Business Context and Reporting Period
This Form 8-K filing by American Express Company (AXP) was submitted on July 15, 2020, under Item 7.01 Regulation FD Disclosure. The report provides preliminary delinquency and write-off statistics for the U.S. Consumer Card Member and U.S. Small Business Card Member lending portfolios for the months ended April 30, May 31, and June 30, 2020, as well as the three-month period ended June 30, 2020.
Key Financial Metrics
U.S. Consumer Card Member Loans
- Total Loans (June 30, 2020): $50.3 billion
- 30 Days Past Due (June 30, 2020): 1.5% of total loans
- Average Loans (Q2 2020): $51.7 billion
- Net Write-off Rate (Q2 2020): 2.8% (principal only)
U.S. Small Business Card Member Loans
- Total Loans (June 30, 2020): $11.7 billion
- 30 Days Past Due (June 30, 2020): 1.6% of total loans
- Average Loans (Q2 2020): $12.4 billion
- Net Write-off Rate (Q2 2020): 2.3% (principal only)
Combined U.S. Card Member Loans
- Total Loans (June 30, 2020): $62.0 billion
American Express Credit Account Master Trust (Lending Trust)
- Ending Principal Balance (June 30, 2020): $24.5 billion
- Annualized Default Rate (June 2020): 1.8%
- Total 30+ Days Delinquent (June 2020): $0.3 billion
Material Changes and Trends
From April to June 2020, total U.S. Consumer loans decreased slightly from $50.5 billion to $50.3 billion, while U.S. Small Business loans declined from $12.4 billion to $11.7 billion. The 30-day past due rate for U.S. Consumer loans improved from 1.7% in April to 1.5% in June. Conversely, the net write-off rate for U.S. Consumer loans rose from 2.7% in April to 2.6% in June, following a peak of 3.0% in May. Small Business delinquency rates remained stable at 1.6% across the three months, while write-off rates fluctuated between 2.0% and 2.5%.
Management Commentary and Unusual Items
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, and loans current at enrollment did not age regardless of payment status. The Company closed this program to new enrollees in the United States as of June 2020. Additionally, the report notes that credit performance statistics for the Lending Trust may differ from the total portfolio due to differences in loan mix, vintage, and calculation mechanics.
Investor Verification Checklist
- Verify the impact of the closed Customer Pandemic Relief Program on future delinquency aging trends.
- Compare the reported net write-off rates against the Lending Trust's annualized default rates to assess portfolio quality differences.
- Monitor the stability of the 30-day past due rates for Small Business loans given the economic environment.
- Confirm the preliminary nature of the Q2 2020 statistics in subsequent quarterly filings.