American Express Company (NYSE: AXP) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with fiscal 2022. This filing reports annual results, not standalone fourth-quarter results.
Business context and performance
American Express is an integrated global payments company with card-issuing, merchant-acquiring and payment-network businesses. Its four reportable segments are U.S. Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS), and Global Merchant and Network Services (GMNS).
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue, net of interest expense | $60.5 billion | $52.9 billion | +14% |
| Net income | $8.4 billion | $7.5 billion | +11% |
| Diluted EPS | $11.21 | $9.85 | +14% |
| Pretax income | $10.5 billion | $9.6 billion | +10% |
| Total expenses | $45.1 billion | $41.1 billion | +10% |
| Provisions for credit losses | $4.9 billion | $2.2 billion | More than doubled |
| Cash and cash equivalents | $46.6 billion | $33.9 billion | +37% |
| Card Member loans | $126.0 billion | $108.0 billion | +17% |
| Card Member receivables | $60.4 billion | $57.6 billion | +5% |
| Customer deposits | $129.1 billion | $110.2 billion | +17% |
| Long-term debt | $47.9 billion | $42.6 billion | +12% |
Net income was approximately 13.8% of revenue, versus 14.2% in 2022. Net interest income rose 33% to $13.1 billion; interest income increased 58% to $20.0 billion, while interest expense rose to $6.8 billion from $2.8 billion, largely reflecting higher rates and deposit costs.
Worldwide billed business grew 9% to $1.46 trillion; network volumes increased 8% to $1.68 trillion. Discount revenue, the largest revenue source, rose 9% to $33.4 billion; net card fees rose 20% to $7.3 billion. Card Member rewards expense increased 10% to $15.4 billion and Card Member services expense increased 34% to $4.0 billion.
Operating cash flow was $18.6 billion, investing cash outflow was $24.4 billion, and financing cash inflow was $18.4 billion. Cash and cash equivalents increased by $12.7 billion during the year. The company reported a 10.5% CET1 ratio, within its 10%–11% target range; AENB’s CET1 ratio was 11.6%.
Material changes versus 2022
- Revenue growth reflected higher spending, card fees and net interest income. T&E spending grew 19%, while Goods & Services spending grew 6%; billed-business growth softened toward year-end.
- Credit costs rose as loan balances, net write-offs and reserves increased. The total Card Member loan and receivables net write-off rate, including interest and fees, increased to 2.0% from 1.0%; the loan reserve was $5.1 billion, or 4.1% of loans, versus $3.7 billion, or 3.5%.
- Segment pretax income was $5.4 billion for USCS (+1%), $2.9 billion for CS (-1%), $1.0 billion for ICS (+68%) and $3.7 billion for GMNS (+24%). Corporate & Other pretax loss widened to $2.4 billion from $2.2 billion.
- Capital returned to shareholders totaled $5.3 billion: $3.5 billion of repurchases and $1.8 billion of common dividends. The common dividend declared per share increased 15% to $2.40.
Outlook, risks and unusual items
- Outlook: The filing provides no specific full-year 2024 revenue or EPS guidance. Management expressed confidence in sustainable, profitable growth while noting macroeconomic and geopolitical uncertainty. It planned to raise the regular quarterly dividend 17%, from $0.60 to $0.70 per share, beginning with the first-quarter 2024 declaration.
- Funding and regulation: The 2024 funding plan included approximately $4–$8 billion of unsecured term debt and $2–$6 billion of secured term debt issuance. The company anticipated becoming a Category III firm in 2024, which would bring heightened prudential requirements, including liquidity requirements. Proposed capital rules could consume the buffer above its current minimum CET1 requirement; final effects remain uncertain.
- Accertify: In January 2024, American Express announced an agreement to sell its fraud-prevention subsidiary. Closing was expected in the second quarter of 2024; the company anticipated a sizeable pretax gain, substantially reinvested in the business. Completion and gain amount are not assured.
- Notable expenses: A $53 million FDIC special assessment was recognized in fourth-quarter 2023. Other expense increases included technology costs, losses associated with Argentine peso devaluation and a reserve for a merchant exposure.
- Legal and regulatory contingencies: Government investigations into historical sales practices remained ongoing after an OCC settlement; the filing does not state the settlement amount here. For specified legal or tax matters where loss is reasonably possible and estimable, the disclosed range is $0–$400 million in excess of accruals; this is not the maximum exposure. Merchant-contract litigation could also affect steering protections and card acceptance.
- Principal business risks: Credit deterioration, interest-rate and funding costs, competition and merchant discount-rate pressure, dependence on cobrand and other partners, cybersecurity and operational disruptions, and changing regulation. Delta is a significant partner: its cobrand portfolio represented about 10% of worldwide network volumes and 21% of worldwide Card Member loans at year-end.
Investor verification points
- Review subsequent credit trends, write-offs, delinquencies and reserve adequacy as loan balances expand.
- Check whether spending, card-fee growth and rewards and benefit costs sustain revenue and earnings growth.
- Track deposit pricing, interest expense, debt issuance and liquidity as regulatory requirements change.
- Monitor final capital-rule changes, the Category III transition, and their implications for capital distributions.
- Verify the status and eventual proceeds of the Accertify sale, and developments in sales-practices investigations and merchant litigation.