8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Aug 15, 2019)

Filed August 15, 2019For Securities:AXP

Summary

This 8-K filing from American Express (AXP) provides updated delinquency and write-off statistics for its U.S. Consumer and U.S. Small Business Card Member lending portfolios as of July 31, 2019, and for the preceding two months. Investors will find this information useful for assessing the credit quality of the company's loan book and its potential impact on future earnings. The data indicates stable 30-day delinquency rates across both the consumer and small business segments, with the consumer segment holding steady at 1.4% and the small business segment slightly increasing from 1.2% to 1.3%. Net write-off rates for the U.S. Consumer segment remained consistent at 2.2% for June and July, while the U.S. Small Business segment saw a slight increase in write-offs from 1.7% to 1.9% in June and July. The filing also provides parallel data for the American Express Credit Account Master Trust, offering a look at securitized loan performance.

Key Highlights

  • 1U.S. Consumer Card Member loans: Total loans grew slightly to $59.7 billion by July 31, 2019.
  • 2U.S. Consumer Card Member loans: 30-day delinquency rate remained stable at 1.4% for the three months ending July 31, 2019.
  • 3U.S. Consumer Card Member loans: Net write-off rate (principal only) was 2.2% for June and July, down from 2.5% in May.
  • 4U.S. Small Business Card Member loans: Total loans remained stable around $13.0-13.2 billion.
  • 5U.S. Small Business Card Member loans: 30-day delinquency rate edged up slightly to 1.3% in July from 1.2% in May.
  • 6U.S. Small Business Card Member loans: Net write-off rate (principal only) fluctuated, ending at 1.9% in July, up from 1.7% in June but down from 2.0% in May.
  • 7American Express Credit Account Master Trust: Annualized default rate, net of recoveries, remained stable at 1.5% for June and July.

Frequently Asked Questions

American Express is disclosing U.S. Consumer and U.S. Small Business Card Member loan statistics, including total loans, 30-day past due loans as a percentage of total loans, and net write-off rates (based on principal only). They are also providing data for the American Express Credit Account Master Trust, such as ending principal balance, defaulted amount, annualized default rate net of recoveries, and 30+ days delinquent amounts.

The 30-day delinquency rates for both U.S. Consumer and U.S. Small Business segments have remained relatively stable or shown only minor increases. Net write-off rates for the U.S. Consumer segment have stabilized at 2.2%. For the U.S. Small Business segment, net write-off rates showed some fluctuation but ended July at 1.9%, a slight increase from June. Overall, the trends suggest stable to slightly increasing credit risk, but not a significant deterioration.

The filing explicitly states that the Card Member loans securitized through the Lending Trust do not possess identical characteristics to the total U.S. Consumer or U.S. Small Business Card Member loan portfolios. This means their reported credit performance may differ due to variations in loan mix, vintage, aging, and calculation methodologies. For instance, the Lending Trust's annualized default rate was 1.5%, while the net write-off rate for the U.S. Consumer portfolio was 2.2% and for U.S. Small Business was 1.9%.

Reporting the net write-off rate on a 'principal only' basis means that any interest or fees that would have been earned on those loans are excluded from the calculation. This provides a more direct measure of the actual loss of the principal amount lent to card members, which can be a conservative way to assess credit losses.