Tax overhaul leads AmEx to first loss in 26 years, buyback suspension

By Pallavi Dewan

(Reuters) - Credit card issuer American Express Co posted its first quarterly loss in 26 years and said it would not buy back shares for the next six months, both due to the impact of the recently enacted U.S. tax reform.

AmEx's shares dropped 2.5 percent to $97.20 in trading after the bell on Thursday.

The company took a $2.6 billion charge to cover a new one-time repatriation tax on undistributed income of certain non-U.S. units and to adjust the value of its deferred tax assets and liabilities.

The charge lowered AmEx's capital ratios and to rebuild that, the company said it would suspend share buybacks for the first half of 2018, but continue paying dividends, though only at current levels.

 

"Buybacks are a meaningful contribution to earnings per share growth at AmEx, and the temporary restriction will require some analysts to revise their 2018 EPS forecasts lower," Kyle Sanders, an analyst at Edward Jones, wrote in a note.

The $2.6 billion charge includes about $2 billion tax recognised on deemed repatriations of certain overseas earnings and roughly $600 million related to the remeasurement of U.S. net deferred tax assets.

The credit card issuer said it expects 2018 tax rate of about 22 percent before discrete items.

Net loss attributable to common shareholders was $1.20 billion, or $1.41 per share, in the fourth quarter, compared with a profit of $825 million, or 88 cents per share, a year earlier.

Excluding the charge, AmEx earned $1.58 per share, beating analysts' estimates of $1.54 per share, according to Thomson Reuters I/B/E/S.

Total revenue, net of interest expense, rose to $8.84 billion from $8.02 billion last year as the company's customers spent more in the holiday season in the United States, its core market.

That also topped analysts' estimate of $8.72 billion.

"I wouldn't characterize Q4 as a high quality beat ... but the guidance is quite solid, despite the share buyback reduction," KBW analyst Sanjay Sakhrani said.

The company said it expects full-year 2018 earnings to be between $6.90-$7.30 per share, while analysts on average were expecting 2018 earnings of $7.04 per share.

The company said it also expects to deliver 2018 revenue growth in the 7-8 percent range.

(Reporting by Pallavi Dewan in Bengaluru; Editing by Savio D'Souza and Maju Samuel)