trending Market Intelligence /marketintelligence/en/news-insights/trending/P-8c7yc-uYUVUJNYVYxSJQ2 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

American Express reserves to increase up to 40% with CECL implementation

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

Street Talk Episode 66 - Community banks tap the debt markets while the getting is good

American Express reserves to increase up to 40% with CECL implementation

American Express Co. expects its reserves will increase 25% to 40% after it implements new accounting standards.

That estimate includes a 55% to 70% increase in lending card reserves, which will be somewhat offset by a "significantly lower" charge card reserve due to the short life of charge receivables, said CFO Jeffrey Campbell on a call to discuss third-quarter earnings. The resulting capital impact from the one-time implementation increase in reserves will be "very manageable" for the card company, he added.

American Express posted total noninterest revenues for the third quarter of $8.79 billion, up from $8.18 billion in the year-ago period. Discount revenues came in at $6.57 billion for the quarter, and net card fees were $1.03 billion.

The current expected credit loss model, also known as CECL, introduces a new accounting method for recording projected loan losses by requiring companies to reserve against them at origination instead of the current standard that requires companies to record provisions for loan losses only when a loss becomes likely. It goes into effect for larger companies on Jan. 1, 2020, while smaller companies must comply by 2023.

American Express will likely have a higher provision expense under CECL relative to the current accounting method, Campbell said, declining to provide specific expectations. The company will provide details on the expected 2020 impact on the fourth-quarter earnings call.

"From our perspective, this is pure accounting-driven acceleration of losses that ultimately would've run through our financial statements anyway," the CFO said. "It has zero impact on real economics. It has zero impact on our view of risk."

The company does not intend to change its capital investment plan because of CECL, Campbell added. In September, the board authorized American Express to repurchase up to 120 million of its common shares. It also approved a 4-cent increase in the quarterly dividend.