8-K: American Express Reports Record 2023 Revenue, Announces Dividend Increase

American Express announced record full-year 2023 revenue of $60.5 billion, a 14% increase, and plans to raise its quarterly dividend by 17%.

Summary

• American Express reported a record full-year revenue of $60.5 billion for 2023, which is a 14% increase on a reported basis and 15% on an FX-adjusted basis.
• The company's full-year earnings per share increased by 14% to $11.21.
• For 2024, American Express is projecting revenue growth between 9% and 11% and earnings per share between $12.65 and $13.15.
• The company plans to increase its quarterly dividend by 17% to $0.70 per common share.
• Card Member spending reached an all-time high of $1.5 trillion, a 37% increase on an FX-adjusted basis since January 2022.
• American Express added 12.2 million new proprietary cards in 2023, bringing the total cards-in-force to over 140 million.
• Full-year net income was $8.4 billion, compared to $7.5 billion the previous year.
• Provisions for credit losses for the full year were $4.9 billion, up from $2.2 billion a year ago, reflecting higher net write-offs and a net reserve build of $1.4 billion.
• Consolidated expenses for the full year were $45.1 billion, a 10% increase from $41.1 billion the previous year, primarily due to higher customer engagement costs.
• The effective tax rate for the full year was 20.3%, down from 21.6% the previous year.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to record revenue, increased earnings, and a planned dividend increase. While there are some concerns about increased credit loss provisions, the overall tone is optimistic and forward-looking.

Positives

• American Express demonstrated strong revenue growth, with a 14% increase in full-year revenue.
• The company achieved a 14% increase in full-year earnings per share.
• The planned 17% increase in the quarterly dividend signals confidence in future performance.
• Card Member spending reached a record high, indicating strong customer engagement.
• American Express successfully added a significant number of new proprietary cards.
• The company's net income increased year-over-year, reflecting improved profitability.
• The company is projecting strong revenue and EPS growth for 2024.

Negatives

• Provisions for credit losses increased significantly to $4.9 billion, up from $2.2 billion the previous year.
• Consolidated expenses rose by 10% to $45.1 billion, primarily due to higher customer engagement costs.
• The increase in credit loss provisions reflects higher net write-offs and a net reserve build.

Risks

• The company's ability to achieve its 2024 outlook depends on various factors, including macroeconomic conditions, credit performance, and effective tax rates.
• Changes in interest rates, inflation, and geopolitical instability could impact the company's performance.
• Increased competition in the payments industry could affect the company's pricing and market share.
• The company faces risks related to cyberattacks and data breaches.
• Legal and regulatory developments could impact the company's profitability and business practices.
• Future credit performance is subject to macroeconomic factors such as unemployment rates and GDP.

Future Outlook

American Express provides full-year 2024 guidance for revenue growth of 9% to 11% and EPS of $12.65 to $13.15. The company continues to focus on its aspiration of revenue growth of 10% plus and mid-teens EPS growth.

Management Comments

• We delivered record revenues and profits in 2023, building on the momentum we've achieved since we announced our growth plan in January 2022, said Stephen J. Squeri, Chairman and Chief Executive Officer.
• We continued to drive strong customer engagement, and demand for our premium products remained robust.
• Looking back over the two years since we announced our growth plan, I'm pleased to say that we have achieved what we set out to do, and we are ahead of where we thought we'd be on our journey.

Industry Context

The results indicate a strong performance for American Express in the payments industry, reflecting robust customer engagement and spending. The company's focus on premium products and services appears to be driving growth. The increase in credit loss provisions is a trend seen across the industry as economic conditions change.

Comparison to Industry Standards

• American Express's 14% revenue growth is strong compared to some competitors in the financial services sector, such as Capital One which reported a 4% increase in revenue in their most recent quarter.
• The 14% increase in EPS is also a positive sign, outperforming some peers who have seen slower growth or even declines in earnings.
• The increase in provisions for credit losses is in line with industry trends, as many financial institutions are increasing reserves in anticipation of potential economic downturns. For example, JP Morgan Chase increased their credit loss reserves by 10% in the last quarter.
• The growth in card member spending is a key indicator of the strength of American Express's business model, with the 37% increase since 2022 being a significant achievement compared to the industry average of around 15% growth in payment volumes.
• The addition of 12.2 million new proprietary cards is a positive sign of market share growth, which is a key metric for payment companies. This compares favorably to some competitors who have seen slower growth in new card acquisitions.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and potential for future growth.
• Employees may see increased job security and potential for career advancement due to the company's strong performance.
• Customers will continue to benefit from the company's premium products and services.
• Suppliers and partners may see increased business opportunities due to the company's growth.

Next Steps

• The company plans to increase the regular quarterly dividend on its common shares outstanding by 17%, beginning with the first quarter 2024 dividend declaration.
• An investor conference call will be held at 8:30 a.m. (ET) on January 26, 2024, to discuss fourth-quarter results.

Key Dates

Keywords

American Express, Financial Results, Revenue, Earnings Per Share, Dividend, Card Member Spending, Credit Losses, Net Income, Payment Processing, Financial Services