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United States : American Express Reports Second Quarter EPS of $1.43, Up 13 Percent from a Year Ago; Revenues, Loans and Card Member Spending...

July 31, 2014

United States : American Express Reports Second Quarter EPS of $1.43, Up 13 Percent from a Year Ago; Revenues, Loans and Card Member Spending Increase; Gain from Business Travel Transaction Largely Re

American Express Company today reported second-quarter net income of $1.5 billion, up from $1.4 billion a year ago. Diluted earnings per share rose 13 percent to $1.43, from $1.27 a year ago.

Net income from the quarter included a gain of $626 million ($409 million after-tax) from the closing of the previously announced joint venture transaction for the company s business travel operations. As planned, the company used a substantial portion of the gain to fund incremental investments in growth and efficiency initiatives.

Consolidated total revenues net of interest expense rose to $8.7 billion in the quarter, up 5 percent from $8.2 billion a year ago. The increase reflected higher Card Member spending, higher net interest income and higher net card fees.

Consolidated provisions for losses totaled $489 million, down 6 percent from $518 million a year ago. The decrease reflected lower net write-offs in the current quarter, offset, in part, by the effect of a larger reserve release a year ago.

Consolidated expenses totaled $5.9 billion, up 2 percent from $5.7 billion a year ago. Expenses for the period were impacted by increased marketing, which included a significant amount of incremental investments in growth initiatives, and rewards costs. Operating expenses2 were lower due to a gain on the business travel joint venture transaction (which was reported as an expense reduction), partially offset by transaction-related costs of $79 million, as well as the following items: A restructuring charge of $133 million ($90 million after-tax); and A contribution to the American Express Foundation of $40 million ($25 million after-tax).

The business travel joint venture transaction gain, net of the offsets and incremental investments mentioned above, contributed approximately $0.05 to second-quarter diluted earnings per share. The gain was recognized in the Global Commercial Services segment. The offsetting investments were made across all of the company s operating segments.

The effective tax rate for the quarter was 34 percent, up from 30 percent a year ago, which reflected the resolution of certain prior years tax items.

The company s return on average equity (ROE) was 28.8 percent, up from 23.6 percent a year ago.

The strong underlying performance this quarter reflected a continuation of some familiar themes: higher Card Member spending, credit metrics at or near their historic lows, a modest increase in loan balances, continued success in containing operating expenses and a substantial return of capital to our investors through share repurchases, said Kenneth I. Chenault, chairman and chief executive officer.

Card Member spending rose 9 percent from year ago levels, and overall the growth rate accelerated from earlier this year, with higher volumes across each of our businesses in the U.S. and internationally.

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Source: TendersInfo (India)

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