Card-billed business for American Express Global Commercial
Services, the division that houses corporate cards, increased 4 percent year
over year in the second quarter to $104.3 billion. Despite the increase, CFO
Jeff Campbell told analysts during an earnings call that corporate clients
continue to be a "tough segment" for the payment network.
While net income for GCS—which includes small-business
services, merchant financing products and foreign exchange services—increased 5
percent year over year for the quarter to $576 million, year-to-date net income
decreased 1 percent. Cards in force decreased 9 percent year over year to 13.4
million, down from 14.7 million.
"The wild card is in the largest corporate clients
where, as we pointed out at our Investor Day, that is not particularly a growth
segment for us and that continues to be a tough segment," Campbell said. "I
don't think there are many of the Fortune 500 who are going on calls like we're
having right now and talking about growing their T&E budgets."
Campbell also noted, "Lower gas and airline ticket
prices remained headwinds across our U.S. businesses."
Additionally, he said the loss of its Costco co-branded card
portfolio to Citi in June, "had a significant impact on our U.S. results, as
well as on the performance of our [U.S. consumer services] and GCS segments."
During the first-quarter
earnings call, Campbell explained that the Costco loss affects Amex GCS's small-business
volume.
Amex companywide net income increased 37 percent to $2
billion year over year in the second quarter. This included a $1.1 billion gain
from the Costco card portfolio and a $232 million restructuring charge related
to the company's efforts to reduce expenses.
Amex's discount rate, the rate merchants pay to
accept Amex cards, continued to decline in the second quarter, by 6 percent
year over year, due expansion of the OptBlue program and merchant negotiations
including interchange
fee caps in Europe as in the last quarter,
according to Campbell. "We do expect to see a much smaller drop in the
reported discount rate during the second half of the year due to the end of the
Costco relationship," Campbell said.