“Since the lows of mid-April, we have seen a steady recovery in our overall spending volumes. In fact, we had positive year-over-year growth in non-T&E spending, which has long accounted for the large majority of our overall volumes. While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels.
“While our business continues to be significantly affected by the impacts of the pandemic, our third quarter results have increased our confidence that our strategy for managing through the current environment is the right one,” said Stephen J. Squeri, Chairman and Chief Executive Officer.
“The investments we have made to enhance our value propositions have yielded strong results, driving spending and loyalty, and our voluntary attrition rates on our proprietary products remain lower than last year. We’re also expanding our largest ever Shop Small campaign to support small merchants in 18 countries and territories. In addition, we have begun to selectively increase our customer acquisition activities while continuing to invest for the long term, such as expanding our commercial offerings through our recent acquisition of financial technology company Kabbage, as well as officially launching our network in mainland China. Additionally, we have maintained a robust liquidity position and capital ratios well above targets.
“We recognize that the road ahead continues to be uncertain, but we are confident that the steps we are taking will enable us to exit this crisis in a strong position and maximize value for our stakeholders over the long term.”
Third-quarter consolidated total revenues net of interest expense were $8.8 billion, down 20 percent from $11.0 billion a year ago. The quarter primarily reflected declines in Card Member spending and the average discount rate compared to the prior year.
Consolidated provisions for credit losses were $665 million, down 24 percent from $879 million a year ago. The decrease primarily reflected a modest reserve release2 and lower net write-offs. Total credit reserve levels at the end of the third quarter were generally consistent with second-quarter levels.
Consolidated expenses were $6.7 billion, down 14 percent from $7.8 billion a year ago. The decrease primarily reflected significantly lower customer engagement costs due to the decline in Card Member spending and lower usage of travel-related Card Member benefits, partially offset by investments in value proposition enhancements for many of the company’s card products, as well as expenses related to the largest ever Shop Small campaign.
The consolidated effective tax rate was 21.3 percent, down from 22.6 percent a year ago.
Global Consumer Services Group reported third-quarter net income of $855 million, compared with $991 million a year ago.
Total revenues net of interest expense were $5.2 billion, down 16 percent from $6.2 billion a year ago. The decrease primarily reflected declines in Card Member spending and loan volumes compared to the prior year.
Provisions for credit losses totaled $412 million, down 37 percent from $653 million a year ago. The decrease primarily reflected a modest reserve release and lower net write-offs.
Total expenses were $3.7 billion, down 14 percent from $4.3 billion a year ago. The decrease primarily reflected significantly lower customer engagement costs due to a decline in Card Member spending and lower usage of travel-related Card Member benefits, partially offset by investments in the previously mentioned value proposition enhancements and expenses related to the Shop Small campaign.
Global Commercial Services reported third-quarter net income of $220 million, compared with net income of $568 million a year ago.
Total revenues net of interest expense were $2.5 billion, down 23 percent from $3.3 billion a year ago, primarily reflecting a decline in Card Member spending.
Provisions for credit losses totaled $250 million, up 13 percent from $222 million a year ago, driven by a slight reserve build.
Total expenses were $2.0 billion, down 14 percent from $2.4 billion a year ago. The decrease primarily reflected lower client incentives and other customer engagement costs due to a decline in Card Member spending.
Global Merchant and Network Services reported third-quarter net income of $263 million, compared with $523 million a year ago.
Total revenues net of interest expense were $1.1 billion, down 27 percent from $1.6 billion a year ago. The decrease primarily reflected declines in Card Member spending and the average discount rate compared to the prior year.
Total expenses were $780 million, down 8 percent from $845 million a year ago, driven by lower network partner payments due to a decline in Card Member spending.
Corporate and Other reported a third-quarter net loss of ($265) million, compared with a net loss of ($327) million a year ago.
1 Diluted earnings per common share (EPS) was reduced by the impact of (i) earnings allocated to participating share awards and other items of $7 million and $11 million for the three months ended September 30, 2020 and 2019, respectively, and $2 million and $13 million for the three months ended June 30, 2020 and 2019, respectively, and (ii) dividends on preferred shares of $16 million and $21 million for the three months ended September 30, 2020 and 2019, respectively, and $17 million and $19 million for the three months ended June 30, 2020 and 2019, respectively.
2 Reserve build (release) represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provisions for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provisions for credit losses.
