10-QPeriod: Q1 FY2023

AMERICAN EXPRESS CO Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 21, 2023For Securities:AXP

Summary

American Express Company (AXP) reported its first-quarter 2023 financial results, showcasing strong revenue growth driven by robust Card Member spending. Total revenues net of interest expense surged by 22% year-over-year to $14.3 billion, primarily fueled by higher network volumes and increased net card fees, reflecting successful acquisition and retention of premium cardholders. Despite the impressive revenue performance, net income saw a decline of 13% to $1.8 billion, or $2.40 per diluted share, compared to $2.1 billion, or $2.73 per diluted share, in the prior year. This decrease was primarily attributed to a significant increase in provisions for credit losses, stemming from reserve builds in the current period, a reversal from the reserve releases seen in the prior year, and higher net write-offs. Card Member loans grew by a substantial 23% to $109 billion, indicating increased customer borrowing and spending. While delinquency and net write-off rates have risen, the company emphasizes that these metrics remain "best in class" due to its premium customer base and risk management. Investments in marketing and operating expenses also increased, supporting business growth and new card acquisitions, though the company remains focused on efficiency. AXP also returned $0.6 billion to shareholders through dividends and share repurchases, including a 15% increase in its quarterly dividend, signaling confidence in its financial health and commitment to shareholder returns.

Financial Highlights

38 data points
Beta

Revenue

$8.85B

Net Income

$1.82B

20.5% Net Margin

EPS (Diluted)

$2.40

Total Assets

$236.00B

Cash & Equivalents

$40.84B

Free Cash Flow

-$737.00M

Financial Statements
Beta
Revenue$8.85B
Interest Expense$1.43B
Net Income$1.82B
EPS (Basic)$2.41
EPS (Diluted)$2.40
Shares Outstanding (Basic)743.00M
Shares Outstanding (Diluted)744.00M

Key Highlights

  • 1Total revenues net of interest expense increased by a significant 22% to $14.3 billion, driven by strong network volumes and net card fees.
  • 2Net income decreased by 13% to $1.8 billion ($2.40 per diluted share) due to higher provisions for credit losses and increased net write-offs.
  • 3Card Member loans grew robustly by 23% to $109 billion, reflecting increased customer engagement and borrowing.
  • 4Provisions for credit losses increased substantially due to reserve builds, a shift from reserve releases in the prior year, and higher net write-offs.
  • 5Card Member rewards, services, and business development expenses rose significantly, largely correlating with higher network volumes and increased usage of travel benefits.
  • 6AXP returned $0.6 billion to shareholders via dividends and share repurchases, including a 15% increase in the quarterly dividend.
  • 7The company maintained strong capital ratios, with Common Equity Tier 1 at 10.6%, well above regulatory minimums.

Frequently Asked Questions

American Express experienced a 22% year-over-year increase in total revenues net of interest expense to $14.3 billion. This growth was primarily driven by a 14% increase in worldwide network volumes, leading to higher discount and processed revenues. Additionally, net card fees rose 20%, reflecting strong Card Member acquisition and retention, particularly in premium card portfolios. Service fees and other revenues also saw a significant 34% increase, boosted by higher travel-related revenues.

Net income for the quarter declined by 13% to $1.8 billion. This was mainly due to a significant increase in provisions for credit losses, which rose from a net release of $33 million in Q1 2022 to a build of $1.055 billion in Q1 2023. This increase was driven by higher delinquencies, loan growth, and an increase in net write-offs, contrasting with reserve releases in the prior year that benefited from the economic recovery post-pandemic.

While Card Member loans increased by 23% to $109 billion and provisions for credit losses have risen, American Express stated that delinquency and net write-off rates, though increasing, remain 'best in class.' This performance is attributed to the premium nature of their customer base and robust risk management capabilities. The company is closely monitoring macroeconomic conditions and proactively managing its reserve levels.

American Express demonstrated its commitment to shareholder returns by repurchasing $0.2 billion of its common stock and paying $0.4 billion in dividends during the first quarter. Furthermore, the company announced a 15% increase in its quarterly common stock dividend, signaling confidence in its ongoing profitability and capital generation.