We are a globally integrated payments company that provides our customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are credit and charge card products, along with travel and lifestyle related services, offered to consumers and businesses around the world. Our range of products and services includes:
• Credit card, charge card, banking products and other payment and financing products
• Merchant acquisition and processing, service and settlement, and point-of-sale marketing and information products and services for merchants
• Network services
• Other fee-based services, including fraud prevention services and the design and operation of customer loyalty programs
• Spend management products and services
• Travel and lifestyle services
Our various products and services are offered globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are offered through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising. We have a significant ownership position in, and extensive commercial arrangements with, Global Business Travel Group, Inc. (GBTG). The commercial arrangements with GBTG include, among other things, a long-term trademark license agreement pursuant to which GBTG uses the American Express brand, GBTG's support of certain of our partnerships, joint negotiation with travel suppliers and a strategic relationship between GBTG and our Global Commercial Services (GCS) business. During the second quarter of 2022, GBTG became a publicly traded company following the completion of a business combination between
American Express Global Business Traveland Apollo Strategic Growth Capital. As a result of the transaction, our economic interest was reduced to approximately 35 percent from approximately 40 percent.
We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (eg cash and checks), wire transfer models (eg wire transfers and the Automated Clearing House (ACH)), as well as the evolution and growth of alternative payment and financing providers. As the payments industry continues to evolve, we face increasing competition from non-traditional players who are leveraging new technologies, business models and customer relationships to create payment or financing solutions.
Effective in the first quarter of 2022, we have made the following changes to the presentation of our Consolidated Statements of Income:
In non-interest income:
•Processed revenue represents revenue from volumes processed, previously reported in discount revenue, other fees and commissions, and other revenue.
•Service fees and other income include the remaining balances of other fees and commissions and other income.
In total expenses:
•Marketing and business development expenses disaggregated into business development expenses and marketing expenses.
Prior period amounts have been restated to conform to the current period presentation; there was no impact on total non-interest revenue or total expense.
July 1, 2022, we made changes to our management organization structure. Our financial disclosures will reflect these organizational changes when our executives, including our chief operating decision maker, begin to review financial information aligned to the new management organization. At that time, we will also recast prior periods to conform to the new reportable operating segments. We expect our reportable operating segments will be as follows:
• US consumer services, including our US consumer card issuance, travel and lifestyle services
•International Card Services, including our consumer card issuing business and travel and lifestyle services outside the
U.S., our commercial services business outside the U.S.and our loyalty coalition businesses;
• Commercial services, including our commercial services activities in the
and for global customers; and
•Global Merchant and Network Services, including our merchant acquiring and card network businesses.
Refer to the “Glossary of Selected Terminology” for definitions of certain key terms and related information appearing in this Form 10-Q.
Forward-Looking Statements and Non-GAAP Measures
Certain of the statements in this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to the "Cautionary Note Regarding Forward-Looking Statements" section. We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in
the United States of America(GAAP). However, certain information included within this Form 10-Q constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.
Table 1: Summary of financial performance
As of or for the Three Months As of or for the Six Months Ended Ended June 30, June 30, (Millions, except percentages, per share amounts and where Change Change indicated) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021 Selected Income Statement Data Total revenues net of interest expense
$ 13,395 $ 10,243 $ 3,15231 % $ 25,130 $ 19,307 $ 5,82330 % Provisions for credit losses 410 (606) 1,016 # 377 (1,281) 1,658 # Expenses 10,442 7,909 2,533 32 19,498 14,655 4,843 33 Pretax income 2,543 2,940 (397) (14) 5,255 5,933 (678) (11) Income tax provision 579 660 (81) (12) 1,192 1,418 (226) (16) Net income 1,964 2,280 (316) (14) 4,063 4,515 (452) (10) Earnings per common share - diluted (a) $ 2.57 $ 2.80 $ (0.23)(8) % $ 5.30 $ 5.54 $ (0.24)(4) Common Share Statistics (b) Cash dividends declared per common share $ 0.52 $ 0.43 $ 0.0921 % $ 1.04 $ 0.86 $ 0.1821 Average common shares outstanding: Basic 752 801 (49) (6) % 755 802 (47) (6) Diluted 753 802 (49) (6) % 756 803 (47) (6) Selected Metrics and Ratios Network volumes (Billions) $ 394.8 $ 316.1$ 79 25 % $ 745.1 $ 585.4$ 160 27 % Return on average equity (c) 34.4 % 36.5 % 36.0 % 37.1 % Net interest income divided by average Card Member loans 10.2 % 10.0 % 10.2 % 10.1 % Net interest yield on average Card Member loans (d) 10.4 % 10.6 % 10.5 % 10.9 % Effective tax rate 22.8 % 22.4 % 22.7 % 23.9 % Common Equity Tier 1 10.3 % 14.2 % 10.3 % 14.2 % Selected Balance Sheet Data Cash and cash equivalents $ 26,277 $ 30,796 $ (4,519)(15) % $ 26,277 $ 30,796 $ (4,519)(15) % Card Member receivables 56,019 47,585 8,434 18 56,019 47,585 8,434 18 Card Member loans 95,437 75,610 19,827 26 95,437 75,610 19,827 26 Customer deposits 96,411 84,905 11,506 14 96,411 84,905 11,506 14 Long-term debt $ 40,495 $ 37,363 $ 3,1328 % $ 40,495 $ 37,363 $ 3,1328 %
# Indicates a deviation of 100% or more
(a)Represents net income, less (i) earnings allocated to participating share awards of
$15 millionand $16 millionfor the three months ended June 30, 2022and 2021, respectively, and $31 millionfor both the six months ended June 30, 2022and 2021, and (ii) dividends on preferred shares of $15 millionfor both the three months ended June 30, 2022and 2021, and $29 millionfor both the six months ended June 30, 2022and 2021.
(b) Our common stock trades primarily on
(c)Return on average equity (ROE) is calculated by dividing (i) annualized net income for the period by (ii) average shareholders' equity for the period. Effective for the first quarter of 2022, the interim period calculation methodology for ROE was modified to present the returns for the period on an annualized basis rather than the preceding twelve months. Prior period amounts have been recast to conform with current period presentation. (d)Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to Table 9 for a reconciliation to Net interest income divided by average Card Member loans. 3
Our strong results for the second quarter reflect the strength of our global customer base and business model, as well as the investments we made during the pandemic while navigating a complex macroeconomic environment. We continue to invest in our brand, value propositions, customers, colleagues, technology and coverage which is driving sustainable growth across our businesses. Our worldwide network volumes for the second quarter increased 25 percent year-over-year (28 percent on an FX-adjusted basis1) and billed business, which represented 86 percent of our total network volumes and was the most significant driver of our financial results, increased 27 percent. Goods & Services spend, which accounts for the majority of our billed business, grew by 15 percent on a year-over-year basis. Travel & Entertainment spend increased 80 percent year-over-year and surpassed pre-pandemic levels, primarily driven by
U.S.consumers and small and medium size businesses as well as a continuing recovery outside of the U.S.Total revenues net of interest expense increased 31 percent year-over-year (33 percent on an FX-adjusted basis1) reflecting strong growth in all our revenue lines. The growth in network volumes drove increases in both Discount revenue, our largest revenue line, and Processed revenue. Service fees and other revenue increased year-over-year, driven in part by higher travel-related revenues. Net card fees grew 15 percent year-over-year, as new card acquisitions increased and Card Member retention remained high, demonstrating the impact of investments we have made in our premium value propositions. Net interest income grew by 30 percent year-over-year, primarily driven by growth in loans, partially offset by higher interest expense due to higher rates. Card Member loans grew 26 percent year-over-year, driven by ongoing strong growth in billed business. Provisions for credit losses increased, primarily driven by reserve builds in the current period, as compared to reserve releases in the prior year. The reserve builds in the current period reflected the strong growth in loans and a slightly worse macroeconomic outlook, partially offset by improved portfolio quality. While delinquency and write-off rates remained near historic lows, most of these rates continued to modestly increase on a sequential basis compared to the prior quarter. Card Member rewards, Business development and Card Member services increased year-over-year primarily due to network volume growth and higher usage of travel-related benefits. Card Member rewards expense growth was also driven by a larger proportion of billed business in categories that earn incremental rewards such as travel. Marketing expense increased 13 percent year-over-year, due to higher investments to drive growth momentum and accelerate new card acquisitions. Operating expenses increased 28 percent year-over-year primarily due to prior-year net gains on our Amex Venturesinvestments and higher compensation costs in the current quarter. During the quarter, we maintained our capital ratios within our target range and returned $1.0 billionof capital to our shareholders through share buybacks and dividends. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth.
Our strong performance continues to give us confidence in our business model, although we recognize the uncertainty in the geopolitical and macroeconomic environment. We remain committed to implementing our strategy to build long-term sustainable growth.
See "Certain Legislative, Regulatory and Other Developments" and "Risk Factors" for information on certain matters that could have a material adverse effect on our results of operations and financial condition. 1 The foreign currency adjusted information 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 current period apply to the corresponding prior year period against which such results are being compared). FX-adjusted revenues is a non-GAAP measure. We believe the presentation of information on a foreign currency adjusted basis is helpful to investors by making it easier to compare our performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates. 4
Results of Operations The discussions in both the "Consolidated Results of Operations" and "Business Segment Results of Operations" provide commentary on the variances for the three and six months ended
June 30, 2022compared to the same periods in the prior year, as presented in the accompanying tables.
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