| Quarters Ended December 31, |
Percentage | Year Ended December 31, |
Percentage | |||||||||||||
|
2011 |
2010 |
Inc/(Dec) |
2011 |
2010 |
Inc/(Dec) | |||||||||||
| Total Revenues Net of Interest Expense |
$ | 7,742 | $ | 7,244 | 7 |
% |
$ | 29,962 | $ | 27,582 | 9 | % | ||||
| Income From Continuing Operations |
$ | 1,192 | $ | 1,062 | 12 | % | $ | 4,899 | $ | 4,057 | 21 | % | ||||
| Income From Discontinued Operations, net of tax(1) |
$ | – | $ | – | – | $ | 36 | $ | – | # | % | |||||
| Net Income | $ | 1,192 | $ | 1,062 | 12 | % | $ | 4,935 | $ | 4,057 | 22 | % | ||||
| Earnings Per Common Share – Diluted: | ||||||||||||||||
| Income From Continuing Operations Attributable to Common Shareholders(2) |
$ | 1.01 | $ | 0.88 | 15 | % | $ | 4.09 | $ | 3.35 | 22 | % | ||||
| Income From Discontinued Operations(1) |
$ | – | $ | – | – | $ | 0.03 | $ | – | # | % | |||||
| Net Income Attributable to Common Shareholders(2) |
$ | 1.01 | $ | 0.88 | 15 | % | $ | 4.12 | $ | 3.35 | 23 | % | ||||
| Average Diluted Common Shares Outstanding |
1,163 | 1,194 | (3) | % | 1,184 | 1,195 | (1) | % | ||||||||
| Return on Average Equity | 27.7 | % | 27.5 | % | 27.7 | % | 27.5 | % | ||||||||
# Denotes a variance of more than 100 %
(1) Income from discontinued operations primarily reflects the resolution of certain prior years’ tax items related to American Express Bank Ltd., which was sold to Standard Chartered PLC during Q1’08.
(2) Represents income from continuing operations or net income, as applicable, less earnings allocated to participating share awards and other items of $14 million and $12 million for the three months ended December 31, 2011 and 2010, and $58 million and $51 million for the twelve months ended December 31, 2011 and 2010, respectively.
NEW YORK, January 19, 2012 —
Adjusted for foreign currency translations, consolidated total revenues net of interest expense also rose 7 percent this quarter compared to a 6 percent increase (9 percent before adjustment) in the third quarter of 2011.(3)
Consolidated provisions for losses totaled $409 million compared to $239 million in the year-ago period. The provision increase reflected a larger reserve release in the year-ago period and higher loans outstanding in the current period, partially offset by lower net write-offs in the current period. Credit indicators continued to be at historically low levels.
Consolidated expenses totaled $5.6 billion, up 1 percent from $5.5 billion in the year-ago period. That increase was a significant reduction from the growth rates of recent quarters and reflected lower marketing and promotion expenses, slower increases in rewards costs and, as planned, slower growth in operating expenses. The current quarter results include $49 million ($32 million after-tax) of restructuring and other reengineering costs compared to $113 million ($74 million after-tax) from the year-ago period.
The effective tax rate was 32 percent, compared to 28 percent in the year-ago quarter.
The company’s return on average equity (ROE) was 27.7 percent, up from 27.5 percent a year ago.
“Results for the quarter underscored the ability of our spend-centric model to generate revenue and earnings growth at a time when consumer behavior and regulations are changing the economics of the revolving credit business,” said Kenneth I. Chenault, chairman and chief executive officer, American Express.
“Cardmembers spent a record amount on their American Express cards, continuing a trend that has translated into overall share gains during the last two years. Billed business rose 11 percent, showing broad-based improvements from the strong levels of a year ago. Online spending was strong as we capitalized on the accelerating popularity of digital commerce. Revolving credit balances grew, but at a much slower rate than spending as Cardmembers continued to manage their debt and household finances more cautiously. Credit quality remained excellent, with past-due loans and write-offs at historically low levels.
“While we continued to make substantial investments in the business, we adjusted our budgets to reflect the end of the receipt of litigation-related payments and a diminishing benefit from reserve releases. As planned, operating expense growth declined significantly from the level of prior quarters.
“The overall recovery in the U.S. remains uneven and the environment in Europe continues to pose challenges for the global economy. But, we start 2012 from a position of strength and with a unique network that connects millions of consumers, merchants and businesses around the world. A network based on service, relationships, data and market insights is a tremendous asset for a digital age when the boundaries between online and offline commerce are being quickly redefined.”
Segment Results
U.S. Card Services reported fourth-quarter net income of $727 million, up 4 percent from $700 million in the year-ago period.
Total revenues net of interest expense increased 5 percent to $3.9 billion from $3.7 billion in the year-ago period. The increase was driven by higher cardmember spending and slightly higher net interest income despite lower yields on the loan portfolio.
Provisions for losses totaled $269 million, up from $111 million in the year-ago period. The provision increase reflected a larger reserve release in the year-ago period and higher loans outstanding in the current period, partially offset by lower net write-offs in the current period. Credit indicators continued to be at historically low levels.
Total expenses decreased 4 percent. Marketing, promotion, rewards and cardmember services expenses remained flat to the year-ago period. Higher volume-related rewards and cardmember services costs were offset by lower marketing and promotion costs. Salaries and employee benefits and other operating expenses decreased 10 percent, primarily reflecting higher restructuring and other reengineering costs in the year-ago period.
The effective tax rate was 38 percent compared to 34 percent in the year-ago quarter.
International Card Services reported fourth-quarter net income of $152 million, up 54 percent from $99 million in the year–ago period.
Total revenues net of interest expense increased 8 percent to $1.3 billion. The benefit from higher cardmember spending and revenues related to Loyalty Partner were partially offset by lower net interest income.
Provisions for losses totaled $84 million, up 5 percent from $80 million in the year-ago period.
Total expenses increased 5 percent, primarily reflecting the acquisition of Loyalty Partner earlier in the year. Marketing, promotion, rewards and cardmember services expenses rose 9 percent from year-ago levels, and included increased investments in marketing and promotion and higher volume-related rewards costs. Salaries and employee benefits and other operating expenses increased 3 percent from year-ago levels.
The effective tax rate was (11) percent compared to 3 percent in the year-ago quarter. The decrease in rate in the current period was primarily due to the favorable resolution of certain prior years’ tax items.
Global Commercial Services reported fourth-quarter net income of $180 million, up 75 percent from $103 million in the year–ago period.
Total revenues net of interest expense increased 11 percent to $1.2 billion, from $1.1 billion, reflecting increased spending by corporate cardmembers and higher travel commissions and fees.
Provisions for losses totaled $35 million, up from $30 million in the year-ago period.
Total expenses decreased 3 percent. Marketing, promotion, rewards and cardmember services expenses increased 13 percent from the year-ago period, primarily reflecting higher volume-related rewards costs. Salaries and employee benefits and other operating expenses decreased 5 percent from the year-ago period.
The effective tax rate was 35 percent compared to 26 percent in the year-ago quarter. The tax rate for the prior period reflected the impact of recurring permanent tax benefits in relation to the lower level of pre-tax income.
Global Network & Merchant Services reported fourth quarter net income of $324 million, up 25 percent from $259 million in the year-ago period.
Total revenues net of interest expense increased 12 percent to $1.3 billion, from $1.2 billion, reflecting higher merchant-related revenues driven by an increase in global cardmember spending, as well as an increase in revenues from Global Network Services’ bank partners.
Total expenses increased 2 percent. Marketing, promotion, rewards and cardmember services expenses increased 5 percent from the year-ago period. Salaries and employee benefits and other operating expenses increased 2 percent.
The effective tax rate was 36 percent compared to 32 percent in the year-ago quarter.
Corporate and Other reported fourth-quarter net loss of $191 million compared with a net loss of $99 million in the year-ago period. The result for the current period reflected income of $70 million ($43 million after-tax) for the previously announced settlement of Visa litigation compared to the $220 million ($136 million after-tax) from both MasterCard and Visa settlements a year ago.
