uploads/2016/03/International2.png

What to Expect of American Express’s International Card Services

By

Updated

International Card Services

American Express’s (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 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. The Federal Reserve has recently decided against a rate hike, which should help in the easing of the dollar versus other international currencies. A stable or falling dollar will be beneficial for the company’s international revenues.

Article continues below advertisement

Over the past few quarters, US companies have witnessed revenue falls 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 American Express’s International Card Services division rose to $73 million compared to $33 million in 4Q14.

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

Dollar impacted expenses

As a result of the strong dollar, American Express saw a fall in its total expenditure by 11% to $1.1 billion in 4Q15 compared to $1.3 billion in 4Q14. On a constant dollar basis, expenses fell by 4% from the previous year, which included a portion of the company’s restructuring charge.

American Express’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 rose by 8%. The company’s cards-in-force rose by 5% to 60.2 million compared to 57.3 million in 4Q14.

American Express is spending its total allocated resources on the following:

  • 30% 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
  • 10% on digital spending and its loyalty coalition business
Advertisement

More From Market Realist