original filing is the authoritative source.
American Express Company (AXP) reported its first quarter 2017 financial results, showing a decrease in net income to $1.237 billiona from $1.426 billion in the same period last year, with diluted EPS falling to $1.34 from $1.45.
Total revenues net of interest expense declined by 2% to $7.889 billionb, primarily due to the absence of Costco-related revenues from the prior year, partially offset by growth in net card fees and other fee categories. Provisions for losses increased significantly by 32% to $573 million, reflecting higher Card Member loans and receivables, increased delinquencies, and elevated net write-off rates. The company continued to focus on growth and cost initiatives, with reported billed business and revenue showing acceleration in the first quarter.
Despite the year-over-year decline in reported metrics due to the Costco relationship ending, adjusted billed business and revenue grew. The company also returned significant capital to shareholders through share repurchases and dividends.
Management highlighted strong performance in international consumer and small business segments, alongside solid growth from middle market and small business customers in the U.S. Looking ahead, the company anticipates provisions for losses to grow faster than loans. While facing intense competition, American Express remains focused on demonstrating differentiated value and maintaining strong capital and liquidity positions, exceeding regulatory requirements.
02—Key points
Key Highlights
- Net income decreased by 13% to $1.237 billion, and diluted EPS fell to $1.34 from $1.45.
- Total revenues net of interest expense decreased 2% to $7.889 billion, primarily impacted by the cessation of the Costco partnership.
- Provisions for losses increased significantly by 32% to $573 million, driven by loan growth and increased delinquencies/write-off rates.
- Card Member loan balances grew by 11% year-over-year to $63.6 billion.
- Card Member rewards expenses increased by 6% to $1.807 billion, driven by enhancements to U.S. Platinum rewards and increased spending volumes.
- Operating expenses increased slightly by 1% to $5.499 billion, with a notable increase in Card Member rewards and services, partially offset by reductions in marketing and salaries.
- The company returned $1.1 billion to shareholders in the first quarter of 2017 through dividends and share repurchases.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed April 27, 2017Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Revenue | $6.05B— | — |
| Operating Income | $1.24B$1.43B | −13.3% |
| Interest Expense | $443.00M$425.00M | +4.2% |
| Net Income | $1.25B$1.43B | −12.3% |
| EPS (Basic) | $1.36$1.45 | −6.2% |
| EPS (Diluted) | $1.35$1.45 | −6.9% |
| Shares Outstanding (Basic) | 899.00M961.00M | −6.5% |
| Shares Outstanding (Diluted) | 903.00M963.00M | −6.2% |
05—Questions
Frequently Asked Questions
What caused the decrease in net income for the first quarter of 2017?
The decrease in net income was primarily due to a 32% increase in provisions for losses to $573 million, coupled with a 2% decrease in total revenues net of interest expense to $7.889 billion. The revenue decline was largely influenced by the absence of Costco-related revenues from the prior year and a 3% decrease in discount revenue. Increased Card Member rewards and services expenses also contributed to the decline.
How did the end of the Costco partnership impact the financial results?
The end of the Costco partnership significantly impacted the results, particularly by reducing discount revenue and other Costco-related revenues included in the prior year's comparable period. This led to a year-over-year decrease in total revenues net of interest expense and required adjustments when comparing certain metrics like billed business and revenues on an FX-adjusted basis.
What is the outlook for provisions for losses?
American Express expects provisions for losses to grow faster than loans for the remainder of the year. This is attributed to continued strong momentum in lending growth initiatives, a slight increase in delinquencies, and higher net write-off rates, particularly due to the seasoning of loans from newer Card Members and a shift towards non-cobrand lending products which typically have slightly higher write-off rates.
How is the company managing its capital and liquidity?
American Express maintains a focus on a solid and flexible equity capital profile, diverse funding sources, and robust liquidity programs to meet obligations for at least a twelve-month period. The company's capital levels and ratios are maintained above minimum regulatory requirements. In the first quarter of 2017, the company returned $1.1 billion to shareholders through dividends and share repurchases, indicating confidence in its financial strength.
06—Continue