American Express's Profits Fall in 3Q15 on Partnerships, New Initiatives
Global Commercial Services
American Express’s (AXP) Global Commercial Services’ total revenues net of interest expense fell by 9% to $817 million in 3Q15, forming 10% of the company’s total revenues, as compared to $900 million in 3Q14. Revenues fell by 5% on a constant dollar basis, mainly due to last year’s gain on the sale of investment securities and lower discount revenue.
Net income for the division fell by 26% to $151 million as compared to $204 million in the prior year’s quarter. The division’s profitability fell largely due to the strong US dollar.
Expenses and initiatives
Total expenses for the Global Commercial Services division stood at $541 million in 3Q15 as compared to $542 million in 3Q14. The company continued to spend on technology development in order to support growth initiatives. Total billed business for the division fell by 3% and increased by 1% on a constant dollar basis.
The Global Commercial Services division offers global corporate payment services to large and mid-sized companies. These services include expense management and travel services to companies and organizations around the world through the Global Corporate Payments and Global Business Travel businesses.
American Express also offers corporate cards and corporate meeting cards, which are issued to individuals through a corporate account established by their employer. The Global Commercial Services division also offers a suite of business-to-business payment solutions, including a corporate purchasing card, which is an account established by companies to pay for everyday and large-ticket business expenses.
American Express achieved operating profit margins of 25% 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:
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MasterCard (MA) – 54%
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Visa (V) – 60%
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Discover Financial (DFS) – 43.6%
Together, these companies account for 1.9% of the iShares Core S&P 500 ETF (IVV).
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