Loans Boost AmEx Q3 As Chenault Bids Adieu

American Express posted Q3 results that beat the Street on growth in its lending and card businesses.

But the numbers were possibly overshadowed by news that the company’s CEO, Kenneth Chenault, is retiring — to be succeeded by Stephen Squeri, who has served at the firm as vice chairman for the past two years.  The transition is slated for February 1 of next year.

Chenault, in remarks tied to the earnings announcement and to investors on the conference call following the release of results, said the credit cards company had dealt effectively with a number of competitive challenges over the past few years and “redesigned our marketing, customer service and risk management capabilities for the digital age.”  The American Express turnaround plan is ahead of schedule, said Chenault.

The headline numbers showed earnings of $1.50, two pennies better than consensus.  Revenues were $8.4 billion, compared to the $8.3 billion expected by analysts and up nearly 8 percent, year on year.

In terms of forward guidance, the company sees earnings for the year at $5.80 to $5.90, where consensus compares at $5.74.

Amex has seen traction in loan growth, and management said that credit cards results were on par with what had been expected.  Moreover, said Chenault, efforts are on track to take $1 billion out of the company’s operating cost structure.

Jeffrey Campbell, the company’s chief financial officer, said that worldwide adjusted billings were up eight percent, year on year, with that growth rate similar to what had been seen in the previous quarter.  The global commercial and consumer segments are about 83 percent of all business activity, at about 83 percent of billings.  Strength was seen in small and mid-sized enterprises, where billings growth was up 10 percent, year over year, in the United States.  The international growth was 15 percent, year on year, in that SME cohort. Large and global customer growth was five percent over the same period.

Campbell noted that the Amex lending business was up 13 percent on an adjusted basis, and the executive stated that “the mix of our loan book has changed” and that branded card loans are a larger percentage of the portfolio.  The worldwide writeoff rate was 1.8 percent, with a delinquency rate of 1.3 percent in line with expectations. Provisions at $769 million were tied to growth in the loan book.

The international consumer segment was up 13 percent, adjusted for FX, and strength was called out for regions as far flung as Japan and the U.K., both up as much as 18 percent.  Cash back and platinum cards are also showing strength, management said on the call.