Business Context and Reporting Period
This Form 8-K, filed on May 15, 2009, by American Express Company, discloses Regulation FD information regarding delinquency and write-off statistics for the U.S. Card Services (USCS) operating segment. The data covers the months ended February 28, March 31, and April 30, 2009, presented on both an owned (GAAP) and managed basis.
Key Financial Metrics
U.S. Card Services Portfolio Statistics
| Metric | Feb 28, 2009 | Mar 31, 2009 | Apr 30, 2009 |
|---|---|---|---|
| Owned Basis Total Loans ($B) | $29.5 | $28.2 | $27.1 |
| Owned Basis Net Write-off Rate | 8.7% | 8.6% | 10.4% |
| Managed Basis Total Loans ($B) | $57.8 | $56.5 | $55.4 |
| Managed Basis Net Write-off Rate | 8.6% | 8.8% | 10.1% |
| 30+ Days Past Due (% of Total) | 5.3% | 5.1% | 4.9% |
Lending Trust Statistics (Securitized)
| Metric | Jan 26 - Feb 24 | Feb 25 - Mar 26 | Mar 27 - Apr 26 |
|---|---|---|---|
| Ending Principal Balance ($B) | $37.2 | $36.0 | $35.5 |
| Annualized Default Rate | 9.3% | 9.7% | 9.9% |
Note: The filing does not provide consolidated revenue, profit, cash flow, or debt figures for the company as a whole.
Material Changes
- Write-off Deterioration: The managed basis net write-off rate increased from 8.8% in March 2009 to 10.1% in April 2009. The owned basis rate rose from 8.6% to 10.4% over the same period.
- Delinquency Improvement: Despite rising write-offs, the percentage of loans 30 days past due declined slightly from 5.1% in March to 4.9% in April.
- Portfolio Reduction: Total managed loans decreased from $56.5 billion in March to $55.4 billion in April.
- March Anomaly: March 2009 write-off rates were artificially lowered by proceeds from the sale of previously written-off loans to third parties.
Guidance, Outlook, and Risks
Outlook: Management estimates that the U.S. lending write-off rate on a managed basis for the second quarter of 2009 will increase between 200 and 250 basis points over the first quarter rate of 8.5%.
Risks and Contingencies: The filing highlights significant risks related to the economic environment, including:
- Fluctuations in card lending balances.
- Ability to manage credit risk amidst housing market instability, rising unemployment, and bankruptcy rates.
- Effectiveness of credit models in predicting payment patterns.
- Impact of efforts to deal with delinquent cardmembers in a challenging economy.
Investor Verification Checklist
- Verify the trend of the managed basis net write-off rate against the Q2 2009 guidance (expected 200-250 bps increase over Q1).
- Confirm the distinction between "owned" (GAAP) and "managed" basis statistics to understand the full scope of credit exposure including securitized loans.
- Monitor the Lending Trust Form 10-D reports for potential divergence in credit performance compared to the managed portfolio due to loan mix and vintage differences.
- Assess the impact of the March 2009 sale of written-off loans on the comparability of historical write-off rates.