8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Oct 17, 2016)

Filed October 17, 2016For Securities:AXP

Summary

This 8-K filing from American Express (AXP) provides an update on credit performance metrics for its U.S. Consumer Services (USCS) and U.S. Small Business segments as of September 30, 2016, along with data for the preceding two months. The report indicates stable credit quality, with 30-day delinquency rates and net write-off rates remaining consistent across the observed periods. This information is crucial for investors as it offers a snapshot of the company's risk management and loan portfolio health in its core domestic lending operations. The filing also includes data on the American Express Credit Account Master Trust (Lending Trust), which represents securitized card member loans. While the statistics for the Lending Trust differ in calculation methodology, they generally show a consistent low annualized default rate and stable delinquency levels. Investors should note these distinctions in reporting when assessing overall credit risk and portfolio performance.

Key Highlights

  • 1Stable 30-day delinquency rates of 1.1% for both U.S. Consumer Services and U.S. Small Business segments for the months ended July, August, and September 2016.
  • 2Consistent net write-off rates (principal only) for USCS at 1.6% and for U.S. Small Business at 1.5%-1.6% during the observed three-month period.
  • 3Total loans in USCS remained steady around $44.8 billion to $45.0 billion, while U.S. Small Business loans grew slightly from $8.7 billion to $9.0 billion by September 30, 2016.
  • 4The report clarifies that securitized loans in the Lending Trust have different characteristics and reporting methodologies than the direct USCS and U.S. Small Business portfolios.
  • 5The American Express Credit Account Master Trust demonstrated a consistently low annualized default rate of 1.0% net of recoveries for the three months ending September 30, 2016.
  • 6Total delinquent loans (30+ days) in the Lending Trust remained stable at $0.2 billion across the reported months.

Frequently Asked Questions

The primary purpose of this 8-K filing is to provide investors with current, unaudited delinquency and write-off statistics for American Express's U.S. Consumer Services and U.S. Small Business operating segments for the months of July, August, and September 2016. It also includes related data for securitized loans held in the American Express Credit Account Master Trust.

No, the filing explicitly states that the credit performance of the Lending Trust may not be identical to the USCS or U.S. Small Business segments due to differences in loan characteristics, vintage, aging, and calculation methodologies (e.g., using end-of-period principal for write-offs in the Trust vs. average loan balances for USCS/Small Business).

The 'adjusted' metrics, noted as non-GAAP measures, exclude the impact of certain Card Member loans that were reclassified from 'held for sale' to 'held for investment' on the balance sheet. These adjustments provide an alternative view of credit performance by removing the specific impact of this reclassification on past due and write-off rates.

The overall trend indicates stable credit quality. Delinquency and write-off rates for both the direct consumer/small business portfolios and the securitized trust remain consistent and at relatively low levels during the reporting period. This suggests no significant deterioration in borrower repayment behavior.