10-QPeriod: Q3 FY2020

AMERICAN EXPRESS CO Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 23, 2020For Securities:AXP

Summary

American Express Company reported its third-quarter 2020 results, reflecting the ongoing impact of the COVID-19 pandemic on its financial performance. Total revenues net of interest expense decreased by 20% year-over-year to $8.8 billion for the three months ended September 30, 2020. This decline was primarily driven by a 19% decrease in billed business, with significant impacts on travel and entertainment (T&E) spend, which was down 69%. However, non-T&E spend showed resilience, increasing by 1% and recovering to pre-pandemic levels. Despite the revenue pressures, the company demonstrated effective expense management, with total expenses decreasing by 14% to $6.7 billion. Provisions for credit losses also decreased by 24% to $665 million, benefiting from improved credit performance and a reserve release, although a cautious view of the macroeconomic outlook was maintained. Net income for the quarter was $1.1 billion, a decrease of 39% compared to the prior year. The company maintained strong capital and liquidity positions, well above regulatory requirements, and intends to maintain its quarterly dividend.

Financial Highlights

37 data points
Beta

Revenue

$5.38B

Net Income

$1.07B

19.9% Net Margin

EPS (Diluted)

$1.30

Total Assets

$187.00B

Cash & Equivalents

$35.63B

Free Cash Flow

$1.83B

Financial Statements
Beta
Revenue$5.38B
Interest Expense$450.00M
Net Income$1.07B
EPS (Basic)$1.31
EPS (Diluted)$1.30
Shares Outstanding (Basic)804.00M
Shares Outstanding (Diluted)805.00M

Key Highlights

  • 1Total revenues net of interest expense decreased 20% to $8.75 billion for Q3 2020 compared to Q3 2019.
  • 2Billed business decreased 19% worldwide, with T&E spend down significantly by 69%, while non-T&E spend grew 1%.
  • 3Total expenses were reduced by 14% to $6.72 billion, demonstrating effective cost management.
  • 4Provisions for credit losses decreased by 24% to $665 million, reflecting improved credit performance and a reserve release.
  • 5Net income declined 39% to $1.07 billion for the quarter.
  • 6Card fee revenues showed strong year-over-year growth of 15%, indicating resilience in recurring revenue streams.
  • 7The company maintained strong capital ratios, with Common Equity Tier 1 at 13.9% for American Express Company.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted American Express's third-quarter results, leading to a 19% decrease in worldwide billed business. This was primarily driven by a severe 69% decline in travel and entertainment (T&E) spending. Consequently, total revenues net of interest expense fell by 20% year-over-year.

While the overall billed business declined, the company noted a recovery in non-T&E spend, which grew 1% and returned to pre-pandemic levels, forming 88% of total billed business. This segment's resilience, coupled with strong growth in net card fees (up 15%), suggests potential for future revenue recovery as economic conditions improve and T&E spending gradually rebounds.

American Express demonstrated strong cost control, reducing total expenses by 14% year-over-year through decreases in Card Member rewards, services, and other operating costs. Provisions for credit losses also decreased by 24%, primarily due to a reserve release and improved credit performance, although the company maintained a cautious outlook due to ongoing macroeconomic uncertainty.

American Express maintained a robust capital and liquidity position, with its Common Equity Tier 1 ratio at 13.9% for the company and 16.1% for its bank subsidiary, well above regulatory requirements. The company also stated its intention to maintain its quarterly dividend, subject to board approval, signaling confidence in its financial stability.