Business Context and Reporting Period
This Form 8-K filing by American Express Company, dated March 15, 2010, 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 December 31, 2009, January 31, 2010, and February 28, 2010.
Key Financial Metrics
The filing details credit performance metrics for the USCS lending portfolio, distinguishing between the total portfolio (GAAP basis) and the non-securitized portfolio.
| Metric | Dec 31, 2009 | Jan 31, 2010 | Feb 28, 2010 |
|---|---|---|---|
| Total Portfolio Loans ($ Billions) | $52.6 | $50.9 | $49.2 |
| 30+ Days Past Due (% of Total) | 3.7% | 3.6% | 3.6% |
| Net Write-off Rate | 7.1% | 7.0% | 7.4% |
Lending Trust (Securitized) Metrics:
- Ending Principal Balance (Feb 22, 2010): $33.1 Billion
- Annualized Default Rate, Net of Recoveries (Feb 22, 2010): 7.8%
- Total 30+ Days Delinquent (Feb 22, 2010): $1.3 Billion
Material Changes
- Write-off Rate Increase: The net write-off rate for the total portfolio increased to 7.4% in February 2010 from 7.0% in January 2010. Management states this increase is consistent with previous disclosures anticipating sequential increases in the first quarter of 2010.
- Portfolio Reduction: Total loans in the USCS portfolio declined from $52.6 billion in December 2009 to $49.2 billion in February 2010.
- Reporting Methodology Change: Effective January 1, 2010, the Company consolidated securitized loans on its balance sheet. Consequently, the "Total portfolio" now reflects a GAAP basis measurement including both securitized and non-securitized loans. The Company generally ceased reporting metrics solely for the non-securitized portfolio starting in January 2010.
Guidance, Outlook, and Risks
Outlook: Management expects the USCS lending net write-off rate for the first quarter of 2010 to be similar to the fourth quarter of 2009, assuming past-due trends, recoveries, and bankruptcies remain consistent with late 2009 levels. The net write-off rate for the second quarter of 2010 is expected to be lower than the first quarter.
Risks and Contingencies: Forward-looking statements are subject to risks including the Company's ability to manage credit risk in a challenging economic environment. Key factors include housing market conditions, unemployment rates, bankruptcy filings, and the effectiveness of credit models. The filing notes that the Lending Trust's credit performance may differ from the total portfolio due to differences in loan mix, vintage, and calculation mechanics.
Investor Verification Checklist
- Verify the sequential increase in the February 2010 net write-off rate (7.4%) against the Company's Q1 2010 guidance.
- Confirm the impact of the January 1, 2010 accounting change (consolidation of securitized loans) on the comparability of "Total portfolio" metrics versus prior periods.
- Monitor the divergence between the Total Portfolio net write-off rate and the Lending Trust annualized default rate (7.8% in late February).
- Review the trend in total loan balances, which have decreased by approximately $3.4 billion over the three-month period.