Business Context and Reporting Period
This Form 8-K, filed on December 15, 2009, by American Express Company, provides Regulation FD disclosure regarding credit performance statistics for its U.S. Card Services (USCS) operating segment. The report details delinquency and write-off data for the months ended September 30, October 31, and November 30, 2009.
Key Financial Metrics
The filing presents credit metrics on both an "owned basis" (GAAP) and a "managed basis" (including securitized loans). The filing does not provide consolidated revenue, profit, cash flow, or total debt figures.
U.S. Card Services - Owned Basis (Billions)
| Metric | Sept 30, 2009 | Oct 31, 2009 | Nov 30, 2009 |
|---|---|---|---|
| Total Loans | $22.7 | $22.1 | $22.4 |
| 30+ Days Past Due (% of Total) | 4.2% | 4.1% | 3.9% |
| Average Loans | $23.5 | $22.4 | $22.3 |
| Net Write-off Rate | 9.2% | 8.6% | 8.1% |
U.S. Card Services - Managed Basis (Billions)
| Metric | Sept 30, 2009 | Oct 31, 2009 | Nov 30, 2009 |
|---|---|---|---|
| Total Loans | $51.9 | $51.2 | $51.5 |
| 30+ Days Past Due (% of Total) | 4.1% | 4.1% | 3.9% |
| Average Loans | $52.4 | $51.6 | $51.4 |
| Net Write-off Rate | 8.4% | 7.8% | 7.6% |
American Express Credit Account Master Trust (Billions)
| Metric | Period Ended Sept 24 | Period Ended Oct 25 | Period Ended Nov 24 |
|---|---|---|---|
| Ending Total Principal Balance | $35.0 | $34.6 | $34.3 |
| Defaulted Amount (Net of Recoveries) | $0.2 | $0.2 | $0.2 |
| Annualized Default Rate (Net) | 8.1% | 7.4% | 7.5% |
| Total 30+ Days Delinquent | $1.5 | $1.5 | $1.4 |
Material Changes
From September to November 2009, the U.S. Card Services portfolio demonstrated improving credit trends:
- Delinquency Reduction: The percentage of loans 30 days past due declined on both owned and managed bases, dropping from 4.2% to 3.9% (owned) and 4.1% to 3.9% (managed).
- Write-off Improvement: Net write-off rates decreased consistently across all three months. On an owned basis, the rate fell from 9.2% to 8.1%. On a managed basis, it declined from 8.4% to 7.6%.
- Loan Balances: Total owned loans fluctuated slightly, ending November at $22.4 billion. Managed loans remained relatively stable, ending at $51.5 billion.
Outlook, Risks, and Management Commentary
Management emphasizes the "managed basis" presentation as it provides a comprehensive view of the cardmember lending business by including securitized loans. The filing includes standard forward-looking statements cautioning that actual results may differ due to various risks.
- Key Risks: Credit risk management depends on the economic environment, including the housing market, bankruptcy rates, and unemployment levels.
- Operational Challenges: Efforts to manage delinquent cardmembers in a challenging economy may impact payment patterns and brand perception.
- Future Write-offs: Near-term write-off rates for the fourth quarter of 2009 depend on loan balance changes, delinquency trends, and bankruptcy filings.
- Provision Benefits: The company noted potential provision benefits in the remainder of 2009 if write-offs are lower than expected.
Investor Verification Checklist
- Verify the trend of declining net write-off rates (8.1% owned, 7.6% managed) in the upcoming Q4 2009 earnings report.
- Confirm whether the improvement in delinquency rates (3.9%) persists into December 2009.
- Review the Q4 2009 10-Q for the actual provision for credit losses and any adjustments to the allowance for loan losses.
- Monitor macroeconomic indicators (unemployment, housing market) cited as primary drivers of future credit performance.
- Compare the managed basis statistics against the Lending Trust's Form 10-D reports to understand the divergence between securitized and owned portfolio performance.