8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Aug 17, 2009)

Filed August 17, 2009For Securities:AXP

Summary

This 8-K filing from American Express Company (AXP), dated August 17, 2009, provides crucial updates on credit performance for its U.S. Card Services (USCS) operating segment. Investors are primarily interested in the delinquency and write-off statistics for the months ending May, June, and July 2009, presented on both an "owned" (GAAP) and "managed" basis. The "managed" basis offers a more comprehensive view, including securitized loans, which management uses to assess the business. While overall loan balances are declining, the key trend to monitor is the trajectory of delinquency and net write-off rates. The filing indicates a slight decrease in 30-day delinquencies and net write-off rates across both "owned" and "managed" portfolios over the three-month period. Specifically, the "managed" basis net write-off rate decreased from 10.0% in May to 9.2% in July. This filing also provides context by referencing the credit performance of the American Express Credit Account Master Trust, a key securitization vehicle.

Key Highlights

  • 1American Express is reporting U.S. Card Services (USCS) delinquency and write-off statistics for May, June, and July 2009.
  • 2Statistics are presented on both "owned" (GAAP) and "managed" (including securitized loans) bases, with the "managed" basis considered a more comprehensive view by management.
  • 3Total cardmember loans (both owned and managed) show a declining trend from May to July 2009.
  • 430-day past due loan percentages have decreased slightly across both "owned" and "managed" portfolios over the reported period.
  • 5Net write-off rates have also shown a downward trend for the "managed" basis portfolio, from 10.0% in May to 9.2% in July.
  • 6The May 2009 net write-off rate benefited from the sale of previously written-off loans, a practice the company intends to continue.
  • 7The filing includes data on the American Express Credit Account Master Trust's performance, noting that it may differ from the overall managed portfolio due to loan mix and other factors.

Frequently Asked Questions

The "owned" basis reflects only cardmember loans included in American Express's consolidated balance sheets, adhering to GAAP. The "managed" basis presentation is a non-GAAP measure that assumes no off-balance sheet securitization transactions, meaning it reflects securitized loans and their associated income as if they were still on the balance sheet. Management uses the "managed" basis as it provides a more comprehensive view of the U.S. cardmember lending business by including both securitized and non-securitized loans.

The filing indicates a slight improvement. For the "managed" basis portfolio, the percentage of loans 30 days past due decreased from 4.7% in May 2009 to 4.2% in July 2009. Similarly, the net write-off rate for the "managed" portfolio declined from 10.0% in May to 9.2% in July. While still elevated, the downward trend is a positive sign in a challenging economic environment.

The American Express Credit Account Master Trust is a significant securitization vehicle, and its loans do not always have identical characteristics to the total "managed" USCS portfolio. Differences in loan mix (e.g., proportion of small business loans), reporting periods, and calculation methodologies can lead to variations in credit performance between the Trust and the overall managed portfolio. Presenting both provides investors with a more granular understanding of credit trends.

This section highlights the inherent risks and uncertainties associated with American Express's business, particularly concerning credit risk. Investors should be aware that factors like the economic environment (unemployment, bankruptcies), the effectiveness of credit models, and management's response to economic challenges can materially impact future financial results, including delinquency rates, write-offs, and spending levels. The company disclaims any obligation to update these forward-looking statements.