8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Aug 6, 2009)

Filed August 6, 2009For Securities:AXP

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.

Frequently Asked Questions

The 'managed' basis includes both on-balance sheet and off-balance sheet securitized cardmember loans, providing a more comprehensive view of the lending business dynamics over time. The 'owned' basis reflects GAAP accounting. The difference is influenced by factors like the proportion of small business loans and the impact of securitization activities on loan issuances and maturities.

The better-than-expected performance was primarily due to lower-than-anticipated bankruptcy trends during the second quarter, which favorably impacted the company's early write-off figures.

The company expects managed net write-off rates for the third and fourth quarters of 2009 to likely fall below 10%, assuming delinquencies remain at current levels and bankruptcies see a moderate increase. The July 2009 rate was projected to be around 9.2% on a managed basis.

American Express indicated that a significant portion of any provision benefits realized from lower-than-expected write-offs would likely be strategically deployed to enhance marketing and promotional activities or other business initiatives.