Lower airline spend and lower average transaction sizes in
the United States caused American Express' third-quarter corporate card billed
volume to dip year over year, CFO Jeff Campbell said during an earnings call.
American Express Global Commercial Services, the division
that houses corporate cards, reported $45 billion in card-billed volume for the
third quarter, a 3 percent year-over-year decline. Net income declined 26
percent to $151 million. Revenue net of interest expense totaled $817 million,
representing a 9 percent decrease.
In the nine months ending Sept. 30, Amex GCS reported $534
million in net income, a 44 percent year-over-year decrease. Revenue net of
interest expense decreased 25 percent to $2.5 billion.
“On average, we’re seeing lower average transaction sizes in
the U.S., as opposed to card members using their American Express cards less
frequently,” Campbell told investors. “The slower airline spend had a larger
relative impact within GCS, where airlines make up approximately 25 percent of
total spend.”
The decrease in transaction size owed to a drop in fuel
prices, not to a loss of market share, according to Campbell.
He also noted a slowdown in spending growth among midmarket U.S.
customers. “Despite this near-term performance, we do see opportunities to
accelerate growth in this segment as we continue to focus and leverage our
efforts to bring together some of the unique products and services we can offer
to middle-market customers,” he said.
Amex reported 6.9 million total cards-in-force at the end of
September, consistent with the year-earlier figure.
Companywide net income declined 14 percent year over year
during the third quarter to $1.3 billion, owing to higher spending on marketing,
technology development and other initiatives, as well as the end of its
co-brand partnership with Costco and a stronger U.S. dollar. Consolidated
expenses totaled $5.7 billion, a 3 percent year-over-year increase.
Lawsuits And Regulations
After Amex lost
its lawsuit to the U.S. Department of Justice, a U.S. federal court in
February ordered the card network to amend its merchant rules to allow
merchants to steer customers to cheaper forms of payment. Amex requested a stay
until its appeal concluded, but a district court in June denied
the request. By July, merchants were free to steer customers from Amex to
preferred forms of payment. “While the remedy has not yet had an impact on our
business, it’s still too early to tell what the longer-term impact in the
marketplace will be,” Campbell said.
Campbell admitted that Europe’s new interchange
fee caps, to take effect in December, would pressure Amex to lower its
rate. However, he noted that Amex’s market shares in most of those countries
are “quite small.”
“What the interchange regulation will do is put downward
pressure on us to move [the merchant rate] down to keep the differential more
similar,” Campbell explained. “Sitting here today, we are pretty pleased by
this year’s result, and you already see changes in the competitive environment
as the number of issuers have announced pullbacks on the products or rewards
they are able to offer.”