American Express Reports Strong 2024 Results

American Express, the globally integrated payments company, has reported impressive financial results for the year 2024. The company’s net income reached a record $10.1 billion, or $14.01 per diluted share, up 21% from the previous year. This performance reflects the strength and resilience of American Express’s business model, as well as the company’s continued investments for growth.

Financial Highlights

• Total revenues net of interest expense increased 9% year-over-year to $65.9 billion, driven by strong growth across the company’s business segments.
• Billed business, which represents the dollar amount of transactions American Express Card Members charge on their cards, grew 6% to $1.55 trillion. This growth was broad-based across geographies and spending categories.
• Net interest income increased 18% to $15.5 billion, outpacing the 8% growth in total loans and Card Member receivables, primarily due to higher growth in revolving loan balances and higher interest rates.
• Provisions for credit losses increased 5% to $5.2 billion, primarily driven by higher net write-offs, partially offset by a lower reserve build compared to the prior year.
• Total expenses increased 6% to $47.9 billion, reflecting higher Card Member rewards, Card Member services, and marketing expenses, partially offset by a decrease in other expenses.
• The company maintained a strong capital position, with a Common Equity Tier 1 (CET1) ratio of 10.5% at the end of 2024, within the target range of 10-11%.

Segment Performance

American Express has four reportable operating segments: U.S. Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS), and Global Merchant and Network Services (GMNS).

U.S. Consumer Services (USCS):

• Total revenues net of interest expense increased 12% to $31.4 billion, driven by higher Discount revenue and Net card fees.
• Provisions for credit losses increased 6%, primarily due to higher net write-offs, partially offset by a lower reserve build.
• Total expenses increased 11%, primarily driven by higher Card Member rewards, Card Member services, and marketing expenses.

Commercial Services (CS):

• Total revenues net of interest expense increased 7% to $15.9 billion, driven by higher Discount revenue and Net card fees.
• Provisions for credit losses increased 6%, primarily due to higher net write-offs, partially offset by a lower reserve build.
• Total expenses increased 3%, primarily driven by higher Marketing and Card Member rewards expenses, partially offset by a decrease in operating expenses.

International Card Services (ICS):

• Total revenues net of interest expense increased 10% to $11.5 billion, driven by higher Discount revenue and Net card fees.
• Provisions for credit losses remained flat, as higher net write-offs were offset by a lower reserve build.
• Total expenses increased 11%, primarily driven by higher Card Member rewards, Card Member services, and operating expenses.

Global Merchant and Network Services (GMNS):

• Total revenues net of interest expense increased 1% to $7.5 billion, primarily driven by higher Discount revenue, partially offset by lower Processed revenue.
• Provisions for credit losses increased 56% to $42 million, albeit from a low base.
• Total expenses decreased 18%, primarily driven by lower operating expenses.

Capital Management and Liquidity

American Express maintained a strong capital position, with a CET1 ratio of 10.5% at the end of 2024, well above the regulatory minimum. The company returned $7.9 billion to shareholders in the form of share repurchases and common stock dividends, representing approximately 76% of the capital generated during the year.

The company’s funding strategy focuses on maintaining a diverse set of funding sources, including customer deposits, unsecured debt, and asset securitizations. As of December 31, 2024, the company had $139.4 billion in customer deposits and $49.7 billion in long-term debt outstanding.

American Express also maintained a strong liquidity position, with $40.6 billion in cash and cash equivalents as of the end of 2024. The company’s liquidity management strategy includes maintaining diversified funding sources, unencumbered liquid assets, and off-balance sheet liquidity sources, as well as projecting cash flows under various economic and market scenarios.

Outlook and Key Strengths

American Express’s performance in 2024 demonstrates the strength and resilience of its business model, as well as the company’s ability to execute on its growth strategy. The company’s global integrated payments platform, premium customer base, and focus on innovation and digital capabilities position it well for continued success.

While the company recognizes the uncertainty of the geopolitical and macroeconomic environment, as well as the evolving regulatory and competitive landscape, it remains committed to delivering sustainable and profitable long-term growth. The company’s robust capital, funding, and liquidity positions provide it with significant flexibility to maintain a strong balance sheet and support future business growth.

Key strengths of American Express include:

1. Diversified Business Model: The company’s four reportable operating segments provide a well-rounded portfolio of products and services, ranging from consumer and commercial cards to merchant acquisition and network services.

2. Premium Customer Base: American Express’s customer base is composed of high-spending, high-credit-quality individuals and businesses, which contributes to the company’s strong credit performance and profitability.

3. Global Integrated Payments Platform: The company’s global network and integrated payments platform allow it to facilitate transactions between Card Members and merchants, generating a significant portion of its revenue from Discount revenue.

4. Focus on Innovation and Digital Capabilities: American Express continues to invest in technology and digital initiatives to enhance its product offerings, improve customer experience, and drive operational efficiency.

5. Disciplined Risk Management: The company’s focus on risk management, including its strong underwriting standards and proactive credit monitoring, has helped it maintain industry-leading credit quality.

6. Robust Capital and Liquidity Position: American Express maintains a strong capital position and diverse funding sources, providing it with the flexibility to support business growth and navigate potential economic and market challenges.

Overall, American Express’s 2024 financial results demonstrate the company’s ability to deliver consistent, profitable growth while navigating a dynamic business environment. The company’s diversified business model, premium customer base, and focus on innovation and digital capabilities position it well for continued success in the years ahead.