Business Context and Reporting Period
This Form 8-K, filed on July 15, 2010, by American Express Company, provides Regulation FD disclosure regarding delinquency and write-off statistics for the U.S. Card Services (USCS) operating segment. The data covers the months ended April 30, May 31, and June 30, 2010, as well as the three-month period ended June 30, 2010.
Key Financial Metrics
The filing presents credit performance metrics for the USCS cardmember lending portfolio and the American Express Credit Account Master Trust (Lending Trust).
USCS Cardmember Lending Portfolio (Preliminary)
| Metric | Apr 30, 2010 | May 31, 2010 | Jun 30, 2010 | 3 Months Ended Jun 30, 2010 |
|---|---|---|---|---|
| Total Loans ($ Billions) | 48.9 | 49.5 | 49.0 | 49.0 |
| 30+ Days Past Due (% of Total) | 3.1% | 2.9% | 2.7% | 2.7% |
| Average Loans ($ Billions) | 49.0 | 49.2 | 49.2 | 49.1 |
| Net Write-off Rate | 6.7% | 6.3% | 5.7% | 6.2% |
Lending Trust Performance
| Metric | Period Ended Apr 23, 2010 | Period Ended May 25, 2010 | Period Ended Jun 24, 2010 |
|---|---|---|---|
| Ending Total Principal Balance ($ Billions) | 32.5 | 32.7 | 32.4 |
| Defaulted Amount, Net of Recoveries ($ Billions) | 0.2 | 0.2 | 0.2 |
| Annualized Default Rate, Net of Recoveries | 7.3% | 6.1% | 5.9% |
| Total 30+ Days Delinquent ($ Billions) | 1.1 | 1.0 | 0.9 |
Material Changes
For the USCS portfolio, the 30+ days past due ratio improved sequentially from 3.1% in April to 2.7% in June. Similarly, the net write-off rate declined from 6.7% in April to 5.7% in June. The Lending Trust also showed improvement, with the annualized default rate decreasing from 7.3% in the April period to 5.9% in the June period.
Management Commentary and Risks
The filing notes that the USCS statistics include both securitized and non-securitized loans, whereas the Lending Trust reports only on securitized loans. Management highlights that credit performance may differ between the two due to:
- Differences in loan mix and vintage (e.g., a larger proportion of small business loans in the non-securitized portion).
- Differences in reporting periods (calendar month for USCS vs. specific monthly periods for the Trust).
- Calculation mechanics, such as the use of end-of-period balances for the Trust versus average loan balances for the USCS total portfolio.
The filing does not provide specific guidance, outlook, or discussion of unusual items beyond the statistical disclosure.
Investor Verification Checklist
- Verify the trend in net write-off rates for the USCS segment against the broader economic environment.
- Compare the Lending Trust's annualized default rate with the USCS net write-off rate to understand the impact of securitization.
- Confirm the composition of the non-securitized portfolio, specifically the exposure to small business loans.
- Review subsequent Form 10-D filings from the Lending Trust for updated monthly performance data.