Business Context and Reporting Period
This Form 8-K filing by American Express Company (AXP) was submitted on August 17, 2020, under Item 7.01 (Regulation FD Disclosure). The report provides supplemental credit performance statistics for the U.S. Consumer and U.S. Small Business Card Member lending portfolios for the months ended May 31, June 30, and July 31, 2020. The data covers both the Company's total loan portfolios and the securitized loans held by the American Express Credit Account Master Trust (Lending Trust).
Key Financial Metrics
U.S. Consumer Card Member Loans
- Total Loans (July 31, 2020): $50.0 billion
- 30+ Days Past Due: 1.4% (down from 1.5% in June and 1.6% in May)
- Net Write-off Rate (Principal Only): 2.6% (stable from June, down from 3.0% in May)
U.S. Small Business Card Member Loans
- Total Loans (July 31, 2020): $11.7 billion
- 30+ Days Past Due: 1.4% (down from 1.6% in June and May)
- Net Write-off Rate (Principal Only): 2.5% (up slightly from 2.4% in June, stable from May)
Lending Trust (Securitized Loans)
- Ending Principal Balance (July 31, 2020): $24.4 billion
- Annualized Default Rate (Net of Recoveries): 1.9% (up from 1.8% in June, down from 2.1% in May)
- Total 30+ Days Delinquent: $0.2 billion
Material Changes and Trends
From May to July 2020, both U.S. Consumer and U.S. Small Business portfolios showed improvement in delinquency rates, with 30+ days past due loans declining in both segments. The U.S. Consumer net write-off rate improved significantly from 3.0% in May to 2.6% in June and July. Conversely, the U.S. Small Business net write-off rate saw a marginal increase in July compared to June. Total loan balances for both segments decreased slightly over the three-month period.
Management Commentary and Risks
The filing highlights the impact of the "Customer Pandemic Relief Program" initiated in Q1 2020 for customers affected by COVID-19. Under this program, delinquency status was frozen at enrollment, preventing loans from aging even if payments were missed. The Company closed this program to new enrollees in the U.S. as of June 2020. The report notes that the credit performance of the Lending Trust may differ from the total portfolio due to differences in loan mix, vintage, and calculation mechanics (e.g., end-of-period balances vs. average balances).
Investor Verification Checklist
- Verify the impact of the June 2020 closure of the Customer Pandemic Relief Program on future delinquency aging trends.
- Compare the reported net write-off rates against the Company's full quarterly earnings reports to assess consistency.
- Review the Lending Trust's Form 10-D filings to understand the specific mechanics driving the 1.9% annualized default rate.
- Monitor the divergence between the U.S. Consumer and Small Business write-off rates as economic conditions evolve.