Business Context and Reporting Period
This Form 8-K filing by American Express Company (the "Company") dated April 15, 2009, 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 January 31, February 28, and March 31, 2009, as well as the three-month period ended March 31, 2009. The Company presents these metrics on both an "owned basis" (GAAP) and a "managed basis" to reflect the full scope of its cardmember lending business, including securitized loans.
Key Financial Metrics
The filing details credit performance metrics for the USCS segment. Key figures for the three months ended March 31, 2009, include:
- Total Loans (Owned Basis): $28.2 billion (end of March 2009).
- Total Loans (Managed Basis): $56.5 billion (end of March 2009).
- 30 Days Past Due Loans: 5.1% of total loans for both owned and managed bases in March 2009.
- Net Write-off Rate (Owned Basis): 8.5% for the three months ended March 31, 2009.
- Net Write-off Rate (Managed Basis): 8.5% for the three months ended March 31, 2009.
- Lending Trust Performance: The American Express Credit Account Master Trust reported an annualized default rate of 9.7% for the period ending March 26, 2009, with a total principal balance of $36.0 billion.
The filing does not provide consolidated revenue, profit, cash flow, or liquidity metrics for the entire Company, as this report is limited to specific credit statistics for the USCS segment.
Material Changes and Unusual Items
Delinquency and write-off rates have remained elevated compared to historical norms, consistent with the Company's expectation that past-due loans and write-offs would rise in the first and second quarters of 2009. A specific unusual item affected the March 2009 data: the Company sold certain previously written-off cardmember loans to third parties. The proceeds from this sale were treated as a partial recovery, which reduced the reported net write-off rates for March 2009 and the three-month period ended March 31, 2009.
Guidance, Outlook, and Risks
Management expects USCS past-due loans and write-offs to continue rising in the first and second quarters of 2009 compared to 2008 levels. The filing includes standard forward-looking statement disclaimers, noting that actual results may differ due to various risks. Key risks identified include:
- Fluctuations in card lending balances dependent on the economic environment.
- Ability to manage credit risk related to consumer and small business loans.
- Macroeconomic factors such as the housing market, bankruptcy rates, and unemployment rates affecting spending and debt payments.
- Effectiveness of credit models and efforts to manage delinquent cardmembers in a challenging economic climate.
Investor Verification Checklist
- Verify the impact of the sale of previously written-off loans on the March 2009 net write-off rates.
- Compare the "managed basis" statistics with the "owned basis" (GAAP) figures to understand the full exposure of the securitized portfolio.
- Review the American Express Credit Account Master Trust Form 10-D reports for granular data on the securitized portion of the portfolio.
- Monitor subsequent filings for confirmation of the expected rise in delinquencies and write-offs for the remainder of 2009.
- Assess the correlation between the reported 5.1% delinquency rate and the broader economic indicators mentioned in the risk factors.