Summary
This Form 8-K filing from American Express Company (AXP) on August 5, 2009, discloses updated expectations regarding its U.S. Card Services (USCS) lending net write-off rates, as presented at their semi-annual Financial Community Meeting. The company reported that its managed net write-off rate for the second quarter of 2009 was 10%, which was better than anticipated, outperforming their previous estimate by 50 to 100 basis points. This positive performance was attributed to lower-than-expected bankruptcy trends impacting early write-offs. Looking ahead, American Express anticipates that managed net write-off rates for the third and fourth quarters of 2009 will likely fall below 10%, assuming current delinquency levels persist and bankruptcies see a modest increase. Specifically, the company projected an actual net write-off rate of approximately 9.2% on a managed basis and 9.9% on an owned basis for July 2009. The company also indicated that any provision benefits derived from lower write-offs would likely be reinvested into marketing, promotion, or other business initiatives.
Key Highlights
- 1Q2 2009 managed net write-off rate for U.S. Card Services was 10%, exceeding expectations by 50-100 basis points.
- 2Better-than-expected bankruptcy trends in Q2 2009 positively impacted early write-offs.
- 3Company expects managed net write-off rates for Q3 and Q4 2009 to be below 10%, assuming stable delinquencies and some increase in bankruptcies.
- 4Projected July 2009 net write-off rate of approximately 9.2% (managed) and 9.9% (owned).
- 5The difference between 'managed' and 'owned' write-off rates is due to portfolio mix (e.g., small business loans) and securitization mechanics.
- 6Anticipates reinvesting provision benefits from lower-than-expected write-offs into marketing and business initiatives.