Card-billed business for American Express Global Commercial
Services, the division that houses corporate cards, increased 4 percent year
over year in the first quarter to $102.8 billion. GCS net income, however,
decreased 14 percent to $418 million because Amex sold its Costco co-branded
cards to Citi in June 2016, according to an Amex filing with the U.S. SEC.
Cards in force declined 10 percent to 13.7 million.
"We continue to see strong growth in the small business
and middle-market customer segments," said CFO Jeff Campbell. "In the
large and global GCS customer segment, spending volumes were up a bit compared
to last year. As we have said for a while now, we would expect that this will
remain a slower-growth segment absent an uptick in travel and entertainment
spending by larger corporations, which we have not yet seen."
Total expenses for the GCS segment increased 10 percent year
over year to $1.6 billion. That reflects the increased amount Amex spent on
rewards for card members, which was "driven by recent product enhancements
and higher card member spending," the filing showed.
The removal of the Costco cards also caused Amex's average discount
rate, the rate merchants pay Amex per transaction, to increase 1 percentage
point to 2.5 percent. But, a research note by investment banking advisory firm
Evercore noted, a competitive environment and European
regulation will put downward pressure on the discount rate "for the
foreseeable future."
Across Amex's full portfolio, first-quarter net income
declined 13 percent to $1.2 billion, owing primarily to the loss of the Costco portfolio.
The
card network is on track to remove $1 billion from the company's cost base by
the end of 2017, according to Campbell. Still, according to Evercore, Amex "will
need to continue to invest aggressively in marketing and rewards in order to
maintain market share of the company's stronghold, the mass affluent segment in
the consumer credit card market."