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Price
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| ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| New York | 13-4922250 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) | ||
| World Financial Center, 200 Vesey Street, New York, NY | 10285 | |
| (Address of principal executive offices) | (Zip Code) |
| Large accelerated filer ý | Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
| Class | Outstanding at July 30, 2010 | |
| Common Shares (par value $.20 per share) | 1,203,211,865 shares |
| Page No. | ||||||||
| 1 | ||||||||
| 2 | ||||||||
| 3 | ||||||||
| 4 | ||||||||
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| 12 | ||||||||
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| 19 | ||||||||
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| 23 | ||||||||
| 29 | ||||||||
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| 30 | ||||||||
| 31 | ||||||||
| 32 | ||||||||
| 33 | ||||||||
| 33 | ||||||||
| 35 | ||||||||
| 77 | ||||||||
| 78 | ||||||||
| 81 | ||||||||
| 85 | ||||||||
| 87 | ||||||||
| 88 | ||||||||
| 89 | ||||||||
| E-1 | ||||||||
| Exhibit 10.1 | ||||||||
| Exhibit 10.2 | ||||||||
| Exhibit 10.3 | ||||||||
| EX-12 | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-32.1 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
| Three Months Ended June 30 (Millions, except per share amounts) | 2010 | 2009 | ||||||
|
Revenues
|
||||||||
|
Non-interest revenues
|
||||||||
|
Discount revenue
|
$ | 3,734 | $ | 3,305 | ||||
|
Net card fees
|
520 | 532 | ||||||
|
Travel commissions and fees
|
434 | 407 | ||||||
|
Other commissions and fees
|
497 | 439 | ||||||
|
Securitization income, net
|
— | (2 | ) | |||||
|
Other
|
485 | 670 | ||||||
|
|
||||||||
|
Total non-interest revenues
|
5,670 | 5,351 | ||||||
|
|
||||||||
|
Interest income
|
||||||||
|
Interest and fees on loans
|
1,657 | 1,081 | ||||||
|
Interest and dividends on investment securities
|
125 | 196 | ||||||
|
Deposits with banks and other
|
16 | 11 | ||||||
|
|
||||||||
|
Total interest income
|
1,798 | 1,288 | ||||||
|
|
||||||||
|
Interest expense
|
||||||||
|
Deposits
|
137 | 105 | ||||||
|
Short-term borrowings
|
1 | 7 | ||||||
|
Long-term debt and other
|
472 | 435 | ||||||
|
|
||||||||
|
Total interest expense
|
610 | 547 | ||||||
|
|
||||||||
|
Net interest income
|
1,188 | 741 | ||||||
|
|
||||||||
|
Total revenues net of interest expense
|
6,858 | 6,092 | ||||||
|
|
||||||||
|
Provisions for losses
|
||||||||
|
Charge card
|
96 | 237 | ||||||
|
Cardmember loans
|
540 | 1,303 | ||||||
|
Other
|
16 | 44 | ||||||
|
|
||||||||
|
Total provisions for losses
|
652 | 1,584 | ||||||
|
|
||||||||
|
Total revenues net of interest expense after provisions for losses
|
6,206 | 4,508 | ||||||
|
|
||||||||
|
Expenses
|
||||||||
|
Marketing, promotion, rewards and cardmember services
|
2,122 | 1,512 | ||||||
|
Salaries and employee benefits
|
1,315 | 1,370 | ||||||
|
Professional services
|
636 | 599 | ||||||
|
Other, net
|
538 | 609 | ||||||
|
|
||||||||
|
Total
|
4,611 | 4,090 | ||||||
|
|
||||||||
|
Pretax income from continuing operations
|
1,595 | 418 | ||||||
|
Income tax provision
|
578 | 76 | ||||||
|
|
||||||||
|
Income from continuing operations
|
1,017 | 342 | ||||||
|
Loss from discontinued operations, net of tax
|
— | (5 | ) | |||||
|
|
||||||||
|
Net income
|
$ | 1,017 | $ | 337 | ||||
|
|
||||||||
|
Earnings per Common Share – Basic: (Note 13)
|
||||||||
|
Income from continuing operations attributable to common
shareholders
(a)
|
$ | 0.84 | $ | 0.09 | ||||
|
Loss from discontinued operations, net of tax
|
— | — | ||||||
|
|
||||||||
|
Net income attributable to common shareholders
(a)
|
$ | 0.84 | $ | 0.09 | ||||
|
|
||||||||
|
Earnings per Common Share – Diluted: (Note 13)
|
||||||||
|
Income from continuing operations attributable to common
shareholders
(a)
|
$ | 0.84 | $ | 0.09 | ||||
|
Loss from discontinued operations, net of tax
|
— | — | ||||||
|
|
||||||||
|
Net income attributable to common shareholders
(a)
|
$ | 0.84 | $ | 0.09 | ||||
|
|
||||||||
|
Average common shares outstanding for earnings per common share:
|
||||||||
|
Basic
|
1,190 | 1,162 | ||||||
|
Diluted
|
1,197 | 1,165 | ||||||
|
Cash dividends declared per common share
|
$ | 0.18 | $ | 0.18 | ||||
| (a) |
Represents income from continuing operations or net income, as applicable, less (i)
accelerated preferred dividend accretion of $212 million for the three months ended June 30,
2009 due to a repurchase of $3.39 billion of preferred shares issued as part of the Capital
Purchase Program (CPP), (ii) preferred share dividends and related accretion of $22 million
for the three months ended June 30, 2009, and (iii) earnings allocated to participating share
awards and other items of $13 million and $1 million for the three months ended June
30, 2010 and 2009, respectively.
|
1
| Six Months Ended June 30 (Millions, except per share amounts) | 2010 | 2009 | ||||||
|
Revenues
|
||||||||
|
Non-interest revenues
|
||||||||
|
Discount revenue
|
$ | 7,200 | $ | 6,371 | ||||
|
Net card fees
|
1,041 | 1,064 | ||||||
|
Travel commissions and fees
|
820 | 772 | ||||||
|
Other commissions and fees
|
997 | 892 | ||||||
|
Securitization income, net
|
— | 139 | ||||||
|
Other
|
911 | 1,120 | ||||||
|
|
||||||||
|
Total non-interest revenues
|
10,969 | 10,358 | ||||||
|
|
||||||||
|
Interest income
|
||||||||
|
Interest and fees on loans
|
3,432 | 2,373 | ||||||
|
Interest and dividends on investment securities
|
242 | 350 | ||||||
|
Deposits with banks and other
|
29 | 39 | ||||||
|
|
||||||||
|
Total interest income
|
3,703 | 2,762 | ||||||
|
|
||||||||
|
Interest expense
|
||||||||
|
Deposits
|
265 | 190 | ||||||
|
Short-term borrowings
|
2 | 34 | ||||||
|
Long-term debt and other
|
941 | 878 | ||||||
|
|
||||||||
|
Total interest expense
|
1,208 | 1,102 | ||||||
|
|
||||||||
|
Net interest income
|
2,495 | 1,660 | ||||||
|
|
||||||||
|
Total revenues net of interest expense
|
13,464 | 12,018 | ||||||
|
|
||||||||
|
Provisions for losses
|
||||||||
|
Charge card
|
323 | 573 | ||||||
|
Cardmember loans
|
1,228 | 2,717 | ||||||
|
Other
|
44 | 97 | ||||||
|
|
||||||||
|
Total provisions for losses
|
1,595 | 3,387 | ||||||
|
|
||||||||
|
Total revenues net of interest expense after provisions for losses
|
11,869 | 8,631 | ||||||
|
|
||||||||
|
Expenses
|
||||||||
|
Marketing, promotion, rewards and cardmember services
|
4,084 | 2,814 | ||||||
|
Salaries and employee benefits
|
2,642 | 2,623 | ||||||
|
Professional services
|
1,197 | 1,118 | ||||||
|
Other, net
|
1,099 | 1,114 | ||||||
|
|
||||||||
|
Total
|
9,022 | 7,669 | ||||||
|
|
||||||||
|
Pretax income from continuing operations
|
2,847 | 962 | ||||||
|
Income tax provision
|
945 | 177 | ||||||
|
|
||||||||
|
Income from continuing operations
|
1,902 | 785 | ||||||
|
Loss from discontinued operations, net of tax
|
— | (11 | ) | |||||
|
|
||||||||
|
Net income
|
$ | 1,902 | $ | 774 | ||||
|
|
||||||||
|
Earnings per Common Share – Basic: (Note 13)
|
||||||||
|
Income from continuing operations attributable to common shareholders
(a)
|
$ | 1.58 | $ | 0.41 | ||||
|
Loss from discontinued operations, net of tax
|
— | (0.01 | ) | |||||
|
|
||||||||
|
Net income attributable to common shareholders
(a)
|
$ | 1.58 | $ | 0.40 | ||||
|
|
||||||||
|
Earnings per Common Share – Diluted: (Note 13)
|
||||||||
|
Income from continuing operations attributable to common shareholders
(a)
|
$ | 1.57 | $ | 0.41 | ||||
|
Loss from discontinued operations, net of tax
|
— | (0.01 | ) | |||||
|
|
||||||||
|
Net income attributable to common shareholders
(a)
|
$ | 1.57 | $ | 0.40 | ||||
|
|
||||||||
|
Average common shares outstanding for earnings per common share:
|
||||||||
|
Basic
|
1,188 | 1,159 | ||||||
|
Diluted
|
1,194 | 1,161 | ||||||
|
Cash dividends declared per common share
|
$ | 0.36 | $ | 0.36 | ||||
| (a) |
Represents income from continuing operations or net income, as applicable, less (i)
accelerated preferred dividend accretion of $212 million for the six months ended June 30,
2009 due to a repurchase of $3.39 billion of preferred shares issued as part of the Capital
Purchase Program (CPP), (ii) preferred share dividends and related accretion of $94 million
for the six months ended June 30, 2009, and (iii) earnings allocated to participating share
awards and other items of $25 million and $5 million for the six months ended June 30,
2010 and 2009, respectively.
|
2
| June 30, | December 31, | |||||||
| (Millions, except share data) | 2010 | 2009 | ||||||
|
Assets
|
||||||||
|
Cash and cash equivalents
|
||||||||
|
Cash and cash due from banks
|
$ | 1,850 | $ | 1,525 | ||||
|
Interest-bearing deposits in other banks (including securities purchased under
resale agreements: 2010, $321; 2009, $212)
|
18,423 | 11,010 | ||||||
|
Short-term investment securities
|
414 | 4,064 | ||||||
|
|
||||||||
|
Total cash and cash equivalents
|
20,687 | 16,599 | ||||||
|
Accounts receivable
|
||||||||
|
Cardmember receivables (includes gross receivables of a consolidated variable interest
entity: 2010, $7,582; 2009, $8,314), less reserves: 2010, $440; 2009, $546
|
34,188 | 33,197 | ||||||
|
Other receivables, less reserves: 2010, $184; 2009, $109
|
2,858 | 5,007 | ||||||
|
Loans
|
||||||||
|
Cardmember loans (includes gross loans of a consolidated variable interest entity: 2010,
$33,510)
(a)
, less reserves: 2010, $4,866; 2009, $3,268
|
52,406 | 29,504 | ||||||
|
Other, less reserves: 2010, $24; 2009, $27
|
409 | 506 | ||||||
|
Investment securities
|
17,328 | 24,337 | ||||||
|
Premises and equipment — at cost, less accumulated depreciation:
2010, $4,387; 2009, $4,130
|
2,714 | 2,782 | ||||||
|
Other assets (includes restricted cash of consolidated variable interest entities: 2010, $1,437;
2009, $1,799)
(a)
|
13,173 | 13,213 | ||||||
|
|
||||||||
|
Total assets
|
$ | 143,763 | $ | 125,145 | ||||
|
|
||||||||
|
Liabilities and Shareholders’ Equity
|
||||||||
|
Liabilities
|
||||||||
|
Customer deposits
|
$ | 28,352 | $ | 26,289 | ||||
|
Travelers Cheques outstanding
|
5,411 | 5,975 | ||||||
|
Accounts payable
|
9,503 | 9,063 | ||||||
|
Short-term borrowings
|
2,609 | 2,344 | ||||||
|
Long-term debt (includes debt issued by consolidated variable interest entities: 2010,
$24,655; 2009, $4,970)
|
69,345 | 52,338 | ||||||
|
Other liabilities
|
14,030 | 14,730 | ||||||
|
|
||||||||
|
Total liabilities
|
129,250 | 110,739 | ||||||
|
|
||||||||
|
Contingencies (Note 15)
|
||||||||
|
|
||||||||
|
Shareholders’ Equity
|
||||||||
|
Common shares, $.20 par value, authorized 3.6 billion shares; issued and outstanding 1,202
million shares in 2010 and 1,192 million shares in 2009
|
239 | 237 | ||||||
|
Additional paid-in capital
|
11,586 | 11,144 | ||||||
|
Retained earnings
|
3,724 | 3,737 | ||||||
|
Accumulated other comprehensive loss, net of tax:
|
||||||||
|
Net unrealized securities gains, net of tax: 2010, $(103); 2009, $(291)
|
201 | 507 | ||||||
|
Net unrealized derivatives losses, net of tax: 2010, $9; 2009, $15
|
(16 | ) | (28 | ) | ||||
|
Foreign currency translation adjustments, net of tax: 2010, $40; 2009, $31
|
(787 | ) | (722 | ) | ||||
|
Net unrealized pension and other postretirement benefit costs, net of tax: 2010 $216;
2009, $244
|
(434 | ) | (469 | ) | ||||
|
|
||||||||
|
Total accumulated other comprehensive loss
|
(1,036 | ) | (712 | ) | ||||
|
|
||||||||
|
Total shareholders’ equity
|
14,513 | 14,406 | ||||||
|
|
||||||||
|
Total liabilities and shareholders’ equity
|
$ | 143,763 | $ | 125,145 | ||||
|
|
||||||||
| (a) |
The balance as of December 31, 2009 includes an undivided, pro-rata interest in an
unconsolidated variable interest entity (historically referred to as “seller’s interest”)
totaling $8,752, of which $8,033 is included in cardmember loans and $719 is included in
other assets. Refer to Note 7 for additional details.
|
3
| Six Months Ended June 30 (Millions) | 2010 | 2009 | ||||||
|
Cash Flows from Operating Activities
|
||||||||
|
Net income
|
$ | 1,902 | $ | 774 | ||||
|
Loss from discontinued operations, net of tax
|
— | 11 | ||||||
|
|
||||||||
|
Income from continuing operations
|
1,902 | 785 | ||||||
|
Adjustments to reconcile income from continuing operations to net cash provided by operating
activities:
|
||||||||
|
Provisions for losses
|
1,595 | 3,387 | ||||||
|
Depreciation and amortization
|
441 | 568 | ||||||
|
Deferred taxes, acquisition costs and other
|
699 | (1,387 | ) | |||||
|
Stock-based compensation
|
106 | 121 | ||||||
|
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
||||||||
|
Other receivables
|
202 | 422 | ||||||
|
Other assets
|
120 | 683 | ||||||
|
Accounts payable and other liabilities
|
(56 | ) | (1,351 | ) | ||||
|
Travelers Cheques outstanding
|
(559 | ) | (462 | ) | ||||
|
Net cash used in operating activities attributable to discontinued operations
|
— | (165 | ) | |||||
|
|
||||||||
|
Net cash provided by operating activities
|
4,450 | 2,601 | ||||||
|
|
||||||||
|
Cash Flows from Investing Activities
|
||||||||
|
Sale of investments
|
1,253 | 1,897 | ||||||
|
Maturity and redemption of investments
|
7,025 | 1,371 | ||||||
|
Purchase of investments
|
(4,911 | ) | (10,023 | ) | ||||
|
Net decrease in cardmember loans/receivables
|
367 | 8,838 | ||||||
|
Proceeds from cardmember loan securitizations
|
— | 998 | ||||||
|
Maturities of cardmember loan securitizations
|
— | (2,100 | ) | |||||
|
Purchase of premises and equipment
|
(329 | ) | (334 | ) | ||||
|
Sale of premises and equipment
|
7 | 36 | ||||||
|
Acquisitions/Dispositions, net of cash acquired
|
(254 | ) | — | |||||
|
Net decrease (increase) in restricted cash
|
2,327 | (56 | ) | |||||
|
Net cash provided by investing activities attributable to discontinued operations
|
— | 183 | ||||||
|
|
||||||||
|
Net cash provided by investing activities
|
5,485 | 810 | ||||||
|
|
||||||||
|
Cash Flows from Financing Activities
|
||||||||
|
Net change in customer deposits
|
2,068 | 4,766 | ||||||
|
Net increase (decrease) in short-term borrowings
|
298 | (6,719 | ) | |||||
|
Issuance of long-term debt
|
1,444 | 2,980 | ||||||
|
Principal payments on long-term debt
|
(9,509 | ) | (9,682 | ) | ||||
|
Issuance of American Express Series A preferred shares and warrants
|
— | 3,389 | ||||||
|
Issuance of American Express common shares
|
295 | 531 | ||||||
|
Repurchase of American Express Series A preferred shares
|
— | (3,389 | ) | |||||
|
Common and preferred dividends paid
|
(433 | ) | (494 | ) | ||||
|
Net cash used in financing activities attributable to discontinued operations
|
— | (19 | ) | |||||
|
|
||||||||
|
Net cash used in financing activities
|
(5,837 | ) | (8,637 | ) | ||||
|
|
||||||||
|
Effect of exchange rate changes on cash
|
(10 | ) | 20 | |||||
|
|
||||||||
|
Net increase (decrease) in cash and cash equivalents
|
4,088 | (5,206 | ) | |||||
|
Cash and cash equivalents at beginning of period includes cash of discontinued operations: 2010, $0; 2009, $3
|
16,599 | 21,654 | ||||||
|
|
||||||||
|
Cash and cash equivalents at end of period includes cash of discontinued operations: 2010, $0; 2009, $2
|
$ | 20,687 | $ | 16,448 | ||||
|
|
||||||||
4
| 1. |
Basis of Presentation
|
| March 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||
| As | As | As | ||||||||||||||||||||||
| Previously | As | Previously | As | Previously | As | |||||||||||||||||||
| (Billions) | Reported | Revised | Reported | Revised | Reported | Revised | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 21.1 | $ | 22.9 | $ | 15.5 | $ | 16.6 | $ | 20.5 | $ | 21.7 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Accounts payable and other
liabilities
|
22.0 | 23.8 | 22.7 | 23.8 | 23.0 | 24.2 | ||||||||||||||||||
5
| Three Months | Nine Months | Six Months | Three Months | |||||||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||
| March 31, 2010 | September 30, 2009 | June 30, 2009 | March 31, 2009 | |||||||||||||||||||||||||||||
| As | As | As | As | |||||||||||||||||||||||||||||
| Previously | As | Previously | As | Previously | As | Previously | As | |||||||||||||||||||||||||
| (Billions) | Reported | Revised | Reported | Revised | Reported | Revised | Reported | Revised | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Change in accounts payable
and other liabilities
|
$ | (1.0 | ) | $ | 0.2 | (a) | $ | (0.9 | ) | $ | (1.0 | ) | $ | (1.1 | ) | $ | (1.4 | ) | $ | (2.3 | ) | $ | (2.7 | ) | ||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net cash provided by
operating activities
|
1.1 | 2.3 | (a) | 5.0 | (b) | 4.9 | 2.9 | (b) | 2.6 | 1.0 | 0.6 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net increase (decrease) in cash
and cash equivalents
|
5.6 | 6.4 | (1.9 | ) | (2.0 | ) | (4.9 | ) | (5.2 | ) | 0.3 | (0.1 | ) | |||||||||||||||||||
| (a) |
The “As Revised’ amounts also include a $0.4 billion adjustment to correct certain balances
relating to the foreign currency translation impact on cash flows. This item resulted in a
corresponding $0.4 billion decrease in cash flows in “net decrease in cardmember
loans/receivables” and “net cash provided by investing activities” in the Consolidated
Statement of Cash Flows for the three months ended March 31, 2010. This item did not affect
any other previously issued quarterly or annual consolidated financial statements.
|
|
| (b) |
The “As Previously Reported” amounts for the nine months ended September 30, 2009 and the six
months ended June 30, 2009 include reductions to net cash provided by operating activities of
$0.6 billion and $0.3 billion, respectively, to conform to certain reclassifications beginning
with the December 31, 2009 Consolidated Statement of Cash Flows. These reclassifications
relate to net recoveries of cardmember loans/receivables and changes in restricted cash
balances, both of which are now reflected in cash flows from investing activities.
|
| Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
| December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||
| As | As | As | ||||||||||||||||||||||
| Previously | As | Previously | As | Previously | As | |||||||||||||||||||
| (Billions) | Reported | Revised | Reported | Revised | Reported | Revised | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Change in accounts payable
and other liabilities
|
$ | — | $ | (0.1 | ) | $ | 0.9 | $ | 0.5 | $ | 1.0 | $ | 1.5 | |||||||||||
|
|
||||||||||||||||||||||||
|
Net cash provided by
operating activities
|
6.4 | 6.3 | 8.1 | 7.7 | 8.0 | 8.5 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net increase (decrease) in cash
and cash equivalents
|
(5.0 | ) | (5.1 | ) | 5.3 | 4.9 | 7.0 | 7.5 | ||||||||||||||||
6
7
| 2. |
Acquisition
|
| 3. |
Fair Values
|
| • |
Level 1 — Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
||
| • |
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the asset or liability, including:
|
| - |
Quoted prices for similar assets or liabilities in active markets
|
||
| - |
Quoted prices for identical or similar assets or liabilities in markets that are not active
|
||
| - |
Inputs other than quoted prices that are observable for the asset or liability
|
||
| - |
Inputs that are derived principally from or corroborated by observable market data by correlation or other means
|
| • |
Level 3 — Inputs that are unobservable and reflect the Company’s own assumptions about the
assumptions market participants would use in pricing the asset or liability based on the best
information available in the circumstances (e.g., internally derived assumptions surrounding
the timing and amount of expected cash flows).
|
8
| 2010 | 2009 | |||||||||||||||||||||||||||||||
| (Millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
|
Assets:
|
||||||||||||||||||||||||||||||||
|
Investment securities:
(a)
|
||||||||||||||||||||||||||||||||
|
Equity securities
|
$ | 469 | $ | 469 | $ | — | $ | — | $ | 530 | $ | 530 | $ | — | $ | — | ||||||||||||||||
|
Retained subordinated
securities
(b)
|
— | — | — | — | 3,599 | — | — | 3,599 | ||||||||||||||||||||||||
|
Debt securities and other
|
16,859 | — | 16,859 | — | 20,208 | — | 20,208 | — | ||||||||||||||||||||||||
|
Interest-only strip
(b)
|
— | — | — | — | 20 | — | — | 20 | ||||||||||||||||||||||||
|
Derivatives
(c)
|
1,218 | — | 1,218 | — | 833 | — | 833 | — | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total assets
|
$ | 18,546 | $ | 469 | $ | 18,077 | $ | — | $ | 25,190 | $ | 530 | $ | 21,041 | $ | 3,619 | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||||||||||||||
|
Derivatives
(c)
|
$ | 240 | $ | — | $ | 240 | $ | — | $ | 283 | $ | — | $ | 283 | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total liabilities
|
$ | 240 | $ | — | $ | 240 | $ | — | $ | 283 | $ | — | $ | 283 | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| (a) |
Refer to Note 6 for the fair values of investment securities on a further disaggregated
basis.
|
||
| (b) |
As a result of new GAAP effective January 1, 2010, the Company no longer presents the
retained subordinated securities and interest-only strip within its Consolidated Financial
Statements in periods subsequent to December 31, 2009. Refer to Note 7 for further details.
|
||
| (c) |
GAAP permits the netting of derivative assets and derivative liabilities when a legally
enforceable master netting agreement exists between the Company and its derivative
counterparty. As of June 30, 2010 and December 31, 2009, $21 million and $33 million,
respectively, of derivative assets and liabilities have been offset and presented net on the
Consolidated Balance Sheets. Refer to Note 9 for the fair values of derivative assets and
liabilities on a further disaggregated basis.
|
| 2009 (a) | ||||||||
| Investments-Retained | Other Assets- | |||||||
| (Millions) | Subordinated Securities | Interest-Only Strip | ||||||
|
Beginning fair value, January 1
|
$ | 744 | $ | 32 | ||||
|
Increases in securitized loans
(b)
|
1,760 | — | ||||||
|
Unrealized and realized gains (losses)
|
1,095 | (c) | (12 | ) (d) | ||||
|
|
||||||||
|
Ending fair value, December 31
|
$ | 3,599 | $ | 20 | ||||
|
|
||||||||
| (a) |
The Company did not measure any financial instruments at fair value using significantly
unobservable inputs during the six months ended June 30, 2010.
|
||
| (b) |
Represents cost basis of securitized loans.
|
||
| (c) |
Included in AOCI, net of taxes.
|
||
| (d) |
Included in securitization income, net.
|
9
| • |
When available, quoted market prices in active markets are used to determine fair value.
Such investment securities are classified within Level 1 of the fair value hierarchy.
|
| • |
When quoted prices in an active market are not available, the fair values for the Company’s
investment securities are obtained primarily from pricing services engaged by the Company, and
the Company receives one price for each security. The fair values provided by the pricing
services are estimated using pricing models, where the inputs to those models are based on
observable market inputs. The inputs to the valuation techniques applied by the pricing
services vary depending on the type of security being priced but are typically benchmark
yields, benchmark security prices, credit spreads, prepayment speeds, reported trades and
broker-dealer quotes, all with reasonable levels of transparency. The pricing services did not
apply any adjustments to the pricing models used. In addition, the Company did not apply any
adjustments to prices received from the pricing services. The Company classifies the prices
obtained from the pricing services within Level 2 of the fair value hierarchy because the
underlying inputs are directly observable from active markets or recent trades of similar
securities in inactive markets. However, the pricing models used do entail a certain amount of
subjectivity and therefore differing judgments in how the underlying inputs are modeled could
result in different estimates of fair value.
|
10
| 2010 | 2009 | |||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||
| (Rounded to nearest billion) | Value | Value | Value | Value | ||||||||||||
|
Financial Assets:
|
||||||||||||||||
|
Assets for which
carrying values equal
or approximate fair
value
|
$ | 60 | $ | 60 | (a) | $ | 58 | $ | 58 | (b) | ||||||
|
Loans, net
|
$ | 53 | $ | 53 | (a) | $ | 30 | $ | 30 | |||||||
|
|
||||||||||||||||
|
Financial Liabilities:
|
||||||||||||||||
|
Liabilities for which
carrying values equal
or approximate fair
value
|
$ | 37 | $ | 37 | $ | 34 | $ | 34 | ||||||||
|
Certificates of deposit
|
$ | 15 | $ | 16 | $ | 15 | $ | 16 | ||||||||
|
Long-term debt
|
$ | 69 | $ | 72 | (a) | $ | 52 | $ | 54 | (b) | ||||||
| (a) |
Includes fair values of cardmember receivables, loans and long-term debt of $7.6 billion,
$31.2 billion and $24.9 billion, respectively, held by consolidated VIEs as of June 30, 2010.
Refer to the Consolidated Balance Sheets for the related carrying values.
|
||
| (b) |
Includes fair values of cardmember receivables and long-term debt of $8.3 billion and $5.0
billion, respectively, held by a consolidated VIE as of December 31, 2009. Refer to the
Consolidated Balance Sheets for the related carrying values.
|
11
| 4. |
Accounts Receivable
|
| (Millions) | 2010 | 2009 | ||||||
|
U.S. Card Services
(a)
|
$ | 17,307 | $ | 17,750 | ||||
|
International Card Services
|
5,596 | 5,944 | ||||||
|
Global Commercial Services
(b)
|
11,532 | 9,844 | ||||||
|
Global Network & Merchant Services
(c)
|
193 | 205 | ||||||
|
|
||||||||
|
Cardmember receivables, gross
(d)
|
34,628 | 33,743 | ||||||
|
Less: Cardmember reserve for losses
|
440 | 546 | ||||||
|
|
||||||||
|
Cardmember receivables, net
|
$ | 34,188 | $ | 33,197 | ||||
|
|
||||||||
|
Other receivables, net
(e)
|
$ | 2,858 | $ | 5,007 | ||||
|
|
||||||||
| (a) |
Includes $7.0 billion and $7.8 billion of gross cardmember receivables of a consolidated
VIE as of June 30, 2010 and December 31, 2009, respectively.
|
||
| (b) |
Includes $0.6 billion and $0.5 billion of gross cardmember receivables of a consolidated VIE
as of June 30, 2010 and December 31, 2009, respectively.
|
||
| (c) |
Includes receivables primarily related to the Company’s International Currency Card
portfolios.
|
||
| (d) |
Includes approximately $10.5 billion and $10.4 billion of cardmember receivables outside the
United States as of June 30, 2010 and December 31, 2009, respectively.
|
||
| (e) |
Other receivables primarily represent amounts due from the Company’s travel customers,
third-party issuing partners, accrued interest on investments, and other receivables due to
the Company in the ordinary course of business. As of December 31, 2009, these amounts also
include $1.9 billion of cash held in an unconsolidated VIE required for daily settlement
requirements. Beginning January 1, 2010, this VIE is consolidated by the Company and cash
held by this consolidated VIE is considered restricted cash included in other assets on the
Company’s Consolidated Balance Sheets. Refer to Note 7 for additional details.
|
12
| (Millions) | 2010 | 2009 | ||||||
|
Balance, January 1
|
$ | 546 | $ | 810 | ||||
|
Additions:
|
||||||||
|
Cardmember receivables provisions
(a)
|
239 | 539 | ||||||
|
Cardmember receivables provisions — other
(b)
|
84 | 34 | ||||||
|
|
||||||||
|
Total provision
|
323 | 573 | ||||||
|
|
||||||||
|
Deductions:
|
||||||||
|
Cardmember receivables net write-offs
(c)(d)
|
(365 | ) | (672 | ) | ||||
|
Cardmember receivables — other
(e)
|
(64 | ) | 3 | |||||
|
|
||||||||
|
Balance, June 30
|
$ | 440 | $ | 714 | ||||
|
|
||||||||
| (a) |
Represents loss provisions for cardmember receivables consisting of principal (resulting
from authorized transactions) and fee reserve components.
|
||
| (b) |
Primarily represents loss provisions for cardmember receivables resulting from unauthorized
transactions.
|
||
| (c) |
Represents write-offs consisting of principal (resulting from authorized transactions) and
fee components, less recoveries of $189 million and $163 million for the six months ended June
30, 2010 and 2009, respectively. For the six months ended June 30, 2009, these amounts also
include net write-offs for cardmember receivables resulting from unauthorized transactions.
|
||
| (d) |
Through December 31, 2009, cardmember receivables in the International Card Services (ICS)
and Global Commercial Services (GCS) segments were written off when 360 days past billing or
earlier. During the first quarter of 2010, consistent with applicable bank regulatory
guidance, the Company modified its methodology to write off cardmember receivables in the ICS
and GCS segments when 180 days past due or earlier. Therefore, net write-offs for cardmember
receivables for the first quarter of 2010 included approximately $108 million resulting from
this change in write-off methodology. The impact of this change to the provision for charge
card losses was not material.
|
||
| (e) |
For the six months ended June 30, 2010, these amounts include net write-offs of cardmember
receivables resulting from unauthorized transactions. For the six months ended June 30, 2009,
net write-offs of cardmember receivables resulting from unauthorized transactions were
included in cardmember receivables net write-offs. For all periods these amounts include
foreign currency translation adjustments.
|
| 5. |
Loans
|
| (Millions) | 2010 | 2009 | ||||||
|
U.S. Card Services
(a)
|
$ | 48,968 | $ | 23,507 | ||||
|
International Card Services
|
8,281 | 9,241 | ||||||
|
Global Commercial Services
|
23 | 24 | ||||||
|
|
||||||||
|
Cardmember loans
(b)
|
57,272 | 32,772 | ||||||
|
Less: Cardmember loans reserve for losses
|
4,866 | 3,268 | ||||||
|
|
||||||||
|
Cardmember loans, net
|
$ | 52,406 | $ | 29,504 | ||||
|
|
||||||||
|
Other loans, net
(c)
|
$ | 409 | $ | 506 | ||||
| (a) |
As of June 30, 2010, includes approximately $33.5 billion of gross cardmember loans of a
consolidated VIE. As of December 31, 2009 includes approximately $8.0 billion for an
undivided, pro-rata interest in an unconsolidated VIE (historically referred to as “seller’s
interest”). Refer to Note 7 for additional details.
|
||
| (b) |
Cardmember loan balance is net of unamortized net card fees of $123 million and $114 million
as of June 30, 2010 and December 31, 2009, respectively.
|
||
| (c) |
Other loans primarily represent small business installment loans, a store card portfolio
whose billed business is not processed on the Company’s network and small business loans
associated with the acquisition of Corporate Payment Services (CPS).
|
13
| (Millions) | 2010 | 2009 | ||||||
|
Balance, January 1
|
$ | 3,268 | $ | 2,570 | ||||
|
Reserves established for consolidation of a variable interest entity
|
2,531 | — | ||||||
|
|
||||||||
|
Total adjusted balance, January 1
|
5,799 | 2,570 | ||||||
|
|
||||||||
|
Additions:
|
||||||||
|
Cardmember loans provisions
(a)
|
1,190 | 2,692 | ||||||
|
Cardmember loans — other
(b)
|
38 | 25 | ||||||
|
|
||||||||
|
Total provision
|
1,228 | 2,717 | ||||||
|
|
||||||||
|
Deductions:
|
||||||||
|
Cardmember loans net write-offs — principal
(c)
|
(1,902 | ) | (1,629 | ) | ||||
|
Cardmember loans net write-offs — interest and fees
(c)
|
(206 | ) | (286 | ) | ||||
|
Cardmember loans — other
(d)
|
(53 | ) | (153 | ) | ||||
|
|
||||||||
|
Balance, June 30
|
$ | 4,866 | $ | 3,219 | ||||
|
|
||||||||
| (a) |
Represents loss provisions for cardmember loans consisting of principal (resulting from
authorized transactions), interest and fee reserves components.
|
||
| (b) |
Primarily represents loss provisions for cardmember loans resulting from unauthorized
transactions.
|
||
| (c) |
Cardmember loans net write-offs — principal for the six months ended June 30, 2010 and 2009
include recoveries of $280 million and $174 million, respectively. Recoveries of interest and
fees were de minimis.
|
||
| (d) |
These amounts include net write-offs related to unauthorized transactions and foreign
currency translation adjustments.
|
14
| Loans | ||||||||||||||||
| Loans and Receivables | and | |||||||||||||||
| Modified in a TDR | Receivables | |||||||||||||||
| Short-Term | Long-Term | Not in | ||||||||||||||
| Modification | Modification | Modification | ||||||||||||||
| (Millions) | Programs | Programs | Programs | Total (e) | ||||||||||||
|
Loans over 90 days past due and accruing
interest
(a)
|
$ | 8 | $ | — | $ | 239 | $ | 247 | ||||||||
|
Non-accrual loans
(b)
|
895 | — | 825 | 1,720 | ||||||||||||
|
Loans and receivables modified in a
TDR
(c)
|
326 | 249 | — | 575 | ||||||||||||
|
|
||||||||||||||||
|
Total as of June 30, 2010
|
$ | 1,229 | $ | 249 | $ | 1,064 | $ | 2,542 | ||||||||
|
|
||||||||||||||||
|
Reserves for losses on impaired loans
and receivables
|
$ | 335 | (d) | $ | 72 | (d) | $ | 749 | $ | 1,156 | ||||||
|
|
||||||||||||||||
| Loans | ||||||||||||||||
| Loans and Receivables | and | |||||||||||||||
| Modified in a TDR | Receivables | |||||||||||||||
| Short-Term | Long-Term | Not in | ||||||||||||||
| Modification | Modification | Modification | ||||||||||||||
| (Millions) | Programs | Programs | Programs | Total (e) | ||||||||||||
|
Loans over 90 days past due and accruing
interest
(a)
|
$ | 1 | $ | — | $ | 253 | $ | 254 | ||||||||
|
Non-accrual loans
(b)
|
586 | — | 494 | 1,080 | ||||||||||||
|
Loans and receivables modified in a
TDR
(c)
|
114 | 114 | — | 228 | ||||||||||||
|
|
||||||||||||||||
|
Total as of December 31, 2009
|
$ | 701 | $ | 114 | $ | 747 | $ | 1,562 | ||||||||
|
|
||||||||||||||||
|
Reserves for losses on impaired loans
and receivables
|
$ | 211 | (d) | $ | 40 | (d) | $ | 539 | $ | 790 | ||||||
|
|
||||||||||||||||
| (a) |
The Company’s policy is generally to accrue interest through the date of charge-off (at 180
days past due). The Company establishes reserves for interest that the Company believes will
not be collected.
|
|
| (b) |
Non-accrual loans not in modification programs include certain cardmember loans placed with
outside collection agencies for which the Company has ceased accruing interest.
|
|
| (c) |
These amounts do not include cardmember loans and receivables modified in a TDR already
disclosed above as (i) loans over 90 days past due and still accruing interest, and (ii)
non-accrual loans.
|
|
| (d) |
Reserves for losses for loans and receivables modified in a TDR are determined by the
difference between cash flows expected to be received from the cardmember discounted at the
original effective interest rate and the recorded investment in the cardmember balance. These
amounts include reserves for losses on loans modified in a TDR that are disclosed above as
loans 90 days past due and still accruing interest and non-accrual loans.
|
|
| (e) |
The increase in impaired loans was due to the adoption of new GAAP effective
January 1, 2010, which resulted in the consolidation of the Lending Trust as discussed further
in Note 1. As a result of these changes, amounts as of June 30, 2010 include impaired loans
and receivables for both the Charge Trust and Lending Trust; correspondingly, amounts as of
December 31, 2009 only include impaired loans and receivables for the Charge Trust and the
seller’s interest portion of the Lending Trust.
|
15
| 6. |
Investment Securities
|
| 2010 | 2009 | |||||||||||||||||||||||||||||||
| Gross | Gross | Estimated | Gross | Gross | Estimated | |||||||||||||||||||||||||||
| Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
| (Millions) | Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | ||||||||||||||||||||||||
|
State and municipal
obligations
|
$ | 6,164 | $ | 53 | $ | (186 | ) | $ | 6,031 | $ | 6,457 | $ | 51 | $ | (258 | ) | $ | 6,250 | ||||||||||||||
|
U.S. Government agency
obligations
|
6,332 | 31 | — | 6,363 | 6,699 | 47 | (1 | ) | 6,745 | |||||||||||||||||||||||
|
U.S. Government treasury
obligations
|
2,700 | 8 | — | 2,708 | 5,556 | 10 | — | 5,566 | ||||||||||||||||||||||||
|
Corporate debt
securities
(a)
|
1,378 | 21 | (1 | ) | 1,398 | 1,333 | 14 | (12 | ) | 1,335 | ||||||||||||||||||||||
|
Retained subordinated
securities
(b)
|
— | — | — | — | 3,088 | 512 | (1 | ) | 3,599 | |||||||||||||||||||||||
|
Mortgage-backed
securities
(c)
|
208 | 7 | — | 215 | 179 | 3 | (2 | ) | 180 | |||||||||||||||||||||||
|
Foreign government
bonds and obligations |
99 | 4 | — | 103 | 90 | 2 | — | 92 | ||||||||||||||||||||||||
|
Equity securities
(d)
|
100 | 369 | — | 469 | 100 | 430 | — | 530 | ||||||||||||||||||||||||
|
Other
(e)
|
40 | 1 | — | 41 | 40 | — | — | 40 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ | 17,021 | $ | 494 | $ | (187 | ) | $ | 17,328 | $ | 23,542 | $ | 1,069 | $ | (274 | ) | $ | 24,337 | ||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| (a) |
The June 30, 2010 and December 31, 2009 balances include, on a cost basis, $1.2 billion and
$1.1 billion, respectively, of corporate debt obligations issued under the Temporary Liquidity
Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation
(FDIC).
|
|
| (b) |
As a result of the adoption of new GAAP effective January 1, 2010, the Company no longer
presents the retained subordinated securities within its Consolidated Financial Statements in
periods subsequent to December 31, 2009. The December 31, 2009 balance consists of
investments in retained subordinated securities issued by unconsolidated VIEs related to the
Company’s cardmember loan securitization programs. Refer to Note 7 for further details.
|
|
| (c) |
Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
|
|
| (d) |
Principally represents the Company’s investment in Industrial and Commercial Bank of China
(ICBC).
|
|
| (e) |
Other is comprised of investments in various mutual funds.
|
16
| 2010 | 2009 | |||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or more | Less than 12 months | 12 months or more | |||||||||||||||||||||||||||||
| Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
| (Millions) | Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | ||||||||||||||||||||||||
| Description of Securities | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||||||||
|
State and municipal
obligations
|
$ | 622 | $ | (14 | ) | $ | 1,923 | $ | (172 | ) | $ | 837 | $ | (25 | ) | $ | 2,074 | $ | (233 | ) | ||||||||||||
|
U.S. Government
agency obligations
|
— | — | — | — | 249 | (1 | ) | — | — | |||||||||||||||||||||||
|
Corporate debt
securities
|
— | — | 2 | (1 | ) | 102 | (1 | ) | 38 | (11 | ) | |||||||||||||||||||||
|
Retained subordinated
securities
|
— | — | — | — | — | — | 75 | (1 | ) | |||||||||||||||||||||||
|
Mortgage-backed
securities
|
— | — | — | — | 120 | (2 | ) | — | — | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ | 622 | $ | (14 | ) | $ | 1,925 | $ | (173 | ) | $ | 1,308 | $ | (29 | ) | $ | 2,187 | $ | (245 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
17
| (Millions) | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
| Ratio of Fair Value to | Number of | Estimated | Unrealized | Number of | Estimated | Unrealized | Number of | Estimated | Unrealized | |||||||||||||||||||||||||||
| Amortized Cost | Securities | Fair Value | Losses | Securities | Fair Value | Losses | Securities | Fair Value | Losses | |||||||||||||||||||||||||||
|
2010:
|
||||||||||||||||||||||||||||||||||||
|
90%–100%
|
85 | $ | 607 | $ | (12 | ) | 227 | $ | 1,290 | $ | (63 | ) | 312 | $ | 1,897 | $ | (75 | ) | ||||||||||||||||||
|
Less than 90%
|
1 | 15 | (2 | ) | 63 | 635 | (110 | ) | 64 | 650 | (112 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total as of June 30, 2010
|
86 | $ | 622 | $ | (14 | ) | 290 | $ | 1,925 | $ | (173 | ) | 376 | $ | 2,547 | $ | (187 | ) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
2009:
|
||||||||||||||||||||||||||||||||||||
|
90%–100%
|
155 | $ | 1,289 | $ | (25 | ) | 225 | $ | 1,411 | $ | (87 | ) | 380 | $ | 2,700 | $ | (112 | ) | ||||||||||||||||||
|
Less than 90%
|
2 | 19 | (4 | ) | 78 | 776 | (158 | ) | 80 | 795 | (162 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total as of
December 31, 2009
|
157 | $ | 1,308 | $ | (29 | ) | 303 | $ | 2,187 | $ | (245 | ) | 460 | $ | 3,495 | $ | (274 | ) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Gains
(a)
|
$ | 1 | $ | 222 | $ | 2 | $ | 223 | ||||||||
|
Losses
|
(6 | ) | — | (6 | ) | — | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | (5 | ) | $ | 222 | $ | (4 | ) | $ | 223 | ||||||
|
|
||||||||||||||||
| (a) |
2009 gains primarily represent the gain from the sale of 50 percent of the Company’s investment in ICBC.
|
18
| Estimated | ||||||||
| (Millions) | Cost | Fair Value | ||||||
|
Due within 1 year:
|
$ | 8,182 | $ | 8,208 | ||||
|
Due after 1 year but within 5 years
|
2,436 | 2,467 | ||||||
|
Due after 5 years but within 10 years
|
337 | 349 | ||||||
|
Due after 10 years
|
5,926 | 5,794 | ||||||
|
|
||||||||
|
Total
|
$ | 16,881 | $ | 16,818 | ||||
|
|
||||||||
| 7. |
Asset Securitizations
|
19
| Balance | Adjusted Balance | |||||||||||
| (Billions) | December 31, 2009 | Adjustments | January 1, 2010 | |||||||||
|
Cardmember loans
|
$ | 32.8 | $ | 29.0 | $ | 61.8 | ||||||
|
Loss reserves (cardmember loans)
|
(3.3 | ) | (2.5 | ) | (5.8 | ) | ||||||
|
Investment securities
|
24.3 | (3.6 | ) | 20.7 | ||||||||
|
Other receivables
|
5.1 | (1.9 | ) | 3.2 | ||||||||
|
Other assets
|
13.2 | 2.2 | 15.4 | |||||||||
|
Long-term debt
|
52.3 | 25.0 | 77.3 | |||||||||
|
Shareholders’ equity
|
14.4 | (1.8 | ) | 12.6 | ||||||||
| • |
An increase to cardmember loans and long-term debt for the (i) cardmember loans
held by the Lending Trust and (ii) debt securities issued by the Lending Trust;
|
| • |
Establishment of a cardmember reserve for losses for the additional cardmember
loans;
|
| • |
The elimination in consolidation of the Company’s retained subordinated securities
against the debt securities issued by the Lending Trust;
|
| • |
A reduction to shareholders’ equity, primarily for the after-tax effect of
establishing the additional reserve for losses on cardmember loans.
|
20
| Quarter-End | ||||||||||||
| Maturity | Outstanding | Stated Rate | ||||||||||
| (Millions, except percentages) | Dates | Balance | on Debt (a) | |||||||||
|
Fixed Rate Senior Notes
|
2011 | $ | 438 | 5.35 | % | |||||||
|
Fixed Rate Subordinated Notes
|
2011 | 62 | 5.61 | % | ||||||||
|
Floating Rate Senior Notes
|
2010-2018 | 19,502 | 0.95 | % | ||||||||
|
Floating Rate Subordinated Notes
|
2010-2018 | 1,539 | 0.73 | % | ||||||||
|
|
||||||||||||
|
Total
|
$ | 21,541 | 1.04 | % | ||||||||
|
|
||||||||||||
| (a) |
For floating rate debt issuances, the stated interest rates are based on the floating rates
in effect as of June 30, 2010. These rates may not be indicative of future interest rates.
|
| (Millions) | Amount | |||
|
2010
|
$ | 2,250 | ||
|
2011
|
5,330 | |||
|
2012
|
5,222 | |||
|
2013
|
2,904 | |||
|
2014
|
2,685 | |||
|
Thereafter
|
3,150 | |||
|
|
||||
|
Total
|
$ | 21,541 | ||
|
|
||||
21
| Three Months | Six Months | |||||||
| Ended | Ended | |||||||
| June 30, 2009 | June 30, 2009 | |||||||
|
Excess spread, net
(a)
|
$ | (139 | ) | $ | (137 | ) | ||
|
Servicing fees
|
140 | 279 | ||||||
|
Losses on securitizations
(b)
|
(3 | ) | (3 | ) | ||||
|
|
||||||||
|
Securitization income, net
|
$ | (2 | ) | $ | 139 | |||
|
|
||||||||
| (a) |
Excess spread, net was the net cash flow from interest and fee collections allocated to the
investors’ interests after deducting the interest paid on investor certificates, credit
losses, contractual servicing fees, other expenses, and the changes in the fair value of the
interest-only strip. This amount excludes issuer rate fees on the securitized accounts, which
were recorded in discount revenue in the Company’s Consolidated Statements of Income.
|
|
| (b) |
Excludes $82 million and $(48) million of impact from cardmember loan sales and maturities
for the three months ended June 30, 2009, reflected in the provisions for losses for the
period. Excludes $82 million and $(141) million of impact from cardmember loan sales and
maturities for the six months ended June 30, 2009, reflected in the provisions for losses for
the period.
|
| 8. |
Customer Deposits
|
| (Millions) | 2010 | 2009 | ||||||
|
U.S.:
|
||||||||
|
Interest-bearing
|
$ | 27,634 | $ | 25,579 | ||||
|
Non-interest-bearing
|
13 | 13 | ||||||
|
Non-U.S.:
|
||||||||
|
Interest-bearing
|
690 | 680 | ||||||
|
Non-interest-bearing
|
15 | 17 | ||||||
|
|
||||||||
|
Total customer deposits
|
$ | 28,352 | $ | 26,289 | ||||
|
|
||||||||
22
| (Millions) | 2010 | 2009 | ||||||
|
U.S. retail deposits:
|
||||||||
|
Cash sweep and savings accounts
|
$ | 12,753 | $ | 10,498 | ||||
|
Certificates of deposit
|
14,881 | 15,081 | ||||||
|
Other deposits
|
718 | 710 | ||||||
|
|
||||||||
|
Total customer deposits
|
$ | 28,352 | $ | 26,289 | ||||
|
|
||||||||
| (Millions) | U.S. | Non-U.S. | Total | |||||||||
|
2010
|
$ | 2,868 | $ | 402 | $ | 3,270 | ||||||
|
2011
|
5,458 | 7 | 5,465 | |||||||||
|
2012
|
2,793 | — | 2,793 | |||||||||
|
2013
|
2,234 | — | 2,234 | |||||||||
|
2014
|
1,016 | — | 1,016 | |||||||||
|
After 5 years
|
512 | — | 512 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 14,881 | $ | 409 | $ | 15,290 | ||||||
|
|
||||||||||||
| (Millions) | 2010 | 2009 | ||||||
|
U.S.
|
$ | 481 | $ | 196 | ||||
|
Non-U.S.
|
313 | 293 | ||||||
|
|
||||||||
|
Total
|
$ | 794 | $ | 489 | ||||
|
|
||||||||
| 9. |
Derivatives and Hedging Activities
|
| • |
Interest rate risk in its card and insurance and travelers cheque businesses, and its
investment portfolios; and
|
| • |
Foreign exchange risk in its international operations.
|
23
24
| Other assets | Other liabilities | |||||||||||||||
| Fair Value | Fair Value | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||
|
Interest rate contracts
|
||||||||||||||||
|
Fair value hedges
|
$ | 1,039 | $ | 632 | $ | — | $ | 6 | ||||||||
|
Cash flow hedges
|
— | 1 | 25 | 44 | ||||||||||||
|
Foreign exchange contracts
|
||||||||||||||||
|
Net investment hedges
|
114 | 132 | 98 | 130 | ||||||||||||
|
|
||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ | 1,153 | $ | 765 | $ | 123 | $ | 180 | ||||||||
|
|
||||||||||||||||
|
Derivatives not designated as hedging instruments:
|
||||||||||||||||
|
Interest rate contracts
|
$ | — | $ | 11 | $ | 8 | $ | 5 | ||||||||
|
Foreign exchange contracts
(a)
|
65 | 57 | 105 | 95 | ||||||||||||
|
Equity-linked contract
(b)
|
— | — | 4 | 3 | ||||||||||||
|
|
||||||||||||||||
|
Total derivatives not designated as hedging instruments
|
65 | 68 | 117 | 103 | ||||||||||||
|
|
||||||||||||||||
|
Total derivatives
(c)
|
$ | 1,218 | $ | 833 | $ | 240 | $ | 283 | ||||||||
|
|
||||||||||||||||
| (a) |
Includes foreign currency derivatives embedded in certain operating agreements.
|
|
| (b) |
Represents an equity-linked derivative embedded in one of the Company’s investment
securities.
|
|
| (c) |
GAAP permits the netting of derivative assets and derivative liabilities when a legally
enforceable master netting agreement exists between the Company and its derivative
counterparty. As of June 30, 2010 and December 31, 2009, $21 million and $33 million,
respectively, of derivative assets and liabilities have been offset and presented net on the
Consolidated Balance Sheets.
|
|
Derivatives that Qualify for Hedge Accounting
|
25
| Gains (losses) recognized in income | ||||||||||||||||||||||||||||||||
| Derivative contract | Hedged item | Net hedge | ||||||||||||||||||||||||||||||
| Amount | Amount | ineffectiveness | ||||||||||||||||||||||||||||||
| (Millions) | Location | 2010 | 2009 | Location | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||
|
Interest rate contracts
|
Other, net expenses | $ | 289 | $ | (408 | ) | Other, net expenses | $ | (252 | ) | $ | 347 | $ | 37 | $ | (61 | ) | |||||||||||||||
| Gains (losses) recognized in income | ||||||||||||||||||||||||||||||||
| Derivative contract | Hedged item | Net hedge | ||||||||||||||||||||||||||||||
| Amount | Amount | ineffectiveness | ||||||||||||||||||||||||||||||
| (Millions) | Location | 2010 | 2009 | Location | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||
|
Interest rate contracts
|
Other, net expenses | $ | 413 | $ | (425 | ) | Other, net expenses | $ | (367 | ) | $ | 430 | $ | 46 | $ | 5 | ||||||||||||||||
26
| Gains (losses) recognized in income | ||||||||||||||||||||||||||||||||
| Gains (losses) | Amount reclassified | |||||||||||||||||||||||||||||||
| recognized in | from AOCI into | Net hedge | ||||||||||||||||||||||||||||||
| AOCI, net of tax | income | ineffectiveness | ||||||||||||||||||||||||||||||
| (Millions) | 2010 | 2009 | Location | 2010 | 2009 | Location | 2010 | 2009 | ||||||||||||||||||||||||
|
Cash flow hedges:
(a)
|
||||||||||||||||||||||||||||||||
|
Interest rate contracts
|
$ | — | $ | (5 | ) | Interest expense | $ | (8 | ) | $ | (31 | ) | Other, net expenses | $ | — | $ | 3 | |||||||||||||||
|
Net investment hedges:
|
||||||||||||||||||||||||||||||||
|
Foreign exchange contracts
|
$ | 199 | $ | (459 | ) | Other, net expenses | $ | — | $ | — | Other, net expenses | $ | — | $ | — | |||||||||||||||||
| Losses recognized in income | ||||||||||||||||||||||||||||||||
| Gains (losses) | Amount reclassified | |||||||||||||||||||||||||||||||
| recognized in | from AOCI into | Net hedge | ||||||||||||||||||||||||||||||
| AOCI, net of tax | income | ineffectiveness | ||||||||||||||||||||||||||||||
| (Millions) | 2010 | 2009 | Location | 2010 | 2009 | Location | 2010 | 2009 | ||||||||||||||||||||||||
|
Cash flow hedges:
(a)
|
||||||||||||||||||||||||||||||||
|
Interest rate contracts
|
$ | (2 | ) | $ | (17 | ) | Interest expense | $ | (21 | ) | $ | (75 | ) | Other, net expenses | $ | — | $ | — | ||||||||||||||
|
Net investment hedges:
|
||||||||||||||||||||||||||||||||
|
Foreign exchange contracts
|
$ | 335 | $ | (371 | ) | Other, net expenses | $ | — | $ | — | Other, net expenses | $ | — | $ | — | |||||||||||||||||
| (a) |
During the six months ended June 30, 2010 and 2009, there were no forecasted transactions
that were considered no longer probable to occur.
|
27
| Gains (losses) recognized in income | ||||||||||
| Amount | ||||||||||
| (Millions) | Location | 2010 | 2009 | |||||||
|
Interest rate contracts
|
Other, net expenses | $ | (13 | ) | $ | 18 | ||||
|
Foreign exchange contracts
(a)
|
Other non-interest revenues | — | — | |||||||
|
|
Interest and dividends on investment securities | — | 1 | |||||||
|
|
Interest expense on short-term borrowings | 2 | 1 | |||||||
|
|
Interest expense on long-term debt and other | 23 | 7 | |||||||
|
|
Other, net expenses | (22 | ) | 54 | ||||||
|
Equity-linked contract
|
Other non-interest revenues | (1 | ) | — | ||||||
|
|
||||||||||
|
Total
|
$ | (11 | ) | $ | 81 | |||||
|
|
||||||||||
| Gains (losses) recognized in income | ||||||||||
| Amount | ||||||||||
| (Millions) | Location | 2010 | 2009 | |||||||
|
Interest rate contracts
|
Other, net expenses | $ | (14 | ) | $ | 17 | ||||
|
Foreign exchange contracts
(a)
|
Other non-interest revenues | — | (1 | ) | ||||||
|
|
Interest and dividends on investment securities | 1 | 3 | |||||||
|
|
Interest expense on short-term borrowings | 4 | 1 | |||||||
|
|
Interest expense on long-term debt and other | 42 | 11 | |||||||
|
|
Other, net expenses | (54 | ) | 53 | ||||||
|
Equity-linked contracts
|
Other non-interest revenues | (1 | ) | — | ||||||
|
|
||||||||||
|
Total
|
$ | (22 | ) | $ | 84 | |||||
|
|
||||||||||
| (a) |
For the three and six months ended June 30, 2010, foreign exchange contracts include
embedded foreign currency derivatives. Gains (losses) on these embedded derivatives are
included in other, net expenses.
|
28
| 10. |
Guarantees
|
| Maximum amount of | Amount of related | |||||||||||||||
| undiscounted future payments (a) | liability (b) | |||||||||||||||
| (Billions) | (Millions) | |||||||||||||||
| Type of Guarantee | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card and travel operations
(c)
|
$ | 68 | $ | 66 | $ | 113 | $ | 112 | ||||||||
|
Other
(d)
|
1 | 1 | 100 | 74 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 69 | $ | 67 | $ | 213 | $ | 186 | ||||||||
|
|
||||||||||||||||
| (a) |
Represents the notional amounts that could be lost under the guarantees and indemnifications
if there were a total default by the guaranteed parties. The Merchant Protection guarantee is
calculated using management’s best estimate of maximum exposure based on all eligible claims
as measured against annual billed business volumes. The Company mitigates this risk by
withholding settlement from the merchant or obtaining deposits and other collateral from
merchants considered higher risk due to various factors. The amounts being held by the Company
are not significant when compared to the maximum potential amount of future payments under
this guarantee.
|
|
| (b) |
Included as part of other liabilities on the Company’s Consolidated Balance Sheets.
|
|
| (c) |
Includes Credit Card Registry, Return Protection, Account Protection and Merchant Protection,
which the Company offers directly to cardmembers.
|
|
| (d) |
Other primarily includes guarantees related to the Company’s business dispositions and real
estate, each of which are individually smaller indemnifications.
|
| 11. |
Comprehensive Income
|
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Net income
|
$ | 1,017 | $ | 337 | $ | 1,902 | $ | 774 | ||||||||
|
Other comprehensive income gains (losses):
|
||||||||||||||||
|
Net unrealized securities gains
|
25 | 400 | 9 | 732 | ||||||||||||
|
Net unrealized derivative gains
|
5 | 12 | 12 | 31 | ||||||||||||
|
Foreign currency translation adjustments
|
(34 | ) | (72 | ) | (65 | ) | (91 | ) | ||||||||
|
Net unrealized pension and other
postretirement benefit costs
|
8 | 8 | 35 | 29 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,021 | $ | 685 | $ | 1,893 | $ | 1,475 | ||||||||
|
|
||||||||||||||||
29
| 12. |
Income Taxes
|
| Three Months Ended | Six Months Ended | Full Year | ||||||||||
| June 30, 2010 | June 30, 2010 | 2009 | ||||||||||
|
Effective tax rate
(a)
|
36% (b) (c) | 33% (b) | 25% | |||||||||
| (a) |
Each of the periods reflects recurring, permanent tax benefits in relation to the level of
pretax income.
|
|
| (b) |
For the three months and six months ended June 30, 2010, the effective tax rate includes
the impact of a $44 million valuation allowance related to deferred tax assets associated with
certain of the Company’s non-U.S. travel operations.
|
|
| (c) |
For the three months ended June 30, 2010, the effective tax rate includes
the impact of an increase of 2010’s estimated
annual effective rate during the quarter.
|
30
| 13. |
Earnings Per Common Share (EPS)
|
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Numerator:
|
||||||||||||||||
|
Basic and diluted:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 1,017 | $ | 342 | $ | 1,902 | $ | 785 | ||||||||
|
Preferred shares dividends, accretion, and recognition of
remaining unaccreted dividends
(a)
|
— | (234 | ) | — | (306 | ) | ||||||||||
|
Earnings allocated to participating share awards and other items
|
(13 | ) | (1 | ) | (25 | ) | (5 | ) | ||||||||
|
Loss from discontinued operations, net of tax
|
— | (5 | ) | — | (11 | ) | ||||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 1,004 | $ | 102 | $ | 1,877 | $ | 463 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Denominator:
|
||||||||||||||||
|
Basic: weighted-average common stock
|
1,190 | 1,162 | 1,188 | 1,159 | ||||||||||||
|
Add: weighted-average stock options and warrants
(b)
|
7 | 3 | 6 | 2 | ||||||||||||
|
|
||||||||||||||||
|
Diluted
|
1,197 | 1,165 | 1,194 | 1,161 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic EPS:
|
||||||||||||||||
|
Income from continuing operations attributable to common
shareholders
|
$ | 0.84 | $ | 0.09 | $ | 1.58 | $ | 0.41 | ||||||||
|
Loss from discontinued operations
|
— | — | — | (0.01 | ) | |||||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 0.84 | $ | 0.09 | $ | 1.58 | $ | 0.40 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Diluted EPS:
|
||||||||||||||||
|
Income from continuing operations attributable to common
shareholders
|
$ | 0.84 | $ | 0.09 | $ | 1.57 | $ | 0.41 | ||||||||
|
Loss from discontinued operations
|
— | — | — | (0.01 | ) | |||||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 0.84 | $ | 0.09 | $ | 1.57 | $ | 0.40 | ||||||||
|
|
||||||||||||||||
| (a) |
Includes the accelerated preferred dividend accretion of $212 millions for the three and six
months ended June 30, 2009, due to the repurchase of $3.39 billion of preferred shares issued
as part of the Capital Purchase Program (CPP) on June 17, 2009.
|
||
| (b) |
For the three and six months ended June 30, 2010, the dilutive effect of unexercised stock
options excluded 35 million and 38 million options, respectively. For the three and six
months ended June 30, 2009, the dilutive effect of unexercised stock options excluded 79
million and 83 million options, respectively, and 24 million warrants for both the three and
six months ended June 30, 2009. Such amounts for all periods were excluded from the
computation of EPS because inclusion of the options and warrants would have been
anti-dilutive.
|
31
| 14. |
Details of Certain Consolidated Statements of Income Lines
|
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Foreign currency conversion revenue
|
$ | 205 | $ | 165 | $ | 393 | $ | 308 | ||||||||
|
Delinquency fees
|
153 | 131 | 312 | 302 | ||||||||||||
|
Service fees
|
80 | 82 | 162 | 161 | ||||||||||||
|
Other
|
59 | 61 | 130 | 121 | ||||||||||||
|
|
||||||||||||||||
|
Total other commissions and fees
|
$ | 497 | $ | 439 | $ | 997 | $ | 892 | ||||||||
|
|
||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Insurance premium revenue
|
$ | 63 | $ | 75 | $ | 136 | $ | 151 | ||||||||
|
(Loss) Gain on investment securities
|
(5 | ) | 222 | (4 | ) | 223 | ||||||||||
|
Other
|
427 | 373 | 779 | 746 | ||||||||||||
|
|
||||||||||||||||
|
Total other revenues
|
$ | 485 | $ | 670 | $ | 911 | $ | 1,120 | ||||||||
|
|
||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Marketing and promotion
|
$ | 802 | $ | 352 | $ | 1,397 | $ | 697 | ||||||||
|
Cardmember rewards
|
1,198 | 1,029 | 2,416 | 1,875 | ||||||||||||
|
Cardmember services
|
122 | 131 | 271 | 242 | ||||||||||||
|
|
||||||||||||||||
|
Total marketing,
promotion, rewards
and cardmember
services
|
$ | 2,122 | $ | 1,512 | $ | 4,084 | $ | 2,814 | ||||||||
|
|
||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Occupancy and equipment
|
$ | 379 | $ | 392 | $ | 763 | $ | 750 | ||||||||
|
Communications
|
97 | 106 | 192 | 210 | ||||||||||||
|
MasterCard and Visa settlements
|
(213 | ) | (213 | ) | (426 | ) | (426 | ) | ||||||||
|
Other
|
275 | 324 | 570 | 580 | ||||||||||||
|
|
||||||||||||||||
|
Total other, net expense
|
$ | 538 | $ | 609 | $ | 1,099 | $ | 1,114 | ||||||||
|
|
||||||||||||||||
32
| 15. |
Contingencies
|
| 16. |
Reportable Operating Segments
|
33
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Non-interest revenues:
|
||||||||||||||||
|
USCS
|
$ | 2,534 | $ | 2,269 | $ | 4,851 | $ | 4,605 | ||||||||
|
ICS
|
865 | 838 | 1,747 | 1,625 | ||||||||||||
|
GCS
|
1,138 | 1,039 | 2,207 | 2,021 | ||||||||||||
|
GNMS
|
1,021 | 872 | 1,970 | 1,679 | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
112 | 333 | 194 | 428 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 5,670 | $ | 5,351 | $ | 10,969 | $ | 10,358 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest income:
|
||||||||||||||||
|
USCS
|
$ | 1,315 | $ | 758 | $ | 2,726 | $ | 1,686 | ||||||||
|
ICS
|
342 | 376 | 705 | 741 | ||||||||||||
|
GCS
|
2 | 2 | 3 | 3 | ||||||||||||
|
GNMS
|
1 | — | 2 | — | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
138 | 152 | 267 | 332 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,798 | $ | 1,288 | $ | 3,703 | $ | 2,762 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest expense:
|
||||||||||||||||
|
USCS
|
$ | 204 | $ | 146 | $ | 394 | $ | 308 | ||||||||
|
ICS
|
99 | 101 | 205 | 209 | ||||||||||||
|
GCS
|
56 | 43 | 104 | 88 | ||||||||||||
|
GNMS
|
(46 | ) | (44 | ) | (93 | ) | (94 | ) | ||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
297 | 301 | 598 | 591 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 610 | $ | 547 | $ | 1,208 | $ | 1,102 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Total revenues, net of interest expense:
|
||||||||||||||||
|
USCS
|
$ | 3,645 | $ | 2,881 | $ | 7,183 | $ | 5,983 | ||||||||
|
ICS
|
1,108 | 1,113 | 2,247 | 2,157 | ||||||||||||
|
GCS
|
1,084 | 998 | 2,106 | 1,936 | ||||||||||||
|
GNMS
|
1,068 | 916 | 2,065 | 1,773 | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
(47 | ) | 184 | (137 | ) | 169 | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 6,858 | $ | 6,092 | $ | 13,464 | $ | 12,018 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Income (Loss) from continuing operations:
|
||||||||||||||||
|
USCS
|
$ | 522 | $ | (153 | ) | $ | 950 | $ | (160 | ) | ||||||
|
ICS
|
160 | 78 | 311 | 130 | ||||||||||||
|
GCS
|
117 | 67 | 209 | 148 | ||||||||||||
|
GNMS
|
269 | 239 | 536 | 489 | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
(51 | ) | 111 | (104 | ) | 178 | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,017 | $ | 342 | $ | 1,902 | $ | 785 | ||||||||
|
|
||||||||||||||||
| (a) |
Corporate & Other includes adjustments and eliminations for intersegment activity.
|
34
| • |
charge and credit card products;
|
| • |
expense management products and services;
|
| • |
consumer and business travel services;
|
| • |
stored value products such as Travelers Cheques and other prepaid products;
|
| • |
network services for the Company’s network partners;
|
| • |
merchant acquisition and processing, point-of-sale, servicing and settlement and marketing
products and services for merchants; and
|
| • |
fee services, including market and trend analyses and related consulting services, and the
design of customized customer loyalty and rewards programs.
|
| • |
Discount revenue, which is the Company’s largest revenue source, represents fees charged to
merchants when cardmembers use their cards to purchase goods and services on the Company’s
network;
|
| • |
Net card fees, which represent revenue earned for annual charge card memberships;
|
| • |
Travel commissions and fees, which are earned by charging a transaction or management fee for
airline or other travel-related transactions;
|
| • |
Other commissions and fees, which are earned on foreign exchange conversions and card-related
fees and assessments;
|
| • |
Other revenue, which represents insurance premiums earned from cardmember travel and other
insurance programs, revenues arising from contracts with Global Network Services’ (GNS)
partners (including royalties and signing fees), publishing revenues and other miscellaneous
revenue and fees; and
|
| • |
Interest and fees on loans, which principally represents interest income earned on
outstanding balances, and card fees related to the cardmember loans portfolio.
|
| • |
Revenues net of interest expense growth of at least 8 percent;
|
| • |
Earnings per share (EPS) growth of 12 to 15 percent; and
|
| • |
Return on average equity (ROE) of 33 to 36 percent.
|
35
36
| 1 |
As discussed on page 41 below, net interest
yield is a non-GAAP measure. The comparable GAAP measure is not determinable
at this time.
|
37
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card billed business:
(a)
|
||||||||||||||||
|
United States
|
$ | 119.7 | $ | 104.8 | $ | 227.7 | $ | 202.2 | ||||||||
|
Outside the United States
|
55.6 | 46.6 | 108.6 | 88.4 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 175.3 | $ | 151.4 | $ | 336.3 | $ | 290.6 | ||||||||
|
|
||||||||||||||||
|
Total cards-in-force
(millions)
(b)
|
||||||||||||||||
|
United States
|
$ | 49.0 | $ | 49.8 | $ | 49.0 | $ | 49.8 | ||||||||
|
Outside the United States
|
39.9 | 38.7 | 39.9 | 38.7 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 88.9 | $ | 88.5 | $ | 88.9 | $ | 88.5 | ||||||||
|
|
||||||||||||||||
|
Basic cards-in-force
(millions)
(b)
|
||||||||||||||||
|
United States
|
$ | 38.1 | $ | 38.7 | $ | 38.1 | $ | 38.7 | ||||||||
|
Outside the United States
|
35.2 | 33.9 | 35.2 | 33.9 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 73.3 | $ | 72.6 | $ | 73.3 | $ | 72.6 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Average discount rate
(c)
|
2.56 | % | 2.55 | % | 2.56 | % | 2.55 | % | ||||||||
|
Average basic cardmember spending
(dollars)
(d)
|
$ | 3,288 | $ | 2,712 | $ | 6,299 | $ | 5,155 | ||||||||
|
Average fee per card
(dollars)
(d)
|
$ | 37 | $ | 35 | $ | 37 | $ | 35 | ||||||||
|
Average fee per card adjusted
(dollars)
(d)
|
$ | 41 | $ | 39 | $ | 41 | $ | 39 | ||||||||
| (a) |
Card billed business includes activities (including cash advances) related to proprietary
cards, cards issued under network partnership agreements, and certain insurance fees charged
on proprietary cards. Card billed business is reflected in the United States or outside the
United States based on where the cardmember is domiciled.
|
|
| (b) |
Total cards-in-force represents the number of cards that are issued and outstanding.
Proprietary basic consumer cards-in-force includes basic cards issued to the primary account
owner and does not include additional supplemental cards issued on that account. Proprietary
basic small business and corporate cards-in-force include basic and supplemental cards issued
to employee cardmembers. Non-proprietary basic cards-in-force includes all cards that are
issued and outstanding under network partnership agreements.
|
|
| (c) |
This calculation is designed to reflect pricing at merchants accepting general purpose
American Express cards. It represents the percentage of billed business (both proprietary and
Global Network Services) retained by the Company from merchants it acquires, prior to payments
to third parties unrelated to merchant acceptance.
|
|
| (d) |
Average basic cardmember spending and average fee per card are computed from proprietary card
activities only. Average fee per card is computed based on net card fees, including the
amortization of deferred direct acquisition costs, plus card fees included in interest and
fees on loans (including related amortization of deferred direct acquisition costs), divided
by average worldwide proprietary cards-in-force. The card fees related to cardmember loans
included in interest and fees on loans were $48 million and $45 million for the three months
ended June 30, 2010 and 2009, respectively, and $99 million and $85 million for the six months
ended June 30, 2010 and 2009, respectively. The adjusted average fee per card is computed in
the same manner, but excludes amortization of deferred direct acquisition costs (a portion of
which is charge card related and included in net card fees and a portion of which is lending
related and included in interest and fees on loans). The amount of amortization excluded was
$56 million and $62 million for the three months ended June 30, 2010 and 2009, respectively,
and $107 million and $132 million for the six months ended June 30, 2010 and 2009,
respectively. The Company presents adjusted average fee per card because management believes
this metric presents a useful indicator of card fee pricing across a range of its proprietary
card products.
|
38
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Worldwide cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 34.6 | $ | 31.4 | $ | 34.6 | $ | 31.4 | ||||||||
|
Loss reserves
(millions):
|
||||||||||||||||
|
Beginning balance
|
$ | 498 | $ | 810 | $ | 546 | $ | 810 | ||||||||
|
Provisions for losses on authorized transactions
(a)
|
55 | 221 | 239 | 539 | ||||||||||||
|
Net write-offs
(b)
|
(121 | ) | (340 | ) | (365 | ) | (672 | ) | ||||||||
|
Other
|
8 | 23 | 20 | 37 | ||||||||||||
|
|
||||||||||||||||
|
Ending balance
|
$ | 440 | $ | 714 | $ | 440 | $ | 714 | ||||||||
|
|
||||||||||||||||
|
% of receivables
|
1.3 | % | 2.3 | % | 1.3 | % | 2.3 | % | ||||||||
|
Net write-off rate — USCS
|
1.6 | % | 5.2 | % | 1.7 | % | 5.0 | % | ||||||||
|
30 days past due loans as a % of total — USCS
|
1.5 | % | 2.6 | % | 1.5 | % | 2.6 | % | ||||||||
|
Net loss ratio (as a % of charge volume) — ICS/GCS
(b) (c)
|
0.10 | % | 0.27 | % | 0.23 | % | N/A | |||||||||
|
90 days past billing as a % of total — ICS/GCS
(b)
|
1.0 | % | 2.3 | % | 1.0 | % | 2.3 | % | ||||||||
|
|
||||||||||||||||
|
Worldwide cardmember loans (GAAP basis portfolio):
(d)
|
||||||||||||||||
|
Total loans
|
$ | 57.3 | $ | 32.5 | $ | 57.3 | $ | 32.5 | ||||||||
|
30 days past due as a % of total
|
2.8 | % | 4.3 | % | 2.8 | % | 4.3 | % | ||||||||
|
Loss reserves
(millions):
|
||||||||||||||||
|
Beginning balance
|
$ | 5,314 | $ | 3,013 | $ | 3,268 | $ | 2,570 | ||||||||
|
Adoption of new GAAP consolidation
standard
(e)
|
N/A | N/A | 2,531 | N/A | ||||||||||||
|
Provisions for losses on authorized transactions
|
520 | 1,291 | 1,190 | 2,692 | ||||||||||||
|
Net write-offs — principal
|
(867 | ) | (847 | ) | (1,902 | ) | (1,629 | ) | ||||||||
|
Net write-offs — interest and fees
|
(92 | ) | (131 | ) | (206 | ) | (286 | ) | ||||||||
|
Other
|
(9 | ) | (107 | ) | (15 | ) | (128 | ) | ||||||||
|
|
||||||||||||||||
|
Ending balance
|
$ | 4,866 | $ | 3,219 | $ | 4,866 | $ | 3,219 | ||||||||
|
|
||||||||||||||||
|
Ending Reserves — principal
|
$ | 4,743 | $ | 3,035 | $ | 4,743 | $ | 3,035 | ||||||||
|
Ending Reserves — interest and fees
|
$ | 123 | $ | 184 | $ | 123 | $ | 184 | ||||||||
|
% of loans
|
8.5 | % | 9.9 | % | 8.5 | % | 9.9 | % | ||||||||
|
% of past due
|
307 | % | 230 | % | 307 | % | 230 | % | ||||||||
|
Average loans
|
$ | 57.5 | $ | 35.2 | $ | 58.5 | $ | 37.2 | ||||||||
|
Net write-off rate
|
6.0 | % | 9.6 | % | 6.5 | % | 8.8 | % | ||||||||
|
Net interest income divided by average loans
(f)
|
8.3 | % | 8.4 | % | 8.6 | % | 9.0 | % | ||||||||
|
Net interest yield on cardmember loans
(g)
|
9.6 | % | 9.7 | % | 9.9 | % | 10.2 | % | ||||||||
|
|
||||||||||||||||
|
Worldwide cardmember loans (Managed basis portfolio):
(h)
|
||||||||||||||||
|
Total loans
|
$ | 57.3 | $ | 62.9 | $ | 57.3 | $ | 62.9 | ||||||||
|
30 days past due loans as a % of total
|
2.8 | % | 4.3 | % | 2.8 | % | 4.3 | % | ||||||||
|
Net write-offs — principal
(millions)
|
$ | 867 | $ | 1,541 | $ | 1,902 | $ | 2,933 | ||||||||
|
Average loans
|
$ | 57.5 | $ | 63.9 | $ | 58.5 | $ | 66.0 | ||||||||
|
Net write-off rate
|
6.0 | % | 9.7 | % | 6.5 | % | 8.9 | % | ||||||||
|
Net interest yield on cardmember loans
(g)
|
9.6 | % | 10.1 | % | 9.9 | % | 10.6 | % | ||||||||
| (a) |
Represents loss provisions for cardmember receivables consisting of principal (resulting
from authorized transactions) and fee reserve components. Adjustments to cardmember
receivables resulting from unauthorized transactions have been reclassified from this line to
“Other” for all periods presented.
|
|
| (b) |
Effective January 1, 2010, the Company revised the time period in which past due cardmember
receivables in International Card Services and Global Commercial Services are written off when
they are 180 days past due or earlier, consistent with applicable bank regulatory guidance and
the write-off methodology adopted for U.S. Card Services in the fourth quarter of 2008.
Previously, receivables were written off when they were 360 days past billing or earlier.
Therefore, the net write-offs for the first quarter of 2010 included net write-offs of
approximately $60 million for International Card Services and approximately $48 million for
Global Commercial Services resulting from this write-off methodology change, which increased
the net loss ratios and decreased the 90 days past billing metrics for these segments, but did
not have a substantial impact on provisions for losses.
|
39
| (c) |
Beginning with the first quarter of 2010, the Company has revised the net loss ratio to
exclude net write-offs related to unauthorized transactions, consistent with the methodology
for calculation of the net write-off rate for U.S. Card Services. The metrics for prior
periods have not been revised for this change as it was deemed immaterial.
|
|
| (d) |
For periods ended on or prior to December 31, 2009, the Company’s cardmember loans and
related debt performance information on a GAAP basis was referred to as the “owned” basis
presentation. The information presented on a GAAP basis for such periods includes only
non-securitized cardmember loans that were included in the Company’s balance sheet. Effective
January 1, 2010, the Company’s securitized portfolio of cardmember loans and related debt is
also consolidated on its balance sheet upon the adoption of the new GAAP. Accordingly,
beginning January 1, 2010, the GAAP basis presentation includes both securitized and
non-securitized cardmember loans. Refer to page 63 for a discussion of GAAP basis
information.
|
|
| (e) |
Reflects the new GAAP effective January 1, 2010, which resulted in the consolidation of
the American Express Credit Account Master Trust (the Lending Trust), reflecting $29.0 billion
of additional cardmember loans along with a $2.5 billion loan loss reserve on the Company’s
balance sheets.
|
|
| (f) |
This calculation includes elements of total interest income and total interest expense that
are not attributable to the cardmember loan portfolio, and thus is not representative of net
interest yield on cardmember loans. The calculation includes interest income and interest
expense attributable to investment securities and other interest-bearing deposits as well as
to cardmember loans, and interest expense attributable to other activities, including
cardmember receivables.
|
|
| (g) |
See below for calculations of net interest yield on cardmember loans, a non-GAAP measure, and
net interest income divided by average loans, a GAAP measure. Management believes net
interest yield on cardmember loans is useful to investors because it provides a measure of
profitability of the Company’s cardmember loan portfolio.
|
|
| (h) |
For periods ended on or prior to December 31, 2009, information presented is based on the
Company’s historical non-GAAP, or “managed” basis presentation. Unlike the GAAP basis
presentation, the information presented on a managed basis in such periods includes both the
securitized and non-securitized cardmember loans. The adoption of new GAAP on January 1, 2010
resulted in accounting for both the Company’s securitized and non-securitized cardmember loans
in the Consolidated Financial Statements. As a result, the Company’s 2010 GAAP presentations
and managed basis presentations prior to 2010 are generally comparable. Refer to page 63 for
a discussion of managed basis information.
|
40
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Calculation based on 2010 and 2009 GAAP
information:
(b)
|
||||||||||||||||
|
Net interest income
|
$ | 1,188 | $ | 741 | $ | 2,495 | $ | 1,660 | ||||||||
|
Average loans
(billions)
|
$ | 57.5 | $ | 35.2 | $ | 58.5 | $ | 37.2 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,379 | $ | 855 | $ | 2,877 | $ | 1,896 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 57.4 | $ | 35.4 | $ | 58.4 | $ | 37.3 | ||||||||
|
Net interest income divided by average loans
|
8.3 | % | 8.4 | % | 8.6 | % | 9.0 | % | ||||||||
|
Net interest yield on cardmember loans
(e)
|
9.6 | % | 9.7 | % | 9.9 | % | 10.2 | % | ||||||||
|
|
||||||||||||||||
|
Calculation based on 2010 and 2009 managed
information:
(f)
|
||||||||||||||||
|
Net interest income
(g)
|
$ | 1,188 | $ | 1,464 | $ | 2,495 | $ | 3,186 | ||||||||
|
Average loans
(billions)
|
$ | 57.5 | $ | 63.9 | $ | 58.5 | $ | 66.0 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,379 | $ | 1,617 | $ | 2,877 | $ | 3,475 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 57.4 | $ | 64.0 | $ | 58.4 | $ | 66.1 | ||||||||
|
Net interest yield on cardmember loans
(e)
|
9.6 | % | 10.1 | % | 9.9 | % | 10.6 | % | ||||||||
| (a) |
Beginning in the first quarter of 2010, the Company changed the manner in which it
allocates interest expense and capital to its reportable operating segments. The change
reflects modifications in allocation methodology that the Company believes to more accurately
reflect the funding and capital characteristics of its segments. The change to interest
allocation impacted the consolidated net interest yield on cardmember loans. Accordingly, the
net interest yields for periods prior to the first quarter of 2010 have been revised for this
change.
|
|
| (b) |
For periods ended on or prior to December 31, 2009, the Company’s cardmember loans and
related debt performance information on a GAAP basis was referred to as the “owned” basis
presentation. The information presented on a GAAP basis for such periods includes only
non-securitized cardmember loans that were included in the Company’s balance sheet. Effective
January 1, 2010, the Company’s securitized portfolio of cardmember loans and related debt is
also consolidated on its balance sheet upon the adoption of the new GAAP. Accordingly,
beginning January 1, 2010, the GAAP basis presentation includes both securitized and
non-securitized cardmember loans. Refer to page 63 for a discussion of GAAP basis information.
|
|
| (c) |
Represents net interest income allocated to the Company’s cardmember loans portfolio on a
GAAP or managed basis, as applicable, in each case excluding the impact of card fees on loans
and balance transfer fees attributable to the Company’s cardmember loans.
|
|
| (d) |
Represents average cardmember loans on a GAAP or managed basis, as applicable, in each case
excluding the impact of deferred card fees, net of deferred direct acquisition costs of
cardmember loans.
|
|
| (e) |
Net interest yield on cardmember loans is a non-GAAP financial measure that represents the
net spread earned on cardmember loans. Net interest yield on cardmember loans is computed by
dividing adjusted net interest income by adjusted average loans, computed on an annualized
basis. The calculation of net interest yield on cardmember loans includes interest that is
deemed uncollectible. For all presentations of net interest yield on cardmember loans,
reserves and net write-offs related to uncollectible interest are recorded through provisions
for losses — cardmember loans; therefore, such reserves and net write-offs are not included in
the net interest yield calculation.
|
|
| (f) |
For periods ended on or prior to December 31, 2009, information presented is based on the
Company’s historical non-GAAP, or “managed” basis presentation. Unlike the GAAP basis
presentation, the information presented on a managed basis in such periods includes both the
securitized and non-securitized cardmember loans. The adoption of new GAAP on January 1, 2010
resulted in accounting for both the Company’s securitized and non-securitized cardmember loans
in the Consolidated Financial Statements. As a result, the Company’s 2010 GAAP presentations
and managed basis presentations prior to 2010 are generally
comparable. Refer to page 63 for
a discussion of managed basis information.
|
|
| (g) |
For periods ended on or prior to December 31, 2009, the information presented includes the
adjustments to the GAAP “owned” basis presentation for such periods attributable to
securitization activity for interest income and interest expense to arrive at the non-GAAP
“managed” basis information, which adjustments are set forth under the U.S. Card Services
managed basis presentation on page 63.
|
41
| 2 |
These currency rate adjustments assume a
constant exchange rate between periods for purposes of currency translation
into U.S. dollars (i.e., assumes the foreign exchange rates used to determine
results for the current year apply to the corresponding year-earlier period
against which such results are being compared). Management believes this
presentation is helpful to investors by making it easier to compare the
Company’s performance from one period to another without the variability caused
by fluctuations in currency exchange rates.
|
42
| Percentage Increase | ||||||||
| Assuming No | ||||||||
| Percentage | Changes in Foreign | |||||||
| Increase/(Decrease) | Exchange Rates | |||||||
|
Worldwide:
(a)
|
||||||||
|
Billed business
|
16 | % | 15 | % | ||||
|
Proprietary billed business
|
14 | 14 | ||||||
|
GNS billed business
(b)
|
27 | 23 | ||||||
|
Average spending per proprietary basic card
|
21 | 20 | ||||||
|
Basic cards-in-force
|
1 | |||||||
|
United States:
(a)
|
||||||||
|
Billed business
|
14 | |||||||
|
Average spending per proprietary basic card
|
22 | |||||||
|
Basic cards-in-force
|
(2 | ) | ||||||
|
Proprietary consumer card billed business
(c)
|
13 | |||||||
|
Proprietary small business billed business
(c)
|
12 | |||||||
|
Proprietary Corporate Services billed business
(d)
|
21 | |||||||
|
Outside the United States:
(a)
|
||||||||
|
Billed business
|
19 | 16 | ||||||
|
Average spending per proprietary basic card
|
20 | 17 | ||||||
|
Basic cards-in-force
|
4 | |||||||
|
Proprietary consumer and small business billed business
(e)
|
12 | 9 | ||||||
|
Proprietary Corporate Services billed business
(d)
|
22 | 22 | ||||||
| (a) |
Captions in the table above not designated as “proprietary” include both proprietary and
Global Network Services data.
|
|
| (b) |
Included in the Global Network & Merchant Services segment.
|
|
| (c) |
Included in the U.S. Card Services segment.
|
|
| (d) |
Included in the Global Commercial Services segment.
|
|
| (e) |
Included in the International Card Services segment.
|
43
44
| 3 |
These currency rate adjustments assume
a constant exchange rate between periods for purposes of currency translation
into U.S. dollars (i.e., assumes the foreign exchange rates used to determine
results for the current year apply to the corresponding year-earlier period
against which such results are being compared). Management believes this
presentation is helpful to investors by making it easier to compare the
Company’s performance from one period to another without the variability caused
by fluctuations in currency exchange rates.
|
45
| Percentage Increase | ||||||||
| Assuming No | ||||||||
| Percentage | Changes in Foreign | |||||||
| Increase/(Decrease) | Exchange Rates | |||||||
|
Worldwide:
(a)
|
||||||||
|
Billed business
|
16 | % | 13 | % | ||||
|
Proprietary billed business
|
14 | 12 | ||||||
|
GNS billed business
(b)
|
31 | 24 | ||||||
|
Average spending per proprietary basic card
|
22 | 20 | ||||||
|
Basic cards-in-force
|
1 | |||||||
|
United States:
(a)
|
||||||||
|
Billed business
|
13 | |||||||
|
Average spending per proprietary basic card
|
22 | |||||||
|
Basic cards-in-force
|
(2 | ) | ||||||
|
Proprietary consumer card billed business
(c)
|
12 | |||||||
|
Proprietary small business billed business
(c)
|
9 | |||||||
|
Proprietary Corporate Services billed business
(d)
|
20 | |||||||
|
Outside the United States:
(a)
|
||||||||
|
Billed business
|
23 | 15 | ||||||
|
Average spending per proprietary basic card
|
25 | 17 | ||||||
|
Basic cards-in-force
|
4 | |||||||
|
Proprietary consumer and small business billed business
(e)
|
16 | 7 | ||||||
|
Proprietary Corporate Services billed business
(d)
|
25 | 19 | ||||||
| (a) |
Captions in the table above not designated as “proprietary” include both proprietary and
Global Network Services data.
|
|
| (b) |
Included in the Global Network & Merchant Services segment.
|
|
| (c) |
Included in the U.S. Card Services segment.
|
|
| (d) |
Included in the Global Commercial Services segment.
|
|
| (e) |
Included in the International Card Services segment.
|
46
47
48
49
| Current | ||||||||
| Well-Capitalized | ||||||||
| Ratio | Actual | |||||||
|
Risk-Based Capital
|
||||||||
|
Tier 1
|
6.0 | % | ||||||
|
American Express Company
|
10.7 | % | ||||||
|
Centurion Bank
|
16.9 | % | ||||||
|
FSB
|
15.5 | % | ||||||
|
Total
|
10.0 | % | ||||||
|
American Express Company
|
12.9 | % | ||||||
|
Centurion Bank
|
18.2 | % | ||||||
|
FSB
|
18.0 | % | ||||||
|
Tier 1 Leverage
|
5.0 | % | ||||||
|
American Express Company
|
8.2 | % | ||||||
|
Centurion Bank
|
18.7 | % | ||||||
|
FSB
|
15.4 | % | ||||||
|
Tier 1 Common Risk-Based
|
||||||||
|
American Express Company
|
10.7 | % | ||||||
|
Common Equity to Risk-Weighted Assets
(a)
|
||||||||
|
American Express Company
|
13.5 | % | ||||||
|
Tangible Common Equity to Risk-Weighted Assets
(a)
|
||||||||
|
American Express Company
|
10.4 | % | ||||||
| (a) |
Common equity equals the Company’s shareholders’ equity of $14.5 billion as of June 30,
2010, and tangible common equity equals common shareholders’ equity, less goodwill and other
intangibles of $3.3 billion. Risk-weighted assets as of June 30, 2010, were $107.6 billion.
Management believes presenting the ratio of tangible common equity to risk-weighted assets is
a useful measure of evaluating the strength of the Company’s capital position.
|
50
| • |
$850 million Class A at one month Libor plus 25 basis points
|
|
| • |
$62 million Class B at one month Libor plus 60 basis points
|
51
| Long-Term | ||||||||
| Short-Term | Senior | |||||||
| Debt and | Unsecured Debt | |||||||
| Credit Agency | Entity Rated | Deposit ratings | ratings | Outlook | ||||
| DBRS | All rated entities |
R-1
(middle) |
A
(high) |
Stable | ||||
| Fitch | All rated entities | F1 | A+ | Stable (a) | ||||
| Moody’s | TRS and rated operating subsidiaries | Prime-1 | A2 | Stable | ||||
| Moody’s | American Express Company | Prime-2 | A3 | Negative | ||||
| S&P | All rated entities | A-2 | BBB+ | Stable |
| (a) |
In April 2010 Fitch revised its ratings outlook from “Negative” to “Stable”.
|
| (Billions) | 2010 | 2009 | ||||||
|
U.S. retail deposits:
|
||||||||
|
Cash sweep and savings accounts
|
$ | 12.8 | $ | 10.5 | ||||
|
Certificates of deposit
(a)
|
14.9 | 15.1 | ||||||
|
Other deposits
|
0.7 | 0.7 | ||||||
|
|
||||||||
|
Total customer deposits
|
$ | 28.4 | $ | 26.3 | ||||
|
|
||||||||
| (a) |
Includes CDs sourced directly with consumers and through third-party distribution channels.
|
52
53
| (Billions) | ||||
|
Cash
|
$ | 21.9 | (a) | |
|
Readily-marketable securities
|
10.2 | (b) | ||
|
|
||||
|
Cash and readily-marketable securities
|
32.1 | |||
|
Less:
|
||||
|
Operating cash
|
(4.3) | (c) | ||
|
Short-term obligations outstanding
|
(2.4) | (d) | ||
|
|
||||
|
Excess cash and readily-marketable securities
|
$ | 25.4 | (e) | |
|
|
||||
| (a) |
Includes cash and cash equivalents of $20.7 billion as well as cash of $1.2 billion held in
other assets on the Consolidated Balance Sheet for certain forthcoming asset-backed
securitization maturities in the third quarter of 2010.
|
|
| (b) |
Consists of certain available-for-sale investment securities (U.S. Treasury and agency
securities and government-guaranteed debt) that are considered highly liquid and either mature
prior to the maturity of borrowings that will occur within the next 12 months, or could be
sold or pledged under sale/repurchase agreements to raise cash.
|
|
| (c) |
Cash on hand for day-to-day operations.
|
|
| (d) |
Consists of commercial paper and U.S. retail CDs with original maturities of three and six
months.
|
|
| (e) |
Amount is not affected by the misclassification of certain book overdraft balances referred
to in Note 1 to the Consolidated Financial Statements.
|
| Funding Maturities | ||||||||||||||||
| (Billions) | Unsecured | Asset-Backed | Certificates | |||||||||||||
| Quarter Ending: | Debt | Securitization | of Deposit | Total | ||||||||||||
|
September 30, 2010
|
$ | 1.0 | $ | 2.3 | $ | 0.2 | $ | 3.5 | ||||||||
|
December 31, 2010
|
3.4 | 1.5 | 1.6 | 6.5 | ||||||||||||
|
March 31, 2011
|
— | 3.2 | 2.0 | 5.2 | ||||||||||||
|
June 30, 2011
|
1.3 | 1.5 | 1.6 | 4.4 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 5.7 | $ | 8.5 | $ | 5.4 | $ | 19.6 | ||||||||
|
|
||||||||||||||||
54
55
56
57
58
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, net card fees and other
|
$ | 2,534 | $ | 2,271 | $ | 4,851 | $ | 4,466 | ||||||||
|
|
||||||||||||||||
|
Securitization income, net
(a)
|
— | (2 | ) | — | 139 | |||||||||||
|
|
||||||||||||||||
|
Interest income
|
1,315 | 758 | 2,726 | 1,686 | ||||||||||||
|
Interest expense
|
204 | 146 | 394 | 308 | ||||||||||||
|
|
||||||||||||||||
|
Net interest income
|
1,111 | 612 | 2,332 | 1,378 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
3,645 | 2,881 | 7,183 | 5,983 | ||||||||||||
|
|
||||||||||||||||
|
Provisions for losses
|
519 | 1,190 | 1,206 | 2,573 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for
losses
|
3,126 | 1,691 | 5,977 | 3,410 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing, promotion, rewards and cardmember services
|
1,386 | 1,021 | 2,687 | 1,910 | ||||||||||||
|
Salaries and employee benefits and other operating expenses
|
912 | 926 | 1,785 | 1,778 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
2,298 | 1,947 | 4,472 | 3,688 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income (loss)
|
828 | (256 | ) | 1,505 | (278 | ) | ||||||||||
|
Income tax provision (benefit)
|
306 | (103 | ) | 555 | (118 | ) | ||||||||||
|
|
||||||||||||||||
|
Segment income (loss)
|
$ | 522 | $ | (153 | ) | $ | 950 | $ | (160 | ) | ||||||
|
|
||||||||||||||||
| (a) |
In accordance with the new GAAP effective January 1, 2010, the Company no longer reports
securitization income, net in its income statement.
|
59
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card billed business
|
$ | 94.6 | $ | 84.1 | $ | 179.5 | $ | 162.1 | ||||||||
|
Total cards-in-force
(millions)
|
39.6 | 40.2 | 39.6 | 40.2 | ||||||||||||
|
Basic cards-in-force
(millions)
|
29.5 | 29.8 | 29.5 | 29.8 | ||||||||||||
|
Average basic cardmember spending
(dollars)
|
$ | 3,212 | $ | 2,667 | $ | 6,095 | $ | 5,058 | ||||||||
|
U.S. Consumer Travel:
|
||||||||||||||||
|
Travel sales
(millions)
|
$ | 840 | $ | 696 | $ | 1,575 | $ | 1,323 | ||||||||
|
Travel commissions and fees/sales
|
7.9 | % | 8.5 | % | 7.8 | % | 8.3 | % | ||||||||
|
Total segment assets
|
$ | 82.4 | $ | 54.1 | $ | 82.4 | $ | 54.1 | ||||||||
|
Segment capital
(millions)
(a)
|
$ | 5,997 | $ | 5,501 | $ | 5,997 | $ | 5,501 | ||||||||
|
Return on average segment capital
(b)
|
26.9 | % | 4.9 | % | 26.9 | % | 4.9 | % | ||||||||
|
Return on average tangible segment capital
(b)
|
29.2 | % | 5.2 | % | 29.2 | % | 5.2 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 17.3 | $ | 15.9 | $ | 17.3 | $ | 15.9 | ||||||||
|
30 days past due as a % of total
|
1.5 | % | 2.6 | % | 1.5 | % | 2.6 | % | ||||||||
|
Average receivables
|
$ | 17.1 | $ | 15.7 | $ | 17.0 | $ | 15.9 | ||||||||
|
Net write-off rate
|
1.6 | % | 5.2 | % | 1.7 | % | 5.0 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember loans — (GAAP basis portfolio):
(c)
|
||||||||||||||||
|
Total loans
|
$ | 49.0 | $ | 23.6 | $ | 49.0 | $ | 23.6 | ||||||||
|
30 days past due loans as a % of total
|
2.7 | % | 4.4 | % | 2.7 | % | 4.4 | % | ||||||||
|
Average loans
|
$ | 49.1 | $ | 26.5 | $ | 49.9 | $ | 28.4 | ||||||||
|
Net write-off rate
|
6.2 | % | 10.3 | % | 6.7 | % | 9.3 | % | ||||||||
|
Net interest income divided by average loans
(d)
|
9.1 | % | 9.3 | % | 9.4 | % | 9.8 | % | ||||||||
|
Net interest yield on cardmember loans
(e)
|
9.3 | % | 8.8 | % | 9.7 | % | 9.6 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember loans — (Managed basis portfolio):
(f)
|
||||||||||||||||
|
Total loans
|
$ | 49.0 | $ | 54.0 | $ | 49.0 | $ | 54.0 | ||||||||
|
30 days past due loans as a % of total
|
2.7 | % | 4.4 | % | 2.7 | % | 4.4 | % | ||||||||
|
Average loans
|
$ | 49.1 | $ | 55.1 | $ | 49.9 | $ | 57.2 | ||||||||
|
Net write-off rate
|
6.2 | % | 10.0 | % | 6.7 | % | 9.2 | % | ||||||||
|
Net interest yield on cardmember loans
(e)
|
9.3 | % | 9.7 | % | 9.7 | % | 10.3 | % | ||||||||
| (a) |
Segment capital represents capital allocated to a segment based upon specific business
operational needs, risk measures, and regulatory capital requirements.
|
|
| (b) |
Return on average segment capital is calculated by dividing the (i) one year period segment
income ($1.5 billion and $223 million for the twelve months ended June 30, 2010 and 2009,
respectively) by the (ii) one year average segment capital ($5.7 billion and $4.6 billion for
the twelve months ended June 30, 2010 and 2009, respectively). Return on average tangible
segment capital is computed in the same manner as return on average segment capital except the
computation of average tangible segment capital excludes average goodwill and other
intangibles of $447 million and $338 million as of June 30, 2010 and 2009, respectively.
Management believes the return on average tangible segment capital is a useful measure of the
profitability of its business.
|
|
| (c) |
For periods ended on or prior to December 31, 2009, the Company’s cardmember loans and
related debt performance information on a GAAP basis was referred to as the “owned” basis
presentation. The information presented on a GAAP basis for such periods includes only
non-securitized cardmember loans that were included in the Company’s balance sheet. Effective
January 1, 2010, the Company’s securitized portfolio of cardmember loans and related debt is
also consolidated on its balance sheet upon the adoption of the new GAAP. Accordingly,
beginning January 1, 2010, the GAAP basis presentation includes both securitized and
non-securitized cardmember loans. Refer to page 63 for a discussion of GAAP basis information.
|
|
| (d) |
This calculation includes elements of total interest income and total interest expense that
are not attributable to the cardmember loan portfolio, and thus is not representative of net
interest yield on cardmember loans. The calculation includes interest income and interest
expense attributable to investment securities and other interest-bearing deposits as well as
to cardmember loans, and interest expense attributable to other activities, including
cardmember receivables.
|
|
| (e) |
See below for calculations of net interest yield on cardmember loans, a non-GAAP
measure, and net interest income divided by average loans, a GAAP measure. Management
believes net interest yield on cardmember loans is useful to investors because it provides a
measure of profitability of the Company’s cardmember loan portfolio.
|
|
| (f) |
For periods ended on or prior to December 31, 2009, information presented is based on the
Company’s historical non-GAAP, or “managed” basis presentation. Unlike the GAAP basis
presentation, the information presented on a managed basis in such periods includes both the
securitized and non-securitized cardmember loans. The adoption of new GAAP on January 1,
2010 resulted in accounting for both the Company’s securitized and non-securitized cardmember
loans in the Consolidated Financial Statements. As a result, the Company’s 2010 GAAP
presentations and managed basis presentations prior to 2010 are generally comparable. Refer
to page 63 for a discussion of managed basis information.
|
60
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions, except percentages or where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Calculation based on 2010 and 2009 GAAP
information:
(b)
|
||||||||||||||||
|
Net interest income
|
$ | 1,111 | $ | 612 | $ | 2,332 | $ | 1,378 | ||||||||
|
Average loans
(billions)
|
$ | 49.1 | $ | 26.5 | $ | 49.9 | $ | 28.4 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,145 | $ | 581 | $ | 2,391 | $ | 1,356 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 49.2 | $ | 26.6 | $ | 49.9 | $ | 28.5 | ||||||||
|
Net interest income divided by average loans
|
9.1 | % | 9.3 | % | 9.4 | % | 9.8 | % | ||||||||
|
Net interest yield on cardmember loans
(e)
|
9.3 | % | 8.8 | % | 9.7 | % | 9.6 | % | ||||||||
|
|
||||||||||||||||
|
Calculation based on 2010 and 2009 managed
information:
(f)
|
||||||||||||||||
|
Net interest income
(g)
|
$ | 1,111 | $ | 1,335 | $ | 2,332 | $ | 2,904 | ||||||||
|
Average loans
(billions)
|
$ | 49.1 | $ | 55.1 | $ | 49.9 | $ | 57.2 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,145 | $ | 1,343 | $ | 2,391 | $ | 2,935 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 49.2 | $ | 55.2 | $ | 49.9 | $ | 57.3 | ||||||||
|
Net interest yield on cardmember loans
(e)
|
9.3 | % | 9.7 | % | 9.7 | % | 10.3 | % | ||||||||
| (a) |
Beginning in the first quarter of 2010, the Company changed the manner in which it allocates
capital and related interest expense to its reportable operating segments to more accurately
reflect the funding and capital characteristics of its segments. The change to interest
allocation impacted the consolidated net interest yield on cardmember loans. Accordingly, the
net interest yields for periods prior to the first quarter of 2010 have been revised for this
change.
|
|
| (b) |
For periods ended on or prior to December 31, 2009, the Company’s cardmember loans and
related debt performance information on a GAAP basis was referred to as the “owned” basis
presentation. The information presented on a GAAP basis for such periods includes only
non-securitized cardmember loans that were included in the Company’s balance sheet. Effective
January 1, 2010, the Company’s securitized portfolio of cardmember loans and related debt is
also consolidated on its balance sheet upon the adoption of the new GAAP. Accordingly,
beginning January 1, 2010, the GAAP basis presentation includes both securitized and
non-securitized cardmember loans. Refer to page 63 for a discussion of GAAP basis
information.
|
|
| (c) |
Represents net interest income allocated to the Company’s cardmember loans portfolio on a
GAAP or managed basis, as applicable, in each case excluding the impact of card fees on loans
and balance transfer fees attributable to the Company’s cardmember loans.
|
|
| (d) |
Represents average cardmember loans on a GAAP or managed portfolio basis, as applicable, in
each case excluding the impact of deferred card fees, net of deferred direct acquisition costs
of cardmember loans.
|
|
| (e) |
Net interest yield on cardmember loans is a non-GAAP financial measure that represents the
net spread earned on cardmember loans. Net interest yield on cardmember loans is computed by
dividing adjusted net interest income by adjusted average loans, computed on an annualized
basis. The calculation of net interest yield on cardmember loans includes interest that is
deemed uncollectible. For all presentations of net interest yield on cardmember loans,
reserves and net write-offs related to uncollectible interest are recorded through provisions
for losses — cardmember loans; therefore, such reserves and net write-offs are not included in
the net interest yield calculation.
|
|
| (f) |
For periods ended on or prior to December 31, 2009, information presented is based on the
Company’s historical non-GAAP, or “managed” basis presentation. Unlike the GAAP basis
presentation, the information presented on a managed basis in such periods includes both the
securitized and non-securitized cardmember loans. The adoption of new GAAP on January 1, 2010
resulted in accounting for both the Company’s securitized and non-securitized cardmember loans
in the Consolidated Financial Statements. As a result, the Company’s 2010 GAAP presentations
and managed basis presentations prior to 2010 are generally comparable. Refer to page 63 for
a discussion of managed basis information.
|
|
| (g) |
For periods ended on or prior to December 31, 2009, the information presented includes the
adjustments to the GAAP “owned” basis presentation for such periods attributable to
securitization activity for interest income and interest expense to arrive at the non-GAAP
“managed” basis information, which adjustments are set forth under the U.S. Card Services
managed basis presentation on page 63.
|
61
62
63
64
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
|
||||||||||||||||
|
Discount revenue, net card fees and other:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 2,534 | $ | 2,271 | $ | 4,851 | $ | 4,466 | ||||||||
|
Securitization adjustments
|
— | 79 | — | 178 | ||||||||||||
|
|
||||||||||||||||
|
Total discount revenue, net card fees and other
|
$ | 2,534 | $ | 2,350 | $ | 4,851 | $ | 4,644 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest income:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 1,315 | $ | 758 | $ | 2,726 | $ | 1,686 | ||||||||
|
Securitization adjustments
|
— | 771 | — | 1,657 | ||||||||||||
|
|
||||||||||||||||
|
Total interest income
|
$ | 1,315 | $ | 1,529 | $ | 2,726 | $ | 3,343 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Securitization income, net:
(a)
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | — | $ | (2 | ) | $ | — | $ | 139 | |||||||
|
Securitization adjustments
|
— | 2 | — | (139 | ) | |||||||||||
|
|
||||||||||||||||
|
Total securitization income, net
|
$ | — | $ | — | $ | — | $ | — | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest expense:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 204 | $ | 146 | $ | 394 | $ | 308 | ||||||||
|
Securitization adjustments
|
— | 48 | — | 131 | ||||||||||||
|
|
||||||||||||||||
|
Total interest expense
|
$ | 204 | $ | 194 | $ | 394 | $ | 439 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Provisions for losses:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 519 | $ | 1,190 | $ | 1,206 | $ | 2,573 | ||||||||
|
Securitization adjustments
|
— | 836 | (b) | — | 1,472 | (b) | ||||||||||
|
|
||||||||||||||||
|
Total provisions for losses
|
$ | 519 | $ | 2,026 | $ | 1,206 | $ | 4,045 | ||||||||
|
|
||||||||||||||||
| (a) |
In accordance with the new GAAP effective January 1, 2010, the Company no longer reports
securitization income, net in its income statement.
|
|
| (b) |
Includes provisions for losses for off-balance sheet cardmember loans based on the same
methodology as applied to on-balance sheet cardmember loans, except that any quarterly
adjustment to reserve levels for on-balance sheet loans to address external environmental
factors was not applied to adjust the provision expense for the securitized portfolio.
|
65
66
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, net card fees and other
|
$ | 865 | $ | 838 | $ | 1,747 | $ | 1,625 | ||||||||
|
|
||||||||||||||||
|
Interest income
|
342 | 376 | 705 | 741 | ||||||||||||
|
Interest expense
|
99 | 101 | 205 | 209 | ||||||||||||
|
|
||||||||||||||||
|
Net interest income
|
243 | 275 | 500 | 532 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
1,108 | 1,113 | 2,247 | 2,157 | ||||||||||||
|
Provisions for losses
|
90 | 302 | 248 | 637 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for losses
|
1,018 | 811 | 1,999 | 1,520 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing, promotion, rewards and cardmember services
|
376 | 287 | 726 | 545 | ||||||||||||
|
Salaries and employee benefits and other operating expenses
|
441 | 453 | 888 | 875 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
817 | 740 | 1,614 | 1,420 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income
|
201 | 71 | 385 | 100 | ||||||||||||
|
Income tax provision (benefit)
|
41 | (7 | ) | 74 | (30 | ) | ||||||||||
|
|
||||||||||||||||
|
Segment income
|
$ | 160 | $ | 78 | $ | 311 | $ | 130 | ||||||||
|
|
||||||||||||||||
67
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
|
||||||||||||||||
|
Card billed business
|
$ | 25.5 | $ | 22.7 | $ | 49.9 | $ | 43.2 | ||||||||
|
Total cards-in-force
(millions)
|
15.0 | 15.5 | 15.0 | 15.5 | ||||||||||||
|
Basic cards-in-force
(millions)
|
10.4 | 10.8 | 10.4 | 10.8 | ||||||||||||
|
Average basic cardmember spending
(dollars)
|
$ | 2,449 | $ | 2,083 | $ | 4,789 | $ | 3,897 | ||||||||
|
International Consumer Travel:
|
||||||||||||||||
|
Travel sales
(millions)
|
$ | 262 | $ | 231 | $ | 523 | $ | 449 | ||||||||
|
Travel commissions and fees/sales
|
8.0 | % | 8.7 | % | 7.6 | % | 8.5 | % | ||||||||
|
Total segment assets
|
$ | 20.0 | $ | 19.5 | $ | 20.0 | $ | 19.5 | ||||||||
|
Segment capital
(millions)
(a)
|
$ | 2,022 | $ | 2,215 | $ | 2,022 | $ | 2,215 | ||||||||
|
Return on average segment capital
(b)
|
23.6 | % | 9.8 | % | 23.6 | % | 9.8 | % | ||||||||
|
Return on average tangible segment capital
(b)
|
31.8 | % | 13.0 | % | 31.8 | % | 13.0 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 5.6 | $ | 5.4 | $ | 5.6 | $ | 5.4 | ||||||||
|
90 days past billing as a % of total
(c)
|
1.0 | % | 3.0 | % | 1.0 | % | 3.0 | % | ||||||||
|
Net loss ratio (as a % of charge volume)
(c)(d)
|
0.15 | % | 0.36 | % | 0.34 | % | 0.35 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember loans:
|
||||||||||||||||
|
Total loans
|
$ | 8.3 | $ | 8.9 | $ | 8.3 | $ | 8.9 | ||||||||
|
30 days past due loans as a % of total
|
3.0 | % | 4.0 | % | 3.0 | % | 4.0 | % | ||||||||
|
Average loans
|
$ | 8.3 | $ | 8.7 | $ | 8.6 | $ | 8.8 | ||||||||
|
Net write-off rate
|
4.9 | % | 7.5 | % | 5.2 | % | 6.9 | % | ||||||||
|
Net interest income divided by average loans
(e)
|
11.7 | % | 12.7 | % | 11.7 | % | 12.2 | % | ||||||||
|
Net interest yield on cardmember loans
(f)
|
11.4 | % | 12.5 | % | 11.5 | % | 12.3 | % | ||||||||
| (a) |
Segment capital represents capital allocated to a segment based upon specific business
operational needs, risk measures, and regulatory capital requirements.
|
|
| (b) |
Return on average segment capital is calculated by dividing the (i) one year period segment
income ($513 million and $219 million for the twelve months ended June 30, 2010 and 2009,
respectively) by the (ii) one year average segment capital ($2.2 billion and $2.2 billion for
the twelve months ended June 30, 2010 and 2009, respectively). Return on average tangible
segment capital is computed in the same manner as return on average segment capital except the
computation of average tangible segment capital excludes average goodwill and other
intangibles of $561 million and $546 million as of June 30, 2010 and 2009,
respectively. Management believes the return on average tangible segment capital is a useful measure of the
profitability of its business.
|
|
| (c) |
Effective January 1, 2010, the Company revised the time period in which past due cardmember
receivables in International Card Services are written off when they are 180 days past due or
earlier, consistent with applicable bank regulatory guidance and the write-off methodology
adopted for U.S. Card Services in the fourth quarter of 2008. Previously, receivables were
written off when they were 360 days past billing or earlier. Therefore, the net write-offs for
the first quarter of 2010 include net write-offs of approximately $60 million for
International Card Services resulting from this write-off methodology change, which increased
the net loss ratio and decreased the 90 days past billing metric for this segment, but did not
have a substantial impact on provisions for losses.
|
|
| (d) |
Beginning with the first quarter of 2010, the Company has revised the net loss ratio to
exclude write-offs related to unauthorized transactions, consistent with the methodology for
calculation of the net write-off rate for U.S. Card Services. The metrics for prior periods
have not been revised for this change as it was deemed immaterial.
|
|
| (e) |
This calculation includes elements of total interest income and total interest expense that
are not attributable to the cardmember loan portfolio, and thus is not representative of net
interest yield on cardmember loans. The calculation includes interest income and interest
expense attributable to investment securities and other interest-bearing deposits as well as
to cardmember loans, and interest expense attributable to other activities, including
cardmember receivables.
|
|
| (f) |
See below for calculations of net interest yield on cardmember loans, a non-GAAP measure,
and the ratio of net interest income divided by average loans, a GAAP measure. Management
believes net interest yield on cardmember loans is useful to investors because it provides a
measure of profitability of the Company’s cardmember loans portfolio.
|
68
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions, except for percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Net interest income
|
$ | 243 | $ | 275 | $ | 500 | $ | 532 | ||||||||
|
Average loans
(billions)
|
$ | 8.3 | $ | 8.7 | $ | 8.6 | $ | 8.8 | ||||||||
|
Adjusted net interest income
(b)
|
$ | 234 | $ | 274 | $ | 487 | $ | 539 | ||||||||
|
Adjusted average loans
(billions)
(c)
|
$ | 8.2 | $ | 8.8 | $ | 8.5 | $ | 8.8 | ||||||||
|
Net interest income divided by average loans
|
11.7 | % | 12.7 | % | 11.7 | % | 12.2 | % | ||||||||
|
Net interest yield on cardmember loans
(d)
|
11.4 | % | 12.5 | % | 11.5 | % | 12.3 | % | ||||||||
| (a) |
Beginning in the first quarter of 2010, the Company changed the manner in which it allocates
capital and related interest expense to its reportable operating segments to more accurately
reflect the funding and capital characteristics of its segments. The change to interest
allocation impacted the consolidated net interest yield on cardmember loans. Accordingly, the
net interest yields for periods prior to the first quarter of 2010 have been revised for this
change.
|
|
| (b) |
Represents net interest income allocated to the Company’s cardmember loans portfolio,
excluding the impact of card fees on loans and balance transfer fees attributable to the
Company’s cardmember loans.
|
|
| (c) |
Represents average cardmember loans excluding the impact of deferred card fees, net of
deferred direct acquisition costs of cardmember loans.
|
|
| (d) |
Net interest yield on cardmember loans is a non-GAAP financial measure that represents the
net spread earned on cardmember loans. Net interest yield on cardmember loans is computed by
dividing adjusted net interest income by adjusted average loans, computed on an annualized
basis. The calculation of net interest yield on cardmember loans includes interest that is
deemed uncollectible. For all net interest yield presentations, reserves and net write-offs
related to uncollectible interest are recorded through provisions for losses — cardmember
loans; therefore, such reserves and net write-offs are not included in the net interest yield
calculation.
|
69
70
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, net card fees and other
|
$ | 1,138 | $ | 1,039 | $ | 2,207 | $ | 2,021 | ||||||||
|
|
||||||||||||||||
|
Interest income
|
2 | 2 | 3 | 3 | ||||||||||||
|
Interest expense
|
56 | 43 | 104 | 88 | ||||||||||||
|
|
||||||||||||||||
|
Net interest income
|
(54 | ) | (41 | ) | (101 | ) | (85 | ) | ||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
1,084 | 998 | 2,106 | 1,936 | ||||||||||||
|
Provisions for losses
|
28 | 53 | 106 | 100 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for losses
|
1,056 | 945 | 2,000 | 1,836 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing, promotion, rewards and cardmember services
|
107 | 74 | 220 | 153 | ||||||||||||
|
Salaries and employee benefits and other operating expenses
|
709 | 777 | 1,404 | 1,467 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
816 | 851 | 1,624 | 1,620 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income
|
240 | 94 | 376 | 216 | ||||||||||||
|
Income tax provision
|
123 | 27 | 167 | 68 | ||||||||||||
|
|
||||||||||||||||
|
Segment income
|
$ | 117 | $ | 67 | $ | 209 | $ | 148 | ||||||||
|
|
||||||||||||||||
71
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
|
||||||||||||||||
|
Card billed business
|
$ | 32.9 | $ | 27.2 | $ | 63.7 | $ | 52.3 | ||||||||
|
Total cards-in-force
(millions)
|
7.0 | 7.2 | 7.0 | 7.2 | ||||||||||||
|
Basic cards-in-force
(millions)
|
7.0 | 7.2 | 7.0 | 7.2 | ||||||||||||
|
Average basic cardmember spending
(dollars)
|
$ | 4,712 | $ | 3,746 | $ | 9,110 | $ | 7,278 | ||||||||
|
Global Corporate Travel:
|
||||||||||||||||
|
Travel sales
|
$ | 4.6 | $ | 3.6 | $ | 8.7 | $ | 7.0 | ||||||||
|
Travel commissions and fees/sales
|
7.6 | % | 9.1 | % | 7.5 | % | 8.8 | % | ||||||||
|
Total segment assets
|
$ | 23.5 | $ | 21.2 | $ | 23.5 | $ | 21.2 | ||||||||
|
Segment capital
(millions)
(a)
|
$ | 3,509 | $ | 3,553 | $ | 3,509 | $ | 3,553 | ||||||||
|
Return on average segment capital
(b)
|
11.5 | % | 7.0 | % | 11.5 | % | 7.0 | % | ||||||||
|
Return on average tangible segment capital
(b)
|
25.0 | % | 15.1 | % | 25.0 | % | 15.1 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 11.5 | $ | 9.9 | $ | 11.5 | $ | 9.9 | ||||||||
|
90 days past billing as a % of total
(c)
|
1.0 | % | 1.9 | % | 1.0 | % | 1.9 | % | ||||||||
|
Net loss ratio (as a % of charge volume)
(c) (d)
|
0.06 | % | 0.22 | % | 0.17 | % | 0.20 | % | ||||||||
| (a) |
Segment capital represents capital allocated to a segment based upon specific business
operational needs, risk measures, and regulatory capital requirements.
|
|
| (b) |
Return on average segment capital is calculated by dividing the (i) one year period
segment income ($411 million and $250 million for the twelve months ended June 30, 2010 and
2009, respectively) by the (ii) one year average segment capital ($3.6 billion and $3.6
billion for the twelve months ended June 30, 2010 and 2009, respectively). Return on
average tangible segment capital is computed in the same manner as return on average
segment capital except the computation of average tangible segment capital excludes average
goodwill and other intangibles of $1.9 billion as of June 30, 2010 and 2009, respectively.
Management believes the return on average tangible segment capital is a useful measure of
the profitability of its business.
|
|
| (c) |
Effective January 1, 2010, the Company revised the time period in which past due
cardmember receivables in Global Commercial Services are written off when they are 180 days
past due or earlier, consistent with applicable bank regulatory guidance and the write-off
methodology adopted for U.S. Card Services in the fourth quarter of 2008. Previously,
receivables were written off when they were 360 days past billing or earlier. Therefore,
the net write-offs for the first quarter of 2010 include net write-offs of approximately
$48 million for Global Commercial Services resulting from this write-off methodology
change, which increased the net loss ratio and decreased the 90 days past billing metric
for this segment, but did not have a substantial impact on provisions for losses.
|
|
| (d) |
Beginning with the first quarter of 2010, the Company has revised the net loss ratio to
exclude net write-offs related to unauthorized transactions, consistent with the
methodology for calculation of the net write-off rate for U.S. Card Services. The metrics
for prior periods have not been revised for this change as it was deemed immaterial.
|
72
73
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, fees and other
|
$ | 1,021 | $ | 872 | $ | 1,970 | $ | 1,679 | ||||||||
|
|
||||||||||||||||
|
Interest income
|
1 | — | 2 | — | ||||||||||||
|
Interest expense
|
(46 | ) | (44 | ) | (93 | ) | (94 | ) | ||||||||
|
|
||||||||||||||||
|
Net interest income
|
47 | 44 | 95 | 94 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
1,068 | 916 | 2,065 | 1,773 | ||||||||||||
|
Provisions for losses
|
12 | 33 | 33 | 68 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for
losses
|
1,056 | 883 | 2,032 | 1,705 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing and promotion
|
209 | 94 | 375 | 158 | ||||||||||||
|
Salaries and employee benefits and other
operating expenses
|
430 | 423 | 825 | 795 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
639 | 517 | 1,200 | 953 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income
|
417 | 366 | 832 | 752 | ||||||||||||
|
Income tax provision
|
148 | 127 | 296 | 263 | ||||||||||||
|
|
||||||||||||||||
|
Segment income
|
$ | 269 | $ | 239 | $ | 536 | $ | 489 | ||||||||
|
|
||||||||||||||||
74
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Global Card billed business
(a)
|
$ | 175.3 | $ | 151.4 | $ | 336.3 | $ | 290.6 | ||||||||
|
Global Network & Merchant Services:
|
||||||||||||||||
|
Total segment assets
|
$ | 11.9 | $ | 10.6 | $ | 11.9 | $ | 10.6 | ||||||||
|
Segment capital
(millions)
(b)
|
$ | 1,762 | $ | 1,488 | $ | 1,762 | $ | 1,488 | ||||||||
|
Return on average segment capital
(c)
|
65.2 | % | 76.7 | % | 65.2 | % | 76.7 | % | ||||||||
|
Return on average tangible segment capital
(c)
|
66.8 | % | 78.8 | % | 66.8 | % | 78.8 | % | ||||||||
|
|
||||||||||||||||
|
Global Network Services:
|
||||||||||||||||
|
Card billed business
|
$ | 21.6 | $ | 17.0 | $ | 41.7 | $ | 31.8 | ||||||||
|
Total cards-in-force
(millions)
|
27.3 | 25.6 | 27.3 | 25.6 | ||||||||||||
| (a) |
Global Card billed business includes activities (including cash advances) related to
proprietary cards, cards issued under network partnership agreements, and certain insurance
fees charged on proprietary cards.
|
|
| (b) |
Segment capital represents capital allocated to a segment based upon specific business
operational needs, risk measures, and regulatory capital requirements.
|
|
| (c) |
Return on average segment capital is calculated by dividing the (i) one year period
segment income ($984 million and $1.0 billion for the twelve months ended June 30, 2010 and
2009, respectively) by the (ii) one year average segment capital ($1.5 billion and $1.3
billion for the twelve months ended June 30, 2010 and 2009, respectively). Return on
average tangible segment capital is computed in the same manner as return on average
segment capital except the computation of average tangible segment capital excludes average
goodwill and other intangibles of $36 million and $35 million at June 30, 2010 and 2009,
respectively. Management believes the return on average tangible segment capital is a
useful measure of the profitability of its business.
|
75
76
| • |
a hypothetical 100 basis point increase in interest rates would be approximately
$117 million;
|
| • |
a hypothetical 10 percent strengthening of the U.S. dollar related to anticipated
overseas operating results for the next 12 months would be approximately $112 million.
|
77
78
79
80
81
82
83
84
85
Ongoing legal and governmental proceedings regarding the Company’s surcharging and “anti-steering” policies could subject the Company to monetary judgments, fines, penalties and/or requirements resulting in increased expenses or loss of revenue.
The U.S. Department of Justice is investigating the Company’s surcharging and “anti-steering” policies that prohibit merchants from discriminating against the Company’s card products in favor of other forms of payment at the point of sale, and the Company is a defendant in a number of class actions filed by merchants that also challenge these policies. The Company’s competitor networks are subject to similar proceedings. An adverse outcome in any of these proceedings against the Company could adversely impact the profitability of the Company and require it to change its policies in a way that could expose the Company’s card products to discrimination or steering at the point of sale. Even if the Company is not required to change its policies, but its competitor networks are compelled to change their policies or practices as a result of the proceedings against them, the Company could be subject to market pressures that force it to make certain changes to its own policies and practices, which could adversely impact its profitability.
86
| Total Number | Maximum Number | |||||||||||||||
| of Shares | of Shares that | |||||||||||||||
| Purchased as | May Yet Be | |||||||||||||||
| Total Number | Part of Publicly | Purchased Under | ||||||||||||||
| of Shares | Average Price | Announced Plans | the Plans or | |||||||||||||
| Purchased | Paid Per Share | or Programs (3) | Programs | |||||||||||||
|
|
||||||||||||||||
|
April 1-30, 2010
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | 100,018,968 | |||||||||||
|
Employee transactions (2)
|
632 | $ | 38.46 | N/A | N/A | |||||||||||
|
|
||||||||||||||||
|
May 1-31, 2010
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | 100,018,968 | |||||||||||
|
Employee transactions (2)
|
6,427 | $ | 45.83 | N/A | N/A | |||||||||||
|
|
||||||||||||||||
|
June 1-30, 2010
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | 100,018,968 | |||||||||||
|
Employee transactions (2)
|
81,384 | $ | 38.18 | N/A | N/A | |||||||||||
|
|
||||||||||||||||
|
Total
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | ||||||||||||
|
Employee transactions (2)
|
88,443 | $ | 38.73 | N/A | ||||||||||||
| (1) |
As of June 30, 2010, there are approximately 100 million shares of common stock remaining
under Board authorization. Such authorization does not have an expiration date, and at
present, there is no intention to modify or otherwise rescind such authorization. Since
September 1994, the Company has acquired 670 million shares of common stock under various
Board authorizations to repurchase up to an aggregate of 770 million shares, including
purchases made under agreements with third parties.
|
|
| (2) |
Includes: (a) shares delivered by or deducted from holders of employee stock options who
exercised options (granted under the Company’s incentive compensation plans) in satisfaction
of the exercise price and/or tax withholding obligation of such holders and (b) restricted
shares withheld (under the terms of grants under the Company’s incentive compensation plans)
to offset tax withholding obligations that occur upon vesting and release of restricted
shares. The Company’s incentive compensation plans provide that the value of the shares
delivered or attested to, or withheld, be based on the price of the Company’s common stock on
the date the relevant transaction occurs.
|
|
| (3) |
Share purchases under publicly announced programs are made pursuant to open market purchases
or privately negotiated transactions (including with employee benefit plans) as market
conditions warrant and at prices the Company deems appropriate.
|
87
88
| AMERICAN EXPRESS COMPANY | ||||
|
(Registrant)
|
||||
| Date: August 4, 2010 | By | /s/ Daniel T. Henry | ||
| Daniel T. Henry | ||||
| Executive Vice President and Chief Financial Officer | ||||
| Date: August 4, 2010 | By | /s/ Joan C. Amble | ||
| Joan C. Amble | ||||
|
Executive Vice President and
Comptroller
(Principal Accounting Officer) |
||||
89
| Exhibit | Description | |||
|
|
||||
| 10.1 |
Time Sharing Agreement, dated May 27, 2010, by and between National Express Company and
Kenneth I. Chenault.
|
|||
|
|
||||
| 10.2 |
Consulting Services Agreement, effective July 19, 2010, by and between American Express
Company and Theodore J. Leonsis.
|
|||
|
|
||||
| 10.3 |
Description of Compensation Payable to Non-Management Directors.
|
|||
|
|
||||
| 12 |
Computation in Support of Ratio of Earnings to Fixed Charges.
|
|||
|
|
||||
| 31.1 |
Certification of Kenneth I. Chenault pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.
|
|||
|
|
||||
| 31.2 |
Certification of Daniel T. Henry pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended.
|
|||
|
|
||||
| 32.1 |
Certification of Kenneth I. Chenault and Daniel T. Henry pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|||
|
|
||||
| 101.INS |
XBRL Instance Document*
|
|||
|
|
||||
| 101.SCH |
XBRL Taxonomy Extension Schema Document*
|
|||
|
|
||||
| 101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document*
|
|||
|
|
||||
| 101.LAB |
XBRL Taxonomy Extension Label Linkbase Document*
|
|||
|
|
||||
| 101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document*
|
|||
|
|
||||
| 101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document*
|
|||
| * |
These interactive data files are furnished and deemed not filed or
part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, as amended, are
deemed not filed for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and otherwise are not subject to liability
under those sections.
|
E-1
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| M&T Bank Corporation | MTB |
| Popular, Inc. | BPOP |
| Provident Financial Services, Inc. | PFS |
| Synovus Financial Corp. | SNV |
| Zions Bancorporation, National Association | ZION |
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|