01—Abstract
Summary
Summary of the 10-Q filed July 23, 2021. Cited figures are marked; the original filing is the authoritative source.
American Express Company (AXP) reported strong performance for the second quarter of 2021, demonstrating a significant recovery from the impacts of the COVID-19 pandemic.
Total revenues net of interest expense increased by 33% year-over-year to $10.243 billiona, driven by a substantial 50% increase in worldwide network volumes. This growth was fueled by a robust rebound in both consumer and commercial spending, particularly in Goods & Services (G&S) categories which exceeded pre-pandemic levels, while Travel & Entertainment (T&E) spending showed a significant year-over-year acceleration but remained below pre-pandemic figures. The company also benefited from a significant decrease in provisions for credit losses, which swung from a substantial build in the prior year to a net benefit in the current period, reflecting improved credit performance and a better macroeconomic outlook.
Expenses increased by 44%, largely due to higher marketing and Card Member rewards, reflecting investments to drive future growth. Net income surged to $2.28 billionb, a stark contrast to the $257 million reported in the same period last year, leading to a diluted EPS of $2.80.
02—Key points
Key Highlights
- Total revenues net of interest expense surged 33% year-over-year to $10.24 billion, driven by a 50% increase in worldwide network volumes.
- Provision for credit losses swung to a net benefit of $606 million, compared to a $1.56 billion provision in the prior year, reflecting improved credit quality.
- Net income increased dramatically to $2.28 billion from $257 million in the prior year's quarter, with diluted EPS reaching $2.80.
- Discount revenue, the largest revenue source, grew 58% year-over-year to $6.33 billion due to increased Card Member spending.
- Card Member loans increased by 8% year-over-year, though this growth lagged billed business due to higher paydown rates.
- Marketing and business development expenses rose 63% year-over-year to $2.22 billion, reflecting investments to drive growth momentum.
- The company maintained a strong capital position, with its Common Equity Tier 1 (CET1) risk-based capital ratio at 14.2% as of June 30, 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 23, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $6.76B$4.36B | +55.2% |
| Interest Expense | $322.00M$542.00M | −40.6% |
| Net Income | $2.28B$257.00M | +787.2% |
| EPS (Basic) | $2.81$0.29 | +869.0% |
| EPS (Diluted) | $2.80$0.29 | +865.5% |
| Shares Outstanding (Basic) | 801.00M804.00M | −0.4% |
| Shares Outstanding (Diluted) | 802.00M805.00M | −0.4% |
05—Questions
Frequently Asked Questions
How did American Express' revenue perform in Q2 2021 compared to Q2 2020?
American Express experienced a significant revenue rebound in the second quarter of 2021. Total revenues net of interest expense increased by 33% year-over-year to $10.24 billion. This growth was primarily driven by a substantial 50% increase in worldwide network volumes, indicating a strong recovery in consumer and business spending.
What was the impact of credit losses on the company's profitability?
The provision for credit losses had a highly favorable impact on profitability. In Q2 2021, the company recorded a net benefit of $606 million from provisions for credit losses, a significant improvement from the $1.56 billion provision in Q2 2020. This swing reflects improved credit performance and a more optimistic macroeconomic outlook, leading to reserve releases.
How is the recovery in spending volumes compared to pre-pandemic levels?
Worldwide network volumes increased by 50% year-over-year in Q2 2021 and were down only 1% compared to pre-pandemic levels. Goods & Services (G&S) spend, which constitutes the majority of billed business, increased 34% year-over-year and showed 16% growth versus pre-pandemic levels. However, Travel & Entertainment (T&E) spend, while more than tripling year-over-year, remained well below pre-pandemic levels.
What is the outlook for future investments and capital return to shareholders?
American Express plans to increase share repurchases to bring its Common Equity Tier 1 (CET1) capital ratio back to its target range of 10-11% over the coming quarters, following the lifting of Federal Reserve capital distribution restrictions. Marketing investments are expected to remain elevated for the remainder of the year to support growth momentum.
06—Continue