Card-billed business for American Express Global Commercial Services, the division that houses corporate cards, increased 13 percent year over year in the first quarter to $115.7 billion. Cards in force increased three percent to 14.1 billion.
First-quarter GCS net income increased 35 percent year over year to $552 million. Amex attributed the rise primarily to higher cardholder spending and net card fees.
GCS expenses increased 6 percent year over year to $2.1 billion, reflecting higher rewards expenses and other costs related to increased cardholder spending.
GCS represented 41 percent of Amex's total billing volume in the first quarter. Billing volume for its non-U.S. small and midsize enterprise segment, which represented 5 percent of Amex's total billings, grew 20 percent year over year on a foreign exchange-adjusted basis for the second consecutive quarter. The segment 's growth rate was GCS's highest in both the fourth quarter of 2017 and the first quarter of 2018. The U.S. SME segment increased 10 percent, and the large and global corporate segment grew 8 percent. "Our small and midsize enterprise customers, or SMEs, continue to represent some of our highest growth opportunities," Amex CFO Jeff Campbell said during an earnings call.
Global airline-related spend across all card products increased 10 percent year over year in the first quarter. U.S. T&E spend jumped 8 percent. "On the subject of T&E spend, certainly in many areas we saw a tick up sequentially in what we would call internally organic spend growth," Campbell said. He was reluctant to speculate on why. "It's harder for us to comment on what's going on in all of [our customers'] minds that's driving this increased confidence," he said. "What we see in our numbers is [that] … it's more premium [client] oriented. There is clearly something going on with increased confidence and increased spending."
Across Amex's full portfolio, the card network reported net income of $1.6 billion, up 31 percent year over year. This reflected a "significant reduction" in its tax provision resulting from the Tax Cuts and Jobs Act President Donald Trump signed in December. Campbell had noted last quarter this would happen.
While Amex's discount rate has decreased gradually, from 2.43 percent in the first quarter of 2017 to 2.37 percent in the first quarter of 2018, discount rate revenue, which Campbell noted is Amex's largest revenue source, began rising in the fourth quarter of 2017. For the first quarter of 2018, it grew 9 percent year over year. "We are focused on driving discount revenue growth, not on maximizing the discount rate," Campbell said. "We believe that our decisions to selectively adjust the rate to drive volumes by expanding merchant coverage and deepening relationships with key, strategic partners have been important to achieving such strong discount revenue momentum."
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