Business Context and Reporting Period
This Form 8-K filing by American Express Company, dated August 15, 2014, provides Regulation FD disclosure regarding credit performance statistics. The report focuses on the U.S. Card Services (USCS) operating segment for the months ended May 31, June 30, and July 31, 2014. It also includes comparative data for the American Express Credit Account Master Trust (Lending Trust) for its three most recent monthly reporting periods.
Key Financial Metrics
U.S. Card Services (USCS) Portfolio
| Metric | May 31, 2014 | June 30, 2014 | July 31, 2014 |
|---|---|---|---|
| Total Loans (Billions) | $57.5 | $57.7 | $57.8 |
| Average Loans (Billions) | $56.9 | $57.6 | $57.8 |
| 30+ Days Past Due (% of Total) | 1.0% | 0.9% | 0.9% |
| Net Write-off Rate (Principal Only) | 1.6% | 1.5% | 1.5% |
Lending Trust Portfolio
| Metric | Apr 25 - May 25, 2014 | May 26 - Jun 24, 2014 | Jun 25 - Jul 25, 2014 |
|---|---|---|---|
| Ending Total Principal Balance (Billions) | $28.5 | $28.3 | $28.0 |
| Defaulted Amount, Net of Recoveries (Billions) | $0.1 | $0.1 | $0.1 |
| Annualized Default Rate, Net of Recoveries | 1.7% | 1.6% | 1.6% |
| Total 30+ Days Delinquent (Billions) | $0.3 | $0.3 | $0.3 |
Material Changes and Trends
- USCS Loan Growth: Total loans in the USCS segment increased slightly from $57.5 billion in May to $57.8 billion in July 2014.
- USCS Credit Quality: The 30+ days past due ratio improved from 1.0% in May to 0.9% in June and remained stable at 0.9% in July. The net write-off rate (principal only) decreased from 1.6% in May to 1.5% in June and held steady at 1.5% in July.
- Lending Trust Balance: The ending principal balance for the Lending Trust declined gradually from $28.5 billion to $28.0 billion over the three reporting periods.
- Lending Trust Defaults: The annualized default rate for the Lending Trust improved from 1.7% to 1.6% and remained at 1.6% through the period ending July 25, 2014.
Management Commentary and Risks
The filing clarifies that USCS statistics cover the total portfolio of Card Member loans (both securitized and non-securitized) under U.S. GAAP, whereas the Lending Trust reports only on securitized loans. Management notes that credit performance between the two may differ due to:
- Differences in loan mix and vintage, specifically a larger proportion of small business loans in the non-securitized portion of the total portfolio.
- Differences in reporting periods (calendar month for USCS vs. ~25th to ~25th for the Lending Trust).
- Calculation mechanics, such as the use of end-of-period balances for the Lending Trust versus average loan balances for the total portfolio.
The filing does not provide specific forward-looking guidance, revenue, profit, or cash flow metrics for the company as a whole.
Key Facts for Investor Verification
- Verify the distinction between the total USCS portfolio performance and the securitized Lending Trust performance, as they are not directly comparable.
- Confirm the stability of the 0.9% delinquency rate and 1.5% net write-off rate in the USCS segment for the second half of the second quarter.
- Note that the Lending Trust principal balance is trending downward while the total USCS loan balance is trending upward.
- Review subsequent Form 10-D filings for the Lending Trust to track the consistency of the 1.6% annualized default rate.