Business Context and Reporting Period
This Form 8-K, filed on August 17, 2009, by American Express Company, provides Regulation FD disclosure regarding credit performance statistics for the U.S. Card Services (USCS) operating segment. The data covers the months ended May 31, June 30, and July 31, 2009.
Key Financial Metrics
The filing presents delinquency and write-off statistics on both an "owned basis" (GAAP) and a "managed basis" (including securitized loans).
U.S. Card Services Statistics (Billions, except percentages)
| Metric | May 31, 2009 | June 30, 2009 | July 31, 2009 |
|---|---|---|---|
| Owned Basis Total Loans | $27.1 | $23.6 | $23.1 |
| Owned Basis 30+ Days Past Due % | 4.7% | 4.4% | 4.3% |
| Owned Basis Net Write-off Rate | 10.3% | 9.9% | 9.9% |
| Managed Basis Total Loans | $54.7 | $54.0 | $52.9 |
| Managed Basis 30+ Days Past Due % | 4.7% | 4.4% | 4.2% |
| Managed Basis Net Write-off Rate | 10.0% | 9.9% | 9.2% |
American Express Credit Account Master Trust (Securitized)
For the period ending July 26, 2009, the Trust reported an ending principal balance of $33.2 billion, a defaulted amount of $0.3 billion, and an annualized default rate of 8.9%.
Material Changes and Trends
- Declining Delinquencies: Both owned and managed basis 30+ days past due ratios decreased sequentially from May (4.7%) to July (4.3% owned, 4.2% managed).
- Improving Write-offs: The managed basis net write-off rate improved from 10.0% in May to 9.2% in July. The owned basis rate stabilized at 9.9% for June and July after a 10.3% rate in May.
- Loan Balance Reduction: Total owned loans decreased from $27.1 billion in May to $23.1 billion in July. Managed loans decreased from $54.7 billion to $52.9 billion over the same period.
- May 2009 Anomaly: The May 2009 write-off rates included a benefit from the sale of previously written-off loans to third parties, which were treated as partial recoveries.
Management Commentary, Risks, and Outlook
Management emphasizes the "managed basis" presentation as it provides a comprehensive view of the lending business by including securitized loans, which are managed alongside owned loans. The filing notes that credit performance in the securitized Lending Trust may differ from the managed portfolio due to differences in loan mix, vintage, and calculation mechanics.
Risks and Uncertainties: The report includes forward-looking statements subject to risks including:
- Ability to manage credit risk in a challenging economic environment (housing market, unemployment, bankruptcies).
- Impact of delinquency management efforts on cardmember payment patterns and brand perception.
- Near-term write-off rates dependent on loan balance changes and economic factors.
- Marketing and promotion spending levels based on competitive opportunities.
Investor Verification Checklist
- Verify the trend of the managed basis net write-off rate (9.2% in July) against future quarterly reports to confirm stabilization.
- Review the Form 10-D filings for the American Express Credit Account Master Trust to compare securitized loan performance against the managed portfolio.
- Monitor the impact of the sale of previously written-off loans on future write-off rate calculations.
- Assess the correlation between the reported decline in delinquency rates and broader economic indicators such as unemployment rates.