Business Context and Reporting Period
This Form 8-K filing by American Express Company, dated June 15, 2012, provides Regulation FD disclosure regarding credit performance statistics. The report covers the U.S. Card Services (USCS) operating segment for the months ended March 31, April 30, and May 31, 2012. It also includes comparative data for the American Express Credit Account Master Trust (Lending Trust) for its three most recent monthly reporting periods.
Key Financial Metrics
U.S. Card Services (USCS) Portfolio
| Metric | March 31, 2012 | April 30, 2012 | May 31, 2012 |
|---|---|---|---|
| Total Loans (Billions) | $51.4 | $51.7 | $52.6 |
| Average Loans (Billions) | $51.0 | $51.6 | $52.2 |
| 30+ Days Past Due (% of Total) | 1.3% | 1.3% | 1.2% |
| Net Write-off Rate (Principal Only) | 2.4% | 2.4% | 2.2% |
Lending Trust Portfolio
| Metric | Feb 24 - Mar 25, 2012 | Mar 26 - Apr 24, 2012 | Apr 25 - May 25, 2012 |
|---|---|---|---|
| Ending Total Principal Balance (Billions) | $30.9 | $30.9 | $30.9 |
| Defaulted Amount, Net of Recoveries (Billions) | $0.1 | $0.1 | $0.1 |
| Annualized Default Rate, Net of Recoveries | 2.5% | 2.6% | 2.2% |
| Total 30+ Days Delinquent (Billions) | $0.5 | $0.4 | $0.4 |
Material Changes
- USCS Delinquency: The percentage of loans 30 days past due decreased from 1.3% in March and April to 1.2% in May 2012.
- USCS Write-offs: The net write-off rate (principal only) improved from 2.4% in March and April to 2.2% in May 2012.
- Lending Trust Defaults: The annualized default rate for the Lending Trust declined from 2.6% in the period ending April 24 to 2.2% in the period ending May 25.
- Portfolio Growth: USCS total loans grew from $51.4 billion in March to $52.6 billion in May 2012.
Management Commentary and Risks
The filing clarifies that USCS statistics include both securitized and non-securitized cardmember loans, whereas the Lending Trust reports only on securitized loans. Management notes that credit performance between the two may differ month-to-month due to:
- Differences in loan mix and vintage (e.g., a larger proportion of small business loans in the non-securitized portion).
- Differences in reporting periods (calendar month for USCS vs. specific monthly cycles for the Lending Trust).
- Calculation mechanics, such as the use of end-of-period balances for the Lending Trust versus average loan balances for the total USCS portfolio.
The filing does not provide specific guidance, outlook, or discussion of unusual items beyond the statistical disclosure.
Investor Verification Checklist
- Verify the trend in net write-off rates for the USCS segment against prior quarters to confirm the improvement in May 2012.
- Compare the Lending Trust's annualized default rate with the USCS net write-off rate to understand the impact of the non-securitized portfolio.
- Review the composition of the non-securitized portfolio, specifically the exposure to small business loans, as noted by management as a differentiator.
- Confirm that the reported "Net write-off rate" excludes interest and fees, as specified in the filing.