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TheStreet Open House

American Express Third Quarter EPS Up 15% To $1.25; Revenues, Card Member Spending And Loans Continue To Grow

Stocks in this article: AXP

1 Represents net income less earnings allocated to participating share awards of $12 million and $14 million for the three months ended September 30, 2013 and 2012, respectively, and $36 million and $42 million for the nine months ended September 30, 2013 and 2012, respectively.

2 As reported in this release, FX adjusted information, which constitute non-GAAP financial measures, assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the three months ended September 30, 2013 apply to the period(s) against which such results are being compared). The company believes the presentation of information on an FX adjusted basis is helpful to investors by making it easier to compare the company's performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.

3 Operating expenses include salaries and employee benefits, professional services, occupancy and equipment, communications and other, net.

All information in the following tables is presented on a basis prepared in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise indicated. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

(Preliminary)

American Express Company

Consolidated Statements of Income

           
(Millions)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2013 2012 Inc/(Dec) 2013 2012 Inc/(Dec)
 
Revenues
Non-interest revenues
Discount revenue $ 4,659 $ 4,425 5

 %

$ 13,826 $ 13,164 5

 %

Net card fees 658 633 4 1,958 1,858 5
Travel commissions and fees 490 465 5 1,422 1,437 (1 )
Other commissions and fees 610 581 5 1,788 1,739 3
Other   601     577   4   1,705     1,781   (4 )
Total non-interest revenues   7,018     6,681   5   20,699     19,979   4
Interest income
Interest on loans 1,698 1,658 2 5,003 4,851 3
Interest and dividends on investment securities 48 60 (20 ) 153 193 (21 )
Deposits with banks and other   21     21   -   67     73   (8 )
Total interest income   1,767     1,739   2   5,223     5,117   2
Interest expense
Deposits 111 118 (6 ) 332 362 (8 )
Long-term debt and other   373     440   (15 )   1,163     1,320   (12 )
Total interest expense   484     558   (13 )   1,495     1,682   (11 )
Net interest income   1,283     1,181   9   3,728     3,435   9
Total revenues net of interest expense   8,301     7,862   6   24,427     23,414   4
Provisions for losses
Charge card 194 190 2 590 531 11
Card Member loans 282 264 7 921 753 22
Other   16     25   (36 )   71     68   4
Total provisions for losses   492     479   3   1,582     1,352   17
Total revenues net of interest expense after provisions for losses   7,809     7,383   6   22,845     22,062   4
 
Expenses
Marketing and promotion 827 764 8 2,234 2,168 3
Card Member rewards 1,619 1,496 8 4,740 4,425 7
Card Member services 197 201 (2 ) 579 575 1
Salaries and employee benefits 1,544 1,516 2 4,702 4,687 -
Professional services 793 690 15 2,272 2,092 9
Occupancy and equipment 462 453 2 1,394 1,337 4
Communications 94 93 1 282 284 (1 )
Other, net   269     300   (10 )   734     972   (24 )

Total

  5,805     5,513   5   16,937     16,540   2
Pretax income 2,004 1,870 7 5,908 5,522 7
Income tax provision   638     620   3   1,857     1,677   11
Net income $ 1,366   $ 1,250   9 $ 4,051   $ 3,845   5
Net income attributable to common shareholders (A) $ 1,354   $ 1,236   10 $ 4,015   $ 3,803   6
Effective tax rate 31.8 % 33.2 % 31.4 % 30.4 %
 

(A) Represents net income, less earnings allocated to participating share awards of $12 million and $14 million for the three months ended September 30, 2013 and 2012, respectively, and $36 million and $42 million for the nine months ended September 30, 2013 and 2012, respectively.

 
(Preliminary)    

American Express Company

Condensed Consolidated Balance Sheets

 
(Billions)
 
September 30, December 31,
2013 2012
 
Assets
Cash & cash equivalents $ 22 $ 22
Accounts receivable 46 46
Investment securities 5 6
Loans 62 64
Other assets   15   15
Total assets $ 150 $ 153
 
Liabilities and Shareholders' Equity
Customer deposits $ 42 $ 40
Short-term borrowings 3 3
Long-term debt 53 59
Other liabilities   33   32
Total liabilities   131   134
 
Shareholders' Equity   19   19
Total liabilities and shareholders' equity $ 150 $ 153
 
(Preliminary)            

American Express Company

Financial Summary

 
(Millions)
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2013 2012 Inc/(Dec) 2013 2012 Inc/(Dec)
 

Total revenues net of interest expense

U.S. Card Services $ 4,286 $ 4,055 6

 %

$ 12,607 $ 11,976 5

 %

International Card Services 1,356 1,313 3 3,972 3,909 2
Global Commercial Services 1,221 1,156 6 3,615 3,534 2
Global Network & Merchant Services   1,379     1,310   5   4,066     3,881   5
8,242 7,834 5 24,260 23,300 4
Corporate & Other   59     28  

#

  167     114   46
 
CONSOLIDATED TOTAL REVENUES NET OF INTEREST EXPENSE $ 8,301   $ 7,862   6 $ 24,427   $ 23,414   4
 

Pretax income (loss)

U.S. Card Services $ 1,257 $ 1,128 11 $ 3,702 $ 3,457 7
International Card Services 186 207 (10 ) 535 549 (3 )
Global Commercial Services 341 275 24 957 818 17
Global Network & Merchant Services   608     561   8   1,837     1,662   11
2,392 2,171 10 7,031 6,486 8
Corporate & Other   (388 )   (301 ) 29   (1,123 )   (964 ) 16
 
PRETAX INCOME $ 2,004   $ 1,870   7 $ 5,908   $ 5,522   7
 

Net income (loss)

U.S. Card Services $ 782 $ 699 12 $ 2,329 $ 2,169 7
International Card Services 142 164 (13 ) 528 539 (2 )
Global Commercial Services 261 183 43 678 579 17
Global Network & Merchant Services   391     360   9   1,176     1,089   8
1,576 1,406 12 4,711 4,376 8
Corporate & Other   (210 )   (156 ) 35   (660 )   (531 ) 24
 
NET INCOME $ 1,366   $ 1,250   9 $ 4,051   $ 3,845   5
 
# - Denotes a variance of more than 100 percent.
 
(Preliminary)            

American Express Company

Financial Summary (continued)

 
 
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
2013 2012 Inc/(Dec) 2013 2012 Inc/(Dec)
EARNINGS PER COMMON SHARE
 
BASIC
Net income attributable to common shareholders $ 1.26   $ 1.10   15

 %

$ 3.69   $ 3.33   11

 %

 
Average common shares outstanding (millions)   1,074     1,126   (5 )%   1,087     1,143   (5 )%
 
DILUTED
Net income attributable to common shareholders $ 1.25   $ 1.09   15

 %

$ 3.67   $ 3.31   11

 %

 
Average common shares outstanding (millions)   1,081     1,132   (5 )%   1,094     1,149   (5 )%
 
Cash dividends declared per common share $ 0.23   $ 0.20   15

 %

$ 0.66   $ 0.60   10

 %

 
 

Selected Statistical Information

 
Quarters Ended Nine Months Ended
September 30, Percentage September 30, Percentage
  2013     2012   Inc/(Dec)   2013     2012   Inc/(Dec)
 
Return on average equity (A) 24.3 % 26.3 % 24.3 % 26.3 %
Return on average common equity (A) 24.1 % 26.0 % 24.1 % 26.0 %
Return on average tangible common equity (A) 30.6 % 33.5 % 30.6 % 33.5 %
Common shares outstanding (millions) 1,071 1,122 (5 )% 1,071 1,122 (5 )%
Book value per common share $ 17.94 $ 17.37 3

 %

$ 17.94 $ 17.37 3

 %

Shareholders' equity (billions) $ 19.2 $ 19.5 (1 )% $ 19.2 $ 19.5 (1 )%

 

(A) Refer to Appendix I for components of return on average equity, return on average common equity and return on average tangible common equity, a non-GAAP measure.

 
(Preliminary)          

American Express Company

Components of Return on Average Equity (ROE), Return on Average Common Equity (ROCE),

and Return on Average Tangible Common Equity (ROTCE)

Appendix I

 
(Millions)
For the Twelve Months Ended
September 30, June 30, March 31, December 31, September 30,
2013 2013 2013 2012 2012
 

ROE

 
Net income $ 4,688 $ 4,572 $ 4,506 $ 4,482 $ 5,037
Average shareholders' equity $ 19,289 $ 19,372 $ 19,426 $ 19,425 $ 19,145
Return on average equity (A) 24.3 % 23.6 % 23.2 % 23.1 % 26.3 %
 

Reconciliation of ROCE and ROTCE

 
Net income $ 4,688 $ 4,572 $ 4,506 $ 4,482 $ 5,037
Earnings allocated to participating share awards and other   43     45     46     49     56  
Net income attributable to common shareholders $ 4,645   $ 4,527   $ 4,460   $ 4,433   $ 4,981  
 
Average shareholders' equity $ 19,289   $ 19,372   $ 19,426   $ 19,425   $ 19,145  
Average common shareholders' equity $ 19,289   $ 19,372   $ 19,426   $ 19,425   $ 19,145  
Average goodwill and other intangibles   4,091     4,128     4,181     4,232     4,272  
Average tangible common shareholders' equity $ 15,198   $ 15,244   $ 15,245   $ 15,193   $ 14,873  
Return on average common equity (A) 24.1 % 23.4 % 23.0 % 22.8 % 26.0 %
Return on average tangible common equity (B) 30.6 % 29.7 % 29.3 % 29.2 % 33.5 %

 

(A) Return on average equity and return on average common equity are calculated by dividing one year period net income/net income attributable to common shareholders by one year average total shareholders’ equity/average common shareholders' equity, respectively.

 

(B) Return on average tangible common equity, a non-GAAP measure, is computed in the same manner as return on average common equity except the computation of average tangible common shareholders' equity, a non-GAAP measure, excludes from average total shareholders' equity, average goodwill and other intangibles. The Company believes that return on average tangible common equity is a useful measure of the profitability of its business.





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