American Express Company (AXP)
Q4 2009 Earnings Call Transcript
January 21, 2010 5:00 p.m. ET

Executives

Ronald Stovall - Senior Vice President of Investor Relations
Daniel T. Henry - Executive Vice President and Chief Financial Officer

Analysts

Craig Maurer - CLSA
Sanjay Sakhrani - Keefe, Bruyette & Woods
Robert Napoli - Piper Jaffray
Bill Carcache - Macquarie Research Equities
Meredith Whitney - Meredith Whitney Advisory Llc
Jason Arnold - RBC Capital Markets
Michael Taiano - Sandler O’Neill & Partners L.P.
Christopher Brendler - Stifel Nicolaus & Company, Inc.
Donald Fandetti - Citigroup
John McDonald - Sanford C. Bernstein
Scott Valentin - FBR Capital Markets & Co.
Bruce Harting - Barclays Capital
Kenneth Bruce - Banc of America/Merrill Lynch
Robert Napoli - Piper Jaffray

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the American Express fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. If you should require assistance during the call, please press star followed by zero and then operator will assist you at that time. As a reminder, today’s call is being recorded.

I would now like to turn the conference over to our host, Ron Stovall. Please go ahead, sir.

Ronald Stovall

Thank you, Gloria. And thanks to all of you for joining us for today’s discussion. As usual, it’s my responsibility to remind you that the discussion today contains certain forward-looking statements about the company’s future financial performance and business prospects, which are subject to risks and uncertainties and speak only as of today. The words believe, expect, anticipate, optimistic, intend, plan, aim, will, should, could, likely, and similar expressions are intended to identify forward-looking statements.

Factors that could cause actual results to differ materially from these forward-looking statements included in the company’s financial and other goals, are set forth within today’s earnings press release, which was filed in an 8-K report, and in the company’s 2008 10-K report already on file with the Securities and Exchange Commission, in the fourth quarter 2009 earnings release and earnings supplement on file with the SEC in an 8-K report, as well as the presentation slides, all of which are now posted on our website at ir.americanexpress.com.

We have provided information that describes the company’s managed spaces and other non-GAAP financial measures, and the comparable GAAP financial information. We encourage you to review that information in conjunction with today’s discussion.

Dan Henry, Executive Vice President and Chief Financial Officer, will review some key points related to the quarter’s earnings through the series of slides included with the earnings documents, and provide some brief summary remarks. Once Dan completes his remarks, we will turn to the moderator who will announce your opportunity to get into the queue for the Q&A period, where Dan will be available to respond to your questions. Up until then, no one has actually registered to ask questions. While we will attempt to respond to as many of your questions as possible before we end the call, we do have a limited amount of time. Based on this, we ask that you limit yourself to one question at a time during the Q&A.

With that, let me turn the discussion over to Dan.

Daniel T. Henry

Okay. Thanks, Ron. And I’ll start on slide two. So, while revenues and income are well below our pre-recession levels, they are heading in the right direction and represent the highest levels that we’ve achieved this year. So, a look at total revenues that of interest expense came in at 6.5 billion, about equal with the amount in the fourth quarter of ‘08. On an FX adjusted basis, we would be down about 4%. If you compare this to the third quarter, year-over-year on a reported basis, we were down 16%; so being approximately even with last year is a significant improvement.

Income from continuing operations was $710 million, up 132% from the prior year; but we identified two significant items in last year’s result, a reengineering charge as well as a MR-related item. And if you were to normalize from those, we’re really up modestly about 5% compared to fourth quarter of ‘08. Diluted EPS from continuing operations came in at $0.59 and return on equity was 14%.

Moving to slide three, you can see that billed business came in at 172 billion, up 8% on a reported basis and 4% on an FX adjusted basis. Again, comparing it to the growth rates we had in the third quarter. Reported billed business was down 11% and on an FX adjusted basis, was down 9%. So, again, a significant improvement compared to the third quarter and this improvement is really across all business lines, as you’ll see in a few minutes, and it’s the first positive growth rate that we’ve had since the third quarter of ‘08.

Card-in-Force came in at 87.9 billion and that’s down 5% from last year. If you normalize to exclude the 3.3 million inactive cards that we canceled this year, we would be down about 1%. Average basic card member spending, if you were -- was up 15%, but if you were to normalize to exclude the inactive cards that I just referred to and adjust for FX, we’re up about 5%, which is a strong rebound from the prior quarter.