AMERICAN EXPRESS CO — Earnings Release 1996

Oct 29, 1996

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 28, 1996 AMERICAN EXPRESS COMPANY - ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 1-7657 13-4922250 - ------------------------------- -------------- ------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification) 200 Vesey Street, World Financial Center New York, New York 10285 - ----------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 640-2000 -------------- - ----------------------------------------------------------------- (Former name or former address, if changed since last report.) Item 5. Other Events On October 28, 1996, American Express Company issued the following press release: NEW YORK, October 28, 1996 -- American Express Company today reported third quarter net income of $458 million, up 10 percent from a year ago. On a per share basis, third quarter net income was $0.95, compared with $0.83 a year ago, an increase of 14 percent. Separately, the Board of Directors today approved a plan to repurchase up to 40 million common shares over the next two to three years, from time to time as market conditions allow. The plan is primarily designed to allow the Company to offset share issuances under employee compensation plans. Under certain conditions, the Company may purchase additional shares in order to increase economic value for shareholders. As of September 30, 1996, the Company had largely completed two prior share repurchase plans totaling 60 million shares. Travel Related Services (TRS) reported third quarter net income of $323 million, a 9 percent increase over net income of $297 million a year ago. Last year's results included income from AMEX Life, a subsidiary that was sold in October, 1995. Excluding the year ago results for AMEX Life, TRS' net income grew approximately 13 percent, revenues increased approximately 4 percent and expenses were up approximately 2 percent, compared with the year ago quarter. Net revenues reflect an increase in worldwide billed business on American Express Cards and growth in Cardmember loans outstanding. The increase in billed business resulted from higher spending per Cardmember, due in part to the benefits of rewards programs and increased merchant coverage, as well as an increase in the number of cards outstanding. These increases were partially offset by a decrease in net card fees, reflecting the Company's strategy of growing its lending portfolio through the issuance of low- and no-fee credit cards. Credit quality has improved since last year, particularly in Latin America. Accordingly, the provision for losses for both charge and lending products declined significantly during the third quarter. Management expects the amount of the fourth quarter provision to be similar to that of the third quarter. Operating expenses increased from last year, primarily reflecting the cost of Cardmember loyalty programs, business growth and investment spending. - ------------------------- Important factors which may cause actual results to differ materially from this forward looking statement include, but are not limited to, the following: consumer and/or business spending per Cardmember, which may result from general economic conditions affecting consumers or businesses, including the overall levels of consumer debt; other general economic and business conditions, such as interest rates and consumer credit trends, which could affect the ability of consumers and businesses to repay credit and charge card debt to TRS; the rate of bankruptcies of consumers and businesses; and the volume of new card products issued by TRS, which typically involve higher provisioning. For other risk factors, see Part II, Item 5 of American Express Company's 10-Q Report for the period ended March 31, 1996. American Express Financial Advisors (AEFA) reported record third quarter net income of $156 million, a 17 percent increase over net income of $134 million a year ago. Revenue and earnings growth benefited primarily from higher fee revenues due to an increase in managed assets and growth in distribution fees primarily from sales of mutual funds. While sales of mutual funds, life and other insurance products and annuities increased, sales of investment certificates declined from last year. American Express Bank (AEB) reported third quarter net income of $18 million, compared with $22 million a year ago. The decline in earnings reflects lower revenues, partly offset by expense savings. These results also reflect the impact of the Bank's continued efforts to focus on strategic markets and eliminate low return activities. Corporate and Other reported third quarter net expenses of $39 million, compared with net expenses of $37 million a year ago. American Express Company, a global travel, financial and network services provider founded in 1850, provides customers with a variety of products and services consistent with its brand. The Company provides individuals with charge and credit cards, travelers cheques and other stored value products. It also offers financial planning, brokerage services, mutual funds, insurance and other investment products. Through its family of Corporate Card services, American Express helps companies and institutions manage their travel, entertainment and purchasing expenses. It provides investment management services and administers pension and other employee benefit plans. The Company also offers accounting and tax preparation to small businesses, and financial education services to employees at their places of work. As the world's largest travel agency, American Express offers travel and related consulting services to individuals and corporations around the globe. The Company also provides banking services to corporations, wealthy entrepreneurs, financial institutions and retail customers outside the United States. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN EXPRESS COMPANY By: /s/ Stephen P. Norman ---------------------------- Name: Stephen P. Norman Title: Secretary Dated: October 29, 1996 AMERICAN EXPRESS COMPANY ------------------------ FINANCIAL SUMMARY ----------------- (Unaudited) (dollars in millions, except per share amounts) - ----------------------------------------------- Three Months Ended September 30, ------------------ Percentage 1996 1995 Inc/(Dec) ---- ---- ---------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $2,920 $2,972 (1.8%) American Express Financial Advisors 1,021 934 9.4 American Express Bank 151 161 (6.7) ------ ------ 4,092 4,067 0.6 Corporate and Other, including adjustments and eliminations (36) (13) # ------- ------- CONSOLIDATED REVENUES (A) $4,056 $4,054 - ======= ======= Pretax Income by Industry Segment - ---------------------------------- Travel Related Services $441 $408 8.2% American Express Financial Advisors 230 197 16.6 American Express Bank 28 33 (16.3) ------ ------ 699 638 9.5 Corporate and Other (78) (67) (16.1) ------ ------ PRETAX INCOME $621 $571 8.7 ====== ====== Net Income by Industry Segment - ------------------------------ Travel Related Services $323 $297 8.8% American Express Financial Advisors 156 134 16.5 American Express Bank 18 22 (18.8) ------ ------ 497 453 9.7 Corporate and Other (39) (37) (6.6) ------ ------ NET INCOME $458 $416 10.0 ====== ====== NET INCOME PER COMMON SHARE $0.95 $0.83 14.5 ======= ======= Cash dividends declared per common share $0.225 $0.225 ======= ======= Average shares outstanding (000's) 481,865 496,516 ======= ======= Nine Months Ended September 30, ----------------- Percentage 1996 1995 Inc/(Dec) ---- ---- ---------- Revenues by Industry Segment (A) - -------------------------------- Travel Related Services $8,571 $8,615 (0.5%) American Express Financial Advisors 3,041 2,718 11.9 American Express Bank 435 484 (10.2) ------- ------- 12,047 11,817 1.9 Corporate and Other,including adjustments and eliminations (65) (25) # ------- ------- CONSOLIDATED REVENUES (A) $11,982 $11,792 1.6 ======= ======= Pretax Income by Industry Segment - ---------------------------------- Travel Related Services $1,316 $1,208 8.9% American Express Financial Advisors 657 553 19.0 American Express Bank 79 83 (5.0) ------- ------- 2,052 1,844 11.3 Corporate and Other (231) (203) (14.3) ------- -------- PRETAX INCOME $1,821 $1,641 11.0 ======= ======== Net Income by Industry Segment - ------------------------------ Travel Related Services $932 $859 8.5% American Express Financial Advisors 439 370 18.5 American Express Bank 51 57 (9.8) ------- ------- 1,422 1,286 10.6 Corporate and Other (115) (107) (8.0) ------- ------- NET INCOME $1,307 $1,179 10.8 ======= ======= NET INCOME PER COMMON SHARE $2.68 $2.34 14.5 ========= ======== Cash dividends declared per common share $0.675 $0.675 ========= ======== Average shares outstanding (000's) 486,554 499,430 ========= ======== (A) Revenue are reported net of interest expense, where applicable. # Denotes variance of more than 100%. (Preliminary) Travel Related Services ----------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Three Months Ended September 30, -------------------- Percentage 1996 1995 Inc/(Dec) ------ ------ ---------- Net Revenues: Discount Revenue $1,256 $1,116 12.5% Net Card Fees 418 439 (4.6) Travel Commissions and Fees 316 316 0.1 Interest and Dividends 167 261 (36.3) Other Revenues 508 570 (10.9) ------- ------- 2,665 2,702 (1.4) ------- ------- Lending: Finance Charge Revenue 377 396 (4.9) Interest Expense 122 126 (3.0) ------- ------- Net Finance Charge Revenue 255 270 (5.7) ------- ------- Total Net Revenues 2,920 2,972 (1.8) ------- ------- Expenses: Marketing and Promotion 278 252 10.3 Provision for Losses and Claims: Charge Card 172 207 (16.8) Lending 107 132 (18.8) Other 28 137 (79.9) ------- ------- Total 307 476 (35.4) ------- ------- Interest Expense: Charge Card 175 169 3.5 Other 72 114 (36.4) ------- ------- Total 247 283 (12.5) Net Discount Expense 128 101 26.5 Human Resources 764 700 9.1 Other Operating Expenses 755 752 0.2 ------- ------- Total Expenses 2,479 2,564 (3.3) ------- ------- Pretax Income 441 408 8.2 Income Tax Provision 118 111 6.5 ------- ------- Net Income $323 $297 8.8 ======= ======= The impact on the Statement of Income related to TRS' securitized receivables and loans was as follows: Increase Net Card Fees $4 - Increase Other Revenues 45 $20 Decrease Lending Finance Charge Revenue (43) - Decrease Lending Interest Expense 17 - Decrease Provision for Losses and Claims: Charge Card 51 40 Lending 11 - Decrease Interest Expense: Charge Card 43 41 Increase Net Discount Expense (128) (101) ------- -------- Pretax Income $0 $0 ======= ======== Travel Related Services (continued) ----------------------------------- Selected Statistical Information -------------------------------- (Unaudited) (Amounts in billions, except percentages and where indicated) Three Months Ended September 30, ------------------- Percentage 1996 1995 Inc/(Dec) ------- ------- ---------- Total Cards in Force (millions): United States 28.4 25.9 9.4% Outside the United States 11.9 11.5 4.1 ------- ------- Total 40.3 37.4 7.8 ======= ======= Basic Cards in Force (millions): United States 21.7 19.4 12.0 Outside the United States 9.4 9.0 4.2 ------- ------- Total 31.1 28.4 9.5 ======= ======= Card Billed Business: United States $32.7 $29.2 11.8 Outside the United States 13.2 11.8 12.4 ------- ------ Total $45.9 $41.0 12.0 ======= ====== Owned and Managed Cardmember Receivables (excluding Revolving Card Products): Total Cardmember Receivables $20.7 $18.7 10.5 90 Days Past Due as a % of Total Cardmember Receivables 3.6% 3.6% - Total Loss Reserves (millions) $996 $915 8.8 % of Cardmember Receivables 4.8% 4.9% - % of 90 Days Past Due 134% 135% - Cardmember Receivables Loss Ratio, Net of Recoveries 0.54% 0.52% - Owned and Managed U.S. Cardmember Lending (including Revolving Card Products): Total Cardmember Loans $11.2 $9.0 24.2 30 Days Past Due as a % of Total Cardmember Loans 3.2% 3.5% - Total Loss Reserves (millions) $427 $389 9.8 % of Cardmember Loans 3.8% 4.3% - % of 30 Days Past Due 119% 122% - Write-Off Rates 5.1% 4.5% - Travelers Cheque Sales $8.6 $8.3 3.2 Average Travelers Cheques Outstanding $6.6 $6.7 (1.8) Travel Sales $3.8 $3.7 4.1 Return on Average Equity ** 25.1% 24.6% - * Both years include Cards issued by strategic alliance partners and independent operators as well as business billed on those Cards. ** ROE is calculated excluding the effect of SFAS #115. Note: Certain prior year amounts have been reclassified to conform to the current year's presentation. (Preliminary) American Express Financial Advisors ----------------------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions, except where indicated) Three Months Ended September 30, ------------------- Percentage 1996 1995 Inc/(Dec) ------- ------- ---------- Revenues: Investment Income $560 $555 0.9% Management and Distribution Fees 302 241 25.4 Other Income 159 138 15.5 ------- ------- Total Revenues 1,021 934 9.4 ------- ------- Expenses: Provision for Losses and Benefits: Annuities 303 293 3.7 Insurance 102 99 2.8 Investment Certificates 45 55 (17.2) ------- ------- Total 450 447 0.9 Human Resources 259 226 14.4 Other Operating Expenses 82 64 28.3 ------- ------- Total Expenses 791 737 7.5 ------- ------- Pretax Income 230 197 16.6 Income Tax Provision 74 63 16.6 ------- ------- Net Income $156 $134 16.5 ======= ======= Selected Statistical Information -------------------------------- Life Insurance in Force (billions) $65.2 $57.6 13.2 ======= ======= Assets Owned and/or Managed (billions): Assets managed for institutions $35.8 $32.3 10.9 Assets owned and managed for individuals: Owned Assets 50.8 46.2 9.9 Managed Assets 56.3 46.3 21.6 ------- ------- Total $142.9 $124.8 14.5 ======= ======= Sales of Selected Products: Mutual Funds $3,313 $2,584 28.2 Annuities $946 $699 35.3 Investment Certificates $182 $363 (49.9) Life and Other Insurance Sales $109 $94 16.2 Number of Financial Advisors 8,092 7,930 2.0 Fees From Financial Plans (thousands) $11,660 $9,798 19.0 Product Sales Generated from Financial Plans as a Percentage of Total Sales 64.7% 65.3% - Return on Average Equity 20.2% 19.2% - * ROE is calculated excluding the effect of SFAS #115. (Preliminary) American Express Bank --------------------- Statement of Income ------------------- (Unaudited) (Dollars in millions) Three Months Ended September 30, ------------------ Percentage 1996 1995 Inc/(Dec) ------- ------- ---------- Net Revenues: Interest Income $206 $221 (6.9%) Interest Expense 128 140 (8.4) ------- ------- Net Interest Income 78 81 (4.3) Commissions, Fees and Other Revenues 57 59 (4.8) Foreign Exchange Income 16 21 (21.7) ------- ------- Total Net Revenues 151 161 (6.7) ------- ------- Provision for Credit Losses 5 1 # ------- ------- Expenses: Human Resources 59 62 (5.0) Other Operating Expenses 59 65 (9.2) ------- ------- Total Expenses 118 127 (7.1) ------- ------- Pretax Income 28 33 (16.3) Income Tax Provision 10 11 (11.6) ------- ------- Net Income $18 $22 (18.8) ======= ======= Selected Statistical Information -------------------------------- Return on Average Assets 0.62% 0.68% - Return on Average Common Equity* 9.61% 11.28% - Total Loans $5,640 $5,383 4.8 Reserve for Credit Losses $116 $115 0.7 Total Nonperforming Loans $31 $32 (2.8) Other Real Estate Owned $34 $43 (20.6) Risk-Based Capital Ratios: Tier 1 9.0% 8.7% - Total 12.8% 13.9% - Leverage Ratio 6.0% 5.6% - # Denotes variance of more than 100%. * ROE is calculated excluding the effect of SFAS #115.