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American Express’s Global Commercial Services: Net Income in 4Q17

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Substantial rise

American Express’s (AXP) Global Commercial Services segment saw a substantial rise of 52% in net income, from $382 million in 4Q16 to $580 million in 4Q17. Its total revenues (net of interest expenses) were $2.7 billion in 4Q17 compared to $2.5 billion in 4Q16. That reflects a rise of 7%, mainly due to a rise in cardmember spending.

The segment consists of large and global corporate and SME (small and medium-sized enterprise) customers. The segment benefits mainly from its SME customers. In 4Q17, it saw a billings growth of 9% and 20% in US SME and international SME, respectively, after adjusting for foreign-exchange fluctuations.

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Total expenses

The Global Commercial Services segment saw a decline in total expenses from $1.8 billion in 4Q16 to $1.7 billion in 4Q17, which implies a fall of 7%. In 4Q17, the segment saw lower marketing expenses. However, during the same period, it saw a rise in rewards expenses on the back of a rise in cardmember spending.

The segment saw a rise in net interest income from $192 million in 4Q16 to $199 million in 4Q17. Its non-interest revenues were $2.4 billion in 4Q17 compared to $2.2 billion in 4Q16.

Over the last 12 months, American Express reported a free cash flow yield of 3.7%. Its peers (XLF) Capital One Financial (COF), Synchrony Financial (SYF), and Global Payments (GPN) reported free cash flow yields of 7.4%, 4.7%, and 3.3%, respectively.

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