10-QPeriod: Q3 FY2021

AMERICAN EXPRESS CO Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 22, 2021For Securities:AXP

Summary

American Express Company (AXP) reported strong performance for the third quarter of 2021, demonstrating significant recovery from the COVID-19 pandemic's impact. Total revenues net of interest expense increased by 25% year-over-year to $10.9 billion, driven by robust growth in discount revenue, which was up 34% due to higher card member spending. The company also benefited from a significant decrease in provisions for credit losses, which swung from a $665 million expense in the prior year to a $191 million benefit in the current quarter, reflecting improved portfolio quality and a strengthening macroeconomic outlook. Network volumes accelerated, increasing 29% year-over-year and exceeding pre-pandemic levels by 5%. While travel and entertainment (T&E) spending continued to recover, it remained below pre-pandemic levels, whereas Goods & Services (G&S) spend showed strong sequential growth and exceeded pre-pandemic levels by 20%. The company continued to invest strategically in marketing and value propositions to drive customer acquisition and retention, leading to higher expenses but supporting the overall revenue growth. American Express also highlighted its strong capital position, with capital ratios well above regulatory requirements, and plans to return capital to shareholders through dividends and share repurchases.

Financial Highlights

38 data points
Beta

Revenue

$7.14B

Net Income

$1.83B

25.6% Net Margin

EPS (Diluted)

$2.27

Total Assets

$184.00B

Cash & Equivalents

$27.92B

Free Cash Flow

$3.70B

Financial Statements
Beta
Revenue$7.14B
Interest Expense$307.00M
Net Income$1.83B
EPS (Basic)$2.27
EPS (Diluted)$2.27
Shares Outstanding (Basic)786.00M
Shares Outstanding (Diluted)787.00M

Key Highlights

  • 1Total revenues net of interest expense grew 25% year-over-year to $10.9 billion, driven by a 34% increase in discount revenue.
  • 2Worldwide network volumes increased 29% year-over-year, exceeding pre-pandemic (Q3 2019) levels by 5%.
  • 3Provisions for credit losses shifted from a $665 million expense in Q3 2020 to a $191 million benefit in Q3 2021, indicating improved credit quality and macroeconomic outlook.
  • 4Goods & Services (G&S) related spending, a key driver of billed business, grew 18% year-over-year and is 20% above pre-pandemic levels.
  • 5Travel and Entertainment (T&E) spending more than doubled year-over-year, though it remained 29% below pre-pandemic levels.
  • 6Return on average equity (ROE) significantly improved to 32.6% in Q3 2021 from 15.3% in Q3 2020.
  • 7The company returned $3.6 billion to shareholders in Q3 2021 through dividends and share repurchases, supported by a strong capital position with a CET1 ratio of 12.6%.

Frequently Asked Questions

American Express reported a strong revenue performance in the third quarter of 2021. Total revenues net of interest expense increased by 25% year-over-year to $10.9 billion. This growth was primarily driven by a 34% increase in discount revenue, which benefited from higher Card Member spending and a favorable shift in spending mix towards Travel and Entertainment (T&E) categories.

Credit quality has significantly improved, leading to a substantial decrease in provisions for credit losses. In the third quarter of 2021, provisions for credit losses resulted in a net benefit of $191 million, a significant improvement from the $665 million expense recorded in the third quarter of 2020. This positive swing reflects a stronger macroeconomic outlook, improved portfolio quality, and lower net write-offs.

Spending patterns show a divergence in recovery. Goods & Services (G&S) related spending, which constitutes the majority of billed business, grew 18% year-over-year and is now 20% above pre-pandemic levels. Travel and Entertainment (T&E) spending, while more than doubling year-over-year, still remains 29% below pre-pandemic levels, indicating a slower but ongoing recovery in that segment.

American Express maintains a strong capital position with regulatory capital ratios well above requirements. During the third quarter of 2021, the company returned $3.6 billion to shareholders through dividends and share repurchases. They plan to continue returning excess capital through these methods over the coming quarters to manage their Common Equity Tier 1 (CET1) risk-based capital ratio back to their target range of 10-11%.