This summary is based on the third quarter fiscal 2007 earnings call conducted by American Express Company (AXP: chart) on October 22, 2007.
Management:
CFO: Dan Henry
IR: Ron Stovall
Key Investors Issues
- EPS were 90 cents a share compared to 79 cents a share last year.
- Profit rose to $1.07 billion from $967 million in the year ago period.
- Total revenue was $7.95 billion, up from $6.99 billion last year.
Third Quarter Highlights
Income from continuing operations was $1.1 billion, up 15% from $934 million a year ago.
Earnings per share were 90 cents per share, up 18% from 76 cents per share last year.
The company entered into an agreement to sell its international banking subsidiary, American Express Bank Ltd.(AEB).
- Net income, which includes AEB within discontinued operations, totaled $1.1 billion, up 10% from $967 million a year ago.
- On a per share basis, net income was 90 cents per share, up 14% from 79 cents per share.
Consolidated revenues net of interest expense rose 11% to $6.9 billion, up from $6.3 billion a year ago.
- Consolidated expenses totaled $4.5 billion, up 9% from $4.2 billion a year ago.
- The company''s return on equity (ROE) was 38.2%.
- Strong earnings growth this quarter reflected a 16% rise in combined spending by consumers, small businesses and corporate cardmembers.
- Investments that expanded service, rewards and loyalty programs helped to add 2.5 million cards while also generating excellent spending increases from existing cardmembers.
The third quarter results included a $75 million tax benefit primarily related to the resolution of prior years’ tax items.
- Also included in results was $81 million ($41 million after-tax) of previously disclosed charges primarily related to the contracted sale of American Express International Deposit Company (AEIDC), a wholly-owned subsidiary of the company which issues investment certificates to AEB’s customers.
- The year-ago quarter results included a $33 million ($24 million after-tax) gain related to the sale of the company''s card operations in Malaysia and Indonesia.
Discontinued operations included a loss of $7 million primarily reflecting the results of AEB.
In the year-ago period, discontinued operations included income of $33 million.
The company reorganized its businesses into two customer-focused groups – the Global Consumer Group and the Global Business-to-Business Group.
The company will continue to report the U.S. Card Services segment and Global Network & Merchant Services segments consistent with previous reporting. The previously reported International Card & Global Commercial Services segment will now be reported as two separate segments: the International Card Services segment and the Global Commercial Services segment. The company’s U.S. Card Services and International Card Services segments are aligned with the Global Consumer Group and the company’s Global Network & Merchant Services and Global Commercial Services segments are aligned with the Global Business-to-Business Group.
In addition, beginning with the third quarter of 2007, and for all prior periods, AEB results have been removed from the Corporate & Other segment and reported within the discontinued operations line on the company’s Consolidated Statements of Income. In addition to the agreement to sell AEB to Standard Chartered PLC, AEIDC was also contracted to be sold to Standard Chartered 18 months after the close of the AEB sale through a put/call agreement. AEIDC will continue to be reflected in continuing operations within the Corporate & Other segment until one year before the anticipated close of this portion of the transaction. Based on the assumed completion of the AEB sale in the first quarter of 2008, the company expects to begin reporting AEIDC’s results in the discontinued operations line in the third quarter of 2008.
U.S. Card Services reported net income of $592 million, up 6% from $558 million a year ago.
