AXP’s US International Card Services Impacted by Strong Dollar


Jan. 26 2016, Updated 1:06 p.m. ET

International Card Services

American Express’ (AXP) International Card Services’ total revenues net of interest expense fell by 5% to $1.3 billion in 4Q15, forming 15% of the company’s total revenues, as compared to $1.4 billion in 4Q14.

On a constant dollar basis, revenues rose by 6%, mainly due to higher card spending. The rising dollar continues to make a dent in the company’s international revenues.

Over the past few quarters, US companies have witnessed falls in revenue due to the strong dollar. This trend is expected to continue, as the global economy slows and the Federal Reserve considers raising rates again in 2016.

Net income for the International Card Services division rose to $73 million as compared to $33 million in 4Q14.

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Lower expenses

As a result of the strong dollar, American Express saw a fall in total expenditure by 11% to $1.1 billion in 4Q15, as compared to $1.3 billion in the prior year’s quarter. On a constant dollar basis, expenses were down by 4% from the previous year, which included a portion of the restructuring charge.

The company’s card billed business fell by 3% in 4Q15 to $83.3 billion due to the strong dollar. On a constant dollar basis, billed business increased by 8%. Its cards-in-force increased by 5% to 60.2 million as compared to 57.3 million in 4Q14.

American Express is spending 30% of its total allocated resources on cardmember acquisition; 30% on cardmember engagement, expansion of merchant coverage, lending on charge, and international lending; 30% on other initiatives such as brand, service, technology, control, and compliance; and 10% on digital spending and its loyalty coalition business.

American Express achieved net profits of $5.2 billion in the last fiscal year. Here is how some of American Express’s peers in the payment processing industry fared with their net profits in the last fiscal year:

  • Mastercard (MA): $3.6 billion
  • Visa (V): $5.4 billion
  • Discover Financial (DFS): $2.3 billion

Together, these companies account for 1.9% of the iShares Core S&P 500 ETF (IVV).


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