10-Q: Amex Reports Strong Q3 2026 Earnings Amidst Growth

American Express Company announced robust financial results for the third quarter of 2026, showcasing significant year-over-year growth in total revenues, net income, and earnings per share.

Summary

• American Express reported strong financial performance for the third quarter of 2026, with total revenues net of interest expense increasing by 9% to $20.1 billion compared to the prior year.
• Net income rose by 28% to $3.7 billion, and diluted earnings per share grew by 31% to $5.42.
• The company saw an 8% increase in billed business, reaching $454.0 billion, driven by strong spending across various segments.
• Provisions for credit losses decreased by 23% to $985 million, reflecting improved credit performance and reserve releases.
• Operating expenses increased by 9% to $14.5 billion, partly due to restructuring charges and investments in risk management and compliance.
• The Common Equity Tier 1 (CET1) capital ratio remained strong at 10.9%, within the company's target range.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive quarter, with robust revenue growth, improved profitability, and solid credit performance, indicating a healthy business trajectory.

Positives

• Total revenues net of interest expense increased by 9% to $20.1 billion for the third quarter and 10% to $58.6 billion for the nine months ended September 30, 2026.
• Net income saw a substantial increase of 28% to $3.7 billion for the quarter and 17% to $9.8 billion for the nine months.
• Diluted earnings per share grew by 31% to $5.42 for the quarter and 20% to $14.22 for the nine months.
• Billed business increased by 8% to $454.0 billion for the quarter and 9% to $1.34 trillion for the nine months.
• Provisions for credit losses decreased by 23% for the quarter and 14% for the nine months, indicating improved credit quality.
• Net card fees grew by 16% for the quarter and 17% for the nine months, driven by product refreshes and portfolio growth.
• International Card Services segment revenue grew by 10% for the quarter and 14% for the nine months, showing strong international performance.
• The company returned $2.2 billion in capital to shareholders through share repurchases and dividends in the third quarter.

Negatives

• Operating expenses increased by 9% to $14.5 billion for the quarter and 11% to $42.9 billion for the nine months.
• Salaries and employee benefits expense increased by 15% for the quarter and 14% for the nine months, partly due to restructuring costs.
• Card Member services expense increased significantly by 36% for the quarter and 44% for the nine months, driven by new benefits and higher usage.
• The sale of the equity interest in Global Business Travel Group (GBTG) resulted in a restructuring charge of $336 million.

Risks

• Macroeconomic and geopolitical conditions, including economic slowdowns, changes in consumer and business confidence, and international hostilities, could impact revenue growth and credit performance.
• Technological changes, including the adoption of AI, could alter the competitive landscape and business dynamics.
• Regulatory and legal proceedings, including potential fines and penalties, could adversely affect profitability and business practices.
• Increased competition in the payments industry from new and traditional players could impact market share and pricing.
• Cybersecurity risks and potential data breaches pose a threat to operations, reputation, and financial stability.
• Changes in interest rates and foreign currency exchange rates can affect net interest income and the value of international investments.
• Potential for increased merchant surcharging and differential acceptance practices could negatively impact Card Member experience and business.

Future Outlook

The company expresses confidence in its ability to drive sustainable growth and create long-term shareholder value, supported by its differentiated business model, premium customer base, and ongoing investments in risk management and compliance. Management plans to continue returning excess capital to shareholders while maintaining its CET1 capital ratio within the target range.

Management Comments

• We delivered strong results for the third quarter of 2026, reflecting the strength of our premium customer base, success of our product refresh strategy and power of our differentiated Membership Model.
• We continued to see strong Card Member spend, new card acquisitions and customer retention, and excellent credit performance.
• Our results for the third quarter also reflect the sale of our equity interest in Global Business Travel Group, Inc. (GBTG), which resulted in a gain of $982 million.
• We have invested significantly in risk and controls over the last several years and will continue to make the investments necessary to strengthen our risk management and compliance programs.
• Our robust capital, funding and liquidity positions provide us with significant flexibility to maintain a strong balance sheet.
• While we recognize the uncertainty of the geopolitical and regulatory landscape, we continue to manage the company for the long term, focusing on backing our customers and colleagues, continuing to strengthen our risk management and compliance programs and strategically investing in our business.

Industry Context

StockSavvy.ai notes that American Express's performance aligns with a generally strong quarter for the payments industry, characterized by resilient consumer spending and a focus on premium offerings. The company's strategic investments in technology and risk management are crucial in navigating evolving industry dynamics and competitive pressures.

Comparison to Industry Standards

• American Express's revenue growth of 9% for the quarter and 10% for the nine months outpaces many traditional banks but is competitive within the payments network sector.
• The net income growth of 28% for the quarter and 17% for the nine months demonstrates strong operational leverage and effective cost management, particularly when compared to broader financial services firms.
• The company's net write-off rate for Card balances (principal, interest, and fees) of 2.1% for the quarter is within historical norms and competitive, reflecting the premium nature of its customer base.
• The CET1 capital ratio of 10.9% is robust and meets or exceeds regulatory requirements and industry best practices for large financial institutions.

Management Changes

Corporate Governance

Legal Proceedings

• Ongoing defense against antitrust claims related to anti-steering and non-discrimination provisions in merchant agreements.
• Lawsuit filed by KServicing Wind Down Corp. seeking recovery of approximately $746 million related to the acquisition of Kabbage's lending platform.
• Putative class action lawsuit alleging violations of ERISA related to the American Express Retirement Savings Plan.
• Consent orders with the Federal Reserve and OCC to resolve reviews of the company's financial crimes compliance program, including a $350 million civil money penalty paid by AENB.
• Contested VAT assessments in various international jurisdictions.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, EPS growth, and capital returns through dividends and share repurchases.
• Card Members: Continued investment in premium products and benefits, but potential for increased surcharging in certain jurisdictions.
• Merchants: Ongoing engagement regarding payment acceptance and pricing, with potential impacts from regulatory changes.
• Employees: Investments in risk and controls, and restructuring costs impacting salaries and benefits expenses.
• Regulators: Ongoing engagement and compliance efforts, including consent orders related to financial crimes compliance.

Next Steps

• Continue to invest in risk management and compliance programs.
• Manage the balance sheet to reflect evolving circumstances and maintain capital levels above regulatory requirements.
• Return excess capital to shareholders through dividends and share repurchases.
• Continue to grow direct deposit program as a funding source.
• Integrate TheFork acquisition upon completion.

Key Dates

Recommendation

The company demonstrates strong operational performance and financial health, with solid revenue growth and profitability. However, the increasing focus on regulatory compliance, potential for increased competition, and ongoing macroeconomic uncertainties warrant a 'hold' recommendation, suggesting investors monitor future developments closely.

Keywords

American Express, Form 10-Q, Quarterly Report, Financial Results, Credit Card, Payments Industry, Billed Business, Net Income