Summary
American Express Company (AXP) reported its first quarter 2001 earnings, showing a notable decline in net income and earnings per share compared to the prior year. Net income fell 18% to $538 million, with diluted EPS down 17% to $0.40. This underperformance was primarily driven by significant losses within American Express Financial Advisors' (AEFA) high-yield investment portfolio, exacerbated by a weaker overall economy and declining equity markets. Despite these headwinds, the Travel Related Services (TRS) segment demonstrated resilience, posting a 16% increase in net income and an 8% rise in net revenues. This growth was fueled by increases in loans, higher billed business, and a growing cardholder base. However, the company acknowledged that full-year earnings per share growth targets would likely not be met due to the challenging economic environment. The filing also disclosed a substantial pre-tax loss of $182 million from the write-down and sale of certain high-yield securities by AEFA, with approximately $34 million of this loss attributed to the early adoption of a new accounting standard for structured investments.
Key Highlights
- 1First quarter net income decreased by 18% year-over-year to $538 million, with diluted EPS down 17% to $0.40.
- 2Travel Related Services (TRS) was a strong performer, with net income up 16% and net revenues up 8% due to growth in loans, billed business, and cards in force.
- 3American Express Financial Advisors (AEFA) reported a significant 79% decline in net income, largely due to a $182 million pre-tax loss from high-yield securities write-downs and sales.
- 4The company expects full-year earnings per share growth to miss previous targets due to the weakened economy and equity markets.
- 5Net revenues on a managed basis increased slightly by 2% to $5.4 billion.
- 6AEFA's high-yield losses were partly influenced by the early adoption of a new FASB accounting rule affecting structured investments.