American Express: It’s Still About Bottom Line Improvement [Seeking Alpha]

American Express Company (AXP), with the market cap of $71.41B, is the most profitable closed-loop credit card network in the U.S., providing credit and travel services to affluent customers. Although AXP missed the revenue estimates for Q1, AXP continues to improve its bottom line.

Q1, 2013 Earnings

For Q1, 2013, revenue increased nearly 4 percent to $7.88B from $7.61B a year ago, which missed the estimates of $8.03B. However, net income increased 2 percent to $1.28B or $1.15 per share, beating analysts’ estimates of $1.12 per share. EPS grew faster than net income due to share buybacks, which had reduced the outstanding shares by 5% year-over-year.

Performance

Despite one less day compared with Q1, 2012 (Leap Year), billed business came in at $224B, which grew 6% on a reported basis and 7% on an FX adjusted basis. Cards in force grew at 5% while proprietary cards grew at 2%. All segments performed consistently with Q4, 2012, except for Global Corporate Services, which had slower growth due to a slower T&E spending growth.

Increasing Provision for Losses

The total provision for losses increased 21%, whereas charge card provision increased 10%, primarily driven by higher receivables, which are 5% higher than a year ago. Card member loan provision increased 30% or $63M, reflecting a 4% increase in card member loans compared to last year. The net write-off rate remains stable and remains historically low.

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