Amex Beats Q4 On Higher Card Spend, Balances

The headline numbers said it was the first quarterly loss in 26 years. But digging a little deeper, American Express posted fourth-quarter results that topped expectations on the heels of higher card spend – and higher balances kept on those cards.

Total revenues were $8.8 billion, up 10 percent from $8 billion a year ago.

As widely reported, the company took a $2.6 billion charge, covering the repatriation tax on undistributed earnings. Earnings, adjusted for that charge, came in at $1.58, four pennies better than expected.

Earnings are expected to be $6.90 to $7.30 a share, bracketing the Street at $7.04.

Tied to the tax charge, capital ratios declined, and the company is suspending its share buyback to reflect the need to rebuild those ratios.

The cost of rewards to card holders was up 12 percent to $1.9 billion as customers ramped up spending.

Billed business, globally, was up 11 percent year on year to $291.4 billion. And the fees charged on merchant, known as the discount rate, was 2.4 percent, down about two basis points year on year.

Drilling down into the billed business, the company’s filings showed that in the United States, that segment was up 8 percent to $188.9 billion, while international billed business grew by 15 percent to $102.5 billion. Total cards in force grew 5 percent in the United States to 50 million, and by one percent to 62.8 million outside the U.S.

Member spending, overall, was up 5 percent year over year, and loans worldwide were up 12 percent, to $73.4 billion.

Turning to bad loans, delinquencies were up 8.3 percent year on year, reaching $833 million.

Separately, in supplemental materials, revenue for consumer and network services was $1.5 billion, up 7 percent, adjusted for FX.

As noted by Reuters, CFO Jeff Campbell said that renewals of some pacts, such as those with Marriott, will take as much as $200 million from earnings this year, tied in part to lower margins on those deals.