Company Quick10K Filing
American Express
Price118.59 EPS8
Shares835 P/E14
MCap99,023 P/FCF13
Net Debt33,120 EBIT11,116
TEV132,143 TEV/EBIT12
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-24
10-Q 2020-03-31 Filed 2020-04-24
10-K 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-10-21
10-Q 2019-06-30 Filed 2019-07-23
10-Q 2019-03-31 Filed 2019-04-23
10-K 2018-12-31 Filed 2019-02-13
10-Q 2018-09-30 Filed 2018-10-23
10-Q 2018-06-30 Filed 2018-07-24
10-Q 2018-03-31 Filed 2018-04-25
10-K 2017-12-31 Filed 2018-02-16
10-Q 2017-09-30 Filed 2017-10-24
10-Q 2017-06-30 Filed 2017-07-25
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-10-25
10-Q 2016-06-30 Filed 2016-07-26
10-Q 2016-03-31 Filed 2016-04-27
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-10-28
10-Q 2015-06-30 Filed 2015-07-29
10-Q 2015-03-31 Filed 2015-04-29
10-K 2014-12-31 Filed 2015-02-24
10-Q 2014-09-30 Filed 2014-10-28
10-Q 2014-06-30 Filed 2014-07-30
10-Q 2014-03-31 Filed 2014-04-29
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-10-29
10-Q 2013-06-30 Filed 2013-07-29
10-Q 2013-03-31 Filed 2013-04-29
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-30 Filed 2012-10-31
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-01
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-11-02
10-Q 2011-06-30 Filed 2011-08-03
10-Q 2011-03-31 Filed 2011-05-04
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-09-30 Filed 2010-11-03
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-05-05
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-07-24 Earnings, Exhibits
8-K 2020-07-15 Regulation FD
8-K 2020-06-30 Regulation FD, Exhibits
8-K 2020-06-15
8-K 2020-05-15
8-K 2020-05-05
8-K 2020-04-24
8-K 2020-04-15
8-K 2020-03-20
8-K 2020-03-17
8-K 2020-03-16
8-K 2020-02-18
8-K 2020-02-07
8-K 2020-01-29
8-K 2020-01-24
8-K 2020-01-15
8-K 2019-12-16
8-K 2019-12-11
8-K 2019-11-15
8-K 2019-10-18
8-K 2019-10-15
8-K 2019-09-23
8-K 2019-09-16
8-K 2019-08-15
8-K 2019-07-30
8-K 2019-07-19
8-K 2019-07-15
8-K 2019-06-17
8-K 2019-05-20
8-K 2019-05-15
8-K 2019-05-07
8-K 2019-05-06
8-K 2019-04-18
8-K 2019-04-15
8-K 2019-03-15
8-K 2019-02-22
8-K 2019-02-15
8-K 2019-01-22
8-K 2019-01-17
8-K 2019-01-15
8-K 2018-12-17
8-K 2018-11-15
8-K 2018-11-06
8-K 2018-10-18
8-K 2018-10-15
8-K 2018-09-24
8-K 2018-09-17
8-K 2018-08-29
8-K 2018-08-15
8-K 2018-08-03
8-K 2018-07-18
8-K 2018-07-16
8-K 2018-06-28
8-K 2018-06-20
8-K 2018-06-15
8-K 2018-05-17
8-K 2018-05-15
8-K 2018-05-07
8-K 2018-04-18
8-K 2018-04-16
8-K 2018-03-28
8-K 2018-03-15
8-K 2018-03-13
8-K 2018-03-09
8-K 2018-02-28
8-K 2018-02-22
8-K 2018-02-15
8-K 2018-01-29
8-K 2018-01-18
8-K 2018-01-16
8-K 2018-01-03

AXP 10Q Quarterly Report

Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
Item 1. Financial Statements
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 axpq220ex311.htm
EX-31.2 axpq220ex312.htm
EX-32.1 axpq220ex321.htm
EX-32.2 axpq220ex322.htm

American Express Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
200160120804002012201420172020
Assets, Equity
10.08.06.04.02.00.02016201720182020
Rev, G Profit, Net Income
10.06.02.0-2.0-6.0-10.02012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____
Commission file number 1-7657
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York13-4922250
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
200 Vesey Street, New York, New York
10285
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code                                          (212) 640-2000        
None
Former name, former address and former fiscal year, if changed since last report.
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares (par value $0.20 per share)AXPNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ      No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ      No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassOutstanding at July 17, 2020
Common Shares (par value $0.20 per share)805,161,121  Shares




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AMERICAN EXPRESS COMPANY
FORM 10-Q
INDEX
Page No.
Throughout this report the terms “American Express,” “we,” “our” or “us,” refer to American Express Company and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise. The use of the term “partner” or “partnering” in this report does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of American Express’ relationship with any third parties. Refer to the “MD&A― Glossary of Selected Terminology” for the definitions of other key terms used in this report.



PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
Business Introduction
We are a globally integrated payments company that provides our customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are credit and charge card products, along with travel and lifestyle related services, offered to consumers and businesses around the world. Our range of products and services includes:
Credit card, charge card and other payment and financing products
Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants
Network services
Other fee services, including fraud prevention services and the design and operation of customer loyalty programs
Expense management products and services
Travel and lifestyle services
Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail, telephone, in-house sales teams, and direct response advertising. Business travel-related services are offered through our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).
We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and Automated Clearing House (ACH)), as well as evolving and growing alternative payment and financing providers. As the payments industry continues to evolve, we face increasing competition from non-traditional players that leverage new technologies, business models and customer relationships to create payment or financing solutions.
The following types of revenue are generated from our various products and services:
Discount revenue, our largest revenue source, primarily represents the amount we earn on transactions occurring at merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members;
Interest on loans, principally represents interest income earned on outstanding balances;
Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account;
Other fees and commissions, primarily represent Card Member delinquency fees, foreign currency conversion fees charged to Card Members, loyalty coalition-related fees, service fees earned from merchants, travel commissions and fees, and Membership Rewards program fees; and
Other revenue, primarily represents revenues arising from contracts with partners of our GNS business (including commissions and signing fees less issuer rate payments), cross-border Card Member spending, ancillary merchant-related fees, earnings from equity method investments (including the GBT JV), insurance premiums earned from Card Members, and prepaid card and Travelers Cheque-related revenue.
Forward-Looking Statements and Non-GAAP Measures
Certain of the statements in this Form 10-Q are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to the “Cautionary Note Regarding Forward-Looking Statements” section. We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included within this Form 10-Q constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies.
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Bank Holding Company
American Express is a bank holding company under the Bank Holding Company Act of 1956 and The Board of Governors of the Federal Reserve System (the Federal Reserve) is our primary federal regulator. As such, we are subject to the Federal Reserve’s regulations, policies and minimum capital standards.
Business Environment
Businesses and economies around the globe continued to see significant adverse impacts during the second quarter due to the COVID-19 pandemic and the resulting containment measures implemented by local and national authorities. During the quarter, while the impact of COVID-19 peaked and subsequently declined in some jurisdictions, leading to phased re-openings, other areas have seen continuing or renewed containment measures.
Throughout the quarter, our colleague base has continued to successfully operate in a remote working environment. We have worked to ensure our colleagues feel secure in their jobs and have the flexibility and resources they need to stay safe and healthy. More recently, we have shifted our focus to planning for the safe return of our colleagues to our offices. This return will take place slowly, in phases, and we are implementing comprehensive safety protocols for when our buildings open. To support our customers and merchants, we continued to offer financial and other assistance, adding product benefits to reflect today’s environment, and continuing to provide the high level of customer service they expect and rely on. During the quarter we participated in the U.S. Paycheck Protection Program, designed to provide small businesses with support to cover payroll and certain other expenses. We also continued to work with our strategic partners on initiatives to support our communities. In June 2020, we launched our global Shop Small campaign, which includes a commitment of over $200 million to help support our small merchants as they begin to re-open. In addition, we remain committed to strengthening inclusion and diversity within our company, while also increasing our support to Black-owned businesses and the Black community. We have pledged $10 million over the next four years to fund grants and training for U.S. Black-owned small businesses to assist in their recovery and address the challenges they face due to racial and social inequalities.
Reflective of the broader economy and spending trends in our customer segments, our billed business for the quarter was down 34 percent versus the prior year. Billed business in the month of April was down 40 percent year-over-year, followed by sequential improvement through May and June, with declines of 36 percent and 26 percent, respectively. Non-T&E spend was down 19 percent year-over-year in April, improving to a 5 percent decline year-over-year in June. In contrast, T&E spend saw much larger declines, down 95 percent year-over-year in April, improving to a 77 percent year-over-year decline in June. U.S. billed business declined 32 percent for the quarter versus the prior year, compared with a 38 percent decline in billed business outside the United States, where T&E volumes make up a higher proportion of spend. Our proprietary consumer and commercial billed business declined by 35 percent and 36 percent year-over-year, respectively. The decline in commercial billed business was driven by continued year-over-year decreases in T&E spend by our large corporate customers, which continued throughout the quarter, with less pronounced billed business declines from small and medium sized corporate customers, where T&E makes up a lower proportion of spend. Consumer billed business was also impacted by declines in T&E, and offline non-T&E spend, which was slightly offset by increased online and card-not-present spend at non-T&E merchants. To the extent we continue to see significant year-over-year declines in billed business, our future results will be materially impacted.
Revenues net of interest expense decreased 29 percent year-over-year, with sequential moderate improvement from April to June, consistent with the trend in billings. Discount revenue, our largest revenue line, decreased 39 percent, which was a larger contraction than the decline in billed business for the quarter, reflecting a decrease in the average discount rate. The average discount rate for the quarter declined by 14 basis points over the prior year, due to a shift in spend mix to non-T&E categories. If the spend mix stays at the current level or if the spend mix to non-T&E categories increases further, we would expect to see continued discount rate erosion in the third quarter. We continued to see COVID-19 related declines in Other fees and commissions and Other revenues, primarily due to declines in travel-related revenues. Card fee revenues had strong year-over-year growth, as such revenues are slower to react to economic shifts since they are recognized over a twelve-month period and we did not see an increase in Card Member attrition compared to the prior year; however, we also saw a modest sequential deceleration in growth rate from the first quarter, as the pace of new account acquisitions slowed. Net interest income declined by 9 percent year-over-year, primarily driven by lower average loans, partially offset by a higher net yield.

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As a result of the spend-centric nature of our business model, Card Member loans and receivables declined 16 percent and 36 percent year-over-year, respectively, due to lower billed business volumes. Provisions for credit losses increased, primarily driven by higher reserve builds reflecting the continued deterioration of the global macroeconomic outlook, including unemployment and Gross Domestic Product (GDP), and a shift in the mix of loans and receivables, partially offset by a decline in the outstanding balance of loans and receivables.
During the first quarter, we created a Customer Pandemic Relief (CPR) program to provide short-term support for customers impacted by COVID-19. Enrollments in the CPR program peaked in April with $8.5 billion of loans and receivables included in the program. As of June 30, 2020, only $0.7 billion of balances remained in the program as the majority of the enrolled customers have become current as we wind down the program. We also enhanced our longer-term financial relief programs during the quarter. The balance in such longer-term programs had grown to approximately $2.6 billion of loans and receivables as of June 30, 2020. See Note 2 to the “Consolidated Financial Statements” for further information on troubled debt restructurings. In addition, as of June 30, 2020, we had $1.9 billion of delinquent loans and receivables, which included those balances in the CPR and other financial relief programs that were delinquent. The balance of delinquent loans and receivables remained relatively constant throughout the quarter.
Card Member rewards and services, and business development expenses, are generally correlated to billings or are variable based on usage and were impacted this quarter by the decline in billing volumes and lower usage of travel-related benefits due to ongoing impacts of COVID-19 and the resulting containment measures. We expect the trend for these expenses to continue to be correlated to billings and usage. In addition, we continued to focus on controlling operating expenses and reducing spend on proactive marketing for new acquisitions, while continuing to invest in new initiatives that enhance and provide relevant product benefits for our Card Members.
During the second quarter, we substantially enhanced our liquidity levels, and we further strengthened our capital position with capital ratios that are well above our targets and regulatory requirements. These robust capital and liquidity levels provide us with significant flexibility to maintain the strength of our balance sheet through this uncertain period. We also intend to maintain our quarterly dividend for the third quarter in line with prior quarters, subject to approval by the Board of Directors.
Looking ahead, there remains great uncertainty on how the COVID-19 pandemic will progress or what its continued impact will be on the global economy. We will continue to focus on what we can control – backing our customers, colleagues and communities, and maintaining a tight rein on expenses, while pursuing opportunities to invest in initiatives that can enable our long-term growth.
See “Certain Legislative, Regulatory and Other Developments” and "Risk Factors" for information on additional impacts of COVID-19 and related containment efforts as well as other matters that could have a material adverse effect on our results of operations and financial condition.
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CRITICAL ACCOUNTING ESTIMATES
Please see the "Critical Accounting Estimates" section of our Annual Report on Form 10-K for the year ended December 31, 2019 for a full description of all of our critical accounting estimates. The critical accounting estimate related to Reserves for Card Member Credit Losses presented below has been updated to reflect the adoption of the Current Expected Credit Loss (CECL) methodology.
Reserves for Card Member Credit Losses
Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.
In estimating expected credit losses, we use a combination of statistically-based models that include a significant amount of judgment, primarily related to the determination of the appropriate R&S Period, the methodology to incorporate current and future economic conditions, and the determination of the probability of and exposure at default, all of which are ultimately used in measuring the quantitative components of our reserves. We use these models and assumptions, combined with historical loss experience, to calculate the reserve rates that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses. Beyond the R&S Period, we estimate expected credit losses using our historical loss rates. We also consider whether to adjust the quantitative reserves for certain external and internal qualitative factors, which consequentially may increase or decrease the reserves for credit losses on Card Member loans and receivables.
The R&S Period, which is approximately 3 years, represents the maximum time-period beyond the balance sheet date over which we can reasonably estimate credit losses, using all available portfolio information, current economic conditions and forecasts of future economic conditions. We obtain our forecasts of future economic conditions from an independent third party, and in determining the relevant R&S Period for Card Member loans and receivables, we also consider information arising from other internal processes, as well as our own past loss experience. Card Member loan products do not have a contractual term and balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S Period. Card Member receivable products are contractually required to be paid in full; therefore, we have assumed the balances will be either paid or written-off within the R&S Period.
Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default. A significant area of judgment relates to how we apply future Card Member payments to the reporting period balances when determining the exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any future spend. Any remaining portion of the future payment would then be allocated to the remaining balance.
As noted above, CECL requires that the R&S Period include an assumption about current and future economic conditions. We incorporate multiple economic scenarios (e.g., baseline, better and worse) obtained from an independent third party. The expected credit losses calculated from each economic scenario are weighted to reflect uncertainty around the baseline economic scenario. We determine the weighting of each scenario based on our detailed review of the externally sourced information and comparing other economic information we use throughout other processes.

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Macroeconomic Sensitivity
Reserves for credit losses are sensitive to various inputs and assumptions, which may differ by portfolio. Macroeconomic forecasts are critical inputs into our models and inherently contain multiple variables, of which the U.S. unemployment rate and U.S. GDP growth rate are the most significant to our estimated expected credit losses. At both March 31 and June 30, 2020, our weighted economic scenarios, obtained from an independent third party, assumed the U.S. unemployment rate and contraction in U.S. GDP would peak during the second quarter of 2020. The following table reflects the macroeconomic forecasts for those key variables utilized for the computation of Reserves for credit losses as of June 30 and March 31, 2020:
As of June 30, 2020As of March 31, 2020
U.S. Unemployment Rate
Second quarter of 2020 (Peak)15% - 17%9% - 13%
Fourth quarter of 20209% - 11%7% - 9%
U.S. GDP Growth (Contraction) (a)
Second quarter of 2020 (Peak)(33%) - (36%)(18%) - (25%)
Fourth quarter of 20200.6% - (4%)2% - (6%)
(a)Real GDP quarter over quarter percentage change seasonally adjusted to annualized rates.
The combination of the material movements in these variables contributed to a build to our Reserves for credit losses of $1.1 billion which was partially offset by other factors, primarily a decrease in the outstanding balance of loans and receivables. These macroeconomic forecasts, under different conditions or using different assumptions or estimates, could result in significantly different changes in reserves for credit losses. It is difficult to estimate how potential changes in specific factors might affect the overall reserves for credit losses and current results may not reflect the potential future impact of macroeconomic forecast changes.
Refer to the "Business Environment" and Table 3 in MD&A and Note 1 and Note 3 to the "Consolidated Financial Statements" for a further description of the impact of CECL, both at implementation and for the three and six months ended June 30, 2020.
The process of estimating these reserves requires a high degree of judgment. To the extent our expected credit loss models are not indicative of future performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or lower future provisions for credit losses in any period.
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Results of Operations
Refer to the “Glossary of Selected Terminology” for the definitions of certain key terms and related information appearing within this section.
The discussions in both the “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the three and six months ended June 30, 2020 compared to the same periods in the prior year, as presented in the accompanying tables. These discussions should be read in conjunction with the discussion under “Business Environment,” which contains further information on COVID-19 and the related impacts on our results.
As a result of the adoption of CECL on January 1, 2020, there is a lack of comparability in both the reserves and provisions for credit losses for the periods presented. Results for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods. Refer to Note 3 to the "Consolidated Financial Statements" for further information.
Consolidated Results of Operations
Table 1: Summary of Financial Performance
Three Months Ended
June 30,
Change
2020 vs. 2019
Six Months Ended
June 30,
Change
2020 vs. 2019
(Millions, except percentages and per share amounts)2020201920202019
Total revenues net of interest expense$7,675  $10,838  $(3,163) (29)%$17,985  $21,202  $(3,217) (15)%
Provisions for credit losses1,555  861  694  81 %4,176  1,670  2,506  #
Expenses5,498  7,758  (2,260) (29) 12,735  15,355  (2,620) (17) 
Pretax income622  2,219  (1,597) (72) 1,074  4,177  (3,103) (74) 
Income tax provision365  458  (93) (20) 450  866  (416) (48) 
Net income257  1,761  (1,504) (85) 624  3,311  (2,687) (81) 
Earnings per common share — diluted (a)
$0.29  $2.07  $(1.78) (86)%$0.71  $3.87  $(3.16) (82)%
Return on average equity (b)
18.1 %31.6 %18.1 %31.6 %
Effective tax rate58.7 %20.6 %41.9 %20.7 %
# Denotes a variance greater than 100 percent
(a)Represents net income, less (i) earnings allocated to participating share awards of $2 million and $13 million for the three months ended June 30, 2020 and 2019, respectively, and $4 million and $24 million for the six months ended June 30, 2020 and 2019, respectively, and (ii) dividends on preferred shares of $17 million and $19 million for the three months ended June 30, 2020 and 2019, respectively, and $49 million and $40 million for the six months ended June 30, 2020 and 2019, respectively.
(b)Return on average equity (ROE) is computed by dividing (i) one-year period of net income ($4.1 billion and $7.0 billion for June 30, 2020 and 2019, respectively) by (ii) one-year average of total shareholders’ equity ($22.5 billion and $22.1 billion for June 30, 2020 and 2019, respectively).
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Table 2: Total Revenues Net of Interest Expense Summary
Three Months Ended
June 30,
Change
2020 vs. 2019
Six Months Ended
June 30,
Change
2020 vs. 2019
(Millions, except percentages)2020201920202019
Discount revenue$4,015  $6,577  $(2,562) (39)%$9,853  $12,772  $(2,919) (23)%
Net card fees1,141  988  153  15  2,251  1,932  319  17  
Other fees and commissions449  837  (388) (46) 1,169  1,640  (471) (29) 
Other186  362  (176) (49) 498  725  (227) (31) 
Total non-interest revenues5,791  8,764  (2,973) (34) 13,771  17,069  (3,298) (19) 
Total interest income2,426  2,965  (539) (18) 5,472  5,919  (447) (8) 
Total interest expense542  891  (349) (39) 1,258  1,786  (528) (30) 
Net interest income1,884  2,074  (190) (9) 4,214  4,133  81   
Total revenues net of interest expense$7,675  $10,838  $(3,163) (29)%$17,985  $21,202  $(3,217) (15)%
Total Revenues Net of Interest Expense

Discount revenue decreased for both the three and six month periods, primarily due to a decrease in billed business of 34 percent and 20 percent, respectively. U.S. billed business decreased 32 percent and 18 percent and non-U.S. billed business decreased 38 percent and 25 percent for the three and six month periods, respectively, due to the continued impacts of the COVID-19 pandemic and the resulting containment measures.

Additional billed business highlights for the three month period:

Worldwide billed business decreased 40 percent, 36 percent and 26 percent for the months of April, May and June, respectively.
Proprietary consumer and commercial billed business decreased by 35 percent and 36 percent, respectively, for the quarter as compared to the prior year. T&E spend experienced a more significant decline than non-T&E spend.
Large and global corporate billed business experienced a more significant decline than Small and Mid-sized Enterprises (SME) with a decrease of 64 percent as compared to the prior year, while SME billed business decreased 27 percent as compared to the prior year.
Global Network Services (GNS), representing 15 percent of total billed business, experienced a smaller decline than proprietary billed business with a decrease of 28 percent as compared to the prior year.
U.S. billed business decreased 39 percent, 33 percent and 24 percent for the months of April, May and June, respectively. Non-U.S. billed business decreased 42 percent for both the months of April and May and 31 percent for the month of June.
See Tables 5, 6 and 7 for more details on billed business performance.
The decrease in discount revenue for both the three and six month periods was also driven by decreases in the average discount rate primarily due to a shift in spend mix to non-T&E categories. The average discount rate was 2.23 percent and 2.37 percent for the three months ended June 30, 2020 and 2019, respectively, and 2.30 percent and 2.37 percent for the six months ended June 30, 2020 and 2019, respectively.
Net card fees increased for both the three and six month periods, primarily driven by increases in our premium card product portfolios. Card fees, which are recognized over a twelve-month period, are slower to react to economic shifts and there was no increase in Card Member attrition compared to the prior year.
Other fees and commissions decreased for both the three and six month periods, primarily due to the impacts of COVID-19 containment measures, including travel bans and restrictions, which resulted in lower foreign exchange conversion revenue related to decreased cross-border Card Member spending and lower travel commissions and fees from our consumer travel business, as well as a decline in late fees due to waived charges for Card Members who are enrolled in COVID-19 related financial relief programs.
Other revenues decreased for both the three and six month periods, primarily driven by a net loss in the current year, as compared to net income in the prior year from the GBT JV, as well as lower revenue earned on cross-border Card Member spending due to the impacts of the COVID-19 containment measures, including travel bans and restrictions.
Interest income decreased for both the three and six month periods, driven by a reduction in benchmark interest rates, customer participation in COVID-19 related financial relief programs and lower average Card Member loan volumes.
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Interest expense decreased for both the three and six month periods, primarily driven by lower interest rates paid on deposits and outstanding debt.
Table 3: Provisions for Credit Losses Summary
Three Months Ended
June 30,
Change
2020 vs. 2019
Six Months Ended
June 30,
Change
2020 vs. 2019
(Millions, except percentages)2020201920202019
Card Member receivables
Net write-offs
$299  $210  $89  42 %$557  $426  $131  31 %
Reserve build (a)
56  14  (7) (50) 395  51  295  
#
Total
355  224  131  58  952  477  475  100  
Card Member loans
Net write-offs
602  557  45   1,227  1,106  121  11  
Reserve build (a)
367  46  321  
#
1,618  22  1,596  
#
Total
969  603  366  61  2,845  1,128  1,717  
#
Other
Net write-offs - Other loans (b)
24  26    53  49  (4) (8) 
Net write-offs - Other receivables (c)
  —    (3) (60) 
Reserve build - Other loans (a)(b)
182   (178) 
#
251   (242) 
#
Reserve build - Other receivables (a)(c)
23   (21) 
#
67   (65) 
#
Total
231  34  197  
#
379  65  314  
#
Total provisions for credit losses$1,555  $861  $694  81 %$4,176  $1,670  $2,506  
# %
# Denotes a variance greater than 100 percent
(a)Refer to the “Glossary of Selected Terminology” for a definition of reserve build (release).
(b)Relates to Other loans of $4.6 billion, $5.2 billion and $4.8 billion, less reserves of $423 million, $241 million and $152 million, as of June 30, 2020, March 31, 2020 and December 31, 2019, respectively; and $4.2 billion, $4.1 billion and $3.8 billion, less reserves of $133 million, $129 million and $124 million, as of June 30, 2019, March 31, 2019 and December 31, 2018, respectively.
(c)Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $2.8 billion, $2.9 billion and $3.1 billion, less reserves of $94 million, $71 million and $27 million as of June 30, 2020, March 31, 2020 and December 31, 2019, respectively; and $3.2 billion, $3.2 billion and $2.9 billion, less reserves of $27 million, $25 million and $25 million, as of June 30, 2019, March 31, 2019 and December 31, 2018, respectively.
Provisions for Credit Losses
Provisions for credit losses on loans and receivables increased for both the three and six month periods, primarily driven by higher reserve builds reflecting the continued deterioration of the global macroeconomic outlook, including unemployment and GDP, and a shift in the mix of loans and receivables, partially offset by a decrease in the outstanding balance of loans and receivables. The current year also included a $53 million write-off in Card Member receivables due to the bankruptcy of a corporate client; an associated expected loss recovery from an insurance claim was recognized as a reduction to Other expense.
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Table 4: Expenses Summary
Three Months Ended
June 30,
Change
2020 vs. 2019
Six Months Ended
June 30,
Change
2020 vs. 2019
(Millions, except percentages)2020201920202019
Marketing and business development$1,362  $1,776  $(414) (23)%$3,067  $3,351  $(284) (8)%
Card Member rewards1,349  2,652  (1,303) (49) 3,741  5,103  (1,362) (27) 
Card Member services208  563  (355) (63) 664  1,113  (449) (40) 
Total marketing, business development, and Card Member rewards and services2,919  4,991  (2,072) (42) 7,472  9,567  (2,095) (22) 
Salaries and employee benefits1,349  1,367  (18) (1) 2,744  2,789  (45) (2) 
Other, net1,230  1,400  (170) (12) 2,519  2,999  (480) (16) 
Total expenses$5,498  $7,758  $(2,260) (29)%$12,735  $15,355  $(2,620) (17)%
Expenses
In January 2020, we re-launched our Delta cobrand products following the renewal extending our cobrand relationship with Delta Air Lines on March 31, 2019. The contract renewal included new pricing terms, some of which became effective upon contract signing and others that were tied to the product re-launch. These pricing changes, as well as changes in the expense classification of certain benefits associated with the re-launch, resulted in offsetting increases to Marketing and business development and decreases to both Card Member rewards and Card Member services expenses, as compared to the prior year.
Marketing and business development expense decreased for both the three and six month periods. The decrease in marketing expense reflected a reduction in proactive marketing for Card Member acquisitions, partially offset by incremental investments in enhancements to our Card Member value proposition. The decrease in business development expense was driven by decreases in corporate client incentives and network partner payments due to lower billed business reflecting the impacts of COVID-19, partially offset by the Delta changes described above.
Card Member rewards expense decreased for both the three and six month periods, primarily driven by decreases in billed business as a result of the impacts of COVID-19. In addition, redemption volume has shifted towards non-travel related options since the onset of COVID-19, contributing to a decrease in Membership Rewards weighted average cost per reward point and expense in both periods. Cobrand rewards expense also reflected the impact of the Delta changes described above. Membership Rewards and cash back rewards decreased $941 million and $954 million and cobrand rewards decreased $362 million and $408 million for the three and six month periods, respectively.
The Membership Rewards URR for current program participants was 96 percent (rounded up) at both June 30, 2020 and 2019.
Card Member services expense decreased for both the three and six month periods, primarily due to lower usage of travel-related benefits as a result of COVID-19, as well as the Delta changes described above.
Salaries and employee benefits expense decreased for the three and six month periods. The decrease in the three month period was primarily driven by lower incentive compensation, partially offset by higher payroll costs and higher deferred compensation expenses. The decrease in the six month period was primarily driven by lower incentive compensation and deferred compensation, partially offset by higher payroll costs.
Other expenses decreased for both the three and six month periods. The decrease in the six month period was primarily driven by a prior year litigation-related charge. Additionally, the decreases in the three and six month periods were driven by lower employee-related operating costs, an expected loss recovery from an insurance claim associated with the write-off of Card Member receivables due to the bankruptcy of a corporate client and a gain in the current year as compared to a loss in the prior year related to our strategic investments.

Income Taxes
The effective tax rate was 58.7 percent and 20.6 percent for the three months ended June 30, 2020 and 2019, respectively, and 41.9 percent and 20.7 percent for the six months ended June 30, 2020 and 2019, respectively. The increase for both periods reflected the impact of discrete tax charges primarily related to the realizability of certain foreign deferred tax assets, resulting from cumulative losses in certain non-U.S. legal entities that were exacerbated by the impacts of COVID-19, and lower overall pretax income.
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Table 5: Selected Card-Related Statistical Information
As of or for the
Three Months Ended
June 30,
Change
2020
vs.
2019
As of or for the
Six Months Ended
June 30,
Change
2020
vs.
2019
2020201920202019
Billed business: (billions)
U.S.$141.9  $209.2  (32)%$332.1  $404.7  (18)%
Outside the U.S.63.2  102.5  (38) 152.3  202.7  (25) 
Total$205.1  $311.7  (34) $484.4  $607.4  (20) 
Proprietary$174.8  $269.4  (35) $417.4  $522.7  (20) 
GNS30.3  42.3  (28) 67.0  84.7  (21) 
Total$205.1  $311.7  (34) $484.4  $607.4  (20) 
Cards-in-force: (millions)
U.S.54.4  54.0   54.4  54.0   
Outside the U.S.58.5  60.2  (3) 58.5  60.2  (3) 
Total112.9  114.2  (1) 112.9  114.2  (1) 
Proprietary69.3  69.7  (1) 69.3  69.7  (1) 
GNS43.6  44.5  (2) 43.6  44.5  (2) 
Total112.9  114.2  (1) 112.9  114.2  (1) 
Basic cards-in-force: (millions)
U.S.42.7  42.5  —  42.7  42.5  —  
Outside the U.S.49.1  50.3  (2) 49.1  50.3  (2) 
Total91.8  92.8  (1) 91.8  92.8  (1) 
Average proprietary basic Card Member spending: (dollars)
U.S.$3,697  $5,445  (32) $8,629  $10,529  (18) 
Outside the U.S.2,272  4,059  (44) 5,788  7,988  (28) 
Worldwide Average$3,270  $5,030  (35) $7,776  $9,773  (20) 
Average discount rate2.23 %2.37 % 2.30 %2.37 % 
Average fee per card (dollars)(a)
$65  $57  14 %$64  $56  14 %
(a)Average fee per card is computed based on proprietary net card fees divided by average proprietary total cards-in-force.
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Table 6: Billed Business-Related Statistical Information
Three Months Ended
June 30, 2020
Year over Year Percentage
Increase (Decrease)
Year over Year Percentage Increase (Decrease) Assuming No Changes in FX Rates (a)
Worldwide
Proprietary
Proprietary consumer(35)%(34)%
Proprietary commercial(36) (36) 
Total Proprietary(35) (35) 
GNS(28) (25) 
Worldwide Total(34) (33) 
T&E-related volume (6% of Worldwide Total) (b)
(87) (87) 
Non-T&E-related volume (94% of Worldwide Total) (b)
(13) (12) 
Airline-related volume (0% of Worldwide Total) (b)
##
U.S.
Proprietary
Proprietary consumer(32) 
Proprietary commercial(33) 
Total Proprietary(32) 
U.S. Total(32) 
T&E-related volume (6% of U.S. Total) (b)
(84) 
Non-T&E-related volume (94% of U.S. Total) (b)
(12) 
Airline-related volume (0% of U.S. Total) (b)
#
Outside the U.S.
Proprietary
Proprietary consumer(41) (39) 
Proprietary commercial(49) (46) 
Total Proprietary(44) (42) 
Outside the U.S. Total(38) (36) 
Japan, Asia Pacific & Australia(27) (25) 
Latin America & Canada(49) (42) 
Europe, the Middle East & Africa(50) (49) 
# Denotes a variance greater than 100 percent
(a)The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current period apply to the corresponding prior year period against which such results are being compared).
(b)Based on billed business from merchants we acquire or merchants acquired by third parties on our behalf (e.g., OptBlue merchants).
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Table 7: Billed Business-Related Statistical Information
Six Months Ended
June 30, 2020
Year over Year Percentage
Increase (Decrease)
Year over Year Percentage Increase (Decrease) Assuming No Changes in FX Rates (a)
Worldwide
Proprietary
Proprietary consumer(19)%(19)%
Proprietary commercial(21) (21) 
Total Proprietary(20) (19) 
GNS(21) (18) 
Worldwide Total(20) (19) 
T&E-related volume (17% of Worldwide Total) (b)
(54) (54) 
Non-T&E-related volume (83% of Worldwide Total) (b)
(5) (4) 
Airline-related volume (4% of Worldwide Total) (b)
(66) (65) 
U.S.
Proprietary
Proprietary consumer(18) 
Proprietary commercial(19) 
Total Proprietary(18) 
U.S. Total(18) 
T&E-related volume (16% of U.S. Total) (b)
(51) 
Non-T&E-related volume (84% of U.S. Total) (b)
(5) 
Airline-related volume (3% of U.S. Total) (b)
(64) 
Outside the U.S.
Proprietary
Proprietary consumer