Business Context and Reporting Period
This Form 8-K filing by American Express Company (the "Company") was submitted on October 15, 2012, under Item 7.01 Regulation FD Disclosure. The report provides delinquency and write-off statistics for the U.S. Card Services ("USCS") operating segment's lending portfolio for the months ended July 31, August 31, and September 30, 2012, as well as the three-month period ended September 30, 2012.
Key Financial Metrics
The filing details credit performance metrics for the USCS total portfolio and the American Express Credit Account Master Trust ("Lending Trust").
USCS Total Portfolio (Cardmember Lending)
| Metric | July 31, 2012 | August 31, 2012 | Sept 30, 2012 (Prelim) | 3 Months Ended Sept 30, 2012 |
|---|---|---|---|---|
| Total Loans ($ Billions) | $52.7 | $53.0 | $52.9 | $52.9 |
| 30 Days Past Due (% of Total) | 1.2% | 1.2% | 1.3% | 1.3% |
| Average Loans ($ Billions) | $52.6 | $52.8 | $52.9 | $52.8 |
| Net Write-off Rate (Principal Only) | 2.0% | 2.0% | 1.9% | 1.9% |
Lending Trust Performance
The Lending Trust reported the following for its three most recent monthly periods:
- Ending Principal Balance: Declined from $30.9 billion (ended July 25) to $30.6 billion (ended Sept 24).
- Annualized Default Rate (Net of Recoveries): Ranged between 2.0% and 2.1% across the three periods.
- Total 30+ Days Delinquent: Remained stable at $0.4 billion for all three periods.
Material Changes and Comparisons
For the USCS total portfolio, the 30-day past due ratio increased slightly from 1.2% in July and August to 1.3% in September. Conversely, the net write-off rate (principal only) improved slightly, decreasing from 2.0% in July and August to 1.9% in September. The Lending Trust's annualized default rate remained relatively stable, fluctuating between 2.0% and 2.1%.
Management Commentary and Risks
The Company notes that the statistics for the USCS total portfolio include both securitized and non-securitized loans, whereas the Lending Trust reports only on securitized loans. Consequently, the credit performance of the Lending Trust may differ from the total portfolio on a month-to-month basis due to:
- Differences in the mix and vintage of loans (e.g., a larger proportion of small business loans in the non-securitized portion).
- Differences in reporting periods (calendar month for total portfolio vs. ~25th to ~25th for the Trust).
- Calculation mechanics, such as the use of end-of-period balances for the Trust versus average balances for the total portfolio.
The filing does not provide specific guidance, outlook, or discussion of unusual items beyond the statistical disclosure.
Investor Verification Checklist
- Verify the distinction between the USCS total portfolio metrics and the Lending Trust metrics, as they are not directly comparable due to portfolio composition and calculation methods.
- Monitor the trend of the 30-day past due ratio, which rose to 1.3% in September.
- Confirm the stability of the net write-off rate at 1.9% for the quarter ended September 30, 2012.
- Review the Lending Trust's Form 10-D filings for granular data on securitized assets, noting the slight decline in ending principal balance to $30.6 billion.