American Express 1Q16 Earnings Call Notes

These notes were compiled by Remy Gill, an undergrad at UCSB

 

American Express 2016 Q1 Earning Call Notes

 

Jeffrey C. Campbell – Chief Financial Officer & Executive Vice President

 

Management seeks to capitalize on lower stock price with share repurchases

“We again leveraged our strong capital position to provide significant returns to shareholders. Over the past 12 months, we have repurchased 69 million shares, which reduced our average share count by 6%.”

 

Despite Costco and declining discount rates, AXP continues to deliver revenue growth

“Turning now to revenue performance on slide 8. Reported revenues were up 2% and grew by 4% after adjusting for changes in FX. The growth was driven by higher volumes, partially offset by a slowdown in Costco related revenues and a larger than usual decline in the reported discount rate.”

 

When adjusted for Costco and JetBlue, loan growth remains strong

“To understand the underlying trends… we have excluded the Costco and JetBlue portfolios and adjusted for FX. This shows a modest sequential acceleration in worldwide loan growth to 11%. And as we disclosed in our regular monthly credit stats 8-K last week, adjusted U.S. Card Member loans were up 12% versus the prior year, which continues to outpace the industry.”

 

Discount rates will continue to decline as AXP seeks to increase volume, particularly small and medium sized merchants.

“As you are aware, expanding merchant coverage is a key priority for us, and we continue to make progress on growing our merchant footprint this quarter. I’d also remind you that while growth in OptBlue does drive a decline in the discount rate, that impact has been more than offset on the bottom line by the benefits from incremental volumes and lower operating expenses from reduced incentive payments to merchant acquirers.”

 

Despite larger than normal expense growth in Q1, 2016 expense growth will match 2015.

“In recent years, our marketing and promotion spend was low during the first quarter and then ramped up for the year beginning in Q2. Going forward, as part of our effort to optimize investments, we intend to spread more evenly the spend across all four quarters. We continue to expect that the total full year spending on growth initiatives during 2016 will be consistent with 2015 levels.”

 

AXP is focused on retaining Costco cardholders and on new card acquisitions.

“we are pleased to see that these efforts drove 2.1 million new cards acquired across our U.S. issuing businesses during the current quarter, and nearly 1 million more from our international issuing businesses…These results include new cards from Costco co-brand Card Members who have signed up for another American Express product.”