Business Context and Reporting Period
This Form 8-K, filed on August 15, 2011, by American Express Company, serves as a Regulation FD disclosure. It provides delinquency and write-off statistics for the U.S. Card Services (USCS) operating segment's lending portfolio for the months ended May 31, June 30, and July 31, 2011. The filing also includes comparative credit performance data for the American Express Credit Account Master Trust (Lending Trust).
Key Financial Metrics
U.S. Card Services (USCS) Portfolio
| Metric | May 31, 2011 | June 30, 2011 | July 31, 2011 |
|---|---|---|---|
| Total Loans ($ Billions) | $50.3 | $49.9 | $50.3 |
| Average Loans ($ Billions) | $49.8 | $50.1 | $50.1 |
| 30+ Days Past Due (% of Total) | 1.6% | 1.5% | 1.5% |
| Net Write-off Rate (Principal Only) | 3.2% | 2.7% | 2.8% |
Lending Trust Portfolio
| Metric | Period Ended May 25 | Period Ended June 24 | Period Ended July 25 |
|---|---|---|---|
| Ending Total Principal Balance ($ Billions) | $31.7 | $31.6 | $31.6 |
| Defaulted Amount, Net of Recoveries ($ Billions) | $0.1 | $0.1 | $0.1 |
| Annualized Default Rate, Net of Recoveries | 3.2% | 2.9% | 2.9% |
| Total 30+ Days Delinquent ($ Billions) | $0.5 | $0.5 | $0.5 |
Material Changes and Trends
- USCS Delinquency: The percentage of loans 30 days past due improved from 1.6% in May to 1.5% in June and remained stable at 1.5% in July.
- USCS Write-offs: The net write-off rate decreased from 3.2% in May to 2.7% in June, before rising slightly to 2.8% in July.
- Lending Trust Defaults: The annualized default rate for the Lending Trust declined from 3.2% in the period ending May 25 to 2.9% for the subsequent two periods.
- Portfolio Size: Total loans in the USCS portfolio fluctuated slightly, ending July at $50.3 billion, matching the May level.
Management Commentary and Risks
The filing clarifies that USCS statistics cover the total portfolio (securitized and non-securitized), whereas Lending Trust data covers only securitized loans. Management notes that credit performance between the two may differ due to:
- Differences in loan mix and vintage, specifically a larger proportion of small business loans in the non-securitized portion of the total portfolio.
- Differences in reporting periods (calendar month for USCS vs. ~25th of month for Lending Trust).
- Calculation mechanics, such as the use of end-of-period balances for the Lending Trust versus average balances for the total portfolio.
The filing does not provide specific guidance, outlook, or commentary on future revenue, profit, or liquidity beyond the historical credit statistics presented.
Investor Verification Checklist
- Verify the trend in net write-off rates for the USCS segment over the next quarter to confirm if the July uptick to 2.8% is a temporary fluctuation.
- Compare the Lending Trust's annualized default rate (2.9%) against the USCS total portfolio net write-off rate (2.8%) to assess the risk profile of securitized versus non-securitized assets.
- Review the upcoming Form 10-D filings from the Lending Trust to monitor the stability of the $0.5 billion in 30+ days delinquent loans.
- Confirm if the "small business loans" mentioned in the non-securitized portfolio are showing distinct performance characteristics compared to consumer loans.