8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Jan 15, 2016)

Filed January 15, 2016For Securities:AXP

Summary

This filing provides an update on American Express's U.S. Card Services (USCS) operating segment, specifically focusing on delinquency and write-off statistics for Card Member loans held for investment as of October, November, and December 2015. A significant operational change noted is the reclassification of Card Member loans related to co-brand partnerships with Costco and JetBlue from "held for investment" to "held for sale" effective December 1, 2015. This reclassification impacts the reported loan figures for December 2015, as these portfolios are no longer included in the "held for investment" data. The company also provides an update on the expected timelines for the sale of these portfolios. The sale of the Costco portfolio is anticipated to close mid-year 2016, subject to ongoing discussions, while the JetBlue portfolio sale is expected to be finalized in the first quarter of 2016, pending customary closing conditions. The filing also includes performance data for the American Express Credit Account Master Trust, which may differ from USCS loan performance due to various factors, including loan mix and calculation methodologies.

Key Highlights

  • 1Reclassification of Costco and JetBlue co-brand loan portfolios from "held for investment" to "held for sale" as of December 1, 2015.
  • 2The Costco portfolio had $14.0 billion and the JetBlue portfolio had $1.1 billion in outstanding balances as of December 31, 2015, prior to their sale inclusion.
  • 3The sale of the Costco portfolio is expected to close mid-year 2016, contingent on discussions.
  • 4The sale of the JetBlue portfolio is expected to close in Q1 2016, subject to closing conditions.
  • 5For USCS Card Member loans held for investment, 30-day past due rates remained stable at 1.0% from October to December 2015.
  • 6Net write-off rates for USCS Card Member loans held for investment were 1.3% for October and the three months ended December 2015, and 1.4% for November and December 2015.
  • 7The filing distinguishes between the credit performance of USCS loans held for investment and the American Express Credit Account Master Trust, noting potential differences in reporting due to loan characteristics and calculation methods.

Frequently Asked Questions

The reclassification of these portfolios from 'held for investment' to 'held for sale' means that their outstanding balances and associated credit performance metrics are no longer included in the reported 'held for investment' statistics for American Express's U.S. Card Services segment starting in December 2015. This change is significant for understanding the underlying credit quality of the loans that American Express continues to hold.

The sale of the Costco portfolio is currently expected to close around the middle of 2016, subject to the outcome of ongoing discussions. The JetBlue portfolio sale is anticipated to be finalized in the first quarter of 2016, provided that customary closing conditions are met.

For the months of October, November, and December 2015, the 30-day past due rate for USCS Card Member loans held for investment remained stable at 1.0%. The net write-off rate for these loans was 1.3% in October and for the three months ended December 2015, and 1.4% for November and December 2015.

The filing states that differences can arise due to various factors, including variations in the mix and age (vintage) of loans, whether loans are securitized or not, and different calculation methodologies for write-off rates (e.g., using end-of-period balances for the trust versus average balances for USCS). Therefore, the performance reported by the trust may not perfectly reflect the performance of all USCS loans held for investment.