Business Context and Reporting Period
This Form 8-K filing by American Express Company (AXP) was submitted on October 15, 2020, under Item 7.01 Regulation FD Disclosure. The report provides preliminary delinquency and write-off statistics for the U.S. Consumer Card Member and U.S. Small Business Card Member lending portfolios for the months ended July 31, August 31, and September 30, 2020, as well as the three-month period ended September 30, 2020.
Key Financial Metrics
The filing details credit performance metrics for total Card Member loans (U.S. Consumer and U.S. Small Business combined) totaling $61.4 billion as of September 30, 2020.
- U.S. Consumer Card Member Loans: Total loans were $49.7 billion. The 30-day past due rate was 1.1% for September 2020. The net write-off rate (principal only) for the three months ended September 30, 2020, was 2.4%.
- U.S. Small Business Card Member Loans: Total loans were $11.6 billion. The 30-day past due rate was 1.1% for September 2020. The net write-off rate (principal only) for the three months ended September 30, 2020, was 2.2%.
- Lending Trust Performance: For the American Express Credit Account Master Trust, the ending total principal balance was $24.2 billion in September 2020. The annualized default rate, net of recoveries, was 1.5% for September 2020.
Material Changes Versus Prior Period
Both U.S. Consumer and U.S. Small Business portfolios showed improvement in delinquency and write-off rates from July through September 2020.
- Delinquency Trends: The 30-day past due rate for both Consumer and Small Business segments declined from 1.4% in July 2020 to 1.1% in September 2020.
- Write-off Trends: The net write-off rate for Consumer loans decreased from 2.6% in July to 2.0% in September. Small Business write-off rates decreased from 2.5% in July to 1.8% in September.
- Lending Trust Defaults: The annualized default rate for the Lending Trust improved from 1.9% in July and August to 1.5% in September 2020.
Management Commentary, Risks, and Unusual Items
The filing notes the impact of the Customer Pandemic Relief Program created in the first quarter of 2020 for customers impacted by COVID-19. Under this program, delinquency status was frozen at enrollment, and loans current at enrollment did not age regardless of payment status. The program for new enrollees in the United States was closed as of June 2020. Upon exiting the program, delinquency aging resumes where it left off.
The report clarifies that statistics for the total loan portfolios differ from those of the securitized Lending Trust due to differences in loan mix, vintage, aging, and calculation mechanics (e.g., end-of-period balances vs. average balances).
Investor Verification Checklist
- Verify the impact of the closure of the Customer Pandemic Relief Program on future delinquency aging as customers exit the program.
- Compare the reported net write-off rates (2.4% Consumer, 2.2% Small Business) against historical pre-pandemic levels to assess credit quality normalization.
- Review the subsequent Form 10-D filings for the Lending Trust to monitor the divergence between securitized and non-securitized portfolio performance.
- Confirm the stability of the $61.4 billion total loan balance given the slight month-over-month fluctuations observed in July and August.