01—Abstract
Summary
Summary of the 10-Q filed October 23, 2020. Cited figures are marked; the original filing is the authoritative source.
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 billiona 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 billionb. 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 billionc, 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.
02—Key points
Key Highlights
- Total revenues net of interest expense decreased 20% to $8.75 billion for Q3 2020 compared to Q3 2019.
- Billed business decreased 19% worldwide, with T&E spend down significantly by 69%, while non-T&E spend grew 1%.
- Total expenses were reduced by 14% to $6.72 billion, demonstrating effective cost management.
- Provisions for credit losses decreased by 24% to $665 million, reflecting improved credit performance and a reserve release.
- Net income declined 39% to $1.07 billion for the quarter.
- Card fee revenues showed strong year-over-year growth of 15%, indicating resilience in recurring revenue streams.
- The company maintained strong capital ratios, with Common Equity Tier 1 at 13.9% for American Express Company.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed October 23, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $5.38B$7.05B | −23.7% |
| Interest Expense | $450.00M$877.00M | −48.7% |
| Net Income | $1.07B$1.75B | −38.9% |
| EPS (Basic) | $1.31$2.09 | −37.3% |
| EPS (Diluted) | $1.30$2.08 | −37.5% |
| Shares Outstanding (Basic) | 804.00M825.00M | −2.5% |
| Shares Outstanding (Diluted) | 805.00M827.00M | −2.7% |
05—Questions
Frequently Asked Questions
How did the COVID-19 pandemic impact American Express's financial results in the third quarter of 2020?
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.
What is the outlook for American Express's revenue growth given the current economic environment?
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.
How has American Express managed its expenses and credit losses during this period?
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.
What is the company's capital and liquidity position?
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.
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