American Express Reports Second Quarter EPS of $1.43, Up 13 Percent from a Year Ago; Revenues, Loans and Card Member Spending

  American Express Reports Second Quarter EPS of $1.43, Up 13 Percent from a   Year Ago; Revenues, Loans and Card Member Spending Increase; Gain from   Business Travel Transaction Largely Reinvested in Business  Business Wire  NEW YORK -- July 29, 2014  American Express Company (NYSE:AXP) today reported second-quarter net income of $1.5 billion, up from $1.4 billion a year ago. Diluted earnings per share rose 13 percent to $1.43, from $1.27 a year ago.   (Millions, except percentages and per share amounts)                         Quarters Ended              Percentage     Six Months Ended              Percentage                                                                                                              June 30,                    Inc/(Dec)      June 30,                      Inc/(Dec)                        2014        2013                         2014         2013 Total Revenues Net of                 $ 8,657       $ 8,245       5    %         $ 16,856       $ 16,126       5    % Interest Expense Net Income             $ 1,529       $ 1,405       9    %         $ 2,961        $ 2,685        10   % Earnings Per Common Share – Diluted: Net Income Attributable           $ 1.43        $ 1.27        13   %         $ 2.77         $ 2.42         14   % to Common Shareholders^1 Average Diluted Common           1,058         1,097       (4   ) %         1,062          1,101        (4   ) % Shares Outstanding Return on                28.8  %       23.6  %                      28.8   %       23.6   % Average Equity   Net income from the quarter included a gain of $626 million ($409 million after-tax) from the closing of the previously announced joint venture transaction for the company’s business travel operations. As planned, the company used a substantial portion of the gain to fund incremental investments in growth and efficiency initiatives.  Consolidated total revenues net of interest expense rose to $8.7 billion in the quarter, up 5 percent from $8.2 billion a year ago. The increase reflected higher Card Member spending, higher net interest income and higher net card fees.  Consolidated provisions for losses totaled $489 million, down 6 percent from $518 million a year ago. The decrease reflected lower net write-offs in the current quarter, offset, in part, by the effect of a larger reserve release a year ago.  Consolidated expenses totaled $5.9 billion, up 2 percent from $5.7 billion a year ago. Expenses for the period were impacted by increased marketing, which included a significant amount of incremental investments in growth initiatives, and rewards costs. Operating expenses^2 were lower due to a gain on the business travel joint venture transaction (which was reported as an expense reduction), partially offset by transaction-related costs of $79 million, as well as the following items:    *A restructuring charge of $133 million ($90 million after-tax); and   *A contribution to the American Express Foundation of $40 million ($25     million after-tax).  The business travel joint venture transaction gain, net of the offsets and incremental investments mentioned above, contributed approximately $0.05 to second-quarter diluted earnings per share. The gain was recognized in the Global Commercial Services segment. The offsetting investments were made across all of the company’s operating segments.  The effective tax rate for the quarter was 34 percent, up from 30 percent a year ago, which reflected the resolution of certain prior years’ tax items.  The company’s return on average equity (ROE) was 28.8 percent, up from 23.6 percent a year ago.  “The strong underlying performance this quarter reflected a continuation of some familiar themes: higher Card Member spending, credit metrics at or near their historic lows, a modest increase in loan balances, continued success in containing operating expenses and a substantial return of capital to our investors through share repurchases,” said Kenneth I. Chenault, chairman and chief executive officer.  “Card Member spending rose 9 percent from year ago levels, and overall the growth rate accelerated from earlier this year, with higher volumes across each of our businesses in the U.S. and internationally.  “As noted above, we completed the formation of the joint venture for our business travel operations, which will have additional resources from a new investor group to develop products, create capabilities and attract new customers. We maintain a 50 percent ownership and will continue to have a close working relationship with the business travel joint venture.  “The gain we recognized on the business travel joint venture transaction gave us the flexibility to substantially increase spending on a number of growth initiatives, including marketing support for products such as the Amex EveryDay Credit Card and American Express Serve. It also offset a restructuring charge we recognized during the quarter. That charge relates to actions that will be taking place over the next year to improve efficiency and contain operating expenses primarily within our Global Corporate Services Group. The restructuring will largely involve positions that do not directly generate revenue.”  Segment Results  U.S. Card Services reported second-quarter net income of $770 million, up 4 percent from $743 million a year ago.  Total revenues net of interest expense increased 6 percent to $4.5 billion from $4.2 billion a year ago. The rise largely reflected a 9 percent increase in Card Member spending and higher net interest income.  Provisions for losses totaled $339 million, down 5 percent from $356 million a year ago. The decrease reflected lower net write-offs in the current quarter, offset, in part, by a larger reserve release a year ago.  Total expenses increased 8 percent to $2.9 billion from $2.7 billion a year ago. The increase primarily reflected a portion of the incremental investments in growth initiatives mentioned earlier, along with higher rewards costs.  The effective tax rate was 36 percent compared to 37 percent a year ago.  International Card Services reported second-quarter net income of $77 million, down 63 percent from $208 million a year ago.  Total revenues net of interest expense were $1.4 billion, up 7 percent from $1.3 billion a year ago. The increase primarily reflected higher Card Member spending and higher revenues from the Loyalty Partner business.  Total expenses were $1.2 billion, up 18 percent from $1.0 billion a year ago. The increase reflected a portion of the incremental investments and restructuring charge mentioned earlier.  The effective tax rate was (12) percent compared to (33) percent a year ago due to the resolution of certain prior years’ tax items.  Global Commercial Services reported second-quarter net income of $561 million, up from $226 million a year ago. The increase primarily reflected the joint venture transaction gain.  Total revenues net of interest expense were $1.3 billion, up 3 percent from $1.2 billion a year ago. The increase primarily reflected higher Card Member spending.  Total expenses decreased 58 percent to $361 million from $862 million a year ago. The decrease primarily reflected the joint venture transaction gain (which was reported as an expense reduction), partially offset by transaction-related costs and a portion of the incremental investments and restructuring charge mentioned previously.  The effective tax rate was 35 percent compared to 32 percent from a year ago.  Global Network & Merchant Services reported second-quarter net income of $373 million, down 9 percent from $412 million a year ago.  Total revenues net of interest expense increased 5 percent to $1.5 billion from $1.4 billion a year ago. The increase primarily reflected higher merchant-related revenues driven by an increase in global Card Member spending.  Total expenses increased 20 percent to $859 million from $716 million a year ago. The increase primarily reflected a portion of the incremental investments mentioned earlier.  The effective tax rate remained unchanged from a year ago at 36 percent.  Corporate and Other reported second-quarter net loss of $252 million compared with net loss of $184 million in the year-ago period, largely reflecting that portion of the previously-mentioned incremental investments that supported growth initiatives in Enterprise Growth.  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 americanexpress.com and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/companies/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.  Key links to products and services: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, corporate card and business travel.  The 2014 Second Quarter Earnings Supplement will be available today on the American Express website at http://ir.americanexpress.com. An investor conference call will be held at 5:00 p.m. (ET) today to discuss second-quarter earnings results. Live audio and presentation slides for the investor conference call will be available to the general public at the same website. A replay of the conference call will be available later today at the same website address.  This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the company’s expected business and financial performance and are subject to risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements due to a variety of factors, including those contained in the company's Annual Report on Form 10-K for the year ended December 31, 2013, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 and the company’s other filings with the Securities and Exchange Commission. 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.  ^1 Represents net income less earnings allocated to participating share awards of $12 million and $13 million for the three months ended June 30, 2014 and 2013, respectively, and $24 million for both the six months ended June 30, 2014 and 2013.  ^2 Operating expenses represent salaries and employee benefits, professional services, occupancy and equipment, communications and other, net.  All information in the following tables is presented on a basis prepared in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise indicated. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.   (Preliminary) American Express Company Consolidated Statements of Income  (Millions)                     Quarters Ended                              Six Months Ended                                            June 30,                        Percentage         June 30,                             Percentage                          2014         2013            Inc/(Dec)          2014          2013                Inc/(Dec)                                                                                                           Revenues Non-interest revenues Discount                 $ 4,945         $ 4,729         5       %          $ 9,591          $ 9,167             5       % revenue Net card fees              687             647           6                    1,361            1,300             5 Travel commissions                500             495           1                    923              932               (1   ) and fees Other commissions                624             605           3                    1,242            1,178             5 and fees Other                     585           567          3                   1,086          1,104            (2   ) Total non-interest              7,341         7,043        4                   14,203         13,681           4 revenues Interest income Interest on                1,696           1,622         5                    3,407            3,305             3 loans Interest and dividends on               45              52            (13  )               91               105               (13  ) investment securities Deposits with banks and                 18            20           (10  )              37             46               (20  ) other Total interest            1,759         1,694        4                   3,535          3,456            2 income Interest expense Deposits                   91              107           (15  )               185              221               (16  ) Long-term debt            352           385          (9   )              697            790              (12  ) and other Total interest            443           492          (10  )              882            1,011            (13  ) expense Net interest              1,316         1,202        9                   2,653          2,445            9 income Total revenues net of                    8,657         8,245        5                   16,856         16,126           5 interest expense Provisions for losses Charge card                183             161           14                   398              315               26 Card Member                282             334           (16  )               532              577               (8   ) loans Other                     24            23           4                   44             42               5 Total provisions for            489           518          (6   )              974            934              4 losses Total revenues net of interest                  8,168         7,727        6                   15,882         15,192           5 expense after provisions for losses                                                                                                                           Expenses Marketing and              985             786           25                   1,598            1,407             14 promotion Card Member                1,773           1,601         11                   3,355            3,121             7 rewards Card Member services and               192             193           (1   )               414              382               8 other Salaries and employee                   1,658           1,543         7                    3,198            3,158             1 benefits Professional               817             763           7                    1,509            1,479             2 services Occupancy and              467             460           2                    929              932               - equipment Communications             101             92            10                   194              188               3 Other, net                (137  )        294          #                   165            621              (73  ) Total                     5,856         5,732        2                   11,362         11,288           1 Pretax income              2,312           1,995         16                   4,520            3,904             16 Income tax                783           590          33                  1,559          1,219            28 provision Net income               $ 1,529        $ 1,405        9                  $ 2,961         $ 2,685            10 Net income attributable to common                $ 1,517        $ 1,392        9                  $ 2,937         $ 2,661            10 shareholders (A) Effective tax              33.9  %         29.6  %                            34.5   %         31.2   % rate                         # - Denotes a variance of more than 100 percent.  (A) Represents net income, less earnings allocated to participating share awards of $12 million and $13 million for the three months ended June 30, 2014 and 2013, respectively, and $24 million for both the six months ended June 30, 2013 and 2012, respectively.   (Preliminary) American Express Company Condensed Consolidated Balance Sheets                                                           (Billions)                                                                                                         June 30,                     December 31,                                      2014       2013                                                                    Assets Cash & cash equivalents              $          18                $     19 Accounts receivable                             49                      47 Investment securities                           5                       5 Loans                                           66                      67 Other assets                                   14                     15 Total assets                         $          152               $     153                                                                    Liabilities and Shareholders' Equity Customer deposits                    $          42                $     42 Short-term borrowings                           3                       5 Long-term debt                                  55                      55 Other liabilities                              32                     32 Total liabilities                              132                    134                                                                    Shareholders' Equity                           20                     19 Total liabilities and                $          152               $     153 shareholders' equity    (Preliminary) American Express Company Financial Summary (Millions)                               Quarters Ended                              Six Months Ended                                       June 30,                        Percentage         June 30,                         Percentage                         2014         2013            Inc/(Dec)          2014          2013            Inc/(Dec)                                                                                                                      Total revenues net of interest expense U.S. Card               $ 4,477         $ 4,239         6       %          $ 8,767          $ 8,321         5       % Services International             1,391           1,299         7                    2,743            2,616         5 Card Services Global Commercial                1,269           1,231         3                    2,463            2,394         3 Services Global Network &                1,455         1,384        5                   2,820          2,687        5 Merchant Services                           8,592           8,153         5                    16,793           16,018        5 Corporate &              65            92           (29  )              63             108          (42  ) Other                                                                                                                      CONSOLIDATED TOTAL REVENUES NET            $ 8,657        $ 8,245        5                  $ 16,856        $ 16,126       5 OF INTEREST EXPENSE                                                                                                                      Pretax income (loss) U.S. Card               $ 1,200         $ 1,175         2                  $ 2,606          $ 2,445         7 Services International             69              156           (56  )               272              349           (22  ) Card Services Global Commercial                865             333           #                    1,150            616           87 Services Global Network &                578           647          (11  )              1,280          1,229        4 Merchant Services                           2,712           2,311         17                   5,308            4,639         14 Corporate &              (400  )        (316  )       27                  (788   )        (735   )      7 Other                                                                                                                      PRETAX INCOME           $ 2,312        $ 1,995        16                 $ 4,520         $ 3,904        16                                                                                                                      Net income (loss) U.S. Card               $ 770           $ 743           4                  $ 1,646          $ 1,547         6 Services International             77              208           (63  )               236              386           (39  ) Card Services Global Commercial                561             226           #                    745              417           79 Services Global Network &                373           412          (9   )              816            785          4 Merchant Services                           1,781           1,589         12                   3,443            3,135         10 Corporate &              (252  )        (184  )       37                  (482   )        (450   )      7 Other                                                                                                                      NET INCOME              $ 1,529        $ 1,405        9                  $ 2,961         $ 2,685        10                                                                                                                      # - Denotes a variance of more than 100 percent.    (Preliminary) American Express Company Financial Summary (continued)                                                                                        Quarters Ended                                 Six Months Ended                                    June 30,                        Percentage            June 30,                       Percentage                        2014         2013            Inc/(Dec)            2014         2013           Inc/(Dec) EARNINGS PER COMMON SHARE                                                                                                                      BASIC Net income attributable           $ 1.44         $ 1.28         13                    $ 2.78         $ 2.43        14      % to common shareholders                                                                                                                      Average common shares           1,052         1,090        (3    )    %           1,056         1,094       (3   )  % outstanding (millions)                                                                                                                      DILUTED Net income attributable           $ 1.43         $ 1.27         13                    $ 2.77         $ 2.42        14      % to common shareholders                                                                                                                      Average common shares           1,058         1,097        (4    )    %           1,062         1,101       (4   )  % outstanding (millions)                                                                                                                      Cash dividends              $ 0.26         $ 0.23         13         %          $ 0.49         $ 0.43        14      % declared per common share                                                                                                                                                                                                                                                               Selected Statistical Information                                                                                                                                             Quarters Ended                                        Six Months Ended                        June 30,                        Percentage            June 30,                       Percentage                        2014            2013            Inc/(Dec)             2014            2013           Inc/(Dec)                                                                                                                      Return on average                  28.8  %         23.6  %                               28.8  %         23.6  % equity (A) Return on average                  28.5  %         23.4  %                               28.5  %         23.4  % common equity (A) Return on average tangible                 35.8  %         29.7  %                               35.8  %         29.7  % common equity (A) Common shares outstanding              1,046           1,084         (3    )    %            1,046           1,084        (3   )  % (millions) Book value per common             $ 19.32         $ 17.57         10         %          $ 19.32         $ 17.57        10      % share Shareholders' equity                 $ 20.2          $ 19.0          6          %          $ 20.2          $ 19.0         6       % (billions)                                                                                                                      # - Denotes a variance of more than 100 percent.                                                                                                                      (A) Refer to Appendix I for components of return on average equity, return on average common equity and return on average tangible common equity, a non-GAAP measure.  (Preliminary) American Express Company Components of Return on Average Equity (ROE), Return on Average Common Equity (ROCE), and Return on Average Tangible Common Equity (ROTCE) Appendix I  (Millions)                    For the Twelve Months Ended                        June 30,      March 31,     December      September     June 30,                                                         31,             30,                        2014             2014            2013            2013            2013                                                                                          ROE                                                                                          Net income             $ 5,635          $ 5,511         $ 5,359         $ 4,688         $ 4,572 Average shareholders'          $ 19,591         $ 19,442        $ 19,254        $ 19,289        $ 19,372 equity Return on average equity           28.8   %         28.3   %        27.8   %        24.3   %        23.6   % (A)                                                                                          Reconciliation of ROCE and ROTCE                                                                                          Net income             $ 5,635          $ 5,511         $ 5,359         $ 4,688         $ 4,572 Earnings allocated to participating           47             48            47            43            45      share awards and other Net income attributable           $ 5,588         $ 5,463        $ 5,312        $ 4,645        $ 4,527   to common shareholders                                                                                          Average shareholders'          $ 19,591        $ 19,442       $ 19,254       $ 19,289       $ 19,372  equity Average common shareholders'          $ 19,591        $ 19,442       $ 19,254       $ 19,289       $ 19,372  equity Average goodwill and            3,994          4,012         4,055         4,091         4,128   other intangibles Average tangible common                 $ 15,597        $ 15,430       $ 15,199       $ 15,198       $ 15,244  shareholders' equity Return on average common           28.5   %         28.1   %        27.6   %        24.1   %        23.4   % equity (A) Return on average tangible                 35.8   %         35.4   %        34.9   %        30.6   %        29.7   % common equity (B)  (A) Return on average equity and return on average common equity are calculated by dividing one year period net income/net income attributable to common shareholders by one year average total shareholders’ equity/average common shareholders' equity, respectively.  (B) Return on average tangible common equity, a non-GAAP measure, is computed in the same manner as return on average common equity except the computation of average tangible common shareholders' equity, a non-GAAP measure, excludes from average total shareholders' equity, average goodwill and other intangibles. The Company believes that return on average tangible common equity is a useful measure of the profitability of its business.  Contact:  Media Contacts: Marina H. Norville, +1-212-640-2832 marina.h.norville@aexp.com or Mike O’Neill, +1-212-640-5951 mike.o'neill@aexp.com or Investors/Analysts Contacts: Ken Paukowits, +1-212-640-6348 ken.f.paukowits@aexp.com or Rick Petrino, +1-212-640-5574 richard.petrino@aexp.com  
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