8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Mar 16, 2015)

Filed March 16, 2015For Securities:AXP

Summary

This 8-K filing from American Express Co. (AXP) on March 16, 2015, provides an update on the credit performance of its U.S. Card Services (USCS) operating segment for the months ending December 31, 2014, January 31, 2015, and February 28, 2015. The company is furnishing key delinquency and write-off statistics, which are important indicators of the health of its lending portfolio and potential future credit losses. Overall, the data indicates stable to slightly increasing net write-off rates and consistent 30-day delinquency rates within the USCS portfolio. While the total loan balances are declining, the net write-off rate has seen a modest uptick, particularly in February. The filing also provides separate data for the American Express Credit Account Master Trust, which shows a more pronounced increase in the annualized default rate, net of recoveries. Management notes a change in charge-off timing for certain modified loans, which affects these rates, and emphasizes that the trust's portfolio characteristics differ from the total USCS portfolio.

Key Highlights

  • 1American Express provided updated delinquency and write-off statistics for its U.S. Card Services (USCS) segment for December 2014, January 2015, and February 2015.
  • 2Total loans in the USCS lending portfolio decreased from $62.6 billion in December 2014 to $58.5 billion in February 2015.
  • 3The 30-day past due loan rate remained stable at 1.0% across all three reported months for the USCS portfolio.
  • 4The net write-off rate (principal only) for the USCS portfolio increased from 1.3% in December 2014 to 1.5% in February 2015.
  • 5A change in the timing of charge-offs for certain modified loans (from 180 to 120 days past due) beginning January 16, 2015, impacted reported write-off and default rates.
  • 6The American Express Credit Account Master Trust reported an increasing annualized default rate, net of recoveries, rising from 1.3% in the period ending December 25, 2014, to 1.7% in the period ending February 22, 2015.
  • 7The company clarifies that the USCS total portfolio and the securitized Lending Trust portfolio have different characteristics, which can lead to variations in reported credit performance metrics.

Frequently Asked Questions

The main purpose of this 8-K filing is to provide investors with timely updates on the credit quality of American Express's U.S. Card Services lending portfolio by disclosing key delinquency and write-off statistics for recent months. This allows investors to monitor potential credit risks and assess the company's loan portfolio performance.

The net write-off rate for the U.S. Card Services portfolio increased slightly from 1.3% in December 2014 to 1.5% in February 2015. The filing also notes a change in charge-off timing for certain modified loans that affects these rates. While the increase is modest, investors should monitor this trend along with other credit metrics in future filings. The 30-day delinquency rate remained stable, which is a positive sign.

The filing presents data for the total USCS portfolio (both securitized and non-securitized loans) and separately for the American Express Credit Account Master Trust (which represents securitized loans). The company highlights that these portfolios have different characteristics (e.g., mix of loan types, small business loans in the non-securitized portion) and calculation methodologies, leading to potential differences in their reported credit performance metrics. The Lending Trust's default rate showed a more pronounced increase than the USCS portfolio's write-off rate.

The change in charge-off timing from 180 days to 120 days past due for loans in certain modification programs, effective January 16, 2015, was implemented by American Express. This change is a methodological adjustment that affects when delinquent loans are written off, potentially accelerating the recognition of losses for specific loan categories and impacting the reported write-off and default rates.