American Express has reported a 39% drop in its net income at $1.07bn for the third quarter that ended 30 September 2020 compared to $1.75bn reported in the same quarter of 2019.
The diluted earnings per common share of the US-based integrated payments company were down by 38% to $1.3 in Q3 2020 compared to $2.08 in Q3 2019.
In the previous quarter, that is Q2 2020, American Express’ net income was $257m or $0.29 in diluted earnings per common share.
The consolidated total revenues net of interest expense for the company in Q3 2020 was down by 20% to $8.75bn, compared to $10.98bn in the same quarter of 2019. On the other hand, its total revenues for Q2 2020 were $7.67bn.
According to the financial services provider, the third quarter mainly reflected declines in the spending of card members and the average discount rate, when compared to Q3 2019.
American Express’ consolidated provisions for credit losses decreased by 24% from $879m in Q3 2019 to $665m in Q3 2020. The company said that the decline was mainly due to a modest reserve release and also lower net write-offs.
Consolidated expenses in the reported quarter dropped by 14% from $7.8bn in Q3 2019 to $6.7bn. This was primarily due to considerably lesser customer engagement costs, which was driven by the decline in card member spending and also lower usage of travel-associated card member benefits, said the firm.
Segment wise performance for American Express in Q3 2020
American Express’ global consumer services unit had a Q3 2020 net income of $855m compared to $991m in the same quarter of 2019. Total revenues of the unit were down by 16% from Q3 2019 to $5.2bn in Q3 2020.
The global commercial services unit’s net income came down to $220m in the reported quarter, compared with Q3 2019 net income of $568m. Total revenues in Q3 2020 were down by 23% to $2.5bn in comparison to Q3 2019.
American Express’ global merchant and network services Q3 2020 net income was down to $263m, compared to $523m in the same quarter of the prior year. Total revenues net of interest expense of this unit were down by 27% to $1.1bn.
Its corporate and other unit saw a Q3 2020 net loss of $265m, compared with a net loss of $327m in Q3 2019.
American Express chairman and CEO Stephen Squeri said: “While our business continues to be significantly affected by the impacts of the pandemic, our third quarter results have increased our confidence that our strategy for managing through the current environment is the right one.
“Since the lows of mid-April, we have seen a steady recovery in our overall spending volumes. In fact, we had positive year-over-year growth in non-T&E spending, which has long accounted for the large majority of our overall volumes.
“While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels.”
Recently, American Express signed a deal to acquire substantially all of Kabbage, a data and technology company engaged in online lending to small businesses across the US.
