Last night, credit card name American Express (AXP 92.66, +0.58 +0.63%) reported solid Q3 earnings and revenues, raised FY17 earnings guidance ahead of market expectations and announced the appointment of Stephen Squeri as CEO, succeeding the retiring Kenneth Chenault.
Total revenues net of interest expense in Q3 were $8.4 billion, up 9% from $7.8 billion a year ago. Excluding the impact of foreign exchange rates, adjusted revenues net of interest expense grew 8%. Those increases primarily reflected higher net interest income and Card Member spending, partially offset by a lower discount rate. Diluted earnings per share (EPS) was $1.50 in Q3, ahead of market expectations
Consolidated provisions for losses were $769 million, up 53 percent from $504 million a year ago. The rise primarily reflected continued strong growth in the loan portfolio and an expected increase in the lending write-off and delinquency rates.
Consolidated expenses were $5.8 billion, up 6% from $5.5 billion last year. The current quarter included higher rewards expenses primarily related to product enhancements and an increase in Card Member spending, which were partially offset by lower marketing costs. Operating expenses were unchanged from a year ago, as lower technology-related costs were offset by asset impairments and restructuring and other charges in the company’s U.S. Loyalty Coalition and Prepaid businesses. Excluding the asset impairments and other charges in the current year and restructuring charges in both years, adjusted operating expenses declined 4%.
By segment, AXP reported U.S. Consumer Services net income of $475 million, up 18% from $401 million a year ago. International Consumer and Network Services reported Q3 net income of $286 million, up 85% from $155 million a year ago. Global Commercial Services reported Q3 net income of $529 million, up 14% from $466 million a year ago. Global Merchant Services reported Q3 net income of $368 million, up 3% from $359 million a year ago and the Corporate and Other segment reported a Q3 net loss of $302 million compared with net loss of $239 million a year ago, reflecting a portion of the previously-mentioned asset impairments and restructuring charges.
Commenting that the company’s two-year turnaround plan is tracking ahead of schedule, management felt it prudent to adjust guidance to reflect the progress. To that end, FY17 EPS guidance now stands at $5.80-5.90, up from the previous range of $5.60-5.80.
Also announced last night, AXP revealed the upcoming retirement of CEO and Chairman of the Board Kenneth Chenault after 37 years at AXP. Chenault will be succeeded by current Vice Chairman, Stephen Squeri. Championing the appointment is AXP’s largest shareholder, Berkshire Hathaway (BRK.A). Berkshire Chairman and CEO Warren Buffett stated Squeri is the right person for the job.