01—Abstract
Summary
Summary of the 8-K filed January 26, 2024. Cited figures are marked; the original filing is the authoritative source.
American Express reported record full-year 2023 results, with total revenues net of interest expense of $60.5 billiona, up 14% reported (15% FX-adjusted), and full-year net income of $8.4 billion, up 11%.
Diluted EPS rose 14% to $11.21b. Growth was driven mainly by higher net interest income and increased Card Member spending, with billed business up 9% to $1.46 trillion. Fourth-quarter revenue was $15.8 billion (up 11%) and EPS was $2.62 (up 27%), though Q4 provisions for credit losses rose 40% to $1.4 billion as net write-offs increased.
Credit costs and expenses are the main watch items. Full-year provisions more than doubled to $4.9 billionc, including a $1.4 billion net reserve build, and the net write-off rate on Card Member loans rose to 2.2% in Q4 from 1.3% a year earlier, though management says delinquency and write-off rates remain below pre-pandemic levels. Total expenses grew 10% for the year, led by customer engagement costs tied to higher spending and greater use of travel benefits.
The effective tax rate fell to 20.3% from 21.6%. Looking forward, management guided to 2024 revenue growth of 9% to 11% and EPS of $12.65 to $13.15d, and announced a 17% quarterly dividend increase from $0.60 to $0.70 per share, starting with the Q1 2024 declaration.
The company also reiterated its aspiration of 10%-plus revenue growth and mid-teens EPS growth, and said it is ahead of the targets set in its January 2022 growth plan. Investors should weigh these results against the rising credit provisions and the forward-looking risks listed in the release, including macroeconomic conditions, regulation, and competition.
02—Key points
Key Highlights
- Record FY2023 revenue of $60.5B, up 14% reported and 15% FX-adjusted; FY2023 net income of $8.4B, up 11%
- FY2023 diluted EPS of $11.21, up 14%; Q4 diluted EPS of $2.62, up 27% year over year
- Billed business reached $1.46 trillion for FY2023 (up 9%); cards-in-force rose to 141.2 million
- Full-year provisions for credit losses more than doubled to $4.9B, including a $1.4B net reserve build; Q4 net write-off rate on Card Member loans rose to 2.2% from 1.3%
- Full-year 2024 guidance: revenue growth of 9% to 11% and EPS of $12.65 to $13.15
- Quarterly dividend to increase 17% to $0.70 per share, beginning with the Q1 2024 declaration
- Full-year effective tax rate fell to 20.3% from 21.6%; return on average equity was 31.5% in Q4 2023
03—Questions
Frequently Asked Questions
What drove American Express's revenue growth in 2023?
Revenue growth of 14% (15% FX-adjusted) was driven primarily by higher net interest income, which rose 33% to $13.1 billion, and by increased Card Member spending, with billed business up 9% for the year.
Is credit quality deteriorating at American Express?
Credit costs rose sharply. Full-year provisions were $4.9B versus $2.2B, and the Q4 net write-off rate on Card Member loans was 2.2%, up from 1.3%. Management says write-off and delinquency rates remain below pre-pandemic levels, but the trend is worth monitoring.
What is the 2024 outlook?
Management guided to 2024 revenue growth of 9% to 11% and EPS of $12.65 to $13.15. It also reiterated an aspiration of 10%-plus revenue growth and mid-teens EPS growth, with the guidance dependent on credit performance, tax rate, and spending trends.
What is changing with the dividend?
The regular quarterly dividend will rise 17%, from $0.60 to $0.70 per common share, beginning with the Q1 2024 dividend declaration.
What were the main expense drivers?
Full-year expenses rose 10% to $45.1B, mainly from customer engagement costs (Card Member rewards, business development, Card Member services) tied to higher spending and greater use of travel-related benefits, plus higher compensation costs. Marketing expenses declined.
04—Continue