Business Context and Reporting Period
This Form 8-K, filed on March 15, 2012, by American Express Company, provides Regulation FD disclosure regarding credit performance statistics for the U.S. Card Services (USCS) operating segment. The data covers the months ended December 31, 2011, January 31, 2012, and February 29, 2012.
Key Financial Metrics
U.S. Card Services (USCS) Total Portfolio
| Metric | Dec 31, 2011 | Jan 31, 2012 | Feb 29, 2012 |
|---|---|---|---|
| Total Loans ($ Billions) | $53.7 | $51.8 | $50.7 |
| Average Loans ($ Billions) | $52.5 | $52.8 | $51.2 |
| 30+ Days Past Due (%) | 1.4% | 1.4% | 1.4% |
| Net Write-off Rate (Principal Only, %) | 2.3% | 2.2% | 2.4% |
American Express Credit Account Master Trust (Lending Trust)
| Metric | Nov 25 - Dec 25, 2011 | Dec 26 - Jan 25, 2012 | Jan 26 - Feb 23, 2012 |
|---|---|---|---|
| Ending Principal Balance ($ Billions) | $33.3 | $31.7 | $30.8 |
| Defaulted Amount, Net of Recoveries ($ Billions) | $0.1 | $0.1 | $0.1 |
| Annualized Default Rate, Net of Recoveries (%) | 2.3% | 2.2% | 2.7% |
| Total 30+ Days Delinquent ($ Billions) | $0.5 | $0.5 | $0.5 |
Note: The filing does not provide consolidated revenue, profit, cash flow, or debt figures for the Company as a whole.
Material Changes
- Loan Balances: The USCS total loan portfolio decreased from $53.7 billion in December 2011 to $50.7 billion in February 2012. Similarly, the Lending Trust principal balance declined from $33.3 billion to $30.8 billion over the comparable periods.
- Credit Quality: The USCS 30+ days past due rate remained stable at 1.4% across all three months. The USCS net write-off rate fluctuated slightly, rising to 2.4% in February from 2.2% in January.
- Lending Trust Defaults: The annualized default rate for the Lending Trust increased to 2.7% in the period ending February 23, 2012, compared to 2.2% in the prior period.
Management Commentary and Risks
The filing clarifies that USCS statistics include both securitized and non-securitized loans, whereas the Lending Trust reports only on securitized loans. Management notes that credit performance between the two may differ due to:
- Differences in loan mix and vintage (e.g., a larger proportion of small business loans in the non-securitized portfolio).
- Differences in reporting periods (calendar month for USCS vs. ~25th to ~25th for the Trust).
- Calculation mechanics, specifically the use of end-of-period balances for the Trust versus average balances for the USCS total portfolio.
Investor Verification Checklist
- Verify the trend in the USCS net write-off rate, which rose to 2.4% in February 2012.
- Confirm the divergence between the Lending Trust annualized default rate (2.7%) and the USCS total portfolio net write-off rate (2.4%) for the most recent period.
- Review the continued decline in total loan balances for both the USCS segment and the Lending Trust.
- Check subsequent Form 10-D filings for the Lending Trust to monitor the stability of the 30+ days delinquent balance, which remained flat at $0.5 billion.