Business Introduction
We are a globally integrated payments company that provides our customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are credit and charge card products, along with travel and lifestyle related services, offered to consumers and businesses around the world. Our range of products and services includes:
•Credit card, charge card, banking and other payment and financing products
•Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants
•Network services
•Other fee services, including fraud prevention services and the design and operation of customer loyalty programs
•Expense management products and services
•Travel and lifestyle services
Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising. We have a significant ownership position in, and extensive commercial arrangements with,American Express Global Business Travel (GBT). The commercial arrangements with GBT include, among other things, a long-term trademark license agreement pursuant to which GBT uses the American Express brand, GBT's support of certain of our partnerships, joint negotiation with travel suppliers and a strategic relationship between GBT and our Global Commercial Services (GCS) business.
We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and Automated Clearing House (ACH)), as well as evolving and growing alternative payment and financing providers. As the payments industry continues to evolve, we face increasing competition from non-traditional players that leverage new technologies, business models and customer relationships to create payment or financing solutions.
Effective for the first quarter of 2022, we made the following reporting presentation changes to our Consolidated Statements of Income:
Within Non-interest revenues:
•Processed revenue represents revenues earned from processed volumes, previously reported in Discount revenue, Other fees and commissions and Other revenue.
•Service fees and other revenue combines the remaining balances from Other fees and commissions and Other revenue.
Within Total expenses:
•Disaggregated Marketing and business development expense into Business development expense and Marketing expense.
Prior period amounts have been recast to conform with current period presentation; there was no impact to Total non-interest revenues or Total expenses.
Refer to the "Glossary of Selected Terminology" for the definitions of certain key terms and related information appearing within this Form 10-Q.
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Forward-Looking Statements and Non-GAAP Measures
Certain of the statements in this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to the "Cautionary Note Regarding Forward-Looking Statements" section. We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted inthe United States of America (GAAP). However, certain information included within this Form 10-Q constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.
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Table 1: Summary of Financial Performance
As of or for the Three Months Ended March 31, (Millions, except percentages, per share amounts and Change where indicated) 2022 2021 2022 vs. 2021 Selected Income Statement Data Total revenues net of interest expense$ 11,735 $ 9,064 $ 2,671 29 % Provisions for credit losses (33) (675) 642 95 Expenses 9,056 6,746 2,310 34 Pretax income 2,712 2,993 (281) (9) Income tax provision 613 758 (145) (19) Net income 2,099 2,235 (136) (6) Earnings per common share - diluted (a)$ 2.73 $ 2.74 $ (0.01) - % Common Share Statistics (b) Cash dividends declared per common share$ 0.52 $ 0.43 $ 0.09 21 % Average common shares outstanding: Basic 757 804 (47) (6) % Diluted 758 805 (47) (6) % Selected Metrics and Ratios Network volumes (Billions)$ 350.3 $ 269.3 $ 81 30 % Return on average equity (c) 37.7 %
37.7 % Net interest income divided by average Card Member loans
10.1 % 10.4 % Net interest yield on average Card Member loans (d) 10.5 % 11.3 % Effective tax rate 22.6 % 25.3 % Common Equity Tier 1 10.4 % 14.8 % Selected Balance Sheet Data ($ in millions) Cash and cash equivalents$ 27,678 $ 40,280 $ (12,602) (31) % Card Member receivables 53,164 42,002 11,162 27 Card Member loans 88,832 70,100 18,732 27 Customer deposits 90,917 89,193 1,724 2 Long-term debt$ 38,337 $ 42,019 $ (3,682) (9) %
# Denotes a variance of 100 percent or more
(a)Represents net income, less (i) earnings allocated to participating share awards of$16 million and$15 million for the three months endedMarch 31, 2022 and 2021, respectively, and (ii) dividends on preferred shares of$14 million for both the three months endedMarch 31, 2022 and 2021.
(b)Our common stock trades principally on
(c)Return on average equity (ROE) is calculated by dividing (i) annualized net income for the period by (ii) average shareholders' equity for the period. Effective for the first quarter of 2022, the interim period calculation methodology for Return on average equity was modified to present the returns for the period on an annualized basis rather than the preceding twelve months. Prior period amounts have been recast to conform with current period presentation. (d)Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to Table 8 for a reconciliation to Net interest income divided by average Card Member loans. 3
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Business Environment
Our results for the first quarter reflect the continued strong growth momentum we have seen in our business during the last several quarters. We are committed to investing in our brand, customers, value proposition, coverage, technology and talent, which is driving sustainable growth across our businesses. Worldwide network volumes for the first quarter increased 30 percent year-over-year and billed business, which represented 86 percent of our total network volumes and drives most of our financial results, increased 34 percent. G&S spend, which accounts for the majority of our billed business, grew by 19 percent on a year-over-year basis, primarily driven by ongoing strong growth in online and card-not-present spending, even while offline spending growth accelerated further. T&E spend increased 119 percent versus the prior year and essentially reached the pre-pandemic levels of 2019 globally in March. Total revenues net of interest expense increased 29 percent year-over-year reflecting double digit growth in most of our revenue lines. The growth in network volumes drove increases in Discount revenue, our largest revenue line, and Processed revenue. Service fees and other revenue increased 42 percent year-over-year, primarily driven by higher travel-related revenues. Net card fees grew 14 percent year over year, as new card acquisitions increased and Card Member retention remained high, demonstrating the impact of investments we have made in our premium value propositions. Net interest income grew by 20 percent year-over-year, primarily driven by growth in loans, partially offset by higher paydown rates on loan balances. Card Member loans grew 27 percent year-over-year, which was lower than the growth in billed business due to higher paydown rates driven in part by the continued liquidity and financial strength of our customer base. Provisions for credit losses increased, resulting in a lower net benefit in the current quarter as compared to a year ago, primarily due to a lower net reserve release in the current quarter, partially offset by lower net write-offs. The reserve release in the current period was primarily driven by a reduction in pandemic-driven reserves reflecting sustained recovery from the macroeconomic impact of the COVID-19 pandemic. While delinquency and net write-off rates remain well below pre-pandemic levels, they increased modestly on a sequential basis as compared to the prior quarter. Card Member rewards, Business development, and Card Member services increased year-over-year due to spend growth and higher usage of travel-related benefits. Card Member rewards expense growth was also driven by a larger proportion of spend in categories that earn incremental rewards such as travel. Marketing expense increased 27 percent year-over-year, due to higher investments to drive growth momentum and accelerate new card acquisitions. We continue to see great demand for our products and a wide range of attractive investment opportunities. Operating expenses increased 26 percent year-over-year primarily due to prior-year net gains on ourAmex Ventures equity investments and higher compensation costs in the current quarter. During the quarter, we maintained our capital ratios within our target range and returned$1.9 billion of capital to our shareholders through share buybacks and dividends. We also increased our quarterly common stock dividend by 21 percent. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. Although we recognize the uncertainty in the geopolitical and inflationary environment, the combination of our investments, successful execution of our strategy, and a number of structural shifts have all come together to deliver our strong first quarter results and build growth momentum. See "Certain Legislative, Regulatory and Other Developments" and "Risk Factors" for information on certain matters that could have a material adverse effect on our results of operations and financial condition. 4
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Results of Operations The discussions in both the "Consolidated Results of Operations" and "Business Segment Results of Operations" provide commentary on the variances for the three months endedMarch 31, 2022 compared to the same period in the prior year, as presented in the accompanying tables.
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