American Express Relief Program Winding Down (This Is A Good Thing)


  • Finding good value in Capital One has made me analyze more credit card companies.
  • American Express follows the same trends as the other credit card companies.
  • The bank has low relief program enrollments and is winding the program down.
  • The stock has declined the least over the year but still offers a good buy-in dip.

The Credit Card Company Search

Since the economy has turned south from the COVID-19 pandemic, I have been looking at credit card companies to invest in. Looking into Capital One Financial (COF), Discover Financial Services (DFS), and Synchrony Financial (SYF), I have found that the future outlook does not look as grim as expected. Analyzing these banks has shown that 2020 will be a poor year financially, but the programs they have in place have helped their customers tremendously. Each of the three banks I have looked at have seen significant losses in the stock market this year and Capital One Financial has so far been the best value play. This article will be focused on American Express Co. (AXP) and will show that the underlying trends are the same. Although American Express is profitable and has started to wind down the forbearance program, I believe that Capital One still offers the best value of the bunch.

American Express Overview

American Express has been known as a top-tier card issuer for decades. Seen as a credit card for the more well-off individual or business member, American Express has a very strong brand. The company differs in the business strategy from a solely card issuer like Capital One. Instead, American Express is much more like Discover and Synchrony, as these banks both issue cards and have a card network to service the transaction. American Express is the largest card company in the United States when ranked by purchase volume.

Fiscal Year 2019 & 2020 Quarterly Review

Top Down Look

In fiscal year 2019, American Express reported interest income of $12.084 billion, which was up 13.94%. The thing is American Express makes the majority of revenue from non-interest. Therefore, it is important to compare this over time even though it isn’t a big factor for the other banks I have written about. In 2019, the bank made $34.936 billion in non-interest revenue, which was a 6.92% increase. The provision for losses totaled $3.573 billion for the year, up 6.6%. Overall, the net income came in at $6.759 billion, down 2.34% from prior year. In 2019, the efficiency ratio and average interest yield were 72.44% and 11%. As a note, the efficiency ratio is higher for American Express when compared to the other banks due to the amount of revenue from fees & non-interest expense, therefore it should be viewed over a time period.

In Q1 of 2020, American Express saw interest income at $3.046 billion and non-interest income at $7.98 billion, up 3.11% and down 3.91% each. The provision for losses jumped 224% to $2.621 billion from $809 million. This resulted in a decrease of 76.32% in net income to $367 million for the quarter. The efficiency ratio was better at 70.19% and average interest yield was higher at 11.9%.

For Q2, nothing was better than the prior year. Interest income was $2.426 billion while non-interest income was $5.791 billion. These revenue sources were both down 18.17% and 33.92%, respectively. The provision for credit losses jumped again up 80.6% to $1.555 billion. Net income was reported at $257 million for Q2, down 85.41%. With an efficiency ratio of 71.64% and an average interest yield of 10%, Q2 saw overall declines across the board.

In total, for the six months of 2020, interest income and non-interest income were $5.472 billion and $13.771 billion, each down 7.55% and 19.32%. The provision for credit losses totaled to $4.176 billion, up 150% to make sure the bank has proper reserve during this period of economic uncertainty. The result for the half year was net income of $624 million. Net income was down 81.15%, but as seen in my past research, any profit has been rare to come by. The bank was actually more efficient in the past half year than in 2019 with an efficiency ratio of 70.81%. On top of that, the average interest yield was only down 0.5% since fiscal year 2019 to 10.5% for the six months.