American Express Reports Strong Cardmember Volumes and Revenues for Fourth Quarter; Will Recognize Charges for Restructuring,

  American Express Reports Strong Cardmember Volumes and Revenues for Fourth
  Quarter; Will RecognizeCharges for Restructuring, Membership Rewards and
  Cardmember Reimbursements

Business Wire

NEW YORK -- January 10, 2013

American Express Company (NYSE: AXP) said today that cardmember spending,
revenue growth and credit quality remained strong during the fourth quarter
despite an uneven economy.

Net income for the quarter, however, reflects costs associated with three

  *A $400 million restructuring charge ($287 million after-tax) designed to
    contain future operating expenses, adapt parts of the business as more
    customers transact online or through mobile channels, and provide the
    resources for additional growth initiatives in the U.S. and
  *A $342 million expense ($212 million after-tax) reflecting enhancements to
    the process that estimates future redemptions of Membership Rewards points
    by U.S. cardmembers.
  *Approximately $153 million ($95 million after-tax) of cardmember
    reimbursements for various types of transactions dating back several
    years. This amount deals with fees, interest and bonus rewards as well as
    an incremental expense related to the consent orders entered into with
    regulators last October.

Fourth Quarter Results

After reflecting the impact of these items, net income for the quarter was
$637 million, or $0.56 per share.

Excluding these items, fourth quarter adjusted net income was $1.2 billion, or
$1.09 per share.^1 For the year ago period, net income was $1.2 billion, or
$1.01 per share.

Fourth quarter consolidated total revenues net of interest expense were $8.1
billion, up 5 percent from $7.7 billion a year ago.

Cardmember spending was 8 percent higher than a year ago, despite a brief dip
in late October/early November reflecting the impact of Hurricane Sandy on
consumers and businesses in the northeastern United States.

Credit indicators remained at historically low levels. The write-off rate for
the U.S. lending portfolio (principal only) was 2.0 percent for the quarter.

Fourth quarter and full year 2012 results will be released as scheduled on
January 17, 2013.

“We’ve delivered strong results since coming out of the recession and have
been consistently gaining share in a very competitive U.S. industry,” said
Kenneth I. Chenault, chairman and chief executive officer. “In addition to
strengthening our ties to merchants and cardmembers, we have launched products
for new customer segments, expanded into new geographies internationally, and
extended our presence well beyond the traditional American Express footprint.

“All of this has been taking place at a time when technology is transforming
the world of commerce, regulatory changes are reshaping the financial
industry, and customer loyalty has become more important than ever.

“Maintaining our momentum in this environment will require us to evolve our
business, embrace new technologies, become more efficient and generate
resources to invest in the many growth opportunities we’ve identified.

“Regardless of the environment, success is also going to be defined by doing
what’s right for our customers. We never want to make mistakes, but we are
fully committed to correcting them and providing compensation when
appropriate. At a time when public confidence in financial institutions is at
a low point, we want to make sure that we live up to the reputation we’ve
earned over many years for delivering superior value and service to our
customers. The material costs for reimbursement that we are able to identify
have been recognized, but we are going to continue to work closely with
regulators and strengthen our controls as part of our personal commitment to
protecting the integrity of the American Express brand.”


The restructuring charge mentioned above will consist largely of severance
payments related to the elimination of an estimated 5,400 jobs. Those
reductions will be partly offset by jobs the company expects to add during the
year. Overall staffing levels by year end 2013 are expected to be 4 to 6
percent less than the current total of 63,500.

Elements of the restructuring program include:

  *Reengineering the business model in Global Business Travel to reduce its
    cost structure and invest in capabilities that better align it with the
    shift of customer volumes to online channels and automated servicing
  *Continuing the reconfiguration of cardmember servicing and collections as
    we drive efficiency through our global scale and as more customers use
    online and mobile channels instead of paper and telephone;
  *Reducing the size of our staff groups while continuing to maintain the
    right focus and resources on risk and control activities;
  *Ensuring that we have the right organizational structure across our client
    management and sales functions to best serve our customers; and
  *Consolidating similar functions and eliminating duplicate efforts wherever
    possible in order to drive efficiency.

The job reductions will take place across seniority levels, businesses and
staff groups. The largest reductions will come in the travel businesses, which
operate in an industry that is being fundamentally reinvented as a result of
the digital revolution. Overall, reductions will be spread proportionally
between the U.S. and international markets and will primarily involve
positions that do not directly generate revenue.

Changes within the customer service organization are designed to help us
continue to deliver award-winning service and operate at maximum efficiency as
more customers and merchants do business with us through online and mobile

“Against the backdrop of an uneven economic recovery, these restructuring
initiatives are designed to make American Express more nimble, more efficient
and more effective in using our resources to drive growth,” said Mr. Chenault.
“For the next two years, our aim is to hold annual operating expense increases
to less than 3 percent.^2 The overall restructuring program will put us in a
better position as we seek to deliver strong results for shareholders and to
maintain marketing and promotion investments at about 9 percent of revenues.”

Membership Rewards Estimates

Membership Rewards, the industry’s largest and most successful customer
loyalty program, allows cardmembers to accumulate points each month and redeem
them at a future date by choosing offers from hundreds of our merchant

Determining the costs for this program is a multi-step process that uses
predictive models to estimate the amount of earned points that will ultimately
be redeemed by cardmembers, and then applies an estimated average cost per
point that the company will incur for those redemptions.

Following a previously announced review, the company enhanced the ultimate
redemption rate (URR) estimation process, refining the predictive model it
uses for the U.S. program. These changes increased the global URR assumption
to 94 percent from 93 percent and translated to an additional $342 million in
the balance sheet reserve for Membership Rewards and a corresponding charge in
the fourth quarter.

“Loyalty and reward programs are one of our major competitive advantages,”
said Mr. Chenault. “They have been a centerpiece of our marketing efforts and
based on their success we have expanded them during the last few years to
offer broader opportunities for cardmembers to earn and redeem points. The
enhancements we’ve made to our models predict even greater usage of the
program in the future and that has traditionally meant closer, more meaningful
relationships with our cardmembers.”

Cardmember Reimbursements

As previously reported the company has been cooperating with ongoing
regulatory reviews and continues to enhance its compliance controls.

The company’s analyses of cardmember inquiries, complaints and account records
from the last several years have identified instances where:

  *Late fees of approximately $28 million were collected from some
    cardmembers who did not receive statements for the billing period prior to
    the write-off of their accounts.
  *Interest of approximately $24 million was charged to some cardmembers who
    had disputed balances on their accounts.
  *Certain bonus rewards for industry specific spending with an aggregate
    value of $68 million should have been credited to cardmembers.

Separately, the company identified additional cardmembers during the quarter
who will receive restitution as part of the consent orders we entered into
with various U.S. banking regulators in October. That restitution, which
amounts to an incremental $33 million, relates to previously disclosed issues
with debt collection settlement letters.

Impacted cardmembers will be notified directly in the coming months.

American Express will hold a conference call for investors to discuss this
announcement at 5:00 p.m. (ET) today. A live audio webcast of the investor
conference call will be available to the general public on the American
Express Investor Relations web site at A replay
of the investor conference call will be available after the call at the same
web site address.

These results represent preliminary estimates for the three months ended
December 31, 2012.

About American Express

American Express is a global services company, providing customers with access
to products, insights and experiences that enrich lives and build business
success. Learn more at and connect with us on,,,, and

Key links to products and services: charge and credit cards, business credit
cards, travel services, gift cards, prepaid cards, merchant services, business
travel, and corporate card

Cautionary Note Regarding Forward−Looking Statements

This press release includes forward-looking statements, which are subject to
risks and uncertainties. Forward-looking statements contain words such as
“believe,” “expect,” “estimate,” “anticipate,” “optimistic,” “intend,” “plan,”
“aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar
expressions. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which they are
made. The company undertakes no obligation to update or revise any
forward-looking statements. Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited
to, the following:

  *adjustments arising in the normal course of completing the company’s
    fourth quarter and year-end financial closing process;
  *the possibility of not achieving the expected timing and financial impact
    of the company’s restructuring plan and higher than expected employee
    levels, which could be caused by factors such as the company’s ability to
    mitigate the operational and other risks posed by planned staff
    reductions, the company’s ability to develop and implement technology
    resources to realize cost savings, underestimating hiring needs related to
    some of the job positions being eliminated and other employee needs
    currently not anticipated, lower than expected attrition rates and higher
    than expected redeployment rates;
  *the company’s ability to grow and deliver strong results on average and
    over time, which will depend on, among other things, the level of consumer
    and business spending; increasing revenues from the company's credit and
    charge card, prepaid and other products; identifying and exploiting new
    opportunities; sustaining pricing in light of regulatory and market
    pressures; increasing merchant coverage and expanding the Global Network
    Services business; credit trends; expense management; currency and
    interest rate fluctuations; and general economic conditions, such as
    consumer confidence, unemployment, the housing market, the health of state
    economies and GDP growth;
  *the ability of the company to maintain and expand its presence in the
    digital payments space, including online and mobile channels, which will
    depend on the company’s success in evolving its business models and
    processes for the digital environment, building partnerships and executing
    programs with companies, and utilizing digital capabilities that can be
    leveraged for future growth;
  *uncertainty relating to the actual growth of operating expenses in 2013
    and subsequent years and the ability to hold annual operating expense
    growth to less than 3 percent for the next two years, which will depend in
    part on the company’s ability to achieve the expected benefits of the
    company’s restructuring plan, which will be impacted by, among other
    things, the factors identified above, the company’s ability to balance the
    control and management of expenses and the maintenance of competitive
    service levels for its customers, unanticipated increases in significant
    categories of operating expenses, such as consulting or professional fees,
    compliance or regulatory-related costs and technology costs, the payment
    of monetary damages and penalties, disgorgement and restitution, the
    company’s decision to increase or decrease discretionary operating
    expenses depending on overall business performance, the impact of changes
    in foreign currency exchange rates on costs and results, and the level of
    acquisition activity and related expenses;
  *uncertainty in the amount of marketing and promotion expenses relative to
    the revenues in 2013 and subsequent years, which will depend on (i)
    factors affecting revenue, such as among other things, the growth of
    consumer and business spending on American Express cards, higher travel
    commissions and fees, the growth of and/or higher yields on the loan
    portfolio and the development of new revenue opportunities and (ii) the
    company’s ability to control and manage marketing and promotion expenses
    as described below, the availability of opportunities to invest at a
    higher level due to favorable business results and changes in
    macroeconomic conditions; and
  *the actual amount to be spent by the company on investments in the
    business, including on marketing, promotion, rewards and cardmember
    services and certain operating expenses, as well as the actual amount of
    resources arising from the restructuring plan the company decides to
    invest in growth initiatives, which will be based in part on management’s
    assessment of competitive opportunities and the company’s performance and
    the ability to control and manage operating, infrastructure, advertising,
    promotion and rewards expenses as business expands or changes, including
    the changing behavior of cardmembers; and
  *the actual amount that the higher URR assumption derived in the fourth
    quarter will increase cardmember rewards expenses annually in 2013 and
    subsequent years, which will depend on the terms of the Membership Rewards
    program, redemption patterns, costs per point redeemed and the level of
    cardmember spend; and
  *uncertainty relating to the timing and magnitude of a possible charge
    resulting from the current review of the URR estimation process for the
    company’s international Membership Rewards programs, which will depend in
    part on the demographics and assumptions about the behavior of cardmembers
    enrolled in the international Membership Rewards programs as compared to
    the U.S. program and the potential growth of the international Membership
    Rewards programs.

A further description of these and other risks and uncertainties can be found
in the company’s Annual Report on Form 10-K for the year ended December 31,
2011, its Quarterly Reports on Form 10-Q for the three months ended March 31,
June 30 and September 30, 2012, and the company’s other reports filed with the

^1 Management believes adjusted net income, and adjusted earnings per share,
which are non-GAAP measures, provide useful metrics to evaluate the ongoing
operating performance of the company.

^2 Operating expenses represent salaries and employee benefits, professional
services, occupancy and equipment, communications and other expenses.


Media Contacts:
Marina H. Norville, +1-212-640-2832
Mike O’Neill, +1-212-640-5951
Investors/Analysts Contacts:
Ken Paukowits, +1-212-640-6348
Rick Petrino, +1-212-640-5574
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