Amex Says Mobile Wallet Growth Slow, Even With Apple Pay

American Express on Wednesday (Oct. 16) reported third-quarter net income of $1.5 billion, up 8 percent from $1.4 billion a year ago. The card brand also reported that diluted earnings per share was $1.40, up 12 percent from $1.25 a year ago.

Overall, the business reported solid earnings across the board, including consolidated total revenues net of interest expense of $8.3 billion. Amex’s return on average equity (ROE) was 28.8 percent, up from 24.3 percent a year ago.

But the company said mobile wallet movement will be slow.

“The mobile wallets have had the potential to change consumer behavior for some years but it’s unlikely to be an overnight shot. It will take time even with Apple’s innovative technology and customer base,” said Jeff Campbell, Executive Vice President and Chief Financial Officer. “The pace of consumer and merchant adoption will depend on the benefits, protection and overall value proposition that participating issuers and networks can provide. That plays to our strength.”

Amex CEO Kenneth Chenault cited some of his favorite financial numbers.

“Card Member spending was up 9 percent, a modest acceleration from last quarter, and loan balances grew 5 percent. Revenues continued to rise at a steady pace, but the growth rate is still below our long-term target. On the cost side of the ledger, operating expense growth remained on track to come in well below our target for the full year and that’s one of the factors that provided the flexibility to invest in both the core business as well as some newer initiatives,” he said. “We developed new partnerships and services with Uber, Apple Pay and McDonald’s that are helping us to capitalize on the convergence of online and offline commerce. At the same time, initiatives like the Amex EveryDay Credit Card and OptBlue are helping to make our brand more welcoming and inclusive as we expand into markets not traditionally served by American Express.”

U.S. Card Services reported third-quarter net income of $889 million, up 14 percent from $782 million a year ago. Total revenues net of interest expense increased 6 percent to $4.5 billion, from $4.3 billion a year ago.  The increase reflected a 9 percent increase in card member spending and a rise in net interest income, driven primarily by 6 percent growth in average card member loans, Amex reported. International Card Services reported third-quarter net income of $142 million, unchanged from a year ago.

Global Commercial Services reported net income of $204 million, down 22 percent from $261 million a year ago. Total expenses were $542 million, down 36 percent from $851 million. Excluding business travel expenses, third quarter adjusted expenses rose 5 percent.¹ The increase reflected joint venture transaction-related costs and higher rewards expenses.