American Express's Profits Fall in 3Q15 on Partnerships, New Initiatives
Global Network & Merchant Services
American Express’s (AXP) Global Network & Merchant Services’ total revenues net of interest expense fell by 6% to $1.4 billion in 3Q15, forming 17% of the company’s total revenues, as compared to $1.5 billion in 3Q14. On a constant dollar basis, revenues rose by 1%, mainly due to increased revenues from bank partners.
The division’s net income rose by 8% to $462 million as compared to $427 million in the prior year’s quarter. The rise was mainly due to lower operating expenses.
Expenses and initiatives
The division’s total expenses fell by 16% to $633 million in 3Q15 as compared to $756 million in 3Q14. The fall was mainly due to a litigation reserve release associated with a recently rejected merchant class settlement.
Billed business for the Global Network & Merchant Services division fell by 1%. However, on a constant dollar basis, the business expanded by 13%, reflecting its continued strong growth.
Billed business includes activities related to proprietary cards, cards issued under network partnership agreements, corporate payments, and certain insurance fees charged on proprietary cards.
The division operates a global payments network that processes and settles proprietary and non-proprietary card transactions. The division acquires merchants and provides point-of-sale products, multi-channel marketing programs and capabilities, and services and data, leveraging the company’s global closed-loop network.
American Express achieved net profit margins of 16% in the last fiscal year. Here’s how some of its peers in the payment processing industry fared with their net margins in the last fiscal year:
-
MasterCard (MA) – 38%
-
Visa (V) – 43%
-
Discover Financial (DFS) – 27%
Together, these companies account for 1.9% of the iShares Core S&P 500 ETF (IVV).
Browse this series on Market Realist: