8-KRegulation FD

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

Filed October 15, 2009For Securities:AXP

Summary

This 8-K filing from American Express Company (AXP) provides updated delinquency and write-off statistics for its U.S. Card Services segment as of and for the months ending July 31, August 31, and September 30, 2009, along with data for the third quarter of 2009. The report emphasizes the company's "managed basis" presentation, which offers a more comprehensive view of the lending business by including securitized assets, as opposed to the "owned basis" which reflects only balance sheet assets. Investors are provided with key credit performance metrics to assess the ongoing health of Amex's U.S. cardmember lending portfolio amidst a challenging economic environment. The data indicates a generally improving trend in credit quality during the third quarter of 2009, particularly on a managed basis. For instance, the net write-off rate on a managed basis decreased from 9.2% in July to 8.4% in September, and the 30-day delinquency rate remained stable or slightly improved. While the "owned basis" metrics show some volatility, likely due to securitization mechanics and loan transfers, the managed basis provides a more consistent picture for evaluating the overall credit risk and performance of the U.S. Card Services business. Investors should pay close attention to these managed basis figures for a clearer understanding of the company's credit exposure and loss trends.

Key Highlights

  • 1American Express is providing updated delinquency and write-off statistics for its U.S. Card Services segment for July, August, and September 2009, and the third quarter of 2009.
  • 2The company emphasizes its "managed basis" presentation, which includes securitized loans, to offer a more complete view of its U.S. cardmember lending business.
  • 3On a managed basis, the net write-off rate for U.S. Card Services showed a declining trend, moving from 9.2% in July to 8.4% in September 2009.
  • 4The 30-day past due loan rate on a managed basis remained relatively stable, around 4.1%, throughout the reported months.
  • 5The "owned basis" metrics, which reflect only balance sheet loans, showed more volatility, with a net write-off rate of 9.2% in September, influenced by loan securitization activities.
  • 6The report also includes data on the American Express Credit Account Master Trust, showing a decreasing annualized default rate, net of recoveries, from 8.9% to 8.1% between June and August 2009.

Frequently Asked Questions

The "owned basis" reflects cardmember loans directly included on American Express's consolidated balance sheets, adhering to GAAP. The "managed basis" presentation treats all securitized cardmember loans and their associated income as if they were still on the company's balance sheet and income statement, providing a more comprehensive view of the entire lending portfolio, including assets that have been securitized off-balance sheet. Management uses the managed basis to better assess the overall dynamics of the U.S. cardmember lending business.

Based on the managed basis data, which management views as the most representative, credit quality appears to be showing signs of improvement during the third quarter of 2009. The net write-off rate on a managed basis decreased from 9.2% in July to 8.4% in September. The 30-day delinquency rate remained stable. This suggests that the company's U.S. cardmember lending portfolio is experiencing a slight easing of credit stress compared to earlier in the quarter.

The "owned basis" data can be more volatile due to the mechanics of securitization transactions. For example, the transfer of loans to the American Express Credit Account Master Trust and the maturity of certificates issued by the trust can impact the "owned basis" metrics like the net write-off rate. The managed basis smooths out these effects by considering all loans as if they were still on the books, offering a more consistent trend analysis.

The data for the American Express Credit Account Master Trust provides insights into the performance of a specific pool of securitized loans. The reported declining annualized default rate (net of recoveries) and stable 30+ day delinquency figures for the trust offer further evidence, albeit for a subset of loans, that credit performance is stabilizing or improving within the securitized portfolio during this period.