What are the key trends in American Express's credit portfolio as of April 2009?

As of April 30, 2009, American Express experienced a notable increase in its net write-off rates on a managed basis, reaching 10.1%, up from 8.8% in March. The owned basis write-off rate also rose to 10.4%. While the 30+ day delinquency rate remained stable at 4.9%, the overall loan balances decreased on both owned and managed bases. This suggests that while new delinquencies are not accelerating significantly, existing bad debts are rising, and the company is potentially reducing its exposure.

Why does American Express present data on both an 'owned' and 'managed' basis?

American Express uses the 'owned' basis, which is a GAAP measurement, to report loans directly on its balance sheet. The 'managed' basis presentation, which the company's management views as more comprehensive for its U.S. cardmember lending business, includes securitized loans that are off-balance sheet. Management believes this managed view provides a fuller picture of the business's trends over time by encompassing all securitized and non-securitized loans.

What is the company's outlook for credit losses in the near term?

American Express reiterated its expectation that the U.S. lending write-off rate on a managed basis for the second quarter of 2009 is likely to increase by 200 to 250 basis points compared to the first quarter's rate of 8.5%. This indicates management anticipates continued deterioration in credit quality due to the challenging economic environment.

Are there any specific events mentioned that affected the reported credit statistics?

Yes, in March 2009, American Express sold certain cardmember loans that had previously been written off. The proceeds from this sale were treated as partial recoveries, which favorably impacted the reported net write-off rates for March 2009.

AXP 8-K: Regulation FD — May 15, 2009

Summary

This 8-K filing from American Express (AXP) on May 15, 2009, provides updated delinquency and write-off statistics for its U.S. Card Services (USCS) operating segment for the months ending February 28, March 31, and April 30, 2009. The data is presented on both an 'owned' (GAAP) basis and a 'managed' basis, with the latter being management's preferred view as it includes securitized assets. Investors should note the increasing trend in net write-off rates, particularly the significant jump in April on both bases, signaling potential credit quality deterioration in the portfolio during a challenging economic period. The filing also reaffirms management's expectation for a further increase in the U.S. lending write-off rate for the second quarter of 2009, between 200 and 250 basis points above the first quarter's rate of 8.5%. While the company is providing these granular credit metrics, the forward-looking statements section highlights the significant risks associated with the economic environment, including unemployment and bankruptcy rates, which could materially impact future credit performance. The information is supplementary to the Lending Trust's Form 10-D reports.

Key Highlights

1Net write-off rate on a managed basis increased to 10.1% in April 2009, up from 8.8% in March 2009 and 8.6% in February 2009.
2Owned basis net write-off rate also saw a significant jump to 10.4% in April 2009, compared to 8.6% in March 2009.
330+ days past due loans as a percentage of total loans remained stable at 4.9% in April 2009, down slightly from 5.1% in March and 5.3% in February on a managed basis.
4Total loans outstanding decreased on both owned ($27.1 billion in April) and managed ($55.4 billion in April) bases, indicating a contraction in the lending portfolio.
5AXP reaffirms its prior estimate that Q2 2009 U.S. lending write-off rate on a managed basis is expected to increase 200-250 basis points over Q1 2009's rate of 8.5%.
6The filing includes data for the American Express Credit Account Master Trust, showing an increasing annualized default rate, net of recoveries, reaching 9.9% in the period ending April 26, 2009.
7Company sold certain previously written-off cardmember loans in March 2009, which positively impacted reported March write-off rates due to sale proceeds being treated as partial recoveries.

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (May 15, 2009)

Summary

Key Highlights

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