This summary is based on the first quarter fiscal 2008 earnings call conducted by American Express Company (AXP: chart) on April 24, 2008.

Management:

CFO and EVP: Daniel T Henry
SVP of IR: Ron Stovall

Key Investor Issues:

- Quarterly EPS decreased 2% to 85 cents from 87 cents a year ago quarter.
- Q1 revenues, net of interest expense, rose 11% from $6.5 billion in the last year quarter.
- Q1 return on average equity was 35.9% versus 36.6% in Q1 of 2007.

First-Quarter Financial Highlights

The quarterly diluted EPS from continuing operations were 84 cents.

- This represents a 7% decrease from 90 cents for the same period last year.
- In the year ago quarter, results from continuing operations included an $80 million ($50 million after tax) gain related to a new accounting standard for retained interest in securitized loans and a $63 million ($39 million after tax) gain from amendments to the company’s U.S. pension plans.
- The year ago quarter also included $32 million ($21 million after tax) of re-engineering costs compared with $10 million ($7 million after tax) in the current period.
- The net income totaled $991 million for the quarter, a decrease of 6% from last year.

The company’s ROE was 35.9%, down from 36.6% in the last year quarter.

- The ROE was computed on a trailing 12-month basis using net income over average shareholders’ equity (including discontinued operations).

The business volume growth for the quarter was in the top tier of the industry.

- This was on the back of continuing returns on the multi-year investments and benefits from a diverse consumer and business-to-business portfolio.
- The Cardmember spending rose 14%, driven by strength in the international markets among bank partners and in the corporate sector.

- The gap between the company’s growth rates and that of most major competitors demonstrates the effectiveness and ongoing benefit of the marketing and rewards investments over the past years.

The consolidated quarterly expenses totaled $4.6 billion, an increase of 14% from $4 billion in the same period last year.

- The company continued to invest in longer-term opportunities at a time when some traditional competitors have been constrained by problems elsewhere in their operations.
- The marketing and related spending rose 20%, with a focus on affluent U.S. consumers and the international markets.
- The human resource expense increased 13%, reflecting last year’s pension gain, merit increase, greater benefits and a 4% higher employee level primarily related to various customer service and sales force related initiatives in addition to last year’s corporate travel acquisition.

- The investments in the business-to-business sector included the recently completed acquisition of General Electric’s corporate card unit.
- The management reported that loan growth slowed from the rate of recent years. This is a partial reflection of credit-related actions like targeted line reductions.
- The loan loss reserves rose in light of the increase in delinquencies and write-offs, especially in areas hit hardest by the U.S. housing market.
- The total provision for losses and benefit increased 48% compared with last year. The charge provision rose 65%, lending provision increased 41% and the other provision was 61% higher.

The discontinued operations for the first quarter reflected income of $17 million.

- This is inclusive of an $11 million after tax gain related to the sale of American Express Bank Limited (AEB).
- The year ago period reflected a loss of $38 million which included $60 million (pretax and after tax) reserve established for regulatory and legal exposure at AEB International.

During the quarter, the company returned 38% of capital generated to shareholders through share repurchase and dividends.

- The management slowed the share repurchase program during the quarter in order to allow the capital generated through earnings to help fund the recent acquisition of GE’s corporate payment services business.
- Since 1994, the company has returned 70% of capital generated to shareholders which is above the 65% long term target.

Performance Analysis of Business Segments