01—Abstract
Summary
Summary of the 10-Q filed July 25, 2017. Cited figures are marked; the original filing is the authoritative source.
American Express Company (AXP) reported its financial results for the second quarter and first half of 2017.
For the three months ended June 30, 2017, total revenues net of interest expense increased slightly to $8.31 billiona, while net income saw a significant decrease to $1.34 billion, compared to $2.02 billion in the prior year. This decline was largely attributed to the absence of a significant gain recognized in the prior year related to the sale of the Costco HFS portfolio. Provisions for losses increased by 26% to $584 million, driven by growth in Card Member loans and a slight increase in delinquencies and write-off rates.
For the six months ended June 30, 2017, total revenues net of interest expense decreased slightly to $16.20 billionb, and net income fell by 25% to $2.58 billion, compared to $3.44 billion in the prior year, also impacted by prior year portfolio sale gains. The company highlighted steady performance in billed business, with growth in international markets and strong performance from small and middle-market businesses. Despite the year-over-year decline in net income, the company continued to return capital to shareholders through dividends and share repurchases, signaling confidence in its ongoing financial strength and strategic execution.
02—Key points
Key Highlights
- Total revenues net of interest expense saw a modest increase for the quarter, reaching $8.31 billion, but declined slightly for the year-to-date period to $16.20 billion.
- Net income for the quarter decreased significantly by 33% to $1.34 billion, and for the year-to-date by 25% to $2.58 billion, largely due to the absence of prior year gains from portfolio sales (Costco and JetBlue).
- Provisions for losses increased substantially, up 26% for the quarter to $584 million and 29% year-to-date to $1.16 billion, primarily due to growth in Card Member loans and slightly higher delinquency and write-off rates.
- Card Member engagement expenses (marketing, rewards, services) increased by 10% for the quarter to $3.11 billion, reflecting investments in premium card benefits and loyalty programs.
- The company continued to return capital to shareholders, with $1.1 billion in dividends and share repurchases in the quarter and $2.3 billion year-to-date, underscoring financial flexibility.
- Worldwide billed business remained flat for the quarter and year-to-date, with strong growth in international markets (9% and 11% respectively) offsetting a decline in the U.S. (-4% and -5% respectively), influenced by the prior year's Costco relationship.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed July 25, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $6.22B— | — |
| Operating Income | $2.58B$3.44B | −25.1% |
| Interest Expense | $521.00M$436.00M | +19.5% |
| Net Income | $1.34B$2.02B | −33.3% |
| EPS (Basic) | $1.48$2.11 | −29.9% |
| EPS (Diluted) | $1.47$2.10 | −30.0% |
| Shares Outstanding (Basic) | 890.00M938.00M | −5.1% |
| Shares Outstanding (Diluted) | 893.00M941.00M | −5.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant decrease in net income compared to the previous year?
The significant decrease in net income for both the quarter and the year-to-date period was primarily due to the absence of large gains recognized in the prior year from the sale of the Costco and JetBlue cobrand card portfolios. These gains significantly boosted the prior year's net income, creating a substantial year-over-year comparison challenge.
Why did provisions for losses increase significantly?
Provisions for losses increased primarily due to strong growth in Card Member loans and a slight increase in delinquency and net write-off rates. The company noted that these rates increased due to the seasoning of loans related to newer Card Members and a shift towards non-cobrand lending products, which tend to have slightly higher write-off rates. Management expects provisions for losses to continue growing faster than loans for the remainder of the year.
How did the company's billed business perform, and were there any geographic variations?
Worldwide billed business was relatively flat for both the three and six-month periods. However, there was a notable geographic divergence: U.S. billed business decreased by 4% and 5% respectively, largely influenced by the absence of Costco-related volumes from the prior year. In contrast, non-U.S. billed business showed robust growth, increasing by 9% for the quarter and 11% year-to-date, indicating strong international performance.
What is the company doing to return capital to shareholders, and what are the future plans?
American Express demonstrated a commitment to returning capital to shareholders through dividends and share repurchases. In the second quarter of 2017, $1.1 billion was returned, and $2.3 billion year-to-date. The company also announced plans to increase its quarterly dividend to $0.35 per share starting in Q3 2017 and received non-objection from the Federal Reserve for a capital plan that includes up to $4.4 billion in share repurchases through Q2 2018.
06—Continue