Tax overhaul leads AmEx to loss in Q4

C redit

card company American Express Co posted a $1.2 billion loss in its latest quarter after booking large one-time charges related to the new tax law.

The company also announced it would suspend its share buy-back programme for six months to rebuild its capital following the charge.

American Express said on Thursday that it lost $1.41 a share in the three months that ended Dec 31, compared with a profit of $825 million, or 88 cents per share, in the same period a year earlier.

Excluding the one-time charges, AmEx said it earned $1.58 a share. Industry analysts had expected $1.54 a share on average, according to FactSet Research Systems Inc.

The company had to take significant one-time charges against its results to comply with the new tax law that was enacted in December.

AmEx had $2.6 billion in charges, mostly tied to profits it had earned abroad and was now returning to the US under a special one-time tax programme.

The company also had some deferred tax assets, or credits it could have used toward future tax bills, which it had to write down.

New York-based AmEx now expects its corporate tax rate to be around 22%, down from the roughly 30% the company historically paid.

This is the last full quarter with Kenneth Chenault, AmEx’s CEO and chairman, at the helm at the company. Chenault announced late last year he would retire effective Jan 31. He had been CEO since early 2001.

“I feel very good about the progress we’ve made throughout 2017 and will be leaving American Express in very strong hands when Steve Squeri succeeds me as chairman and chief executive officer at the end of this month,’’ Chenault said.

Outside of the impact of the tax bill, AmExs’ quarterly results were driven by higher spending on its credit cards by its customers, who the company calls its card members.

AmEx charges a fee on every transaction that is run on its network.

The company’s cardholders spent $291.4 billion on its cards in the fourth quarter, up from $263.2 billion in the same period a year earlier. Average card member spending was $5,300 in the quarter, up from $5,181, in the US, its largest market.

AmEx also had more card members carry a balance on its cards in the quarter, a practice that the company historically did not emphasise but recently has been trying to encourage more customers to keep a balance, and therefore allow the company to earn interest income from that balance. Total loans were $64.5 billion in the quarter, up from $58.3 billion a year earlier.

AmEx gave a full-year 2018 forecast of $6.90 to $7.30 a share, excluding the impact of the tax law. Wall Street is forecasting $6.94 a share, according to FactSet.

The company also said it would temporarily suspend its share buyback programme for two quarters to help rebuild its capital following the charges it took this quarter.