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American Express’s Global Commercial Services: 1Q16 Spending Rose

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Apr. 22 2016, Updated 3:06 p.m. ET

Global Commercial Services

American Express’s (AXP) Global Commercial Services’ total revenues net of interest expense rose by 2% to $2.4 billion in 1Q16. It formed 30% of the company’s total revenues. The increase reflected higher net interest income and card member spending. Net income for the division fell by 6% to $485 million compared to $517 million in 1Q15, on higher spending and provisions.

Provisions for losses in the quarter totaled $160 million, up 6% from $151 million a year ago. They were primarily driven by higher merchant financing loan balances and delinquencies, partially offset by lower write-offs in the card member receivables portfolio.

American Express achieved operating profit margins of 74% in the last fiscal year. Here’s how some of American Express’s peers in the payment processing industry fared with their operating margins in the last fiscal year:

  • Mastercard (MA): 54%
  • Visa (V): 60%
  • Discover Financial Services (DFS): 43.6%

Together, these companies account for 2.3% of the Technology Select Sector SPDR ETF (XLK).

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Expenses and initiatives

Total expenses for American Express’s Global Commercial Services division stood at $1.5 billion in 1Q16 compared to $1.4 billion in 1Q15. The expenses reflected higher rewards and investment spending, primarily on technology development.

The Global Commercial Services division offers global corporate payment services to large and mid-sized companies. These services include expense management and travel services through the Global Corporate Payments and Global Business Travel businesses.

American Express also offers corporate cards and corporate meeting cards. They’re issued to individuals through a corporate account established by their employers. The Global Commercial Services division also offers a suite of business-to-business payment solutions. For example, the corporate purchasing card is an account established by companies to pay for everyday and big-ticket business expenses.

In the next part of our series, we’ll look at American Express’s Global Network and Merchant Services in 1Q16.

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