American Express(US:AXP)2023-10-20 16:36Revenue Growth - Total revenues net of interest expense increased by 13% year-over-year to $15.381 billion for Q3 2023, driven by growth in billed business and net card fees[12][16] - Total revenues net of interest expense increased by $1.825 billion (13%) for the three-month period and $6.030 billion (16%) for the nine-month period, driven by growth in discount revenue and net card fees[22][23] - Total revenues net of interest expense increased to $15.381 billion in Q3 2023, up from $13.556 billion in Q3 2022[134] - Total revenues net of interest expense increased to $44,716 million in 2023 from $38,686 million in 2022, reflecting a growth of 15.6%[137] Net Income and Earnings - Net income for Q3 2023 was $2.451 billion, a 30% increase compared to $1.879 billion in Q3 2022[12] - Earnings per diluted share increased by 34% year-over-year to $3.30 in Q3 2023[12] - Net income rose to $2.451 billion in Q3 2023, compared to $1.879 billion in Q3 2022[134] - Net income rose to $6,441 million in 2023 compared to $5,942 million in 2022, marking an 8.4% increase[137] - Net income for the nine months ended September 30, 2023, was $6,441 million, compared to $5,942 million in the same period in 2022[144] - Net income for the three months ended September 30, 2022 was $1,879 million[150] - Net income for the nine months ended September 30, 2022 was $5,942 million[150] Card Member Spending and Billed Business - Worldwide network volumes increased by 7% year-over-year to $420.2 billion in Q3 2023, with billed business growing 8%[16] - Travel & Entertainment (T&E) spend grew by 13% year-over-year, reflecting strong demand for travel and dining experiences[16] - U.S. Consumer Services billed business grew by 9% year-over-year, with significant growth from Millennial and Gen-Z Card Members[16] - International Card Services billed business grew by 18% year-over-year (15% FX-adjusted), driven by consumer and commercial spending outside the U.S.[16] - Billed business grew by 8% to $366.2 billion for the three months ended September 2023 compared to $339.0 billion in 2022[35] - International Card Services saw an 18% increase in billed business for the three months ended September 2023[36] - Billed business increased by 9% to $153.5 billion for the three months ended September 2023 compared to $140.3 billion in 2022, and by 12% to $451.1 billion for the nine months ended September 2023 compared to $404.1 billion in 2022[52] - Billed business increased by 1% to $129.5 billion for the three months ended September 2023 compared to $127.6 billion in 2022, and by 4% to $384.7 billion for the nine months ended September 2023 compared to $369.0 billion in 2022[62] - Billed business increased by 18% to $82.7 billion for the three months ended September 30, 2023, compared to $70.2 billion in the same period in 2022[72] Net Interest Income and Loans - Net interest income increased by 34% year-over-year, primarily due to growth in interest-bearing loans and Card Member receivables[16] - Total loans and Card Member receivables increased by 15% year-over-year, driven by higher Card Member spending[17] - Net interest income increased by $864 million (34%) for the three-month period and $2.393 billion (34%) for the nine-month period, primarily due to higher interest rates and growth in revolving loan balances[22][24] - Card Member loans grew by 19% to $118.0 billion as of September 2023 compared to $99.0 billion in 2022[38] - Net interest income for the three months ended September 30, 2023, was $3.442 billion, compared to $2.578 billion in the same period in 2022, representing a 33.5% increase[40] - Adjusted net interest income for the three months ended September 30, 2023, was $3.445 billion, compared to $2.652 billion in the same period in 2022, reflecting a 29.9% increase[40] - Average Card Member loans for the three months ended September 30, 2023, were $116.6 billion, up from $97.7 billion in the same period in 2022, a 19.3% increase[40] - Net interest income increased to $2.528 billion for the three months ended September 2023 compared to $1.977 billion in 2022, and to $7.039 billion for the nine months ended September 2023 compared to $5.366 billion in 2022[52] - Net interest income for International Card Services increased by 36% to $253 million for the three months ended September 2023 compared to $186 million in 2022, and by 24% to $732 million for the nine months ended September 2023 compared to $590 million in 2022[64] - Card Member loans increased from $107,964 million as of December 31, 2022 to $117,978 million as of September 30, 2023[158] - Consumer Card Member loans increased from $84,964 million as of December 31, 2022 to $90,900 million as of September 30, 2023[158] - Small Business Card Member loans increased from $22,947 million as of December 31, 2022 to $27,022 million as of September 30, 2023[158] Credit Losses and Provisions - Provisions for credit losses increased by 58% year-over-year to $1.233 billion in Q3 2023, primarily due to higher net write-offs[12][17] - Provisions for credit losses increased by $455 million (58%) for the three-month period and $2.331 billion (202%) for the nine-month period, driven by higher net write-offs and reserve builds[26][27][28] - Net write-off rate for principal, interest, and fees increased to 2.0% for the three months ended September 2023 compared to 1.0% in 2022[38] - Credit loss reserves ending balance increased by 42% to $4,721 million as of September 2023 compared to $3,319 million in 2022[38] - Provisions for credit losses for the three months ended September 30, 2023, were $752 million, up 87% from $403 million in the same period in 2022[43] - Provisions for credit losses increased by 65% to $323 million for the three months ended September 2023 compared to $196 million in 2022, and by a significant margin to $945 million for the nine months ended September 2023 compared to $294 million in 2022[54] - Provisions for credit losses surged to $3,486 million in 2023 from $1,155 million in 2022, a 201.8% increase[137] - Provisions for credit losses for the nine months ended September 30, 2023, were $3,486 million, up from $1,155 million in 2022[144] - Reserves for credit losses on Card Member loans increased from $3,747 million as of December 31, 2022 to $4,721 million as of September 30, 2023[158] - Provisions for credit losses were $206 million for the three months ended September 30, 2023, compared to $165 million for the same period in 2022[203] - Net write-offs were $241 million for the three months ended September 30, 2023, compared to $122 million for the same period in 2022[203] - Ending balance of Card Member receivables reserve for credit losses was $174 million for the three months ended September 30, 2023, compared to $159 million for the same period in 2022[203] Operating Expenses and Costs - Operating expenses increased by $729 million (7%) for the three-month period and $3.412 billion (11%) for the nine-month period, primarily due to higher compensation and technology costs[30][32] - Salaries and employee benefits expense increased by $299 million (17%) for the three-month period and $718 million (14%) for the nine-month period, reflecting higher compensation costs and an increase in the colleague base[30][32] - Total expenses increased by 2% to $2.572 billion for the three months ended September 2023 compared to $2.526 billion in 2022, and by 6% to $7.828 billion for the nine months ended September 2023 compared to $7.385 billion in 2022[54] - Total expenses increased to $33,229 million in 2023 from $29,817 million in 2022, reflecting an 11.4% growth[137] - Total expenses for International Card Services increased by 10% to $2.102 billion for the three months ended September 2023 compared to $1.910 billion in 2022, and by 12% to $6.376 billion for the nine months ended September 2023 compared to $5.688 billion in 2022[64] Capital and Liquidity Management - The company returned $1.7 billion of capital to shareholders through share repurchases and common stock dividends during the third quarter[19] - The company aims to maintain a Common Equity Tier 1 (CET1) risk-based capital ratio within a 10 to 11 percent target range[79] - The company manages its balance sheet to maintain liquidity programs that enable it to meet future financing obligations for at least a twelve-month period[78] - American Express Company's Common Equity Tier 1 (CET1) capital ratio as of September 30, 2023, was 10.7%, significantly above the effective minimum requirement of 7.0%[84] - American Express National Bank (AENB) reported a CET1 capital ratio of 11.4% as of September 30, 2023, also exceeding the minimum requirement[84] - Total risk-weighted assets for American Express Company stood at $209.4 billion as of September 30, 2023[85] - American Express Company returned $1.7 billion to shareholders in Q3 2023, including $0.4 billion in common stock dividends and $1.3 billion in share repurchases[90] - Customer deposits increased to $124.4 billion as of September 30, 2023, up from $110.2 billion at the end of 2022[94] - American Express Company issued $11.0 billion of debt in the first nine months of 2023, including $7.5 billion in unsecured debt and $3.5 billion in asset-backed securities[95] - Approximately 92% of deposits in AENB were FDIC-insured as of September 30, 2023, with a total of 2.2 million accounts in the direct retail deposit program[100] - Cash and cash equivalents increased to $43.9 billion as of September 30, 2023, compared to $33.9 billion at the end of 2022[102] - As of September 30, 2023, the company maintained committed, revolving, secured borrowing facilities allowing the sale of up to $3.0 billion face amount of eligible AAA notes from American Express Issuance Trust II and $3.0 billion face amount of eligible AAA certificates from American Express Credit Account Master Trust[103] - The company extended the Charge Trust's facility to mature on July 15, 2026, and increased the maximum face amount of eligible AAA certificates from $2.0 billion to $3.0 billion[103] - As of September 30, 2023, the company had a committed syndicated bank credit facility of $3.5 billion, with a maturity date of October 15, 2024[104] - As of September 30, 2023, AENB had available borrowing capacity of $67.3 billion through the Federal Reserve discount window and approximately $1.0 billion in U.S. Treasuries, agency debt, and mortgage-backed securities that could be pledged through the BTFP[105] - As of September 30, 2023, the company had approximately $377 billion of unused credit outstanding, primarily available to customers as part of established lending product agreements[106] - In 2023, the net cash provided by operating activities was $11.8 billion, driven by cash generated from net income and higher net operating liabilities[107][108] - In 2023, the net cash used in investing activities was $16.3 billion, primarily driven by higher Card Member loans and receivables outstanding[107][110] - In 2023, the net cash provided by financing activities was $14.3 billion, primarily driven by growth in customer deposits and net proceeds from debt[107][111] - Total shareholders' equity as of September 30, 2023, was $27,324 million, compared to $24,711 million at the end of 2022[147] - Repurchase of common shares for the nine months ended September 30, 2023, amounted to $2,611 million[147] - Cash dividends declared for common shares for the nine months ended September 30, 2023, totaled $1,334 million[147] - Net increase in Card Member loans and receivables, and other loans for the nine months ended September 30, 2023, was $15,462 million, compared to $19,431 million in 2022[144] Regulatory and Compliance - The company is subject to a proposed Basel III rule that could significantly revise U.S. regulatory capital requirements, with potential impacts on risk-weighted assets and capital ratios[114] - The company is required to comply with a CFPB rule by October 1, 2024, to collect and report data regarding certain small business credit applications[116] - The company is subject to stringent AML/CFT regulations, including the Bank Secrecy Act and the Anti-Money Laundering Act of 2020, which require enhanced reporting and recordkeeping[122] - Non-compliance with AML/CFT laws could result in significant penalties, loss of licenses, or restrictions on business activities[123] Card Member Metrics - Cards-in-force increased by 5% to 138.2 million as of September 2023 compared to 131.4 million in 2022[35] - Average proprietary basic Card Member spending rose by 5% to $61.2 for the three months ended September 2023 compared to $58.2 in 2022[35] - Proprietary cards-in-force grew by 5% to 43.4 million as of September 2023 compared to 41.2 million in 2022[52] - Proprietary cards-in-force grew by 5% to 20.8 million as of September 30, 2023, compared to 19.8 million in 2022[72] Investment and Securities - Investment securities include available-for-sale debt securities carried at fair value, with accrued interest totaling $12 million as of September 30, 2023[206] - Unrealized losses attributable to credit deterioration are recorded in the Consolidated Statements of Income in Other loans Provision for credit losses[206] - Unrealized gains and any portion of a security's unrealized loss attributable to non-credit losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax[206] - Equity securities carried at fair value have unrealized gains and losses recorded in the Consolidated Statements of Income as Other, net expense[206] Economic and Market Conditions - U.S. unemployment rate projections for the fourth quarter of 2023 range from 3% to 8%, with GDP growth projections ranging from 4% to -3%[196] - The CECL methodology requires estimating lifetime expected credit losses, incorporating historical loss experience and future economic conditions over a reasonable and supportable period[187] Modified Loans and Receivables - Consumer card member loans modified under financial difficulty programs totaled $542 million, representing 0.6% of total class of financing receivables[172] - Small business card member loans modified under financial difficulty programs amounted to $167 million, representing 0.6% of total class of financing receivables[172] - Total modified loans and receivables for borrowers experiencing financial difficulty reached $2,320 million for the nine months ended September 30, 2023[172] - Card Member Loans modified as TDRs totaled $546 million for the three months ended September 30, 2022, with an average interest rate reduction of 14 percentage points[182] - Card Member Receivables modified as TDRs amounted to $591 million for the nine months ended September 30, 2022, with no interest rate reduction offered[182] - Total loans and receivables modified as TDRs that subsequently defaulted within twelve months of modification aggregated $25 million for the three months ended September 30, 2022[184] Delinquencies and Write-offs - Consumer Card Member loans 90+ days past due increased from $272 million as of December 31, 2022 to $369 million as of September 30, 2023[163] - Small Business Card Member loans 90+ days past due increased from $73 million as of December 31, 2022 to $109 million as of September 30, 2023[163] - The net write-off rate for consumer card member loans was 1.7% in 2023, compared to 1.5% in 2022[168] - The net write-off rate for small business card member loans was 2.1% in 2023, compared to 1.8% in 2022[168] - Net write-off rate for principal, interest, and fees increased to 2.6% for the three months ended September 30, 2023, compared to 1.4% in 2022[72]