10-QPeriod: Q2 FY2020

AMERICAN EXPRESS CO Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 24, 2020For Securities:AXP

Summary

American Express Company (AXP) reported its second-quarter 2020 financial results, reflecting significant impacts from the COVID-19 pandemic. Total revenues net of interest expense decreased by 29% year-over-year to $7.7 billion. This decline was primarily driven by a 34% decrease in billed business, particularly in travel and entertainment (T&E) spend, which fell by 77% in June compared to the previous year. Provisions for credit losses saw a substantial increase of 81% to $1.6 billion, driven by higher reserve builds due to the deteriorating macroeconomic outlook. Despite the challenging environment, American Express maintained a strong capital and liquidity position. The company emphasized its commitment to managing expenses tightly while continuing to invest in initiatives for long-term growth. Share repurchases were suspended in March 2020, but the company intends to maintain its quarterly dividend. Management highlighted ongoing efforts to support customers and merchants, including participation in the U.S. Paycheck Protection Program and global Shop Small campaigns.

Financial Highlights

37 data points
Beta

Revenue

$4.36B

Net Income

$257.00M

5.9% Net Margin

EPS (Diluted)

$0.29

Total Assets

$189.00B

Cash & Equivalents

$42.10B

Free Cash Flow

$1.78B

Financial Statements
Beta
Revenue$4.36B
Interest Expense$542.00M
Net Income$257.00M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)804.00M
Shares Outstanding (Diluted)805.00M

Key Highlights

  • 1Total revenues net of interest expense declined 29% year-over-year to $7.7 billion due to the economic impact of COVID-19.
  • 2Billed business decreased by 34% year-over-year, with significant declines in travel and entertainment (T&E) spend (-77% in June).
  • 3Provisions for credit losses surged by 81% to $1.6 billion, driven by increased reserve builds reflecting a weaker economic outlook.
  • 4Net income dropped 85% to $257 million, resulting in diluted EPS of $0.29.
  • 5The company maintained robust capital and liquidity levels, well above regulatory requirements.
  • 6Share repurchases were suspended in March 2020 to preserve financial strength.
  • 7Card fees showed strong year-over-year growth (15%), partly due to their delayed reaction to economic shifts and stable Card Member attrition.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted American Express's performance. Billed business, particularly in travel and entertainment, saw substantial declines. This led to a 29% decrease in total revenues net of interest expense. The company also significantly increased its provisions for credit losses due to the worsening economic outlook.

American Express significantly increased its provisions for credit losses by 81% year-over-year, reflecting a deterioration in the global macroeconomic outlook, including higher unemployment and GDP contraction. The company is using the CECL methodology to estimate expected credit losses and is closely monitoring economic conditions and adjusting reserves accordingly. They also have customer pandemic relief programs to support impacted individuals.

American Express maintained a strong capital and liquidity position, with capital ratios well above regulatory requirements. The company has substantial liquidity to manage through the uncertain economic period. To preserve this strength, share repurchases were suspended in March 2020.

While share repurchases were suspended in March 2020 due to economic uncertainty, American Express intends to maintain its quarterly common share dividend of $0.43 per share for the third quarter of 2020, subject to Board approval. Future capital distributions will depend on various factors including capital levels, regulatory requirements, business results, and economic conditions.