American Express: Why Its Consumer Services Income Fell
American Express’s (AXP) US consumer services division generated income of $909 million in 1H17 compared with $1.8 billion in 1H16, reflecting a substantial 48% fall. This substantial decline was mainly due to non-interest revenue. The division saw non-interest revenue of $4.1 billion in 1H16 and $3.9 billion in 1H17, reflecting a 6% fall. This fall was due to lower discount revenue.
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However, the division’s provisions for losses rose substantially from $427 million in 1H16 to $639 million in 1H17, reflecting a substantial 50% rise. This rise was mainly due to a higher card member loan provision in 1H17 than 1H16.
The division’s total expenses rose from $3.3 billion in 1H16 to $4.2 billion in 1H17, reflecting a 28% rise. This rise was mainly due to salary and employee benefit expenses rising substantially between 1H16 and 1H17.
American Express had an EBITDA (earnings before interest, tax, depreciation, and amortization) margin of 27% on June 30, 2017. Other consumer financial companies’ (XLF) margins were as follows: