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Understanding American Express’s Global Merchant Services Segment

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Non-interest revenues

American Express’s (AXP) Global Merchant Services segment saw a rise in non-interest revenues from $1.06 billion in 4Q16 to $1.14 billion in 4Q17, which implies a rise of 7%. The segment’s income rose from $369 million in 4Q16 to $413 million in 4Q17.

The segment’s provision for losses in 4Q17 was $4 million, which was the same as 4Q16. In 3Q17, it was $8 million. The segment saw a rise in salaries, employee benefits, and other operating expenses, from $499 million in 4Q16 to $522 million in 4Q17.

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Total revenues

The Global Merchant Services segment’s total revenues (net of interest expenses) were $1.2 billion in 4Q17 compared to $1.1 billion in 4Q16, which implies a rise of 9%. The rise was mainly due to a positive momentum in cardmember spending. However, the decline in the discount rate negatively impacted that increase.

The segment incurred total expenses of $587 million in 4Q17 compared to $560 million in 4Q16, implying a 5% increase due to a rise in employee compensation expenses.

On a last 12-month basis, American Express has reported a return on assets of 1.6%. Its peers (XLF) Capital One Financial (COF), Global Payments (GPN), and Synchrony Financial (SYF) have returns on assets of 1.1%, 2.6%, and 2.1%, respectively.

Next, let’s look at American Express’s total revenues.

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