American Express Company Earnings Conference Call Q3'17 October 18, 2017
2016-2017 Priorities & Financial Growth Drivers Growth Accelerate Businesses Revenue Growth OpEx Leverage Optimize Investments Capital Strength Reset Cost Base EPS Growth 2
Q3’17 Summary Financial Performance (in millions; except per share amounts) Q3’17 Q3’17 Q3’16 Inc/(Dec) 9% Total Revenues Net of Interest Expense $8,436 $ 7,774 8% FX-Adjusted * $ 7,810 19% Net Income $1,356 $1,142 † Diluted EPS $1.50 $1.20 25% 2016 Restructuring (Per Share)** $0.04 23% 26% Return on Average Equity Average Diluted Shares Outstanding 881 923 (5%) *Total Revenues Net of Interest Expense adjusted for FX and the related growth rate are non-GAAP measures. FX-adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes Q3’17 foreign exchange rates apply to Q3‘16 results). †Attributable to common shareholders. Represents net 3 income less earnings allocated to participating share awards, dividends on preferred shares and other items. **Represents a restructuring charge of $44MM ($28MM after-tax) in Q3’16.
AXP Worldwide Adjusted Billed Business Growth* % Increase/(decrease) vs. Prior year: 11% 8% 8% 8% 7% 7% 6% 1% 0% 1% (3%) (3%) (4%) Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Total (FX-Adj) Adjusted Total** *See Annex 1 for reported billings growth rates. **Excludes Costco cobrand card billed business (in-store and out-of-store) and billed business on other (non-Costco cobrand) American Express 4 4 cards at Costco in the U.S.
Billed Business Growth by Segment % Increase/(decrease) vs. Prior year: Q2’17 Q3’17 Int’l Consumer Proprietary Billings (FX-Adj)* 12% 13% GNS Billings (FX-Adj)* 5% 4% 14% 9% 8% 6% 7% (2%) (10%) (18%) Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 U.S. Consumer International Consumer & Network (ICNS) Global Commercial (GCS) Total * * * (FX-Adj) (FX-Adj) (FX-Adj) 5 5 *See Annex 1 for reported billings growth rates.
Q3’17 Billed Business Growth by Customer Type % Increase vs. Prior year (FX-adjusted): Global Commercial: Global Network Services: % of AXP Global Consumer: 40% 17% billings 43% 15% 13% 10% 7% 5% 4% Int’l Global Network US Int’l Large & Global US Customer Type Consumer* Services* SME SME* Corporate* Consumer % of AXP 12% 17% 25% 5% 10% 31% Billings 6 Note: SME refers to small and mid-sized businesses with less than $300MM in annual revenues. * See Annex 1 for reported billings growth rates.
Total Worldwide Lending Performance ($ in billions) † Worldwide Total Loans Total Loans WW Net Interest Yield on CM Loans $70.2 $67.9 $66.7 $65.3 10.7% $61.1 $61.8 10.3% 10.3% 9.9% 9.8% YoY Loan (12%) (13%) 11% 11% 14% 9.5% 11% Growth Adj.* YoY 13% 12% 13% 12% 11% 13% Loan Growth Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Note: Total Loans reflects Card Member loans and Other loans. *Adjusted loan growth excluding the impact of foreign exchange rates, and further adjusted to exclude from Q2’15-Q3’15 Card Member balances related to cobrand partnerships with Costco in the U.S. and JetBlue, which were moved to Held for Sale as of December 2015, is a non-GAAP measure. See Annex 2 for a 7 7 reconciliation.† See Annex 6 for a reconciliation of net interest income divided by average loans, a GAAP measure, and net interest yield, a non-GAAP measure.
Total Worldwide Card Member Loans Performance WW Lending Net Write-off Rate 30+ Days Past Due Rate 1.8% 1.8% 1.7% 1.7% 1.6% 1.3% 1.2% 1.2% 1.2% 1.1% Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Note: Net write-off rates above include Principal only. See Statistical Tables for the Third Quarter of 2017, available at ir.americanexpress.com, for net write-off rates including interest and/or fees. 8 8
Provisions for Losses ($ in millions) Total Provision $769 $625 $584 $573 $504 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 WW CM Reserve $219 $37 $139 $49 $56 Build/(Release) 9 9 See Additional Commentary on Slide 18 for an explanation of the provision variance versus last year.
Adjusted Revenue Growth 8% 8% 8% 7% 6% 5% 5% 6% 5% 4% 3% 4% 4% 4% 2% 1% 0% 1% (2%) (2%) (4%) (3%) (5%) (6%) Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Adj. for FX and Concur* Adj. for FX, Concur and Costco* See Annex 3 for reconciliation to total Revenue Net of Interest Expense on a GAAP basis. *Total Revenue Net of Interest Expense adjusted for FX and excluding the gain on the Q4’14 sale of the Concur investment and estimated revenues from Costco in the U.S., Costco U.S. cobrand Card Members and other merchants for out-of-store spend on the Costco cobrand card, and the related 10 10 growth rates are non-GAAP measures.
Revenue Performance ($ in millions) Q3’17 Q3’17 Q3’16 % Inc/(Dec) $4,772 $4,516 Discount Revenue 6% 786 747 Net Card Fees 5% 767 694 Other Fees & Commissions 11% 436 483 Other Revenue (10%) 1,675 1,334 26% Net Interest Income Total Revenues Net of Interest $8,436 $7,774 9% Expense $7,810 8% FX-Adjusted* * Total Revenues Net of Interest Expense adjusted for FX and the related growth rate are non-GAAP measures. See slide 3 for an explanation of FX-adjusted information. See Additional 11 11 Commentary on Slide 18 for an explanation of the revenue variances versus last year.
Discount Rate Analysis Discount Rate Discount Rate Trend* Second Half - 2017 2.47% ~(4.0) – (5.0) Discount Rate Erosion (bps) Discount Rate Erosion (bps) 2.42% Merchant Specific Negotiations (excl. Internationally Regulated Markets) 1.80% Merchant Specific Negotiations (Internationally Regulated Markets) 1.76% Volume-Driven Rate Charges Costco Q3’16 Q3’17 Q3’16 Q3’17 Discount Revenue / Average Mix (excluding Costco U.S.) Billed Business Discount Rate OptBlue 12 * As presented at Investor Day on March 8, 2017.
Expense Performance Q3’17 ($ in millions) Adj** Q3’17 Q3’16 % Inc/(Dec) % Inc/(Dec) $814 $930 (12%) Marketing and Promotion 1,900 1,566 21% Card Member Rewards 363 278 31% Card Member Services and Other 2,763 2,761 Total Operating Expenses* 0% (4%) Total Expenses $5,840 $5,535 6% Tax Rate 25.8% 34.2% See Additional Commentary on slide 19 for an explanation of the expense variances versus last year. * Represents salaries and employee benefits, professional services, occupancy and equipment, communications, and other, net.**Adjusted operating expenses, which exclude assets impairments, restructuring and other charges, and the related growth rates, are non-GAAP measures. See 13 Annex 4 for a reconciliation to Operating Expenses on a GAAP basis.
Card Member Engagement ($ in billions) Q3’17 % Inc/(Dec) YoY $3.3 $3.1 $3.1 11% $0.3 $2.8 $2.8 $0.4 $2.8 $0.4 CM Services $0.3 $0.3 $0.3 31% $1.8 Rewards $1.9 $1.9 $1.6 $1.8 $1.8 21% $1.2 $0.9 M&P $0.8 $0.8 $0.8 $0.7 (12%) Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 14
Capital and Payout Ratios Percentage of Capital Generated Returned to Shareholders 115% 105% 99% 91% 83% 86% 81% 2013 2014 2015 2016 Q1'17 Q2'17 Q3'17 Risk-Based Capital Ratios* Common Equity 12.5% 13.1% 12.4% 12.3% 12.3% 11.9% 12.7% Tier 1 Tier 1 Capital 12.5% 13.6% 13.5% 13.5% 13.0% 13.5% 13.9% Note: Payout Ratio is calculated by dividing the total amount returned to shareholders through dividends and share repurchases during the respective period by the total capital generated through net income attributable to common shareholders and employee plans during the respective period. *The Risk-Based Capital Ratios for Q3’17 represent a preliminary estimate as of the date of these earnings slides and may be revised in the Company’s Form 10-Q for the quarter ended September 30, 2017. Common Equity Tier 1 is Tier 1 Common under Basel I for 2013, and Common Equity Tier 1 under Basel III, inclusive of transition provisions, for 2014-2016, Q1’17 to Q3’17. The Tier 1 Common Risk-Based Capital Ratio is calculated as Tier 1 Common Equity, a non-GAAP measure, 15 15 divided by Risk-Weighted Assets. See Annex 5 for a reconciliation between Tier 1 Common Equity and Total Shareholders’ Equity.
2017 EPS Growth Outlook 2017 $5.80-$5.90 16 16
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