Business Context and Reporting Period
This Form 8-K, filed on February 15, 2011, by American Express Company (the "Company"), provides Regulation FD disclosure regarding delinquency and write-off statistics for the U.S. Card Services ("USCS") operating segment. The report covers the months ended November 30 and December 31, 2010, and January 31, 2011.
Key Financial Metrics
The filing presents credit performance data for the USCS total portfolio and the American Express Credit Account Master Trust ("Lending Trust").
USCS Total Portfolio (Cardmember Lending)
| Metric | Nov 30, 2010 | Dec 31, 2010 | Jan 31, 2011 |
|---|---|---|---|
| Total Loans ($ Billions) | $49.6 | $51.6 | $49.5 |
| Average Loans ($ Billions) | $49.4 | $50.1 | $50.5 |
| 30 Days Past Due (% of Total) | 2.2% | 2.1% | 2.1% |
| Net Write-off Rate | 4.4% | 4.1% | 3.8% |
Lending Trust (Securitized Portfolio)
| Metric | Period Ended Nov 24, 2010 | Period Ended Dec 24, 2010 | Period Ended Jan 25, 2011 |
|---|---|---|---|
| Ending Total Principal Balance ($ Billions) | $32.2 | $34.1 | $32.6 |
| Defaulted Amount, Net of Recoveries ($ Billions) | $0.1 | $0.1 | $0.1 |
| Annualized Default Rate, Net of Recoveries | 4.6% | 4.2% | 3.8% |
| Total 30+ Days Delinquent ($ Billions) | $0.8 | $0.7 | $0.7 |
Note: This filing does not provide revenue, profit, cash flow, margins, debt, or liquidity metrics for the Company as a whole.
Material Changes
- Improving Credit Quality: The USCS net write-off rate declined sequentially from 4.4% in November 2010 to 3.8% in January 2011.
- Stable Delinquency: The percentage of loans 30 days past due in the USCS portfolio stabilized at 2.1% for December 2010 and January 2011, down from 2.2% in November.
- Lending Trust Trends: The Lending Trust's annualized default rate improved from 4.6% to 3.8% over the three reported periods, while total 30+ days delinquent balances decreased from $0.8 billion to $0.7 billion.
- Loan Balances: USCS total loans peaked at $51.6 billion in December 2010 before declining to $49.5 billion in January 2011.
Management Commentary and Risks
The Company notes that statistics for the total USCS portfolio (securitized and non-securitized) differ from those reported by the Lending Trust due to several factors:
- Portfolio Mix: The total portfolio includes a larger proportion of small business loans in the non-securitized portion compared to the Lending Trust.
- Calculation Mechanics: The Lending Trust uses end-of-period principal balances, whereas the total portfolio uses average loan balances over the reporting period.
- Reporting Periods: The total portfolio uses calendar months, while the Lending Trust reports on periods generally beginning around the 25th of each month.
Consequently, the credit performance of the Lending Trust may vary month-to-month relative to the total portfolio.
Investor Verification Checklist
- Verify the sequential improvement in the USCS net write-off rate (4.4% to 3.8%) against broader industry credit trends.
- Confirm the distinction between the total USCS portfolio and the securitized Lending Trust to avoid misinterpreting credit metrics.
- Review the decline in USCS total loans from December to January 2011 to understand portfolio management actions.
- Check subsequent Form 10-D filings for the Lending Trust to monitor the stability of the 3.8% annualized default rate.