American Express EPS Up 15% for the Quarter; 14% for Full Year; Card Member Spending and Loans Rise; Investment Gain Used for Business Building Initiatives and Restructuring

American Express Company (NYSE:AXP) today reported fourth-quarter net income of $1.4 billion, up 11 percent from $1.3 billion a year ago. Diluted earnings per share rose 15 percent to $1.39, from $1.21 a year ago.

(Millions, except percentages and per share amounts)

Quarters Ended

December 31,

Percentage

Inc/(Dec)

Years Ended

December 31,

Percentage

Inc/(Dec)

2014

2013

2014

2013

Total Revenues Net of Interest Expense $ 9,107 $ 8,547 7 % $ 34,292 $ 32,974 4 %
Net Income $ 1,447 $ 1,308 11 % $ 5,885 $ 5,359 10 %
Earnings Per Common Share – Diluted:

Net Income Attributable to Common Shareholders1

$ 1.39 $ 1.21 15 % $ 5.56 $ 4.88 14 %
Average Diluted Common Shares Outstanding 1,033 1,073 (4 )% 1,051 1,089 (4 )%
Return on Average Equity 29.1 % 27.8 % 29.1 % 27.8 %

Fourth-quarter consolidated total revenues net of interest expense rose to $9.1 billion from $8.5 billion a year ago, up 7 percent (9 percent when adjusted for foreign currency translations2). The revenue increase primarily reflected the previously reported gain of $719 million ($453 million after-tax) on the sale of the company’s investment in Concur Technologies. The increase also reflected a rise in Card Member spending and higher net interest income. Last year’s fourth quarter included revenue from the company’s business travel operations, which were deconsolidated as a result of the joint venture transaction that closed on June 30, 2014.

Consolidated provisions for losses totaled $582 million, up 22 percent from $479 million a year ago. The increase primarily reflected a build in reserves this quarter compared to a reserve release last year. Credit indicators continued to be at historically strong levels.

Consolidated expenses totaled $6.3 billion, up 3 percent (6 percent FX adjusted2) from $6.1 billion a year ago. As indicated last quarter, the company used a substantial portion of the Concur gain for:

  • Companywide initiatives to improve operating efficiencies, which entailed a restructuring charge of $313 million ($206 million after-tax);
  • Incremental investments in growth initiatives, which were largely reflected in higher marketing and promotion expenses; and
  • The renewal of the company’s partnership with Delta Air Lines, which created additional rewards costs of $109 million ($68 million after-tax).

In addition, fourth-quarter results were negatively affected by the impact of foreign currency translations on international operations.

The effective tax rate for the quarter was 35 percent, up from 34 percent from a year ago, driven by the geographic mix of earnings and the resolution of certain prior years’ items.

The company's return on average equity (ROE) was 29.1 percent, up from 27.8 percent a year ago.

For the full year, the company reported net income of $5.9 billion, up 10 percent from $5.4 billion a year ago. Diluted earnings per share rose 14 percent to $5.56 from $4.88 a year ago.

Revenues net of interest expense for the full year increased 4 percent (5 percent FX adjusted2) to $34.3 billion from $33.0 billion a year ago. Consolidated expenses remained unchanged from 2013 at $23.3 billion. Adjusted for foreign currency translations2, consolidated expenses were up 1 percent.

“Solid results this quarter reflected the underlying themes that have characterized our performance throughout 2014: higher Card Member spending, increased loan balances, tight control of operating expenses and a substantial return of capital to shareholders through share repurchases,” said Kenneth I. Chenault, chairman and chief executive officer.

“Fourth-quarter Card Member spending rose 6 percent (8 percent FX adjusted). Volumes for the year crossed the trillion dollar mark for the first time, reflecting the progress we’ve made in building customer loyalty, adding new cards and expanding the network of merchants who accept our products. Loan balances were up 7 percent in the U.S., continuing the progress we’ve made throughout 2014. We continue to see opportunities to grow this portfolio with existing and new customers without significantly changing the overall risk profile of the company.

“Tight controls on the cost side of the ledger continued to give us the flexibility to invest in growth opportunities. And, as in the second quarter, a substantial gain allowed us to accelerate some critical initiatives: reengineering to make American Express more efficient; renewing a key partner relationship; and making additional investments to grow our business and drive innovation in the world of payments and commerce.

“We’ve made very good progress against the backdrop of an uneven global economy and the negative impact of a strengthening U.S. dollar. We see many opportunities for growth, but at the same time, we face competitive and regulatory challenges. Our aim is to continue to capitalize on the opportunities while dealing with the challenges as we enter 2015.”

Segment Results

U.S. Card Services reported fourth-quarter net income of $665 million, down 23 percent from $864 million a year ago.

Total revenues net of interest expense increased 5 percent to $4.6 billion from $4.4 billion a year ago. The increase reflected an 8 percent rise in Card Member spending and higher net interest income.

Provisions for losses totaled $399 million, up 25 percent from $319 million a year ago. The increase primarily reflected a build in reserves this quarter compared to a reserve release last year.

Total expenses increased 13 percent to $3.1 billion from $2.8 billion a year ago. The increase reflected a substantial portion of the initiatives related to the Concur gain and were reflected in higher rewards, marketing and operating expenses3.

The effective tax rate was 39 percent compared to 33 percent a year ago, reflecting the impact of certain prior years’ tax items.

International Card Services reported fourth-quarter net income of $33 million, down 68 percent from $103 million a year ago.

Total revenues net of interest expense decreased 5 percent (up 3 percent FX adusted2) to $1.4 billion.

Provisions for losses totaled $95 million, down 14 percent from $110 million a year ago. The decrease reflected a small reserve release in the current quarter compared with a reserve build a year ago.

Total expenses increased 4 percent (10 percent FX adjusted2) to $1.3 billion. The increase primarily reflected higher operating expenses, which included a portion of the restructuring charge, partially offset by a decrease in rewards costs.

Taxes for the quarter reflected the level of pretax income in combination with recurring permanent tax benefits.

Global Commercial Services reported fourth-quarter net income of $594 million, up from $182 million a year ago. The increase reflected the previously mentioned gain on the sale of the company’s investment in Concur Technologies. Year-ago results included earnings from the company’s business travel operations, which were deconsolidated as a result of the joint venture transaction referred to above. The company’s proportional share of the joint venture’s net income is now reported in Other Revenues.

Total revenues net of interest expense increased 28 percent (32 percent FX adjusted2) to $1.6 billion from $1.2 billion. The increase primarily reflected the previously mentioned Concur gain, partially offset by business travel revenues that were in the year-ago quarter.

Provisions for losses totaled $50 million, up from $36 million a year ago.

Total expenses decreased 36 percent (34 percent FX adjusted2) to $586 million from $915 million a year ago. Excluding business travel expenses, fourth quarter adjusted expenses increased 6 percent compared to the year-ago period.4

Global Network & Merchant Services reported fourth-quarter net income of $417 million, up 5 percent from $399 million a year ago.

Total revenues net of interest expense increased 2 percent (6 percent FX adjusted2) to $1.5 billion. The increase primarily reflected higher merchant-related revenues driven by an increase in global Card Member spending.

Provisions for losses totaled $35 million, up from $14 million a year ago, reflecting a reserve build in the current period.

Total expenses decreased 4 percent to $772 million (1 percent FX adjusted2) from $801 million a year ago. The decrease reflected merchant litigation settlement expenses a year ago, partially offset by higher marketing and promotion costs in the current quarter.

Corporate and Other reported fourth-quarter net loss of $262 million, compared with net loss of $240 million in the year-ago period. The current quarter included a portion of the previously mentioned restructuring charge.

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 Fourth Quarter/Full Year 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 fourth-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 Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 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.

1Represents net income less earnings allocated to participating share awards of $11 million for both the three months ended December 31, 2014 and 2013, and $46 million and $47 million for the twelve months ended December 31, 2014 and 2013, respectively.

2 As reported in this release, FX adjusted information, which constitute non-GAAP financial measures, assumes a constant exchange rate between the periods being compared for purposes of currency translations into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the three months ended December 31, 2014 apply to the period(s) against which such results are being compared). The company believes the presentation of information on an FX adjusted basis is helpful to investors by making it easier to compare the company’s performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.

3 Operating expenses represent salaries and employee benefits, professional services, occupancy and equipment, communications and other, net.

4 The adjusted expense growth rate for Global Commercial Services is a non-GAAP measure. Management believes this metric is useful in evaluating the ongoing operating performance of the company. See Appendix V in the selected statistical tables for a reconciliation to total expenses for Global Commercial Services on a GAAP basis.

American Express Company

(Preliminary)

Consolidated Statements of Income

(Millions, except percentages and per share amounts)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013
Revenues
Non-interest revenues
Discount revenue$4,987$4,915$4,945$4,646$4,8692$19,493$18,6954
Net card fees671680687674673(0)2,7122,6313
Travel commissions and fees91104500423491(81)1,1181,913(42)
Other commissions and fees624642624618626(0)2,5082,4144
Other1,310593585501569#2,9892,27431
Total non-interest revenues7,6836,9347,3416,8627,228628,82027,9273
Interest income
Interest on loans1,7691,7531,6961,7111,71536,9296,7183
Interest and dividends on investment securities4345454648(10)179201(11)
Deposits with banks and other1717181919(11)7186(17)
Total interest income1,8291,8151,7591,7761,78237,1797,0052
Interest expense
Deposits97919194110(12)373442(16)
Long-term debt and other308329352345353(13)1,3341,516(12)
Total interest expense405420443439463(13)1,7071,958(13)
Net interest income1,4241,3951,3161,3371,31985,4725,0478
Total revenues net of interest expense9,1078,3298,6578,1998,547734,29232,9744
Provisions for losses
Charge card1981961832151741479264822
Card Member loans341265282250290181,1381,1152
Other4327242015#1146965
Total provisions for losses582488489485479222,0441,83212
Total revenues net of interest expense after provisions for losses8,5257,8418,1687,7148,068632,24831,1424
Expenses
Marketing and promotion913809985613809133,3203,0439
Card Member rewards1,8811,6951,7731,5821,717106,9316,4577
Card Member services and other20320519222218888227677
Salaries and employee benefits1,6071,2901,6581,5401,48986,0956,191(2)
Professional services768731817692830(7)3,0083,102(3)
Occupancy and equipment446432467462510(13)1,8071,904(5)
Communications9891101939713833791
Other, net384342(137)302448(14)8911,411(37)
Total6,3005,5955,8565,5066,088323,25723,2540
Pretax income2,2252,2462,3122,2081,980128,9917,88814
Income tax provision778769783776672163,1062,52923
Net income$1,447$1,477$1,529$1,432$1,30811$5,885$5,35910
Net income attributable to common shareholders (A)$1,436$1,466$1,517$1,420$1,29711$5,839$5,31210
Effective tax rate35.0%34.2%33.9%35.1%33.9%34.5%32.1%

Earnings Per Common Share

BASIC
Net income attributable to common shareholders$1.40$1.41$1.44$1.34$1.2215$5.58$4.9114
Average common shares outstanding1,0281,0411,0521,0601,067(4)1,0451,082(3)
DILUTED
Net income attributable to common shareholders$1.39$1.40$1.43$1.33$1.2115$5.56$4.8814
Average common shares outstanding1,0331,0471,0581,0671,073(4)1,0511,089(4)
Cash dividends declared per common share$0.26$0.26$0.26$0.23$0.2313$1.01$0.8913
# - Denotes a variance of more than 100 percent.
American Express Company

Condensed Consolidated Balance Sheets

(Billions, except percentages, per share amounts and where indicated)
Quarters Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 2013
Assets
Cash & cash equivalents$22$21$18$21$1916
Accounts receivable4747494747-
Investment securities45555(20)
Loans70666663674
Other assets16151415157
Total assets$159$154$152$151$1534
Liabilities and Shareholders' Equity
Customer deposits$44$43$42$43$425
Short-term borrowings33335(40)
Long-term debt58565554555
Other liabilities33323231323
Total liabilities1381341321311343
Shareholders' Equity212020201911
Total liabilities and shareholders' equity$159$154$152$151$1534

Selected Statistical Information

Return on average equity (B)29.1%28.8%28.8%28.3%27.8%
Return on average common equity (B)29.0%28.6%28.5%28.1%27.6%
Return on average tangible common equity (B)35.9%35.6%35.8%35.4%34.9%
Common shares outstanding (millions)1,0231,0351,0461,0591,064(4)
Book value per common share (dollars)$20.21$19.54$19.32$18.87$18.3210
Shareholders' equity$20.7$20.2$20.2$20.0$19.56
# - Denotes a variance of more than 100 percent.
American Express Company

Financial Summary

(Millions)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013

Total revenues net of interest expense

U.S. Card Services$4,620$4,527$4,477$4,290$4,3885$17,914$16,9955
International Card Services1,3551,3941,3911,3521,429(5)5,4925,4012
Global Commercial Services1,5859001,2691,1941,238284,9484,8532
Global Network & Merchant Services1,4771,4501,4551,3651,44725,7475,5134
9,0378,2718,5928,2018,502634,10132,7624
Corporate & Other705865(2)4556191212(10)
CONSOLIDATED TOTAL REVENUES NET OF INTEREST EXPENSE$9,107$8,329$8,657$8,199$8,5477$34,292$32,9744

Pretax income (loss)

U.S. Card Services$1,083$1,411$1,200$1,406$1,292(16)$5,100$4,9942
International Card Services117669203108(99)449643(30)
Global Commercial Services949309865285287#2,4081,24494
Global Network & Merchant Services67067057870263262,6202,4696
2,7032,5662,7122,5962,3191710,5779,35013
Corporate & Other(478)(320)(400)(388)(339)41(1,586)(1,462)8
PRETAX INCOME$2,225$2,246$2,312$2,208$1,98012$8,991$7,88814

Net income (loss)

U.S. Card Services$665$889$770$876$864(23)$3,200$3,1930
International Card Services3314277159103(68)411631(35)
Global Commercial Services594204561184182#1,54386079
Global Network & Merchant Services41742737344339951,6601,5755
1,7091,6621,7811,6621,548106,8146,2599
Corporate & Other(262)(185)(252)(230)(240)9(929)(900)3
NET INCOME$1,447$1,477$1,529$1,432$1,30811$5,885$5,35910
# - Denotes a variance of more than 100 percent.
American Express Company(Preliminary)

Selected Statistical Information (continued)

(Billions, except percentages and where indicated)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013
Card billed business (C):
United States$182.5$173.0$173.4$159.2$169.18$688.1$637.08
Outside the United States86.085.184.778.984.91334.7315.46
Total$268.5$258.1$258.1$238.1$254.06$1,022.8$952.47
Total cards-in-force (D) (millions):
United States54.954.554.153.553.1354.953.13
Outside the United States57.356.655.854.754.1657.354.16
Total112.2111.1109.9108.2107.25112.2107.25
Basic cards-in-force (D) (millions):
United States42.642.242.041.541.1442.641.14
Outside the United States47.046.345.644.644.0747447
Total89.688.587.686.185.1589.685.15
Average discount rate (E)2.45%2.49%2.48%2.52%2.48%2.48%2.51%
Average basic Card Member spending (dollars) (F)$4,377$4,223$4,288$3,991$4,2922$16,884$16,3343
Average fee per card (dollars) (F)$39$40$41$40$41(5)$40$40-
Average fee per card adjusted (dollars) (F)$44$45$45$45$44-$45$442
Worldwide Card Member receivables:
Total receivables$44.9$45.1$45.3$44.7$44.22$44.9$44.22
Loss reserves (millions):
Beginning balance$432$413$414$386$3969$386$428(10)
Provisions (G)1981961832151741479264822
Net write-offs (H)(156)(168)(182)(177)(162)(4)(683)(669)2
Other (I)(9)(9)(2)(10)(22)(59)(30)(21)43
Ending balance$465$432$413$414$38620$465$38620
% of receivables1.0%1.0%0.9%0.9%0.9%1.0%0.9%
Net write-off rate (principal only) - USCS/ICS (J)1.5%1.6%1.8%1.9%(L)1.7%(L)
Net write-off rate (principal and fees) - USCS/ICS (J)1.7%1.8%2.0%2.1%(L)1.9%(L)
30 days past due as a % of total - USCS/ICS1.6%1.6%1.5%1.7%(L)1.6%(L)
Net loss ratio (as a % of charge volume) - GCS0.08%0.09%0.09%0.09%0.08%0.09%0.08%
90 days past billing as a % of total - GCS0.8%0.8%0.7%0.7%0.9%0.8%0.9%
Worldwide Card Member loans:
Total loans$70.4$66.1$66.3$64.0$67.25$70.4$67.25
Loss reserves (millions):
Beginning balance$1,146$1,170$1,191$1,261$1,281(11)$1,261$1,471(14)
Provisions (G)341265282250290181,1381,1152
Net write-offs - principal (H)(237)(245)(267)(274)(253)(6)(1,023)(1,141)(10)
Net write-offs - interest and fees (H)(40)(40)(42)(42)(37)8(164)(150)9
Other (I)(9)(4)6(4)(20)(55)(11)(34)(68)
Ending balance$1,201$1,146$1,170$1,191$1,261(5)$1,201$1,261(5)
Ending reserves - principal$1,149$1,093$1,114$1,135$1,212(5)$1,149$1,212(5)
Ending reserves - interest and fees$52$53$56$56$496$52$496
% of loans1.7%1.7%1.8%1.9%1.9%1.7%1.9%
% of past due167%165%171%159%169%167%169%
Average loans$67.7$66.4$65.2$64.5$64.45$66.0$63.34
Net write-off rate (principal only) (J)1.4%1.5%1.6%1.7%1.6%1.5%1.8%
Net write-off rate (principal, interest and fees) (J)1.6%1.7%1.9%2.0%1.8%1.8%2.0%
30 days past due loans as a % of total1.0%1.1%1.0%1.2%1.1%1.0%1.1%
Net interest income divided by average loans (K)8.4%8.5%8.1%8.4%8.1%8.3%8.0%
Net interest yield on Card Member loans (K)9.3%9.3%9.2%9.5%9.3%9.3%9.3%
# - Denotes a variance of more than 100 percent.
U.S. Card Services(Preliminary)

Selected Income Statement Data

(Millions, except percentages)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013
Revenues
Discount revenue, net card fees and other$3,279$3,214$3,222$3,017$3,1325$12,732$12,1235
Interest income1,4901,4651,4081,4231,41755,7865,5654
Interest expense149152153150161(7)604693(13)
Net interest income1,3411,3131,2551,2731,25675,1824,8726
Total revenues net of interest expense4,6204,5274,4774,2904,388517,91416,9955
Provisions for losses399316339342319251,3961,25012
Total revenues net of interest expense after provisions for losses4,2214,2114,1383,9484,069416,51815,7455
Expenses
Marketing, promotion, rewards,
Card Member services and other2,0641,7901,8651,5821,789157,3016,8257
Salaries and employee benefits
and other operating expenses1,0741,0101,07396098894,1173,9265
Total3,1382,8002,9382,5422,7771311,41810,7516
Pretax segment income1,0831,4111,2001,4061,292(16)5,1004,9942
Income tax provision418522430530428(2)1,9001,8015
Segment income$665$889$770$876$864(23)$3,200$3,1930
Effective tax rate38.6%37.0%35.8%37.7%33.1%37.3%36.1%

Selected Statistical Information

(Billions, except percentages and where indicated)
Card billed business$145.0$136.2$136.5$124.3$134.18$542.0$501.08
Total cards-in-force (millions)45.645.244.744.143.7445.643.74
Basic cards-in-force (millions)34.033.733.332.832.5534.032.55
Average basic Card Member spending (dollars)$4,281$4,069$4,133$3,805$4,1383$16,294$15,6894
U.S. Consumer Travel:
Travel sales (millions)$817$956$1,027$974$865(6)$3,774$3,967(5)
Travel commissions and fees/sales7.5%7.4%7.4%6.5%7.4%7.2%7.1%
Total segment assets$113.2$103.3$101.1$98.9$103.59$113.2$103.59
Segment capital (M)$10.4$9.9$9.9$9.7$9.313$10.4$9.313
Return on average segment capital (N)32.5%35.5%35.3%35.6%35.6%32.5%35.6%
Return on average tangible segment capital (N)33.6%36.6%36.5%36.9%37.0%33.6%37.0%
Card Member receivables:
Total receivables$22.5$21.3$21.2$20.7$21.83$22.5$21.83
30 days past due as a % of total1.7%1.6%1.5%1.8%1.6%1.7%1.6%
Average receivables$21.8$21.4$21.3$20.6$21.23$21.3$20.63
Net write-off rate (principal only) (J)1.4%1.5%1.8%1.8%1.5%1.6%1.7%
Net write-off rate (principal and fees) (J)1.6%1.7%2.0%2.0%1.7%1.8%1.9%
Card Member loans:
Total loans$62.6$58.0$57.7$55.8$58.47$62.6$58.47
30 days past due loans as a % of total1.0%1.0%0.9%1.1%1.1%1.0%1.1%
Average loans$59.7$58.0$56.8$56.1$55.87$57.8$54.76
Net write-off rate (principal only) (J)1.3%1.4%1.6%1.7%1.5%1.5%1.8%
Net write-off rate (principal, interest and fees) (J)1.5%1.6%1.8%1.9%1.7%1.7%2.0%
Net interest income divided by average loans (O)9.0%9.1%8.9%9.2%8.9%9.0%8.9%
Net interest yield on Card Member loans (O)9.1%9.2%9.1%9.4%9.2%9.2%9.2%
# - Denotes a variance of more than 100 percent.
International Card Services(Preliminary)

Selected Income Statement Data

(Millions, except percentages)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013
Revenues
Discount revenue, net card fees and other$1,166$1,206$1,208$1,157$1,229(5)$4,737$4,6442
Interest income260273275277288(10)1,0851,118(3)
Interest expense7185928288(19)330361(9)
Net interest income189188183195200(6)755757(0)
Total revenues net of interest expense1,3551,3941,3911,3521,429(5)5,4925,4012
Provisions for losses95989087110(14)370388(5)
Total revenues net of interest expense after provisions for losses1,2601,2961,3011,2651,319(4)5,1225,0132
Expenses
Marketing, promotion, rewards,
Card Member services and other555532577496585(5)2,1602,0137
Salaries and employee benefits
and other operating expenses704588655566626122,5132,3577
Total1,2591,1201,2321,0621,21144,6734,3707
Pretax segment income117669203108(99)449643(30)
Income tax provision/(benefit)(32)34(8)445#3812#
Segment income$33$142$77$159$103(68)$411$631(35)
Effective tax rate#19.3%-11.6%21.7%4.6%8.5%1.9%

Selected Statistical Information

(Billions, except percentages and where indicated)
Card billed business$34.0$33.9$34.1$31.9$35.5(4)$133.8$131.72
Total cards-in-force (millions)15.715.815.715.715.7015.715.70
Basic cards-in-force (millions)11.010.910.910.910.7311.010.73
Average basic Card Member spending (dollars)$3,109$3,100$3,137$2,942$3,336(7)$12,297$12,429(1)
International Consumer Travel:
Travel sales (millions)$353$362$354$353$367(4)$1,422$1,4200
Travel commissions and fees/sales7.4%6.9%6.8%6.2%7.1%6.8%6.9%
Total segment assets$30.7$31.1$31.6$30.4$31.1(1)$30.7$31.1(1)
Segment capital (M)$3.0$3.0$3.0$3.0$3.1(5)$3.0$3.1(5)
Return on average segment capital (N)13.6%15.8%15.7%20.0%20.9%13.6%20.9%
Return on average tangible segment capital (N)24.6%28.9%28.8%36.8%38.8%24.6%38.8%
Card Member receivables:
Total receivables$7.7$7.3$7.5$7.2$7.8(1)$7.7$7.8(1)
30 days past billing as a % of total1.3%1.4%1.3%1.4%(L)1.3%(L)
Net write-off rate (principal only) (J)1.8%1.9%1.9%2.2%(L)1.9%(L)
Net write-off rate (principal and fees) (J)1.9%2.1%2.0%2.3%(L)2.1%(L)
90 days past billing as a % of total(L)(L)(L)(L)1.1%(L)1.1%
Net loss ratio (as a % of charge volume)(L)(L)(L)(L)0.19%(L)0.20%
Card Member loans:
Total loans$7.7$8.0$8.6$8.2$8.8(13)$7.7$8.8(13)
30 days past due loans as a % of total1.6%1.6%1.6%1.7%1.4%1.6%1.4%
Average loans$7.9$8.3$8.3$8.3$8.5(7)$8.2$8.5(4)
Net write-off rate (principal only) (J)1.9%1.9%2.0%2.0%1.8%2.0%1.9%
Net write-off rate (principal, interest and fees) (J)2.4%2.4%2.4%2.4%2.2%2.4%2.3%
Net interest income divided by average loans (O)9.6%9.1%8.8%9.5%9.3%9.2%8.9%
Net interest yield on Card Member loans (O)10.5%9.9%9.6%10.1%10.0%10.0%9.9%
# - Denotes a variance of more than 100 percent.
Global Commercial Services(Preliminary)

Selected Income Statement Data

(Millions, except percentages)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013
Revenues
Discount revenue, net card fees and other$1,635$957$1,332$1,249$1,29826$5,173$5,0852
Interest income44344-151315
Interest expense5461665964(16)240245(2)
Net interest expense(50)(57)(63)(55)(60)(17)(225)(232)(3)
Total revenues net of interest expense1,5859001,2691,1941,238284,9484,8532
Provisions for losses50494338363918012940
Total revenues net of interest expense after provisions for losses1,5358511,2261,1561,202284,7684,7241
Expenses
Marketing, promotion, rewards,
Card Member services and other1781611771661621068260413
Salaries and employee benefits
and other operating expenses408381184705753(46)1,6782,876(42)
Total586542361871915(36)2,3603,480(32)
Pretax segment income949309865285287#2,4081,24494
Income tax provision355105304101105#865384#
Segment income$594$204$561$184$182#$1,543$86079
Effective tax rate37.4%34.0%35.1%35.4%36.6%35.9%30.9%

Selected Statistical Information

(Billions, except percentages and where indicated)
Card billed business$47.1$46.5$47.6$45.5$45.05$186.7$175.46
Total cards-in-force (millions)6.96.97.07.17.1(3)6.97.1(3)
Basic cards-in-force (millions)6.96.97.07.17.1(3)6.97.1(3)
Average basic Card Member spending (dollars)$6,817$6,691$6,781$6,429$6,3617$26,706$24,9247
Global Corporate Travel:
Travel sales (millions)$28$80$4,882$4,698$4,793(99)$9,688$18,869(49)
Travel commissions and fees/sales7.1%10.0%8.2%7.2%8.3%7.7%8.1%
Total segment assets$18.5$20.6$20.8$21.6$19.2(4)$18.5$19.2(4)
Segment capital (M)$3.8$3.8$3.8$3.8$3.74$3.8$3.74
Return on average segment capital (N)40.9%30.3%32.0%23.2%23.6%40.9%23.6%
Return on average tangible segment capital (N)74.4%56.0%60.3%44.4%45.8%74.4%45.8%
Card Member receivables:
Total receivables$14.6$16.4$16.5$16.6$14.41$14.6$14.41
90 days past billing as a % of total0.8%0.8%0.7%0.7%0.9%0.8%0.9%
Net loss ratio (as a % of charge volume)0.08%0.09%0.09%0.09%0.08%0.09%0.08%
# - Denotes a variance of more than 100 percent.
Global Network & Merchant Services(Preliminary)

Selected Income Statement Data

(Millions, except percentages)
Quarters Ended% ChangeYears Ended% Change
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31, 2014 vs.
20142014201420142013Dec 31, 201320142013Dec 31, 2013
Revenues
Discount revenue, fees and other$1,399$1,368$1,366$1,293$1,3732$5,426$5,2294
Interest income17141110989523263
Interest expense(61)(68)(78)(62)(65)(6)(269)(252)7
Net interest income7882897274532128413
Total revenues net of interest expense1,4771,4501,4551,3651,44725,7475,5134
Provisions for losses3524181614#936739
Total revenues net of interest expense after provisions for losses1,4421,4261,4371,3491,43315,6545,4464
Expenses
Marketing, promotion, rewards, Card Member services and other1852012771561581781970416
Salaries and employee benefits
and other operating expenses587555582491643(9)2,2152,273(3)
Total772756859647801(4)3,0342,9772
Pretax segment income67067057870263262,6202,4696
Income tax provision25324320525923399608947
Segment income$417$427$373$443$3995$1,660$1,5755
Effective tax rate37.8%36.3%35.5%36.9%36.9%36.6%36.2%

Selected Statistical Information

(Billions, except percentages and where indicated)
Global Card billed business (P)$268.5$258.1$258.1$238.1$254.06$1,022.8$952.47
Global Network & Merchant Services:
Total segment assets$18.1$18.2$18.7$18.3$17.16$18.1$17.16
Segment capital (M)$2.0$2.0$2.0$1.9$2.01$2.0$2.01
Return on average segment capital (N)84.0%82.6%79.4%81.2%76.8%84.0%76.8%
Return on average tangible segment capital (N)92.9%91.3%87.8%89.7%84.9%92.9%84.9%
Global Network Services:
Card billed business$42.5$41.6$40.1$36.6$39.38$160.7$144.112
Total cards-in-force (millions)44.043.242.541.340.7844.040.78
# - Denotes a variance of more than 100 percent.
American Express Company(Preliminary)

Components of Return on Average Equity (ROE), Return on Average Common Equity (ROCE), and Return on Average Tangible Common Equity (ROTCE)

Appendix I

(Millions, except percentages)
For the Twelve Months Ended
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,
20142014201420142013

ROE

Net income$5,885$5,746$5,635$5,511$5,359
Average shareholders' equity$20,254$19,948$19,591$19,442$19,254
Return on average equity (Q)29.1%28.8%28.8%28.3%27.8%

Reconciliation of ROCE and ROTCE

Net income$5,885$5,746$5,635$5,511$5,359
Preferred shares dividends and related accretion-----
Earnings allocated to participating share awards and other4646474847
Net income attributable to common shareholders$5,839$5,700$5,588$5,463$5,312
Average shareholders' equity$20,254$19,948$19,591$19,442$19,254
Average preferred shares114----
Average common shareholders' equity$20,140$19,948$19,591$19,442$19,254
Average goodwill and other intangibles3,8883,9413,9944,0124,055
Average tangible common shareholders' equity$16,252$16,007$15,597$15,430$15,199
Return on average common equity (Q)29.0%28.6%28.5%28.1%27.6%
Return on average tangible common equity (R)35.9%35.6%35.8%35.4%34.9%
American Express Company(Preliminary)

Components of Return on Average Segment Capital (ROSC) and Return on Average Tangible Segment Capital (ROTSC)

Appendix II

(Millions, except percentages)
For the Twelve Months Ended
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,
20142014201420142013

U.S. Card Services

Segment income$3,200$3,399$3,292$3,265$3,193
Average segment capital$9,843$9,580$9,337$9,180$8,974
Average goodwill and other intangibles319299311323334
Average tangible segment capital$9,524$9,281$9,026$8,857$8,640
Return on average segment capital (S)32.5%35.5%35.3%35.6%35.6%
Return on average tangible segment capital (S)33.6%36.6%36.5%36.9%37.0%

International Card Services

Segment income$411$481$481$612$631
Average segment capital$3,020$3,043$3,063$3,053$3,024
Average goodwill and other intangibles1,3501,3761,3941,3891,396
Average tangible segment capital$1,670$1,667$1,669$1,664$1,628
Return on average segment capital (S)13.6%15.8%15.7%20.0%20.9%
Return on average tangible segment capital (S)24.6%28.9%28.8%36.8%38.8%

Global Commercial Services

Segment income$1,543$1,131$1,188$853$860
Average segment capital$3,771$3,736$3,707$3,679$3,647
Average goodwill and other intangibles1,6961,7151,7361,7591,768
Average tangible segment capital$2,075$2,021$1,971$1,920$1,879
Return on average segment capital (S)40.9%30.3%32.0%23.2%23.6%
Return on average tangible segment capital (S)74.4%56.0%60.3%44.4%45.8%

Global Network & Merchant Services

Segment income$1,660$1,642$1,606$1,645$1,575
Average segment capital$1,976$1,989$2,022$2,026$2,050
Average goodwill and other intangibles189190192193195
Average tangible segment capital$1,787$1,799$1,830$1,833$1,855
Return on average segment capital (S)84.0%82.6%79.4%81.2%76.8%
Return on average tangible segment capital (S)92.9%91.3%87.8%89.7%84.9%
American Express Company(Preliminary)

Net Interest Yield on Card Member Loans

Appendix III

(Millions, except percentages and where indicated)
Quarters Ended
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,
20142014201420142013
Net interest income$1,424$1,395$1,316$1,337$1,319
Exclude:
Interest expense not attributable to the Company's
Card Member loan portfolio$250$247$259$263$279
Interest income not attributable to the Company's
Card Member loan portfolio$(92)$(90)$(89)$(88)$(91)
Adjusted net interest income (T)$1,582$1,552$1,486$1,512$1,507
Average loans (billions)$67.7$66.4$65.2$64.5$64.4
Exclude:
Unamortized deferred card fees, net of direct
acquisition costs of Card Member loans, and other (billions)$(0.2)$(0.2)$(0.2)$(0.2)$(0.2)
Adjusted average loans (billions) (U)$67.5$66.2$65.0$64.3$64.2
Net interest income divided by average loans (V)8.4%8.5%8.1%8.4%8.1%
Net interest yield on Card Member loans (W)9.3%9.3%9.2%9.5%9.3%
U.S. Card Services and International Card Services(Preliminary)

Net Interest Yield on Card Member Loans

Appendix IV

(Millions, except percentages and where indicated)
Quarters Ended
Dec 31,Sep 30,Jun 30,Mar 31,Dec 31,
20142014201420142013

USCS:

Net interest income$1,341$1,313$1,255$1,273$1,256
Exclude:
Interest expense not attributable to the Company's
Card Member loan portfolio$39$39$40$39$43
Interest income not attributable to the Company's
Card Member loan portfolio$(3)$(3)$(3)$(3)$(2)
Adjusted net interest income (T)$1,377$1,349$1,292$1,309$1,297
Average loans (billions)$59.7$58.0$56.8$56.1$55.8
Exclude:
Unamortized deferred card fees, net of direct
acquisition costs of Card Member loans (billions)$-$-$-$0.1$-
Adjusted average loans (billions) (U)$59.7$58.0$56.8$56.2$55.8
Net interest income divided by average loans (V)9.0%9.1%8.9%9.2%8.9%
Net interest yield on Card Member loans (W)9.1%9.2%9.1%9.4%9.2%

ICS:

Net interest income$189$188$183$195$200
Exclude:
Interest expense not attributable to the Company's
Card Member loan portfolio$26$24$21$18$21
Interest income not attributable to the Company's
Card Member loan portfolio$(9)$(10)$(10)$(10)$(11)
Adjusted net interest income (T)$206$202$194$203$210
Average loans (billions)$7.9$8.3$8.3$8.3$8.5
Exclude:
Unamortized deferred card fees, net of direct
acquisition costs of Card Member loans, and other (billions)$(0.2)$(0.2)$(0.2)$(0.2)$(0.2)
Adjusted average loans (billions) (U)$7.7$8.1$8.1$8.1$8.3
Net interest income divided by average loans (V)9.6%9.1%8.8%9.5%9.3%
Net interest yield on Card Member loans (W)10.5%9.9%9.6%10.1%10.0%
American Express Company(Preliminary)

Revenue and Expense Reconciliation

Appendix V

(Millions, except percentages)
Quarters Ended% ChangeTwelve Months Ended% Change
Dec 31,Dec 31,Dec 31, 2014 vs.Dec 31,Dec 31,Dec 31, 2014 vs.
20142013

31-Dec-13

20142013Dec 31, 2013

Consolidated:

Reported total revenues net of interest expense$9,107$8,5477$34,292$32,9744
Global Business Travel ("GBT") revenues net of interest expense-405-801
Adjusted total revenues net of interest expense9,1078,1421234,29232,1737
FX and GBT adjusted total revenues net of interest expense (X)7,9611431,8328
Reported total expenses6,3006,088323,25723,254-
GBT expenses-362-698
Adjusted total expenses6,3005,7261023,25722,5563
FX and GBT adjusted total expenses (X)5,6081222,3714

Global Commercial Services:

Reported total revenues net of interest expense1,5851,238284,9484,8532
GBT revenues net of interest expense-405-801
Adjusted total revenues net of interest expense1,585833904,9484,05222
FX and GBT adjusted total revenues net of interest expense (X)813954,01823
Reported total expenses586915(36)2,3603,480(32)
GBT expenses-362-698
Adjusted total expenses$586$5536$2,360$2,782(15)
FX and GBT adjusted total expenses (X)54282,767(15)
Note: Full-year GBT revenues and expenses represent operating performance as reported in Q3’13 and Q4'13. Adjustments do not include other Global Business Travel-related items, including equity earnings from the joint venture and impacts related to a transition services agreement that will phase out over time.
Appendix VI(Preliminary)
All Information in the preceding 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.
(A) Represents net income, less earnings allocated to participating share awards of $11 million for the quarter ended December 31, 2014, $11 million for the quarter ended September 30, 2014, $12 million for the quarter ended June 30, 2014, $12 million for the quarter ended March 31, 2014, and $11 million for the quarter ended December 31, 2013.
(B) 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.
(C) Card billed business includes activities (including cash advances) related to proprietary cards, cards issued under network partnership agreements (non-proprietary billed business), and certain insurance fees charged on proprietary cards. In-store spend activity within retail co-brand portfolios in Global Network Services, from which the Company earns no revenue, is not included in non-proprietary billed business. Card billed business is reflected in the United States or outside the United States based on where the issuer is located.
(D) Total cards-in-force represents the number of cards that are issued and outstanding. Proprietary basic consumer cards-in-force includes basic cards issued to the primary account owner and does not include additional supplemental cards issued on that account. Proprietary basic small business and corporate cards-in-force include basic and supplemental cards issued to employee Card Members. Non-proprietary cards-in-force includes all cards that are issued and outstanding under network partnership agreements, except for retail co-brand Card Member accounts that have no out-of-store spend activity during the prior 12 month period.
(E) This calculation is designed to reflect pricing at merchants accepting general purpose American Express cards. It represents the percentage of billed business (both proprietary and Global Network Services) retained by the Company from merchants it acquires, prior to payments to third parties unrelated to merchant acceptance.
(F) Average basic Card Member spending and average fee per card are computed from proprietary card activities only. Average fee per card is computed based on net card fees, including the amortization of deferred direct acquisition costs divided by average worldwide proprietary cards-in-force. The adjusted average fee per card, which is a non-GAAP measure, is computed in the same manner, but excludes amortization of deferred direct acquisition costs. The amount of amortization excluded for these periods was $79 million for the quarter ended December 31, 2014, $77 million for the quarter ended September 30, 2014, $77 million for the quarter ended June 30, 2014, $73 million for the quarter ended March 31, 2014, and $64 million for the quarter ended December 31, 2013. The Company presents adjusted average fee per card because the Company believes this metric presents a useful indicator of card fee pricing across a range of its proprietary card products.
(G) Provisions for principal (resulting from authorized transactions) and fee reserve components.
(H) Consists of principal (resulting from authorized transactions), interest and/or fees, less recoveries.
(I) Beginning in first quarter 2014, reserves related for card-related fraud losses are reflected in Other liabilities. All periods include foreign currency translation adjustments and other items.
(J) The Company presents a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, because the Company's practice is to include uncollectible interest and/or fees as part of its total provision for losses, a net write-off rate including principal, interest and/or fees is also presented.
(K) See Appendix III for quarterly calculations of net interest yield on Card Member loans, a non-GAAP measure, and net interest income divided by average loans, a GAAP measure, and the Company's rationale for presenting net interest yield on Card Member loans. For calculations for the twelve months ended December 31, 2014 and 2013, please refer to Annex 3 of the Company’s 2014 Fourth Quarter/ Full Year Earnings Supplement on file with the Securities and Exchange Commission.
(L) Historically, net loss ratio as a % of charge volume and 90 days past billings as a % of receivables were presented for ICS and GCS. As a result of system enhancements, beginning in first quarter 2014, 30 days past due as a % of total, net write-off rate (principal only) and net write-off rate (principal and fees) will be presented for ICS.
(M) Segment capital represents capital allocated to a segment based upon specific business operational needs, risk measures, and regulatory capital requirements.
(N) Refer to Appendix II for components of return on average segment capital and return on average tangible segment capital, a non-GAAP measure.
(O) See Appendix IV for calculations of net interest yield on Card Member loans, a non-GAAP measure, and net interest income divided by average loans, a GAAP measure, and the Company's rationale for presenting net interest yield on Card Member loans.
(P) Global Card billed business includes activities (including cash advances) related to proprietary cards, cards issued under network partnership agreements (non-proprietary billed business), and certain insurance fees charged on proprietary cards. In-store spend activity within retail co-brand portfolios in Global Network Services, from which the Company earns no revenue, is not included in non-proprietary billed business.
(Q) 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.
(R) 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 common 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.
(S) Return on average segment capital is calculated by dividing one year period segment income by one year average segment capital. Return on average tangible segment capital, a non-GAAP measure, is computed in the same manner as return on average segment capital except the computation of average tangible segment capital, a non-GAAP measure, excludes average goodwill and other intangibles. The Company believes that return on average tangible segment capital is a useful measure of the profitability of its business.
(T) Adjusted net interest income, a non-GAAP measure, represents net interest income allocated to the Company's Card Member loan portfolio excluding the impact of interest expense and interest income not attributable to the Company's Card Member loan portfolio. The Company believes adjusted net interest income is useful to investors because it is a component of net interest yield on Card Member loans.
(U) Adjusted average loans, a non-GAAP measure, represents average Card Member loans excluding the impact of deferred card fees, net of deferred direct acquisition costs of Card Member loans, and other. The Company believes adjusted average loans is useful to investors because it is a component of net interest yield on Card Member loans.
(V) This calculation includes elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not representative of net interest yield on Card Member loans. The calculation includes interest income and interest expense attributable to investment securities and other interest-bearing deposits as well as to Card Member loans, and interest expense attributable to other activities, including Card Member receivables.
(W) Net interest yield on Card Member loans, a non-GAAP measure, is computed by dividing adjusted net interest income by adjusted average loans, computed on an annualized basis. The calculation of net interest yield on Card Member loans includes interest that is deemed uncollectible. For all presentations of net interest yield on Card Member loans, reserves and net write-offs related to uncollectible interest are recorded through provisions for losses - Card Member loans; therefore, such reserves and net write-offs are not included in the net interest yield calculation. The Company believes net interest yield on Card Member loans is useful to investors because it provides a measure of profitability of the Company's Card Member loan portfolio.
(X) Revenue net of interest expense and total expenses on an FX adjusted basis are a non-GAAP measures. FX adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes Q3’14 foreign exchange rates apply to Q3'13 results). The Company’s calculations of non-GAAP measures may differ from the calculations of similarly titled measures of other companies.

Contacts:

Media:
Marina H. Norville, marina.h.norville@aexp.com, +1.212.640.2832
Mike O’Neill, mike.o'neill@aexp.com, +1.212.640.5951
or
Investors/Analysts:
Ken Paukowits, ken.f.paukowits@aexp.com , +1.212.640.6348
Rick Petrino, richard.petrino@aexp.com, +1.212.640.5574

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