American Express Co.
), also known as AmEx, reported its third-quarter 2013 operating
earnings per share of $1.25. The result comfortably surpassed
both the Zacks Consensus Estimate of $1.22 and the year-ago
quarter earnings of $1.09 a share.
Consequently, net income from operations rose 9% year over
year to $1.37 billion from $1.25 billion in the year-ago
AmEx' total billed business, or global card spending,
continued to witness improvement in the U.S. and beyond climbing
7% year over year to $236.2 billion. The increase came from
international cards-in-force that escalated 7% year over year to
$78.0 billion, whereas cards-in-use improved 8% in the U.S.
Behind the Headlines
AmEx posted total revenues, net of interest expenses, of $8.3
billion, up 6% year over year and 7% on constant currency basis.
It also exceeded the Zacks Consensus Estimate of $8.22 billion.
The year-over-year upside in revenues was supported by healthy
growth in card spending, net interest income and the loan
portfolio. Further, delinquency rates and yield exhibited
stability, partially offset by lower lending balances.
However, provisions for losses were $492 million, edging up 3%
from $479 million in the prior-year quarter. The increase was
driven primarily by lower reserve release, partially offset by
lower net write-offs in the reported quarter.
Meanwhile, AmEx's total expenses increased 5% year over year
to $5.81 billion in the reported quarter. This primarily
reflected 8% rise in card member rewards, marketing and promotion
expenses and 15% surge in professional services. These were
partially offset by lower card member service expenses
and stability in other operating expenses. Tax rate stood at 32%
against 33% in the year-ago quarter.
U.S. Card Services
reported a net income of $782 million, up 12% from $699 million
in the prior-year quarter. Total revenue, net of interest
expenses, increased 6% to $4.3 billion from $4.1 billion in the
International Card Services
net income amounted to $142 million, declining 13% from $164
million in the year-ago quarter. However, total revenues, net of
interest expenses, came in at $1.4 billion, up 3% from the
year-ago quarter, driven by higher cardmember spending and annual
Global Commercial Services
net income escalated 43% to $261 million from $183 million in the
prior-year quarter. Total revenues, net of interest expenses,
improved 6% year over year to $1.2 billion, reflecting higher
spending by corporate card members and growth in business travel
commissions and fees.
Global Network & Merchant Services
reported net income of $391 million, up 9% from $360 million in
the prior-year quarter. Total revenues, net of interest expenses,
stood at $1.4 billion, up 5% year over year and 7% on constant
currency basis, driven by higher merchant-related revenues.
Corporate & Other
reported net loss of $210 million, widening from net loss of $156
million a year ago.
As of Sep 30, 2013, AmEx's total assets stood at $150 billion
(lower than $153 billion at 2012- end), while long-term debt
totaled $53 billion (down from $59 billion at 2012-end) against
cash of $22 billion (at par with 2012-end level). Meanwhile,
shareholder equity amounted to $19 billion at the end of the
reported quarter, unchanged from the 2012-end level.
As of Sep 30, 2013, AmEx's return on equity (ROE) was 24.3%,
down from 26.3% in the year-ago period. Return on average common
equity (ROCE) was 24.1%, declining from 26.0% in the prior-year
quarter. Further, return on average tangible common equity was
30.6%, down from 33.5% in the comparable period last year.
However, book value increased 3% year over year to $17.94 per
Capital Deployment Update
During the reported quarter, American Express repurchased 13
million shares, at an average price of $74.73, for a total of
about $971.5 million. Approximately 86% of capital generated was
distributed to shareholders through dividend payouts and share
repurchases during the reported quarter.
American Express plans to repurchase shares worth $0.8 billion
in the fourth quarter of 2013. Previously, management also
disclosed its plans to buy back shares worth $3.2 billion in
2013, followed by another $1.0 billion of share repurchase in the
first quarter of 2014.
On Sep 23, 2013, the board of AmEx declared a regular
quarterly dividend of 23 cents per share, which is payable on Nov
8, 2013 to shareholders of record as on Oct 4, 2013.
On Aug 9, 2013, AmEx paid a regular quarterly dividend of 23
cents per share to shareholders of record as on Jul 5, 2013.
In Apr 2013, this dividend was hiked by 15% from 20 cents,
which was sustained even during the recession period.
Discover Financial Services
) is expected to release its third-quarter results before the
opening bell on Oct 21, 2013. Moreover,
), is slated to release its fiscal fourth-quarter results after
the closing bell on Oct 30. Another rival firm,
) is scheduled to release its third-quarter results before the
market opens on Oct 31. All the stocks carry a Zacks Rank #2
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