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American Express(AXP) - 2023 Q3 - Quarterly Report
AXPAmerican Express(AXP)2023-10-20 16:36
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Revenue Growth - Total revenues net of interest expense increased by 13% year-over-year to 15.381billionforQ32023,drivenbygrowthinbilledbusinessandnetcardfees[12][16]−Totalrevenuesnetofinterestexpenseincreasedby15.381 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 6.030billion(166.030 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 13.556billioninQ32022[134]−Totalrevenuesnetofinterestexpenseincreasedto13.556 billion in Q3 2022[134] - Total revenues net of interest expense increased to 44,716 million in 2023 from 38,686millionin2022,reflectingagrowthof15.638,686 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 1.879billioninQ32022[12]−Earningsperdilutedshareincreasedby341.879 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 2.451billioninQ32023,comparedto2.451 billion in Q3 2023, compared to 1.879 billion in Q3 2022[134] - Net income rose to 6,441millionin2023comparedto6,441 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 6,441million,comparedto6,441 million, compared to 5,942 million in the same period in 2022[144] - Net income for the three months ended September 30, 2022 was 1,879million[150]−NetincomefortheninemonthsendedSeptember30,2022was1,879 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 420.2billioninQ32023,withbilledbusinessgrowing8420.2 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 339.0billionin2022[35]−InternationalCardServicessawan18339.0 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 140.3billionin2022,andby12140.3 billion in 2022, and by 12% to 451.1 billion for the nine months ended September 2023 compared to 404.1billionin2022[52]−Billedbusinessincreasedby1404.1 billion in 2022[52] - Billed business increased by 1% to 129.5 billion for the three months ended September 2023 compared to 127.6billionin2022,andby4127.6 billion in 2022, and by 4% to 384.7 billion for the nine months ended September 2023 compared to 369.0billionin2022[62]−Billedbusinessincreasedby18369.0 billion in 2022[62] - Billed business increased by 18% to 82.7 billion for the three months ended September 30, 2023, compared to 70.2billioninthesameperiodin2022[72]NetInterestIncomeandLoans−Netinterestincomeincreasedby3470.2 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 2.393billion(342.393 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 99.0billionin2022[38]−NetinterestincomeforthethreemonthsendedSeptember30,2023,was99.0 billion in 2022[38] - Net interest income for the three months ended September 30, 2023, was 3.442 billion, compared to 2.578billioninthesameperiodin2022,representinga33.52.578 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 2.652billioninthesameperiodin2022,reflectinga29.92.652 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 97.7billioninthesameperiodin2022,a19.397.7 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 1.977billionin2022,andto1.977 billion in 2022, and to 7.039 billion for the nine months ended September 2023 compared to 5.366billionin2022[52]−NetinterestincomeforInternationalCardServicesincreasedby365.366 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 186millionin2022,andby24186 million in 2022, and by 24% to 732 million for the nine months ended September 2023 compared to 590millionin2022[64]−CardMemberloansincreasedfrom590 million in 2022[64] - Card Member loans increased from 107,964 million as of December 31, 2022 to 117,978millionasofSeptember30,2023[158]−ConsumerCardMemberloansincreasedfrom117,978 million as of September 30, 2023[158] - Consumer Card Member loans increased from 84,964 million as of December 31, 2022 to 90,900millionasofSeptember30,2023[158]−SmallBusinessCardMemberloansincreasedfrom90,900 million as of September 30, 2023[158] - Small Business Card Member loans increased from 22,947 million as of December 31, 2022 to 27,022millionasofSeptember30,2023[158]CreditLossesandProvisions−Provisionsforcreditlossesincreasedby5827,022 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 455million(58455 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 4,721millionasofSeptember2023comparedto4,721 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 752million,up87752 million, up 87% from 403 million in the same period in 2022[43] - Provisions for credit losses increased by 65% to 323millionforthethreemonthsendedSeptember2023comparedto323 million for the three months ended September 2023 compared to 196 million in 2022, and by a significant margin to 945millionfortheninemonthsendedSeptember2023comparedto945 million for the nine months ended September 2023 compared to 294 million in 2022[54] - Provisions for credit losses surged to 3,486millionin2023from3,486 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 3,486million,upfrom3,486 million, up from 1,155 million in 2022[144] - Reserves for credit losses on Card Member loans increased from 3,747millionasofDecember31,2022to3,747 million as of December 31, 2022 to 4,721 million as of September 30, 2023[158] - Provisions for credit losses were 206millionforthethreemonthsendedSeptember30,2023,comparedto206 million for the three months ended September 30, 2023, compared to 165 million for the same period in 2022[203] - Net write-offs were 241millionforthethreemonthsendedSeptember30,2023,comparedto241 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 174millionforthethreemonthsendedSeptember30,2023,comparedto174 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 729million(7729 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 299million(17299 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 2.572billionforthethreemonthsendedSeptember2023comparedto2.572 billion for the three months ended September 2023 compared to 2.526 billion in 2022, and by 6% to 7.828billionfortheninemonthsendedSeptember2023comparedto7.828 billion for the nine months ended September 2023 compared to 7.385 billion in 2022[54] - Total expenses increased to 33,229millionin2023from33,229 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 2.102billionforthethreemonthsendedSeptember2023comparedto2.102 billion for the three months ended September 2023 compared to 1.910 billion in 2022, and by 12% to 6.376billionfortheninemonthsendedSeptember2023comparedto6.376 billion for the nine months ended September 2023 compared to 5.688 billion in 2022[64] Capital and Liquidity Management - The company returned 1.7billionofcapitaltoshareholdersthroughsharerepurchasesandcommonstockdividendsduringthethirdquarter[19]−ThecompanyaimstomaintainaCommonEquityTier1(CET1)risk−basedcapitalratiowithina10to11percenttargetrange[79]−Thecompanymanagesitsbalancesheettomaintainliquidityprogramsthatenableittomeetfuturefinancingobligationsforatleastatwelve−monthperiod[78]−AmericanExpressCompany′sCommonEquityTier1(CET1)capitalratioasofSeptember30,2023,was10.71.7 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 1.7billiontoshareholdersinQ32023,including1.7 billion to shareholders in Q3 2023, including 0.4 billion in common stock dividends and 1.3billioninsharerepurchases[90]−Customerdepositsincreasedto1.3 billion in share repurchases[90] - Customer deposits increased to 124.4 billion as of September 30, 2023, up from 110.2billionattheendof2022[94]−AmericanExpressCompanyissued110.2 billion at the end of 2022[94] - American Express Company issued 11.0 billion of debt in the first nine months of 2023, including 7.5billioninunsecureddebtand7.5 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 43.9billionasofSeptember30,2023,comparedto43.9 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 3.0billionfaceamountofeligibleAAAnotesfromAmericanExpressIssuanceTrustIIand3.0 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 2.0billionto2.0 billion to 3.0 billion[103] - As of September 30, 2023, the company had a committed syndicated bank credit facility of 3.5billion,withamaturitydateofOctober15,2024[104]−AsofSeptember30,2023,AENBhadavailableborrowingcapacityof3.5 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 1.0billioninU.S.Treasuries,agencydebt,andmortgage−backedsecuritiesthatcouldbepledgedthroughtheBTFP[105]−AsofSeptember30,2023,thecompanyhadapproximately1.0 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 11.8billion,drivenbycashgeneratedfromnetincomeandhighernetoperatingliabilities[107][108]−In2023,thenetcashusedininvestingactivitieswas11.8 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 14.3billion,primarilydrivenbygrowthincustomerdepositsandnetproceedsfromdebt[107][111]−Totalshareholders′equityasofSeptember30,2023,was14.3 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 24,711millionattheendof2022[147]−RepurchaseofcommonsharesfortheninemonthsendedSeptember30,2023,amountedto24,711 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 1,334million[147]−NetincreaseinCardMemberloansandreceivables,andotherloansfortheninemonthsendedSeptember30,2023,was1,334 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 19,431millionin2022[144]RegulatoryandCompliance−ThecompanyissubjecttoaproposedBaselIIIrulethatcouldsignificantlyreviseU.S.regulatorycapitalrequirements,withpotentialimpactsonrisk−weightedassetsandcapitalratios[114]−ThecompanyisrequiredtocomplywithaCFPBrulebyOctober1,2024,tocollectandreportdataregardingcertainsmallbusinesscreditapplications[116]−ThecompanyissubjecttostringentAML/CFTregulations,includingtheBankSecrecyActandtheAnti−MoneyLaunderingActof2020,whichrequireenhancedreportingandrecordkeeping[122]−Non−compliancewithAML/CFTlawscouldresultinsignificantpenalties,lossoflicenses,orrestrictionsonbusinessactivities[123]CardMemberMetrics−Cards−in−forceincreasedby519,431 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 58.2in2022[35]−Proprietarycards−in−forcegrewby558.2 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 542million,representing0.6542 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 2,320millionfortheninemonthsendedSeptember30,2023[172]−CardMemberLoansmodifiedasTDRstotaled2,320 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 591millionfortheninemonthsendedSeptember30,2022,withnointerestratereductionoffered[182]−TotalloansandreceivablesmodifiedasTDRsthatsubsequentlydefaultedwithintwelvemonthsofmodificationaggregated591 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 272millionasofDecember31,2022to272 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 73millionasofDecember31,2022to73 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]