Business Context and Reporting Period
This Form 8-K, filed on February 16, 2010, by American Express Company, provides Regulation FD disclosure regarding delinquency and write-off statistics for the U.S. Card Services (USCS) operating segment. The data covers the months ended November 30, 2009, December 31, 2009, and January 31, 2010.
Key Financial Metrics
The filing details credit performance metrics for the USCS lending portfolio, distinguishing between the "Total portfolio" (GAAP basis as of Jan 1, 2010) and the "Non-securitized portfolio."
| Metric | Nov 30, 2009 | Dec 31, 2009 | Jan 31, 2010 |
|---|---|---|---|
| Total Portfolio Loans ($ Billions) | $51.5 | $52.6 | $50.9 |
| 30+ Days Past Due (%) | 3.9% | 3.7% | 3.6% |
| Net Write-off Rate (%) | 7.6% | 7.1% | 7.0% |
| Non-Seuritized Loans ($ Billions) | $22.4 | $23.5 | Not Reported |
| Non-Seuritized Write-off Rate (%) | 8.1% | 7.4% | Not Reported |
Additionally, the American Express Credit Account Master Trust (Lending Trust) reported an annualized default rate of 6.8% for the period ending January 25, 2010, with a total principal balance of $34.3 billion.
Material Changes
- Improving Credit Trends: Both the 30+ days past due percentage and the net write-off rate for the total portfolio declined sequentially from November 2009 through January 2010.
- Portfolio Consolidation: As of January 1, 2010, the Company consolidated securitized loans onto its balance sheet. Consequently, the "Total portfolio" now reflects a GAAP basis measurement including both securitized and non-securitized loans.
- Reporting Methodology Change: The Company announced it will generally cease reporting metrics specifically for the "Non-securitized portfolio" (formerly "owned basis") commencing with January 2010 data, shifting focus to the consolidated total portfolio.
Outlook, Risks, and Unusual Items
The filing notes that credit performance metrics for the Lending Trust may differ from the total portfolio due to differences in loan mix, vintage, and calculation mechanics (e.g., end-of-period balances vs. average balances). The Company highlighted that the non-securitized portion of the total portfolio contains a larger proportion of small business loans, which may impact risk profiles compared to the securitized trust.
Investor Verification Checklist
- Verify the impact of the January 1, 2010 consolidation of securitized loans on future GAAP financial reporting.
- Confirm the cessation of "Non-securitized portfolio" specific metrics in future earnings releases.
- Compare the Lending Trust's default rates (reported in Form 10-D) against the Company's total portfolio write-off rates to understand the risk distribution between securitized and non-securitized assets.
- Monitor the sequential trend of the net write-off rate to assess if the improvement observed in Q4 2009 and January 2010 is sustainable.