What does 'managed basis' mean and why is it important?

The 'managed basis' presentation for American Express's U.S. Card Services includes all cardmember loans, both those on the company's balance sheet ('owned basis') and those that have been securitized off-balance sheet. The company believes this provides a more comprehensive view of the lending business's performance over time, as management views and manages the entire portfolio, not just the on-balance sheet portion.

Why did American Express increase credit reserves even though write-offs were better than expected?

American Express proactively recorded additional credit reserves to further strengthen its coverage ratios. This demonstrates a prudent approach to risk management, ensuring the company is well-positioned to absorb potential future credit losses, even in an improving credit environment.

What is the company's outlook for credit performance in the second half of 2009?

The company expressed optimism, stating it is highly likely that its U.S. Card Services lending net write-off rate for both the third and fourth quarters of 2009 will be better than previously forecasted, provided that delinquency and bankruptcy trends continue to be below expected levels. These anticipated improvements are expected to be reinvested in the business.

What impact did selling off previously written-off loans have in May 2009?

In May 2009, American Express sold certain previously written-off cardmember loans to third parties. The proceeds from these sales were treated as partial recoveries, which benefited the net write-off rate reported for that month. The company intends to continue this practice as part of its strategy to recover value from written-off loans.

AXP 8-K: Regulation FD — Jul 15, 2009

Summary

This 8-K filing from American Express Co. (AXP) provides an update on the delinquency and write-off statistics for its U.S. Card Services (USCS) operating segment for the months ending April, May, and June 2009, and for the second quarter of 2009. Notably, the preliminary results for the second quarter indicate that net write-off rates were better than previously forecasted. Despite this positive trend, the company proactively recorded additional credit reserves to enhance its coverage ratios. Looking ahead, American Express expressed optimism that if delinquency and bankruptcy trends remain below expectations, its USCS lending net write-off rate for both the third and fourth quarters of 2009 is likely to be better than previously forecasted. The company indicated plans to utilize a significant portion of the benefits from improved credit performance for selective investments and other business initiatives during the latter half of 2009.

Key Highlights

1Preliminary net write-off rates for U.S. Card Services (USCS) in Q2 2009 were better than initially forecasted.
2The company recorded additional credit reserves in Q2 2009 to strengthen coverage ratios, despite better-than-expected credit performance.
3American Express anticipates that its USCS lending net write-off rate for Q3 and Q4 2009 will likely be better than previously forecasted, assuming favorable delinquency and bankruptcy trends continue.
4The company plans to use anticipated benefits from improved credit performance for selective investments and business initiatives in Q3 and Q4 2009.
5Delinquency rates (30+ days past due) for both owned and managed basis cardmember lending showed a declining trend from April to June 2009.
6The filing provides both 'owned' (GAAP) and 'managed' basis data, with the latter offering a more comprehensive view of the lending business by including securitized loans.
7Separate data for the American Express Credit Account Master Trust is also presented, showing trends in default rates and delinquencies for securitized loans.

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

Summary

Key Highlights

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