American Express just posted its first net loss since 1992.
In its latest quarterly earnings report on Thursday, the firm reported that it was $1.1 billion in the red. Spokesperson Marina Norville confirmed it’s the first time the company has posted a quarterly loss in about 25 years.
In a press release, the company said the recent tax code overhaul was the culprit. American Express said it currently estimates that it will face a $2.6 billion “charge” because of the new law. Most of the $2.6 billion will go toward paying repatriation taxes, or taxes paid on profits that were earned overseas.
Companies used to be able to keep those earnings offshore and avoid paying U.S. taxes, but the Republican-backed tax code eliminated that. Most major U.S. corporations are expecting to be hit with a big one-time tax bill in order to bring that money home.
The loss prompted American Express to suspend its share buyback plans while it “rebuilds” its cash stockpile, the company said. Eventually it plans to “more than make up” for the pause in buybacks, an executive told investors during a conference call.
In the long run, CEO Kenneth Chenault said in a statement, the company expects the “Tax Act will be a positive development for both the U.S. economy and American Express.” The new tax code lowers the corporate tax rate from 35% to 21%.
“Given the momentum in the business and the anticipated benefit of a lower tax rate, we now expect to invest up to $200 million more in 2018 than we originally planned for customer-facing growth initiatives,” Chenault said.
“We’ve also made an incremental contribution to our employee profit-sharing plans to support the long-term financial well-being of our employees. And, for shareholders, we expect to use the remaining anticipated benefits to build capital and support earnings growth in 2018,” he said.
Looking just at revenue, American Express actually raked in more cash last quarter than Wall Street expected, according to an estimate from Breifing.com. Nonetheless, the company’s stock shed more than 2% during after-hours trading Thursday.