8-KRegulation FD

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

Filed December 15, 2009For Securities:AXP

Summary

This 8-K filing from American Express (AXP) provides updated delinquency and write-off statistics for its U.S. Card Services operating segment for the months of September, October, and November 2009. The company emphasizes its "managed basis" presentation, which includes securitized loans, as management's preferred view for understanding the lending business's dynamics. Investors should note a consistent downward trend in both 30-day delinquencies and net write-off rates across both the "owned" (GAAP) and "managed" bases during this period, indicating potential early signs of credit quality improvement amidst a challenging economic environment. The filing also distinguishes the performance of the "managed" portfolio from the "American Express Credit Account Master Trust" (Lending Trust), explaining that differences can arise due to loan mix, vintage, and reporting mechanics. While the Lending Trust shows a stable annualized default rate and a slight decrease in 30+ day delinquencies, the overall trend for AXP's core U.S. Card Services business on a managed basis appears to be one of improving credit metrics by the end of November 2009.

Key Highlights

  • 1AXP is providing updated U.S. Card Services delinquency and write-off statistics for September, October, and November 2009.
  • 2The company highlights its "managed basis" presentation, which includes securitized loans, as a key metric for investors.
  • 3A consistent downward trend in 30-day past due loans as a percentage of total loans was observed across both "owned" and "managed" bases.
  • 4Net write-off rates showed a notable decrease from September to November 2009 for both "owned" and "managed" portfolios.
  • 5The "owned basis" (GAAP) showed a decrease in 30-day delinquencies from 4.2% in September to 3.9% in November.
  • 6The "managed basis" showed a similar decrease in 30-day delinquencies from 4.1% in September to 3.9% in November.
  • 7The "managed basis" net write-off rate improved from 8.4% in September to 7.6% in November.

Frequently Asked Questions

The "managed basis" presentation is significant because it provides investors with a more comprehensive view of American Express's U.S. Card Services lending business. It includes all securitized cardmember loans and their related income effects as if they were on the company's balance sheet and income statement, offering a fuller picture of credit performance trends compared to the GAAP "owned basis" which only includes on-balance sheet loans.

Based on the provided statistics for September, October, and November 2009, credit quality metrics appear to be improving. Both the "owned" and "managed" portfolios show a decreasing trend in 30-day delinquencies and net write-off rates over the three-month period, suggesting a positive development in loan performance.

The filing explains that differences can exist between the "managed" portfolio and the "Lending Trust" due to various factors such as the mix and vintage of loans, the number of days in the reporting period, and calculation methodologies (e.g., using average vs. end-of-period loan balances for write-offs). While both showed some stability or slight improvement, the "managed" basis reflects the company's entire U.S. Card Services lending business, including securitized assets, whereas the Lending Trust is a specific securitization vehicle.

American Express highlights risks related to managing credit risk, influenced by the overall economic environment (housing market, bankruptcies, unemployment), the effectiveness of credit models, and the company's strategies for dealing with delinquent cardmembers. Future write-off rates are dependent on loan balance changes, delinquency rates, and bankruptcy/unemployment trends. Marketing and service spending decisions also factor into overall results.