American Express Company — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report; the supplied filing text does not provide a standalone fourth-quarter income statement or complete Q4 financial results.
Business context and performance
American Express operates an integrated payments business across Global Consumer Services Group (GCSG), Global Commercial Services (GCS), and Global Merchant and Network Services (GMNS). Revenue is primarily driven by card spending and merchant discount fees, alongside card fees and interest income. The company reported recovering spending and growth momentum as pandemic-related restrictions eased, while travel-related activity remained below 2019 levels.
- Worldwide network volumes were $1.284 trillion, up 24% year over year; billed business was $1.090 trillion, up 25%. Total network volumes returned to 2019 levels.
- At year-end, American Express had 121.7 million cards-in-force, including 71.4 million proprietary cards and 50.3 million third-party-issued cards.
- Goods-and-services spending was 18% above 2019; fourth-quarter travel-and-entertainment volumes reached 82% of 2019 levels. Airline-related billed business remained 62% below 2019 for the year.
Financial results and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue, net of interest expense | $42.38 billion | $36.09 billion | +17% |
| Net interest income | $7.75 billion | $7.99 billion | -3% |
| Provisions for credit losses | $(1.42) billion | $4.73 billion | $6.15 billion lower |
| Expenses | $33.11 billion | $27.06 billion | +22% |
| Pretax income | $10.69 billion | $4.30 billion | Up from prior year |
| Net income | $8.06 billion | $3.14 billion | More than doubled |
| Diluted earnings per share | $10.02 | $3.77 | Up from prior year |
| Return on average equity | 33.7% | 14.2% |
Revenue growth reflected a 26% increase in discount revenue and an 11% increase in net card fees. Net interest income fell as higher loan paydowns reduced yields. The filing reports 2021 net income exceeded 2019’s $6.76 billion, while revenue net of interest expense remained below 2019’s $43.56 billion.
- Credit and margins: The average discount rate was 2.30%, versus 2.28% in 2020. Card Member loan net write-off rate (principal only) fell to 0.9% from 2.4%; receivables write-offs fell to 0.3% from 2.0%. Past-due and delinquency measures also improved.
- Cash flow: Operating activities provided $14.6 billion; investing activities used $10.5 billion; financing activities used $14.9 billion. Cash and cash equivalents declined $10.9 billion to $22.0 billion.
- Debt and funding: Year-end long-term debt was $38.7 billion and short-term borrowings were $2.2 billion; customer deposits were $84.4 billion. Cash and investment securities totaled $24.6 billion, down from $54.6 billion in 2020.
- Capital and shareholder returns: Company CET1 capital ratio was 10.5%, within its 10%–11% target range; AENB’s was 11.8%. The company returned $9.0 billion to shareholders, including $7.6 billion of repurchases and $1.4 billion of dividends. Management expected to propose a roughly 20% increase in the regular quarterly dividend for Q1 2022, subject to board approval.
Material changes versus comparable periods
- Compared with 2020, the recovery in spending lifted revenue, while expenses rose as the company increased marketing and customer rewards spending and travel benefits were used more often.
- The credit-loss provision was a net benefit of $1.42 billion, including a $2.5 billion reserve release, versus a $4.73 billion provision in 2020. Management attributed the release to improved portfolio quality and a better macroeconomic outlook, partly offset by higher balances.
- Compared with 2019, total network volumes were back to approximately pre-pandemic levels, but travel-related spending had not fully recovered. Full-year revenue remained below 2019, while net income was higher.
- Year-end customer deposits decreased to $84.4 billion from $86.9 billion, and long-term debt decreased to $38.7 billion from $43.0 billion. Liquidity resources also declined, mainly reflecting higher loan and receivable balances, debt maturities, repurchases, and lower deposits.
Outlook, risks, contingencies, and unusual items
- Outlook: No quantified full-year 2022 revenue or earnings guidance is stated in the supplied text. Management said it did not expect reserve releases of 2021’s magnitude in 2022 and planned continued investment in marketing, customer value propositions, technology, and colleagues. The 2022 funding plan included approximately $8–$12 billion of unsecured term debt and $6–$10 billion of secured term debt issuance.
- Unusual items: 2021 results included the $2.5 billion credit reserve release and sizeable equity-investment gains. Amex Ventures recorded $727 million of net unrealized and realized gains. Management also cited a non-cash gain related to GBT’s increased equity book value following its acquisition of Egencia. These items increased reported earnings and may not recur at similar levels.
- Key risks: The pandemic and new variants, inflation, labor shortages, supply-chain constraints, and an uneven recovery in travel could affect spending, credit quality, and costs. Competition, partner concentration (including Delta), merchant pricing and acceptance, surcharging or steering, cyber and operational disruption, and changing regulation may pressure volumes or profitability.
- Legal and regulatory matters: The company disclosed ongoing inquiries concerning historical small-business card sales practices and litigation challenging merchant-contract provisions. It said it was cooperating with authorities and did not believe the sales-practices matter would have a material adverse impact. For certain disclosed legal proceedings, the estimated reasonably possible loss range was zero to $170 million in excess of accruals; this is not the maximum exposure, and other exposures could not be quantified.
- Estimation sensitivity: Credit reserves and the $11.4 billion Membership Rewards liability depend on management assumptions. A 25-basis-point increase in estimated rewards redemption rates would increase the liability and expense by about $140 million; a one-basis-point increase in cost per point would add about $168 million.
- Audit and controls: PwC gave an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded controls were effective as of December 31, 2021.
Important facts for investors to verify
- How much 2021 earnings depended on the $2.5 billion reserve release and investment gains, and whether core earnings trends persist without them.
- Whether travel and airline spending continue recovering, and how business and consumer spending compare with pre-pandemic levels.
- Future credit-loss provisions, write-offs, revolving balances, and reserve adequacy as pandemic support programs end and economic conditions change.
- Whether rewards, partner payments, and marketing costs grow faster than revenue, and how the Membership Rewards liability assumptions evolve.
- Capital and liquidity headroom, planned debt issuance, shareholder distributions, and the regulatory conditions attached to them.
- Developments in the sales-practices inquiries, merchant litigation, and other legal, regulatory, cyber, and partner-related risks.