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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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| New York | 13-4922250 | |
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| World Financial Center, 200 Vesey Street, New York, NY | 10285 | |
| (Address of principal executive offices) | (Zip Code) |
| Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
| Class | Outstanding at October 28, 2010 | |
| Common Shares (par value $.20 per share) | 1,203,764,300 shares |
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| E-1 | ||||||||
| EX-12 | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-32.1 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
| Three Months Ended September 30 (Millions, except per share amounts) | 2010 | 2009 | ||||||
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Revenues
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||||||||
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Non-interest revenues
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||||||||
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Discount revenue
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$ | 3,818 | $ | 3,373 | ||||
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Net card fees
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527 | 538 | ||||||
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Travel commissions and fees
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487 | 383 | ||||||
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Other commissions and fees
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515 | 448 | ||||||
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Securitization income, net
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— | 71 | ||||||
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Other
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502 | 449 | ||||||
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||||||||
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Total non-interest revenues
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5,849 | 5,262 | ||||||
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||||||||
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Interest income
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||||||||
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Interest and fees on loans
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1,675 | 1,059 | ||||||
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Interest and dividends on investment securities
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103 | 229 | ||||||
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Deposits with banks and other
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16 | 9 | ||||||
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||||||||
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Total interest income
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1,794 | 1,297 | ||||||
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||||||||
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Interest expense
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||||||||
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Deposits
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141 | 109 | ||||||
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Short-term borrowings
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— | 2 | ||||||
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Long-term debt and other
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469 | 432 | ||||||
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||||||||
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Total interest expense
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610 | 543 | ||||||
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||||||||
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Net interest income
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1,184 | 754 | ||||||
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||||||||
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Total revenues net of interest expense
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7,033 | 6,016 | ||||||
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||||||||
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Provisions for losses
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||||||||
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Charge card
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89 | 143 | ||||||
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Cardmember loans
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262 | 989 | ||||||
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Other
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22 | 46 | ||||||
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||||||||
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Total provisions for losses
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373 | 1,178 | ||||||
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||||||||
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Total revenues net of interest expense after provisions for losses
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6,660 | 4,838 | ||||||
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||||||||
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Expenses
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||||||||
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Marketing, promotion, rewards and cardmember services
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2,251 | 1,619 | ||||||
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Salaries and employee benefits
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1,354 | 1,261 | ||||||
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Professional services
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701 | 575 | ||||||
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Other, net
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714 | 465 | ||||||
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||||||||
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Total
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5,020 | 3,920 | ||||||
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||||||||
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Pretax income from continuing operations
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1,640 | 918 | ||||||
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Income tax provision
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547 | 276 | ||||||
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||||||||
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Income from continuing operations
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1,093 | 642 | ||||||
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Loss from discontinued operations, net of tax
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— | (2 | ) | |||||
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||||||||
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Net income
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$ | 1,093 | $ | 640 | ||||
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||||||||
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Earnings per Common Share – Basic: (Note 13)
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||||||||
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Income from continuing operations attributable to common shareholders
(a)
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$ | 0.91 | $ | 0.54 | ||||
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Loss from
discontinued operations, net of tax
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— | — | ||||||
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||||||||
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Net income attributable to common shareholders
(a)
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$ | 0.91 | $ | 0.54 | ||||
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Earnings per Common Share – Diluted: (Note 13)
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Income from continuing operations attributable to common shareholders
(a)
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$ | 0.90 | $ | 0.54 | ||||
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Loss from discontinued operations, net of tax
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— | (0.01 | ) | |||||
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||||||||
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Net income attributable to common shareholders
(a)
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$ | 0.90 | $ | 0.53 | ||||
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Average common shares outstanding for earnings per common share:
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Basic
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1,193 | 1,178 | ||||||
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Diluted
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1,199 | 1,181 | ||||||
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Cash dividends declared per common share
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$ | 0.18 | $ | 0.18 | ||||
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||||||||
| (a) |
Represents income from continuing operations or net income, as applicable, less earnings
allocated to participating share awards and other items of $13 million and $8 million for the
three months ended September 30, 2010 and 2009, respectively.
|
2
| Nine Months Ended September 30 (Millions, except per share amounts) | 2010 | 2009 | ||||||
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Revenues
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||||||||
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Non-interest revenues
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||||||||
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Discount revenue
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$ | 11,018 | $ | 9,744 | ||||
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Net card fees
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1,568 | 1,602 | ||||||
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Travel commissions and fees
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1,307 | 1,155 | ||||||
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Other commissions and fees
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1,512 | 1,340 | ||||||
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Securitization income, net
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— | 210 | ||||||
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Other
|
1,413 | 1,569 | ||||||
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||||||||
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Total non-interest revenues
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16,818 | 15,620 | ||||||
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||||||||
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Interest income
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||||||||
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Interest and fees on loans
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5,107 | 3,432 | ||||||
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Interest and dividends on investment securities
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345 | 579 | ||||||
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Deposits with banks and other
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45 | 48 | ||||||
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Total interest income
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5,497 | 4,059 | ||||||
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Interest expense
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Deposits
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406 | 299 | ||||||
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Short-term borrowings
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2 | 36 | ||||||
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Long-term debt and other
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1,410 | 1,310 | ||||||
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Total interest expense
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1,818 | 1,645 | ||||||
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||||||||
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Net interest income
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3,679 | 2,414 | ||||||
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||||||||
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Total revenues net of interest expense
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20,497 | 18,034 | ||||||
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Provisions for losses
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||||||||
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Charge card
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412 | 716 | ||||||
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Cardmember loans
|
1,490 | 3,706 | ||||||
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Other
|
66 | 143 | ||||||
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||||||||
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Total provisions for losses
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1,968 | 4,565 | ||||||
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||||||||
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Total revenues net of interest expense after provisions for losses
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18,529 | 13,469 | ||||||
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||||||||
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Expenses
|
||||||||
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Marketing, promotion, rewards and cardmember services
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6,335 | 4,433 | ||||||
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Salaries and employee benefits
|
3,996 | 3,884 | ||||||
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Professional services
|
1,898 | 1,693 | ||||||
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Other, net
|
1,813 | 1,579 | ||||||
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||||||||
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Total
|
14,042 | 11,589 | ||||||
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Pretax income from continuing operations
|
4,487 | 1,880 | ||||||
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Income tax provision
|
1,492 | 453 | ||||||
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||||||||
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Income from continuing operations
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2,995 | 1,427 | ||||||
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Loss from discontinued operations, net of tax
|
— | (13 | ) | |||||
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Net income
|
$ | 2,995 | $ | 1,414 | ||||
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|
||||||||
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Earnings per Common Share – Basic: (Note 13)
|
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Income from continuing operations attributable to common shareholders
(a)
|
$ | 2.49 | $ | 0.95 | ||||
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Loss from discontinued operations, net of tax
|
— | (0.01 | ) | |||||
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|
||||||||
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Net income attributable to common shareholders
(a)
|
$ | 2.49 | $ | 0.94 | ||||
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Earnings per Common Share – Diluted: (Note 13)
|
||||||||
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Income from continuing operations attributable to common shareholders
(a)
|
$ | 2.47 | $ | 0.95 | ||||
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Loss from discontinued operations, net of tax
|
— | (0.01 | ) | |||||
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|
||||||||
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Net income attributable to common shareholders
(a)
|
$ | 2.47 | $ | 0.94 | ||||
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|
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Average common shares outstanding for earnings per common share:
|
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Basic
|
1,189 | 1,164 | ||||||
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Diluted
|
1,195 | 1,166 | ||||||
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Cash dividends declared per common share
|
$ | 0.54 | $ | 0.54 | ||||
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||||||||
| (a) |
Represents income from continuing operations or net income, as applicable, less (i)
accelerated preferred dividend accretion of $212 million for the nine months ended September 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
nine
months ended September 30, 2009, and (iii) earnings allocated to participating share awards and
other items of $38 million and $13 million for the nine months ended September 30, 2010
and 2009, respectively.
|
3
| September 30, | December 31, | |||||||
| (Millions, except share data) | 2010 | 2009 | ||||||
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Assets
|
||||||||
|
Cash and cash equivalents
|
||||||||
|
Cash and cash due from banks
|
$ | 2,159 | $ | 1,525 | ||||
|
Interest-bearing deposits in other banks (including securities purchased under
resale agreements: 2010, $360; 2009, $212)
|
18,784 | 11,010 | ||||||
|
Short-term investment securities
|
398 | 4,064 | ||||||
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|
||||||||
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Total cash and cash equivalents
|
21,341 | 16,599 | ||||||
|
Accounts receivable
|
||||||||
|
Cardmember receivables (includes gross receivables of a consolidated variable interest
entity: 2010, $7,078; 2009, $8,314), less reserves: 2010, $364; 2009, $546
|
34,751 | 33,197 | ||||||
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Other receivables, less reserves: 2010, $182; 2009, $109
|
3,281 | 5,007 | ||||||
|
Loans
|
||||||||
|
Cardmember loans (includes gross loans of a consolidated variable interest entity: 2010,
$33,010)
(a)
, less reserves: 2010, $4,318; 2009, $3,268
|
52,892 | 29,504 | ||||||
|
Other, less reserves: 2010, $25; 2009, $27
|
390 | 506 | ||||||
|
Investment securities
|
17,170 | 24,337 | ||||||
|
Premises and equipment – at cost, less accumulated depreciation:
2010, $4,499; 2009, $4,130
|
2,799 | 2,782 | ||||||
|
Other assets (includes restricted cash of consolidated variable interest entities: 2010, $1,374;
2009, $1,799)
(a)
|
13,432 | 13,213 | ||||||
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|
||||||||
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Total assets
|
$ | 146,056 | $ | 125,145 | ||||
|
|
||||||||
|
Liabilities and Shareholders’ Equity
|
||||||||
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Liabilities
|
||||||||
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Customer deposits
|
$ | 28,365 | $ | 26,289 | ||||
|
Travelers Cheques outstanding
|
5,410 | 5,975 | ||||||
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Accounts payable
|
10,510 | 9,063 | ||||||
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Short-term borrowings
|
1,919 | 2,344 | ||||||
|
Long-term debt (includes debt issued by consolidated variable interest entities: 2010,
$22,305; 2009, $4,970)
|
68,828 | 52,338 | ||||||
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Other liabilities
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15,104 | 14,730 | ||||||
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|
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Total liabilities
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130,136 | 110,739 | ||||||
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|
||||||||
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Contingencies (Note 15)
|
||||||||
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Shareholders’ Equity
|
||||||||
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Common shares, $.20 par value, authorized 3.6 billion shares; issued and outstanding 1,204
million shares in 2010 and 1,192 million shares in 2009
|
240 | 237 | ||||||
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Additional paid-in capital
|
11,715 | 11,144 | ||||||
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Retained earnings
|
4,582 | 3,737 | ||||||
|
Accumulated other comprehensive loss, net of tax:
|
||||||||
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Net unrealized securities gains, net of tax: 2010, $(165); 2009, $(291)
|
305 | 507 | ||||||
|
Net unrealized derivatives losses, net of tax: 2010, $6; 2009, $15
|
(12 | ) | (28 | ) | ||||
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Foreign currency translation adjustments, net of tax: 2010, $380; 2009, $31
|
(480 | ) | (722 | ) | ||||
|
Net unrealized pension and other postretirement benefit costs, net of tax: 2010 $215;
2009, $244
|
(430 | ) | (469 | ) | ||||
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|
||||||||
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Total accumulated other comprehensive loss
|
(617 | ) | (712 | ) | ||||
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|
||||||||
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Total shareholders’ equity
|
15,920 | 14,406 | ||||||
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|
||||||||
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Total liabilities and shareholders’ equity
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$ | 146,056 | $ | 125,145 | ||||
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||||||||
| (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.
|
4
| Nine Months Ended September 30 (Millions) | 2010 | 2009 | ||||||
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Cash Flows from Operating Activities
|
||||||||
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Net income
|
$ | 2,995 | $ | 1,414 | ||||
|
Loss from discontinued operations, net of tax
|
— | 13 | ||||||
|
|
||||||||
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Income from continuing operations
|
2,995 | 1,427 | ||||||
|
Adjustments to reconcile income from continuing operations to net cash provided by operating
activities:
|
||||||||
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Provisions for losses
|
1,968 | 4,565 | ||||||
|
Depreciation and amortization
|
689 | 777 | ||||||
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Deferred taxes, acquisition costs and other
|
735 | (1,423 | ) | |||||
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Stock-based compensation
|
157 | 158 | ||||||
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Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
|
||||||||
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Other receivables
|
(232 | ) | 1,028 | |||||
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Other assets
|
(424 | ) | 287 | |||||
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Accounts payable and other liabilities
|
1,871 | (987 | ) | |||||
|
Travelers Cheques outstanding
|
(532 | ) | (681 | ) | ||||
|
Net cash used in operating activities attributable to discontinued operations
|
— | (239 | ) | |||||
|
|
||||||||
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Net cash provided by operating activities
|
7,227 | 4,912 | ||||||
|
|
||||||||
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Cash Flows from Investing Activities
|
||||||||
|
Sale of investments
|
1,759 | 2,647 | ||||||
|
Maturity and redemption of investments
|
8,998 | 2,741 | ||||||
|
Purchase of investments
|
(7,054 | ) | (12,493 | ) | ||||
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Net decrease in cardmember loans/receivables
|
66 | 9,684 | ||||||
|
Proceeds from cardmember loan securitizations
|
— | 2,244 | ||||||
|
Maturities of cardmember loan securitizations
|
— | (4,800 | ) | |||||
|
Purchase of premises and equipment
|
(592 | ) | (491 | ) | ||||
|
Sale of premises and equipment
|
6 | 39 | ||||||
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Acquisitions/Dispositions, net of cash acquired
|
(254 | ) | — | |||||
|
Net decrease (increase) in restricted cash
|
2,369 | (51 | ) | |||||
|
Net cash provided by investing activities attributable to discontinued operations
|
— | 196 | ||||||
|
|
||||||||
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Net cash provided by (used in) investing activities
|
5,298 | (284 | ) | |||||
|
|
||||||||
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Cash Flows from Financing Activities
|
||||||||
|
Net change in customer deposits
|
2,055 | 8,545 | ||||||
|
Net decrease in short-term borrowings
|
(274 | ) | (6,724 | ) | ||||
|
Issuance of long-term debt
|
3,423 | 4,500 | ||||||
|
Principal payments on long-term debt
|
(12,814 | ) | (12,439 | ) | ||||
|
Issuance of American Express Series A preferred shares and warrants
|
— | 3,389 | ||||||
|
Issuance of American Express common shares
|
375 | 531 | ||||||
|
Repurchase of American Express Series A preferred shares
|
— | (3,389 | ) | |||||
|
Repurchase of American Express Stock Warrants
|
— | (340 | ) | |||||
|
Common and preferred dividends paid
|
(650 | ) | (709 | ) | ||||
|
Net cash provided by financing activities attributable to discontinued operations
|
— | 40 | ||||||
|
|
||||||||
|
Net cash used in financing activities
|
(7,885 | ) | (6,596 | ) | ||||
|
|
||||||||
|
Effect of exchange rate changes on cash
|
102 | 4 | ||||||
|
|
||||||||
|
Net increase (decrease) in cash and cash equivalents
|
4,742 | (1,964 | ) | |||||
|
Cash and cash equivalents at beginning of period includes cash of discontinued operations: 2010, $0; 2009, $3
|
16,599 | 21,654 | ||||||
|
|
||||||||
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Cash and cash equivalents at end of period
|
$ | 21,341 | $ | 19,690 | ||||
|
|
||||||||
5
| 1. | Basis of Presentation |
| The Company | ||
|
American Express is a global service company that provides customers with access to products,
insights and experiences that enrich lives and build business success. The Company’s principal
products and services are charge and credit payment card products and travel-related services
offered to consumers and businesses around the world.
|
||
|
The accompanying Consolidated Financial Statements should be read in conjunction with the financial
statements incorporated by reference in the Annual Report on Form 10-K of American Express Company
(the Company) for the year ended December 31, 2009 (2009
Form 10-K). |
||
|
The interim consolidated financial information in this report has not been audited. In the opinion
of management, all adjustments necessary for a fair statement of the consolidated financial
position and the consolidated results of operations for the interim periods have been made. All
adjustments made were of a normal, recurring nature. Results of operations reported for interim
periods are not necessarily indicative of results for the entire year. Certain amounts in prior
periods have been reclassified to conform to the current presentation. Refer to Note 1 to the
Consolidated Financial Statements included in the Company’s Form 10-Q for the quarter ended June
30, 2010 for a description of changes made to certain line items in the Consolidated Balance Sheet
as of December 31, 2009 and the Consolidated Statement of Cash Flows for the nine months ended
September 30, 2009 to correct the effects of certain misclassifications.
|
||
|
Accounting estimates are an integral part of the Consolidated Financial Statements. These
estimates are based, in part, on management’s assumptions concerning future events. Among the more
significant assumptions are those that relate to reserves for cardmember losses relating to loans
and charge card receivables, reserves for Membership Rewards costs, fair value measurement,
goodwill and income taxes. These accounting estimates reflect the best judgment of management, but
actual results could differ.
|
| Recently Issued Accounting Standards | ||
|
The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU)
No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables
and the Allowance for Credit Losses. This standard amends existing guidance by requiring an entity
to provide a greater level of disaggregated information about the credit quality of its financing
receivables and its allowance for credit losses. In addition, an entity will be required to
disclose credit quality indicators, past due information, and modifications of its financing
receivables. The amendments that require disclosures as of a balance sheet date are effective for
December 31, 2010. The amendments that require disclosures about activity during a period are
effective for periods beginning January 1, 2011. The new standard is anticipated to require
expanded disclosure by the Company due to the requirement for further disaggregation of currently
disclosed information, as well as new disclosure requirements surrounding reserve activity.
|
||
|
Effective January 1, 2010, the Company adopted ASU No. 2009-16, Transfers and Servicing (Topic
860): Accounting for Transfers of Financial Assets and ASU No. 2009-17, Consolidations (Topic 810):
Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities
(generally referred to herein as new GAAP effective January 1, 2010). These standards eliminate the
concept of a qualifying special purpose entity (QSPE), therefore requiring these entities to be
evaluated under the accounting guidance for consolidation of variable interest entities (VIEs). In
addition, ASU 2009-17 requires an entity to reconsider its previous consolidation conclusions
reached under the VIE consolidation model, including (i) whether an entity is a VIE, (ii) whether
the enterprise is the VIE’s primary beneficiary and (iii) the required financial statement
disclosures.
|
6
|
Upon adoption of new GAAP effective January 1, 2010, the Company was required to change its
accounting for the American Express Credit Account Master Trust (the Lending Trust), a previously
unconsolidated VIE, which is now consolidated. As a result, beginning January 1, 2010, the
securitized cardmember loans and related debt securities issued to third parties by the Lending
Trust are included on the Company’s Consolidated Balance Sheet. The Company continues to
consolidate the American Express Issuance Trust (the Charge Trust). Prior period results have not
been revised for the change in accounting for the Lending Trust. Refer to Note 7 for further
discussion.
|
| 2. |
Acquisition
|
|
On January 15, 2010, the Company purchased Revolution Money, a provider of secure person-to-person
payment services through an internet based platform, for a cash purchase price of approximately
$305 million. Among the assets acquired was $184 million of goodwill, $119 million of
definite-lived intangible assets, and other miscellaneous net assets totaling $2 million. All
assets and liabilities acquired, including goodwill, are reflected in the Corporate & Other
segment. The acquisition of Revolution Money did not have a significant impact on the Corporate &
Other segment’s or the Company’s results of operations for the three and nine months ended
September 30, 2010.
|
| 3. |
Fair Values
|
|
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability (an exit price) in an orderly transaction between market participants at the measurement
date, and is based on the Company’s principal or most advantageous market for the specific asset or
liability.
|
||
|
Generally Accepted Accounting Principles (GAAP) provide for a three-level hierarchy of inputs to
valuation techniques used to measure fair value, defined as follows:
|
| • |
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).
|
7
|
The following table summarizes the Company’s financial assets and financial liabilities measured at
fair value on a recurring basis, categorized by GAAP’s valuation hierarchy (as described in the
preceding paragraphs), as of September 30, 2010 and December 31, 2009:
|
| 2010 | 2009 | |||||||||||||||||||||||||||||||
| (Millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
|
Assets:
|
||||||||||||||||||||||||||||||||
|
Investment securities:
(a)
|
||||||||||||||||||||||||||||||||
|
Equity securities
|
$ | 475 | $ | 475 | $ | — | $ | — | $ | 530 | $ | 530 | $ | — | $ | — | ||||||||||||||||
|
Retained subordinated securities
(b)
|
— | — | — | — | 3,599 | — | — | 3,599 | ||||||||||||||||||||||||
|
Debt securities and other
|
16,695 | — | 16,695 | — | 20,208 | — | 20,208 | — | ||||||||||||||||||||||||
|
Interest-only strip
(b)
|
— | — | — | — | 20 | — | — | 20 | ||||||||||||||||||||||||
|
Derivatives
(c)
|
1,414 | — | 1,414 | — | 833 | — | 833 | — | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total assets
|
$ | 18,584 | $ | 475 | $ | 18,109 | $ | — | $ | 25,190 | $ | 530 | $ | 21,041 | $ | 3,619 | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||||||||||||||
|
Derivatives
(c)
|
$ | 581 | $ | — | $ | 581 | $ | — | $ | 283 | $ | — | $ | 283 | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total liabilities
|
$ | 581 | $ | — | $ | 581 | $ | — | $ | 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 September 30, 2010 and December 31, 2009, $8 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.
|
|
The table below presents a reconciliation of all assets and liabilities measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2009,
including realized and unrealized gains (losses) included in earnings and accumulated other
comprehensive (loss) income (AOCI):
|
| 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 nine months ended September 30, 2010.
|
|
| (b) |
Represents cost basis of securitized loans.
|
|
| (c) |
Included in AOCI, net of taxes.
|
|
| (d) |
Included in securitization income, net.
|
|
Valuation Techniques Used in Measuring Fair Value
|
||
|
GAAP requires disclosure of the estimated fair value of all financial instruments. A financial
instrument is defined as cash, evidence of an ownership in an entity, or a contract between two
entities to deliver cash or another financial instrument or to exchange other financial
instruments. The disclosure requirements for the fair value of financial instruments exclude
leases, equity method investments, affiliate investments, pension and benefit obligations,
insurance contracts and all non-financial instruments.
|
||
8
|
For the financial assets and liabilities measured at fair value on a recurring basis (categorized
in the valuation hierarchy table on the previous page) the Company applies the following valuation
techniques to measure fair value:
|
||
|
Investment Securities (Excluding Retained Subordinated Securities and the Interest-only Strip)
|
| • |
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.
|
|
The Company reaffirms its understanding of the valuation techniques used by its pricing services at
least annually. In addition, the Company corroborates the prices provided by its pricing services
to test their reasonableness by comparing their prices to valuations from different pricing sources
as well as comparing prices to the sale prices received from sold securities. Refer to Note 6 for
additional fair value information.
|
||
|
Retained Subordinated Securities
|
||
|
As of December 31, 2009, the Company determined the fair value of its retained subordinated
securities using discounted cash flow models. The discount rate used was based on an interest rate
curve that was observable in the marketplace plus an unobservable credit spread commensurate with
the risk of these securities and similar financial instruments. The Company classified such
securities in Level 3 of the fair value hierarchy because the applicable credit spreads were not
observable due to the illiquidity in the market with respect to these securities and similar
financial instruments.
|
||
|
Interest-only Strip
|
||
|
As of December 31, 2009, the fair value of the interest-only strip was the present value of
estimated future positive excess spread expected to be generated by the securitized loans over the
estimated remaining life of those loans. Management utilized certain estimates and assumptions to
determine the fair value of the interest-only strip asset, including estimates for finance charge
yield, credit losses, London Interbank Offered Rate (LIBOR) (which determined future certificate
interest costs), monthly payment rate and discount rate. On a quarterly basis, the Company compared
the assumptions it used in calculating the fair value of its interest-only strip to observable
market data when available, and to historical trends. The interest-only strip was classified within
Level 3 of the fair value hierarchy due to the significance of the unobservable inputs used in
valuing this asset.
|
||
|
Derivative Financial Instruments
|
||
|
The fair value of the Company’s derivative financial instruments, which could be assets or
liabilities on the Consolidated Balance Sheets, is estimated by a third-party valuation service
that uses proprietary pricing
|
9
|
models, or by internal pricing models. The pricing models do not contain a high level of
subjectivity as the valuation techniques used do not require significant judgment, and inputs to
those models are readily observable from actively quoted markets. The pricing models used are
consistently applied and reflect the contractual terms of the derivatives, including the period of
maturity, and market-based parameters such as interest rates, foreign exchange rates, equity
indices or prices, and volatility.
|
||
|
Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve,
used to value derivatives are not indicative of the credit quality of the Company or its
counterparties. The Company considers the counterparty credit risk by applying an observable
forecasted default rate to the current exposure. Refer to Note 9 for additional fair value
information.
|
||
|
The following table discloses the estimated fair value for the Company’s financial assets and
financial liabilities that are not carried at fair value, as of September 30, 2010 and December 31,
2009:
|
| 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
|
$ | 61 | $ | 61 | (a) | $ | 58 | $ | 58 | (b) | ||||||
|
Loans, net
|
$ | 53 | $ | 54 | (a) | $ | 30 | $ | 30 | |||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Financial Liabilities:
|
||||||||||||||||
|
Liabilities for which
carrying values equal
or approximate fair
value
|
$ | 38 | $ | 38 | $ | 34 | $ | 34 | ||||||||
|
Certificates of deposit
|
$ | 14 | $ | 15 | $ | 15 | $ | 16 | ||||||||
|
Long-term debt
|
$ | 69 | $ | 72 | (a) | $ | 52 | $ | 54 | (b) | ||||||
| (a) |
Includes fair values of cardmember receivables, loans and long-term debt of $7.1 billion,
$31.1 billion and $22.5 billion, respectively, held by consolidated VIEs as of September 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.
|
|
The fair values of these financial instruments are estimates based upon the market conditions
and perceived risks as of September 30, 2010 and December 31, 2009, and require management
judgment. These figures may not be indicative of their future fair values. The fair value of the
Company cannot be reliably estimated by aggregating the amounts presented.
|
||
|
The following methods were used to determine estimated fair values:
|
||
|
Financial Assets for Which Carrying Values Equal or Approximate Fair Value
|
||
|
Financial assets for which carrying values equal or approximate fair value include cash and cash
equivalents, cardmember receivables, accrued interest and certain other assets. For these assets,
the carrying values approximate fair value because they are short-term in duration or variable rate
in nature.
|
||
|
Financial Assets Carried at Other than Fair Value
|
||
|
Loans, net
|
||
|
Loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In
estimating the fair value for the Company’s loans the principal market is assumed to be the
securitization market, and the Company uses the hypothetical securitization price to determine the
fair value of the portfolio. The securitization price is estimated from the assumed proceeds of the
hypothetical securitization in the current market, adjusted for securitization uncertainties such
as market conditions and liquidity.
|
||
10
|
Financial Liabilities for Which Carrying Values Equal or Approximate Fair Value
|
||
|
Financial liabilities for which carrying values equal or approximate fair value include accrued
interest, customer deposits (excluding certificates of deposit, which are described further below),
Travelers Cheques outstanding, short-term borrowings and certain other liabilities for which the
carrying values approximate fair value because they are short-term in duration, variable rate in
nature, or have no defined maturity.
|
||
|
Financial Liabilities Carried at Other than Fair Value
|
||
|
Certificates of Deposit
|
||
|
Certificates of deposit (CDs) are recorded at their historical issuance cost on the Consolidated
Balance Sheets. Fair value is estimated using a discounted cash flow methodology based on the
Company’s current borrowing rates for similar types of CDs.
|
||
|
Long-term Debt
|
||
|
Long-term debt is recorded at historical issuance cost on the Consolidated Balance Sheets. Fair
value is estimated using either quoted market prices or discounted cash flows based on the
Company’s current borrowing rates for similar types of borrowings.
|
| 4. |
Accounts Receivable
|
|
Accounts receivable as of September 30, 2010 and December 31, 2009, consisted of:
|
| (Millions) | 2010 | 2009 | ||||||
|
U.S. Card Services
(a)
|
$ | 16,476 | $ | 17,750 | ||||
|
International Card Services
|
6,231 | 5,944 | ||||||
|
Global Commercial Services
(b)
|
12,212 | 9,844 | ||||||
|
Global Network & Merchant Services
(c)
|
196 | 205 | ||||||
|
|
||||||||
|
Cardmember receivables, gross
(d)
|
35,115 | 33,743 | ||||||
|
Less: Cardmember reserve for losses
|
364 | 546 | ||||||
|
|
||||||||
|
Cardmember receivables, net
|
$ | 34,751 | $ | 33,197 | ||||
|
|
||||||||
|
Other receivables, net
(e)
|
$ | 3,281 | $ | 5,007 | ||||
|
|
||||||||
| (a) |
Includes $6.5 billion and $7.8 billion of gross cardmember receivables of a consolidated
VIE as of September 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 September 30, 2010 and December 31, 2009, respectively.
|
|
| (c) |
Includes receivables primarily related to the Company’s International Currency Card
portfolios.
|
|
| (d) |
Includes approximately $11.3 billion and $10.4 billion of cardmember receivables outside the
United States as of September 30, 2010 and December 31, 2009, respectively.
|
|
| (e) |
Other receivables primarily represent amounts due from the Company’s travel customers and
suppliers, 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.
|
11
| (Millions) | 2010 | 2009 | ||||||
|
Balance, January 1
|
$ | 546 | $ | 810 | ||||
|
Additions:
|
||||||||
|
Cardmember receivables provisions
(a)
|
292 | 657 | ||||||
|
Cardmember receivables provisions – other
(b)
|
120 | 59 | ||||||
|
|
||||||||
|
Total provision
|
412 | 716 | ||||||
|
|
||||||||
|
Deductions:
|
||||||||
|
Cardmember receivables net write-offs
(c)(d)
|
(481 | ) | (937 | ) | ||||
|
Cardmember receivables – other
(e)
|
(113 | ) | 10 | |||||
|
|
||||||||
|
Balance, September 30
|
$ | 364 | $ | 599 | ||||
|
|
||||||||
| (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 $275 million and $254 million for the nine months ended
September 30, 2010 and 2009, respectively. For the nine months ended September 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 nine months ended September 30, 2010, these amounts include net write-offs of
cardmember receivables resulting from unauthorized transactions. For all periods these amounts
include foreign currency translation adjustments.
|
| (Millions) | 2010 | 2009 | ||||||
|
U.S. Card Services
(a)
|
$ | 48,722 | $ | 23,507 | ||||
|
International Card Services
|
8,462 | 9,241 | ||||||
|
Global Commercial Services
|
26 | 24 | ||||||
|
|
||||||||
|
Cardmember loans
(b)
|
57,210 | 32,772 | ||||||
|
Less: Cardmember loans reserve for losses
|
4,318 | 3,268 | ||||||
|
|
||||||||
|
Cardmember loans, net
|
$ | 52,892 | $ | 29,504 | ||||
|
|
||||||||
|
Other loans, net
(c)
|
$ | 390 | $ | 506 | ||||
|
|
||||||||
| (a) |
As of September 30, 2010, includes approximately $33.0 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 $128 million and $114 million
as of September 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).
|
12
| (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)
|
1,429 | 3,665 | ||||||
|
Cardmember loans – other
(b)
|
61 | 41 | ||||||
|
|
||||||||
|
Total provision
|
1,490 | 3,706 | ||||||
|
|
||||||||
|
Deductions:
|
||||||||
|
Cardmember loans net write-offs – principal
(c)
|
(2,630 | ) | (2,360 | ) | ||||
|
Cardmember loans net write-offs – interest and fees
(c)
|
(287 | ) | (376 | ) | ||||
|
Cardmember loans – other
(d)
|
(54 | ) | (181 | ) | ||||
|
|
||||||||
|
Balance, September 30
|
$ | 4,318 | $ | 3,359 | ||||
|
|
||||||||
| (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 nine months ended September 30, 2010 and
2009 include recoveries of $422 million and $253 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.
|
13
| Loans and Receivables | Loans 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)
|
$ | 4 | $ | 3 | $ | 215 | $ | 222 | ||||||||
|
Non-accrual loans
(b)
|
795 | 9 | 663 | 1,467 | ||||||||||||
|
Loans and receivables modified in a TDR
(c)
|
265 | 229 | — | 494 | ||||||||||||
|
|
||||||||||||||||
|
Total as of September 30, 2010
|
$ | 1,064 | $ | 241 | $ | 878 | $ | 2,183 | ||||||||
|
|
||||||||||||||||
|
Reserves for losses on impaired loans
and receivables
|
$ | 316 | (d) | $ | 63 | (d) | $ | 622 | $ | 1,001 | ||||||
|
|
||||||||||||||||
| Loans and Receivables | Loans 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 September 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.
Amounts as of both balance sheet dates also include impaired loans and
receivables associated with other non-securitized portfolios.
|
14
| 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
|
$ | 6,064 | $ | 105 | $ | (75 | ) | $ | 6,094 | $ | 6,457 | $ | 51 | $ | (258 | ) | $ | 6,250 | ||||||||||||||
|
U.S. Government agency
obligations
|
5,429 | 20 | (1 | ) | 5,448 | 6,699 | 47 | (1 | ) | 6,745 | ||||||||||||||||||||||
|
U.S. Government treasury
obligations
|
3,153 | 10 | — | 3,163 | 5,556 | 10 | — | 5,566 | ||||||||||||||||||||||||
|
Corporate debt
securities
(a)
|
1,570 | 23 | — | 1,593 | 1,333 | 14 | (12 | ) | 1,335 | |||||||||||||||||||||||
|
Retained subordinated
securities
(b)
|
— | — | — | — | 3,088 | 512 | (1 | ) | 3,599 | |||||||||||||||||||||||
|
Mortgage-backed
securities
(c)
|
244 | 9 | — | 253 | 179 | 3 | (2 | ) | 180 | |||||||||||||||||||||||
|
Equity securities
(d)
|
100 | 375 | — | 475 | 100 | 430 | — | 530 | ||||||||||||||||||||||||
|
Foreign government bonds and
obligations
|
95 | 8 | — | 103 | 90 | 2 | — | 92 | ||||||||||||||||||||||||
|
Other
(e)
|
40 | 1 | — | 41 | 40 | — | — | 40 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ | 16,695 | $ | 551 | $ | (76 | ) | $ | 17,170 | $ | 23,542 | $ | 1,069 | $ | (274 | ) | $ | 24,337 | ||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| (a) |
The September 30, 2010 and December 31, 2009 balances include, on a cost basis, $1.4
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) |
Represents the Company’s investment in Industrial and Commercial Bank of China (ICBC).
|
|
| (e) |
Other is comprised of investments in various mutual funds.
|
15
| 2010 | 2009 | |||||||||||||||||||||||||||||||
| (Millions) | Less than 12 months | 12 months or more | Less than 12 months | 12 months or more | ||||||||||||||||||||||||||||
| Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
| 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
|
$ | 147 | $ | (2 | ) | $ | 1,259 | $ | (73 | ) | $ | 837 | $ | (25 | ) | $ | 2,074 | $ | (233 | ) | ||||||||||||
|
U.S. Government
agency obligations
|
299 | (1 | ) | — | — | 249 | (1 | ) | — | — | ||||||||||||||||||||||
|
Corporate debt
securities
|
— | — | — | — | 102 | (1 | ) | 38 | (11 | ) | ||||||||||||||||||||||
|
Retained subordinated
securities
|
— | — | — | — | — | — | 75 | (1 | ) | |||||||||||||||||||||||
|
Mortgage-backed
securities
|
— | — | — | — | 120 | (2 | ) | — | — | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ | 446 | $ | (3 | ) | $ | 1,259 | $ | (73 | ) | $ | 1,308 | $ | (29 | ) | $ | 2,187 | $ | (245 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
16
| (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%
|
21 | $ | 446 | $ | (3 | ) | 141 | $ | 1,083 | $ | (47 | ) | 162 | $ | 1,529 | $ | (50 | ) | ||||||||||||||||||
|
Less than 90%
|
— | — | — | 18 | 176 | (26 | ) | 18 | 176 | (26 | ) | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total as of September 30, 2010
|
21 | $ | 446 | $ | (3 | ) | 159 | $ | 1,259 | $ | (73 | ) | 180 | $ | 1,705 | $ | (76 | ) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
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 | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Gains
(a)
|
$ | — | $ | 2 | $ | 1 | $ | 225 | ||||||||
|
Losses
|
— | — | (6 | ) | — | |||||||||||
|
|
||||||||||||||||
|
Total
|
$ | — | $ | 2 | $ | (5 | ) | $ | 225 | |||||||
|
|
||||||||||||||||
| (a) | 2009 gains primarily represent the gain from the sale of 50 percent of the Company’s investment in ICBC. |
17
| Estimated | ||||||||
| (Millions) | Cost | Fair Value | ||||||
|
Due within 1 year
|
$ | 6,931 | $ | 6,945 | ||||
|
Due after 1 year but within 5 years
|
3,306 | 3,341 | ||||||
|
Due after 5 years but within 10 years
|
342 | 357 | ||||||
|
Due after 10 years
|
5,976 | 6,011 | ||||||
|
|
||||||||
|
Total
|
$ | 16,555 | $ | 16,654 | ||||
|
|
||||||||
18
| 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.
|
19
| 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 | 17,933 | 0.87 | % | ||||||||
|
Floating Rate Subordinated Notes
|
2010-2018 | 1,358 | 0.65 | % | ||||||||
|
|
||||||||||||
|
Total
|
$ | 19,791 | 0.97 | % | ||||||||
|
|
||||||||||||
| (a) |
For floating rate debt issuances, the stated interest rates are based on the floating rates
in effect as of September 30, 2010. These rates may not be indicative of future interest
rates.
|
| (Millions) | Amount | |||
|
2010
|
$ | 500 | ||
|
2011
|
5,330 | |||
|
2012
|
5,222 | |||
|
2013
|
2,904 | |||
|
2014
|
2,685 | |||
|
Thereafter
|
3,150 | |||
|
|
||||
|
Total
|
$ | 19,791 | ||
|
|
||||
20
| Three Months Ended | Nine Months Ended | |||||||
| (Millions) | September 30, 2009 | September 30, 2009 | ||||||
|
Excess spread, net
(a)
|
$ | (67 | ) | $ | (204 | ) | ||
|
Servicing fees
|
142 | 421 | ||||||
|
Losses on securitizations
(b)
|
(4 | ) | (7 | ) | ||||
|
|
||||||||
|
Securitization income, net
|
$ | 71 | $ | 210 | ||||
|
|
||||||||
| (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 $119 million and $(252) million of impact from cardmember loan sales and maturities
for the three months ended September 30, 2009, reflected in the provisions for losses for the
period. Excludes $201 million and $(393) million of impact from cardmember loan sales and
maturities for the nine months ended September 30, 2009, reflected in the provisions for
losses for the period.
|
| (Millions) | 2010 | 2009 | ||||||
|
U.S.:
|
||||||||
|
Interest-bearing
|
$ | 27,675 | $ | 25,579 | ||||
|
Non-interest-bearing
|
12 | 13 | ||||||
|
Non-U.S.:
|
||||||||
|
Interest-bearing
|
663 | 680 | ||||||
|
Non-interest-bearing
|
15 | 17 | ||||||
|
|
||||||||
|
Total customer deposits
|
$ | 28,365 | $ | 26,289 | ||||
|
|
||||||||
21
| (Millions) | 2010 | 2009 | ||||||
|
U.S. retail deposits:
|
||||||||
|
Cash sweep and savings accounts
|
$ | 13,797 | $ | 10,498 | ||||
|
Certificates of deposit
|
13,878 | 15,081 | ||||||
|
Other deposits
|
690 | 710 | ||||||
|
|
||||||||
|
Total customer deposits
|
$ | 28,365 | $ | 26,289 | ||||
|
|
||||||||
| (Millions) | U.S. | Non-U.S. | Total | |||||||||
|
2010
|
$ | 1,673 | $ | 326 | $ | 1,999 | ||||||
|
2011
|
5,524 | 72 | 5,596 | |||||||||
|
2012
|
2,857 | — | 2,857 | |||||||||
|
2013
|
2,273 | — | 2,273 | |||||||||
|
2014
|
1,017 | — | 1,017 | |||||||||
|
After 5 years
|
534 | — | 534 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 13,878 | $ | 398 | $ | 14,276 | ||||||
|
|
||||||||||||
| (Millions) | 2010 | 2009 | ||||||
|
U.S.
|
$ | 584 | $ | 196 | ||||
|
Non-U.S.
|
308 | 293 | ||||||
|
|
||||||||
|
Total
|
$ | 892 | $ | 489 | ||||
|
|
||||||||
| • | Interest rate risk in its card and insurance and travelers cheque businesses, and its investment portfolios; and | |
| • | Foreign exchange risk in its international operations. |
22
23
| Other assets | Other liabilities | |||||||||||||||
| Fair Value | Fair Value | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||
|
Interest rate contracts
|
||||||||||||||||
|
Fair value hedges
|
$ | 1,228 | $ | 632 | $ | — | $ | 6 | ||||||||
|
Cash flow hedges
|
2 | 1 | 20 | 44 | ||||||||||||
|
Foreign exchange contracts
|
||||||||||||||||
|
Net investment hedges
|
22 | 132 | 434 | 130 | ||||||||||||
|
|
||||||||||||||||
|
Total derivatives designated as hedging instruments
|
$ | 1,252 | $ | 765 | $ | 454 | $ | 180 | ||||||||
|
|
||||||||||||||||
|
Derivatives not designated as hedging instruments:
|
||||||||||||||||
|
Interest rate contracts
|
$ | — | $ | 11 | $ | 8 | $ | 5 | ||||||||
|
Foreign exchange contracts
(a)
|
162 | 57 | 115 | 95 | ||||||||||||
|
Equity-linked contract
(b)
|
— | — | 4 | 3 | ||||||||||||
|
|
||||||||||||||||
|
Total derivatives not designated as hedging instruments
|
162 | 68 | 127 | 103 | ||||||||||||
|
|
||||||||||||||||
|
Total derivatives
(c)
|
$ | 1,414 | $ | 833 | $ | 581 | $ | 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 September 30, 2010 and December 31, 2009, $8 million and $33 million,
respectively, of derivative assets and liabilities have been offset and presented net on the
Consolidated Balance Sheets.
|
24
| 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 | $ | 189 | $ | 146 | Other, net expenses | $ | (195 | ) | $ | (153 | ) | $ | (6 | ) | $ | (7 | ) | ||||||||||
| 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 | $ | 602 | $ | (279 | ) | Other, net expenses | $ | (562 | ) | $ | 277 | $ | 40 | $ | (2 | ) | |||||||||||
25
| 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
|
$ | (1 | ) | $ | (3 | ) | Interest expense | $ | (8 | ) | $ | (20 | ) | Other, net expenses | $ | — | $ | — | ||||||||||
|
Net investment hedges:
|
||||||||||||||||||||||||||||
|
Foreign exchange
contracts
|
$ | (218 | ) | $ | (272 | ) | 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
|
$ | (3 | ) | $ | (20 | ) | Interest expense | $ | (29 | ) | $ | (95 | ) | Other, net expenses | $ | — | $ | — | ||||||||||
|
Net investment hedges:
|
||||||||||||||||||||||||||||
|
Foreign exchange
contracts
|
$ | 117 | $ | (643 | ) | Other, net expenses | $ | — | $ | — | Other, net expenses | $ | — | $ | — | |||||||||||||
| (a) |
During the nine months ended September 30, 2010 and 2009, there were no forecasted
transactions that were considered no longer probable to occur.
|
26
| Gains (losses) recognized in income | ||||||||||
| Amount | ||||||||||
| (Millions) | Location | 2010 | 2009 | |||||||
| Interest rate contracts |
Other, net expenses
|
$ | 3 | $ | (1 | ) | ||||
| Foreign exchange contracts (a) |
Interest and dividends on investment securities
|
1 | 1 | |||||||
|
Interest expense on short-term borrowings
|
2 | 2 | ||||||||
|
Interest expense on long-term debt and other
|
24 | 2 | ||||||||
|
Other, net expenses
|
101 | 55 | ||||||||
| Equity-linked contract |
Other non-interest revenues
|
1 | — | |||||||
|
|
||||||||||
| Total |
|
$ | 132 | $ | 59 | |||||
|
|
||||||||||
| Gains (losses) recognized in income | ||||||||||
| Amount | ||||||||||
| (Millions) | Location | 2010 | 2009 | |||||||
| Interest rate contracts |
Other, net expenses
|
$ | (11 | ) | $ | 16 | ||||
| Foreign exchange contracts (a) |
Other non-interest revenues
|
— | (1 | ) | ||||||
|
Interest and dividends on investment securities
|
2 | 4 | ||||||||
|
Interest expense on short-term borrowings
|
6 | 3 | ||||||||
|
Interest expense on long-term debt and other
|
66 | 13 | ||||||||
|
Other, net expenses
|
49 | 91 | ||||||||
|
|
||||||||||
| Total |
|
$ | 112 | $ | 126 | |||||
|
|
||||||||||
| (a) |
For the three and nine months ended September 30, foreign exchange contracts include
embedded foreign currency derivatives. Gains (losses) on these embedded derivatives are
included in other, net expenses.
|
27
| 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 | 101 | 74 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 69 | $ | 67 | $ | 214 | $ | 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.
|
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Net income
|
$ | 1,093 | $ | 640 | $ | 2,995 | $ | 1,414 | ||||||||
|
Other comprehensive income gains (losses):
|
||||||||||||||||
|
Net unrealized securities gains
|
104 | 554 | 113 | 1,286 | ||||||||||||
|
Net unrealized derivative gains
|
4 | 11 | 16 | 42 | ||||||||||||
|
Foreign currency translation adjustments
|
307 | (220 | ) | 242 | (311 | ) | ||||||||||
|
Net unrealized pension and other
postretirement benefit costs
|
4 | 4 | 39 | 33 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,512 | $ | 989 | $ | 3,405 | $ | 2,464 | ||||||||
|
|
||||||||||||||||
28
| Three Months Ended | Nine Months Ended | Full Year | ||||||||||
| September 30, 2010 | September 30, 2010 | 2009 | ||||||||||
|
Effective tax rate
(a)
|
33 | % | 33 | % | 25 | % | ||||||
| (a) | Each of the periods reflects recurring, permanent tax benefits in relation to the level of pretax income. |
29
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Numerator:
|
||||||||||||||||
|
Basic and diluted:
|
||||||||||||||||
|
Income from continuing operations
|
$ | 1,093 | $ | 642 | $ | 2,995 | $ | 1,427 | ||||||||
|
Preferred shares dividends, accretion, and recognition of
remaining unaccreted dividends
(a)
|
— | — | — | (306 | ) | |||||||||||
|
Earnings allocated to participating share awards and other items
|
(13 | ) | (8 | ) | (38 | ) | (13 | ) | ||||||||
|
Loss from discontinued operations, net of tax
|
— | (2 | ) | — | (13 | ) | ||||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 1,080 | $ | 632 | $ | 2,957 | $ | 1,095 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Denominator:
|
||||||||||||||||
|
Basic: weighted-average common stock
|
1,193 | 1,178 | 1,189 | 1,164 | ||||||||||||
|
Add: weighted-average stock options and warrants
(b)
|
6 | 3 | 6 | 2 | ||||||||||||
|
|
||||||||||||||||
|
Diluted
|
1,199 | 1,181 | 1,195 | 1,166 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic EPS:
|
||||||||||||||||
|
Income from continuing operations attributable to common
shareholders
|
$ | 0.91 | $ | 0.54 | $ | 2.49 | $ | 0.95 | ||||||||
|
Loss from discontinued operations
|
— | — | — | (0.01 | ) | |||||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 0.91 | $ | 0.54 | $ | 2.49 | $ | 0.94 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Diluted EPS:
|
||||||||||||||||
|
Income from continuing operations attributable to common
shareholders
|
$ | 0.90 | $ | 0.54 | $ | 2.47 | $ | 0.95 | ||||||||
|
Loss from discontinued operations
|
— | (0.01 | ) | — | (0.01 | ) | ||||||||||
|
|
||||||||||||||||
|
Net income attributable to common shareholders
|
$ | 0.90 | $ | 0.53 | $ | 2.47 | $ | 0.94 | ||||||||
|
|
||||||||||||||||
| (a) |
Includes the accelerated preferred dividend accretion of $212 million for the nine months
ended September 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 nine months ended September 30, 2010, the dilutive effect of unexercised
stock options excluded 36 million and 37 million options, respectively. For the three and
nine months ended September 30, 2009, the dilutive effect of unexercised stock options
excluded 71 million and 79 million options, respectively, and 24 million warrants for the
nine months ended September 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.
|
30
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Foreign currency conversion revenue
|
$ | 221 | $ | 184 | $ | 614 | $ | 492 | ||||||||
|
Delinquency fees
|
151 | 118 | 463 | 420 | ||||||||||||
|
Service fees
|
85 | 84 | 247 | 244 | ||||||||||||
|
Other
|
58 | 62 | 188 | 184 | ||||||||||||
|
|
||||||||||||||||
|
Total other commissions and fees
|
$ | 515 | $ | 448 | $ | 1,512 | $ | 1,340 | ||||||||
|
|
||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Royalties from Global Network Services
|
$ | 78 | $ | 59 | $ | 218 | $ | 156 | ||||||||
|
Insurance premium revenue
|
61 | 73 | 198 | 225 | ||||||||||||
|
Gain (Loss) on investment securities
|
— | 2 | (5 | ) | 225 | |||||||||||
|
Other
|
363 | 315 | 1,002 | 963 | ||||||||||||
|
|
||||||||||||||||
|
Total other revenues
|
$ | 502 | $ | 449 | $ | 1,413 | $ | 1,569 | ||||||||
|
|
||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Marketing and promotion
|
$ | 847 | $ | 504 | $ | 2,244 | $ | 1,201 | ||||||||
|
Cardmember rewards
|
1,269 | 983 | 3,685 | 2,858 | ||||||||||||
|
Cardmember services
|
135 | 132 | 406 | 374 | ||||||||||||
|
|
||||||||||||||||
|
Total marketing,
promotion, rewards
and cardmember
services
|
$ | 2,251 | $ | 1,619 | $ | 6,335 | $ | 4,433 | ||||||||
|
|
||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Occupancy and equipment
|
$ | 371 | $ | 374 | $ | 1,134 | $ | 1,124 | ||||||||
|
Communications
|
92 | 105 | 284 | 315 | ||||||||||||
|
Other non-income taxes
|
77 | 99 | 172 | 173 | ||||||||||||
|
Foreign exchange (gain) loss
(a)
|
31 | (160 | ) | (8 | ) | (152 | ) | |||||||||
|
MasterCard and Visa settlements
|
(213 | ) | (213 | ) | (639 | ) | (639 | ) | ||||||||
|
Other
(b)
|
356 | 260 | 870 | 758 | ||||||||||||
|
|
||||||||||||||||
|
Total other, net expense
|
$ | 714 | $ | 465 | $ | 1,813 | $ | 1,579 | ||||||||
|
|
||||||||||||||||
| (a) |
The three and nine months ended September 30, 2009 include (i) a $135 million benefit
representing the correction of an error related to the accounting for cumulative translation
adjustments associated with a net investment in foreign subsidiaries and (ii) a $45 million
benefit resulting from the change in fair value of certain forward exchange contracts.
|
|
| (b) |
The nine months ended September 30, 2009 include (i) a $59 million benefit representing the
correction of an error related to prior periods from the completion of certain account
reconciliations and (ii) lower travel and entertainment and other expenses due to the
Company’s reengineering activities.
|
31
32
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Non-interest revenues:
|
||||||||||||||||
|
USCS
|
$ | 2,540 | $ | 2,333 | $ | 7,391 | $ | 6,938 | ||||||||
|
ICS
|
932 | 878 | 2,679 | 2,503 | ||||||||||||
|
GCS
|
1,200 | 1,017 | 3,407 | 3,038 | ||||||||||||
|
GNMS
|
1,066 | 937 | 3,036 | 2,616 | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
111 | 97 | 305 | 525 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 5,849 | $ | 5,262 | $ | 16,818 | $ | 15,620 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest income:
|
||||||||||||||||
|
USCS
|
$ | 1,334 | $ | 776 | $ | 4,060 | $ | 2,462 | ||||||||
|
ICS
|
342 | 384 | 1,047 | 1,125 | ||||||||||||
|
GCS
|
2 | 1 | 5 | 4 | ||||||||||||
|
GNMS
|
1 | — | 3 | — | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
115 | 136 | 382 | 468 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,794 | $ | 1,297 | $ | 5,497 | $ | 4,059 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest expense:
|
||||||||||||||||
|
USCS
|
$ | 210 | $ | 127 | $ | 604 | $ | 435 | ||||||||
|
ICS
|
105 | 105 | 310 | 314 | ||||||||||||
|
GCS
|
58 | 43 | 162 | 131 | ||||||||||||
|
GNMS
|
(51 | ) | (39 | ) | (144 | ) | (133 | ) | ||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
288 | 307 | 886 | 898 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 610 | $ | 543 | $ | 1,818 | $ | 1,645 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Total revenues, net of interest expense:
|
||||||||||||||||
|
USCS
|
$ | 3,664 | $ | 2,982 | $ | 10,847 | $ | 8,965 | ||||||||
|
ICS
|
1,169 | 1,157 | 3,416 | 3,314 | ||||||||||||
|
GCS
|
1,144 | 975 | 3,250 | 2,911 | ||||||||||||
|
GNMS
|
1,118 | 976 | 3,183 | 2,749 | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
(62 | ) | (74 | ) | (199 | ) | 95 | |||||||||
|
|
||||||||||||||||
|
Total
|
$ | 7,033 | $ | 6,016 | $ | 20,497 | $ | 18,034 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Income (Loss) from continuing operations:
|
||||||||||||||||
|
USCS
|
$ | 595 | $ | 158 | $ | 1,545 | $ | (2 | ) | |||||||
|
ICS
|
153 | 133 | 464 | 263 | ||||||||||||
|
GCS
|
159 | 102 | 368 | 250 | ||||||||||||
|
GNMS
|
259 | 248 | 795 | 737 | ||||||||||||
|
Corporate & Other, including adjustments and eliminations
(a)
|
(73 | ) | 1 | (177 | ) | 179 | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,093 | $ | 642 | $ | 2,995 | $ | 1,427 | ||||||||
|
|
||||||||||||||||
| (a) | Corporate & Other includes adjustments and eliminations for intersegment activity. |
33
| • |
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.
|
34
| • |
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
| 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.
|
36
37
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card billed business:
(a)
|
||||||||||||||||
|
United States
|
$ | 120.5 | $ | 106.5 | $ | 348.2 | $ | 308.7 | ||||||||
|
Outside the United States
|
58.8 | 50.1 | 167.4 | 138.5 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 179.3 | $ | 156.6 | $ | 515.6 | $ | 447.2 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Total cards-in-force
(millions)
(b)
|
||||||||||||||||
|
United States
|
$ | 48.1 | $ | 49.4 | $ | 48.1 | $ | 49.4 | ||||||||
|
Outside the United States
|
40.9 | 39.0 | 40.9 | 39.0 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 89.0 | $ | 88.4 | $ | 89.0 | $ | 88.4 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic cards-in-force
(millions)
(b)
|
||||||||||||||||
|
United States
|
$ | 37.2 | $ | 38.6 | $ | 37.2 | $ | 38.6 | ||||||||
|
Outside the United States
|
36.2 | 34.3 | 36.2 | 34.3 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 73.4 | $ | 72.9 | $ | 73.4 | $ | 72.9 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Average discount rate
(c)
|
2.56 | % | 2.54 | % | 2.56 | % | 2.55 | % | ||||||||
|
Average basic cardmember spending
(dollars)
(d)
|
$ | 3,330 | $ | 2,898 | $ | 9,628 | $ | 8,029 | ||||||||
|
Average fee per card
(dollars)
(d)
|
$ | 38 | $ | 37 | $ | 37 | $ | 37 | ||||||||
|
Average fee per card adjusted
(dollars)
(d)
|
$ | 41 | $ | 41 | $ | 41 | $ | 41 | ||||||||
| (a) |
Card billed business includes activities (including cash advances) related to proprietary
cards, cards issued under network partnership agreements (non-proprietary billed business),
and certain insurance fees charged on proprietary cards. In-store spend activity within
retail co-brand portfolios in Global Network Services, from which the Company earns no
revenue, is not included in non-proprietary billed business. 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 cards-in-force includes all cards that are issued
and outstanding under network partnership agreements, except for retail co-brand cardmember
accounts that have no out-of-store spend activity during the prior 12-month period.
|
|
| (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 $58 million and $47 million for the three months
ended September 30, 2010 and 2009, respectively, and $157 million and $132 million for the
nine months ended September 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 $49 million and $57 million for the three months ended September 30,
2010 and 2009, respectively, and $156 million and $189 million for the nine months ended
September 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 | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Worldwide cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 35.1 | $ | 32.1 | $ | 35.1 | $ | 32.1 | ||||||||
|
Loss reserves
(millions):
|
||||||||||||||||
|
Beginning balance
|
$ | 440 | $ | 714 | $ | 546 | $ | 810 | ||||||||
|
Provisions for losses on authorized transactions
(a)
|
53 | 118 | 292 | 657 | ||||||||||||
|
Net write-offs
(b)
|
(116 | ) | (265 | ) | (481 | ) | (937 | ) | ||||||||
|
Other
|
(13 | ) | 32 | 7 | 69 | |||||||||||
|
|
||||||||||||||||
|
Ending balance
|
$ | 364 | $ | 599 | $ | 364 | $ | 599 | ||||||||
|
|
||||||||||||||||
|
% of receivables
|
1.0 | % | 1.9 | % | 1.0 | % | 1.9 | % | ||||||||
|
Net write-off rate — USCS
|
1.6 | % | 3.2 | % | 1.7 | % | 4.4 | % | ||||||||
|
30 days past due loans as a % of total — USCS
|
1.7 | % | 2.2 | % | 1.7 | % | 2.2 | % | ||||||||
|
Net loss ratio (as a % of charge volume) — ICS/GCS
(b) (c)
|
0.09 | % | 0.28 | % | 0.18 | % | N/A | |||||||||
|
90 days past billing as a % of total — ICS/GCS
(b)
|
0.8 | % | 1.9 | % | 0.8 | % | 1.9 | % | ||||||||
|
Worldwide cardmember loans (GAAP basis portfolio):
(d)
|
||||||||||||||||
|
Total loans
|
$ | 57.2 | $ | 31.5 | $ | 57.2 | $ | 31.5 | ||||||||
|
30 days past due as a % of total
|
2.5 | % | 4.0 | % | 2.5 | % | 4.0 | % | ||||||||
|
Loss reserves
(millions):
|
||||||||||||||||
|
Beginning balance
|
$ | 4,866 | $ | 3,219 | $ | 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
|
239 | 973 | 1,429 | 3,665 | ||||||||||||
|
Net write-offs — principal
|
(728 | ) | (731 | ) | (2,630 | ) | (2,360 | ) | ||||||||
|
Net write-offs — interest and fees
|
(81 | ) | (90 | ) | (287 | ) | (376 | ) | ||||||||
|
Other
|
22 | (12 | ) | 7 | (140 | ) | ||||||||||
|
|
||||||||||||||||
|
Ending balance
|
$ | 4,318 | $ | 3,359 | $ | 4,318 | $ | 3,359 | ||||||||
|
|
||||||||||||||||
|
Ending Reserves — principal
|
$ | 4,210 | $ | 3,246 | $ | 4,210 | $ | 3,246 | ||||||||
|
Ending Reserves — interest and fees
|
$ | 108 | $ | 113 | $ | 108 | $ | 113 | ||||||||
|
% of loans
|
7.5 | % | 10.7 | % | 7.5 | % | 10.7 | % | ||||||||
|
% of past due
|
302 | % | 264 | % | 302 | % | 264 | % | ||||||||
|
Average loans
|
$ | 57.4 | $ | 32.3 | $ | 58.2 | $ | 35.7 | ||||||||
|
Net write-off rate
|
5.1 | % | 9.1 | % | 6.0 | % | 8.8 | % | ||||||||
|
Net interest income divided by average loans
(f)(g)
|
8.2 | % | 9.3 | % | 8.5 | % | 9.0 | % | ||||||||
|
Net interest yield on cardmember loans
(f)
|
9.5 | % | 10.2 | % | 9.8 | % | 10.2 | % | ||||||||
|
|
||||||||||||||||
|
Worldwide cardmember loans (Managed basis portfolio):
(h)
|
||||||||||||||||
|
Total loans
|
$ | 57.2 | $ | 60.7 | $ | 57.2 | $ | 60.7 | ||||||||
|
30 days past due loans as a % of total
|
2.5 | % | 4.0 | % | 2.5 | % | 4.0 | % | ||||||||
|
Net write-offs — principal
(millions)
|
$ | 728 | $ | 1,327 | $ | 2,630 | $ | 4,260 | ||||||||
|
Average loans
|
$ | 57.4 | $ | 61.8 | $ | 58.2 | $ | 64.6 | ||||||||
|
Net write-off rate
|
5.1 | % | 8.6 | % | 6.0 | % | 8.8 | % | ||||||||
|
Net interest yield on cardmember loans
(f)
|
9.5 | % | 10.2 | % | 9.8 | % | 10.5 | % | ||||||||
| (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 to
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 66 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) |
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.
|
|
| (g) |
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.
|
|
| (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 66 for
a discussion of managed basis information.
|
40
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Calculation based on 2010 and 2009 GAAP
information:
(b)
|
||||||||||||||||
|
Net interest income
|
$ | 1,184 | $ | 754 | $ | 3,679 | $ | 2,414 | ||||||||
|
Average loans
(billions)
|
$ | 57.4 | $ | 32.3 | $ | 58.2 | $ | 35.7 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,381 | $ | 837 | $ | 4,258 | $ | 2,733 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 57.4 | $ | 32.4 | $ | 58.1 | $ | 35.8 | ||||||||
|
Net interest income divided by average loans
(e)
|
8.2 | % | 9.3 | % | 8.5 | % | 9.0 | % | ||||||||
|
Net interest yield on cardmember loans
(f)
|
9.5 | % | 10.2 | % | 9.8 | % | 10.2 | % | ||||||||
|
|
||||||||||||||||
|
Calculation based on 2010 and 2009 managed
information:
(g)
|
||||||||||||||||
|
Net interest income
(h)
|
$ | 1,184 | $ | 1,410 | $ | 3,679 | $ | 4,596 | ||||||||
|
Average loans
(billions)
|
$ | 57.4 | $ | 61.8 | $ | 58.2 | $ | 64.6 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,381 | $ | 1,594 | $ | 4,258 | $ | 5,069 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 57.4 | $ | 62.0 | $ | 58.1 | $ | 64.8 | ||||||||
|
Net interest yield on cardmember loans
(f)
|
9.5 | % | 10.2 | % | 9.8 | % | 10.5 | % | ||||||||
| (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 management believes more accurately
reflect the funding and capital characteristics of the Company’s 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 66 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) |
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) |
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.
|
|
| (g) |
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 66 for
a discussion of managed basis information.
|
|
| (h) |
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 67.
|
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
|
14 | % | 14 | % | ||||
|
Proprietary billed business
|
13 | 13 | ||||||
|
GNS billed business
(b)
|
24 | 22 | ||||||
|
Average spending per proprietary basic card
|
15 | 15 | ||||||
|
Basic cards-in-force
|
1 | |||||||
|
United States:
(a)
|
||||||||
|
Billed business
|
13 | |||||||
|
Average spending per proprietary basic card
|
14 | |||||||
|
Basic cards-in-force
|
(4 | ) | ||||||
|
Proprietary consumer card billed business
(c)
|
12 | |||||||
|
Proprietary small business billed business
(c)
|
12 | |||||||
|
Proprietary Corporate Services billed business
(d)
|
18 | |||||||
|
Outside the United States:
(a)
|
||||||||
|
Billed business
|
17 | 16 | ||||||
|
Average spending per proprietary basic card
|
17 | 16 | ||||||
|
Basic cards-in-force
|
6 | |||||||
|
Proprietary consumer and small business billed business
(e)
|
12 | 10 | ||||||
|
Proprietary Corporate Services billed business
(d)
|
19 | 20 | ||||||
| (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
45
| Percentage Increase | ||||||||
| Assuming No | ||||||||
| Percentage | Changes in Foreign | |||||||
| Increase/(Decrease) | Exchange Rates | |||||||
|
Worldwide:
(a)
|
||||||||
|
Billed business
|
15 | % | 14 | % | ||||
|
Proprietary billed business
|
14 | 12 | ||||||
|
GNS billed business
(b)
|
29 | 23 | ||||||
|
Average spending per proprietary basic card
|
20 | 19 | ||||||
|
Basic cards-in-force
|
1 | |||||||
|
United States:
(a)
|
||||||||
|
Billed business
|
13 | |||||||
|
Average spending per proprietary basic card
|
19 | |||||||
|
Basic cards-in-force
|
(4 | ) | ||||||
|
Proprietary consumer card billed business
(c)
|
12 | |||||||
|
Proprietary small business billed business
(c)
|
10 | |||||||
|
Proprietary Corporate Services billed business
(d)
|
20 | |||||||
|
Outside the United States:
(a)
|
||||||||
|
Billed business
|
21 | 15 | ||||||
|
Average spending per proprietary basic card
|
22 | 17 | ||||||
|
Basic cards-in-force
|
6 | |||||||
|
Proprietary consumer and small business billed business
(e)
|
14 | 8 | ||||||
|
Proprietary Corporate Services billed business
(d)
|
23 | 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.
|
| 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.
|
46
47
48
49
| Current | ||||||||
| Well-Capitalized | ||||||||
| Ratio | Actual | |||||||
|
Risk-Based Capital Ratios
|
||||||||
|
Tier 1
|
6.0 | % | ||||||
|
American Express Company
|
11.7 | % | ||||||
|
Centurion Bank
|
18.6 | % | ||||||
|
FSB
|
16.6 | % | ||||||
|
Total
|
10.0 | % | ||||||
|
American Express Company
|
13.9 | % | ||||||
|
Centurion Bank
|
19.8 | % | ||||||
|
FSB
|
19.1 | % | ||||||
|
Tier 1 Leverage Ratio
|
5.0 | % | ||||||
|
American Express Company
|
9.2 | % | ||||||
|
Centurion Bank
|
17.8 | % | ||||||
|
FSB
|
15.8 | % | ||||||
|
Tier 1 Common Risk-Based Capital Ratio
|
||||||||
|
American Express Company
|
11.7 | % | ||||||
|
Common Equity to Risk-Weighted Assets Ratio
|
||||||||
|
American Express Company
|
14.6 | % | ||||||
|
Tangible Common Equity to Risk-Weighted Assets Ratio
|
||||||||
|
American Express Company
|
11.5 | % | ||||||
50
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 | ||||
| Moody’s | TRS and rated operating subsidiaries | Prime-1 | A2 | Negative (a) | ||||
| Moody’s | American Express Company | Prime-2 | A3 | Negative | ||||
| S&P | All rated entities | A-2 | BBB+ | Stable |
52
| (Billions) | 2010 | 2009 | ||||||
|
U.S. retail deposits:
|
||||||||
|
Cash sweep and savings accounts
|
$ | 13.8 | $ | 10.5 | ||||
|
Certificates of deposit
(a)
|
13.9 | 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. |
53
| • |
Maintaining a diversified set of funding sources (refer to Funding section for more
details);
|
||
| • |
Maintaining unencumbered, liquid assets and off-balance sheet liquidity sources; and
|
||
| • |
Projecting cash inflows and outflows from a variety of sources and under a variety of
scenarios, including contingent liquidity exposures such as unused cardmember lines of
credit and collateral requirements for derivative transactions.
|
54
| (Billions) | ||||
|
Cash
|
$ | 22.5 | (a) | |
|
Readily-marketable securities
|
9.9 | (b) | ||
|
|
||||
|
Cash and readily-marketable securities
|
32.4 | |||
|
Less:
|
||||
|
Operating cash
|
(4.7) | (c) | ||
|
Short-term obligations outstanding
|
(0.9) | (d) | ||
|
|
||||
|
Excess cash and readily-marketable securities
|
$ | 26.8 | ||
|
|
||||
| (a) |
Includes cash and cash equivalents of $21.3 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 fourth quarter of 2010.
|
|
| (b) |
Consists of certain available-for-sale investment securities (U.S. Treasury and agency
securities and U.S. 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.
|
| (Billions) | Funding Maturities | |||||||||||||||
| Unsecured | Asset-Backed | Certificates | ||||||||||||||
| Quarter Ending: | Debt | Securitization | of Deposit | Total | ||||||||||||
|
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 | ||||||||||||
|
September 30, 2011
|
0.7 | 0.6 | 0.7 | 2.0 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 5.4 | $ | 6.8 | $ | 5.9 | $ | 18.1 | ||||||||
|
|
||||||||||||||||
55
56
57
58
59
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, net card fees and other
|
$ | 2,540 | $ | 2,262 | $ | 7,391 | $ | 6,728 | ||||||||
|
|
||||||||||||||||
|
Securitization income, net
(a)
|
— | 71 | — | 210 | ||||||||||||
|
|
||||||||||||||||
|
Interest income
|
1,334 | 776 | 4,060 | 2,462 | ||||||||||||
|
Interest expense
|
210 | 127 | 604 | 435 | ||||||||||||
|
|
||||||||||||||||
|
Net interest income
|
1,124 | 649 | 3,456 | 2,027 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
3,664 | 2,982 | 10,847 | 8,965 | ||||||||||||
|
|
||||||||||||||||
|
Provisions for losses
|
274 | 850 | 1,480 | 3,423 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for
losses
|
3,390 | 2,132 | 9,367 | 5,542 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing, promotion, rewards and cardmember services
|
1,455 | 1,050 | 4,142 | 2,960 | ||||||||||||
|
Salaries and employee benefits and other operating expenses
|
964 | 864 | 2,749 | 2,642 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
2,419 | 1,914 | 6,891 | 5,602 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income (loss)
|
971 | 218 | 2,476 | (60 | ) | |||||||||||
|
Income tax provision (benefit)
|
376 | 60 | 931 | (58 | ) | |||||||||||
|
|
||||||||||||||||
|
Segment income (loss)
|
$ | 595 | $ | 158 | $ | 1,545 | $ | (2 | ) | |||||||
|
|
||||||||||||||||
| (a) |
In accordance with the new GAAP effective January 1, 2010, the Company no longer reports
securitization income, net in its income statement.
|
60
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card billed business
|
$ | 95.2 | $ | 85.2 | $ | 274.7 | $ | 247.3 | ||||||||
|
Total cards-in-force
(millions)
|
39.9 | 39.8 | 39.9 | 39.8 | ||||||||||||
|
Basic cards-in-force
(millions)
|
29.7 | 29.7 | 29.7 | 29.7 | ||||||||||||
|
Average basic cardmember spending
(dollars)
|
$ | 3,219 | $ | 2,851 | $ | 9,313 | $ | 7,875 | ||||||||
|
U.S. Consumer Travel:
|
||||||||||||||||
|
Travel sales
(millions)
|
$ | 828 | $ | 629 | $ | 2,403 | $ | 1,952 | ||||||||
|
Travel commissions and fees/sales
|
8.6 | % | 8.4 | % | 8.1 | % | 8.4 | % | ||||||||
|
Total segment assets
|
$ | 82.2 | $ | 53.2 | $ | 82.2 | $ | 53.2 | ||||||||
|
Segment capital
(millions)
(a)
|
$ | 7,011 | $ | 5,493 | $ | 7,011 | $ | 5,493 | ||||||||
|
Return on average segment capital
(b)
|
32.8 | % | 2.6 | % | 32.8 | % | 2.6 | % | ||||||||
|
Return on average tangible segment capital
(b)
|
35.5 | % | 2.8 | % | 35.5 | % | 2.8 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 16.5 | $ | 15.9 | $ | 16.5 | $ | 15.9 | ||||||||
|
30 days past due as a % of total
|
1.7 | % | 2.2 | % | 1.7 | % | 2.2 | % | ||||||||
|
Average receivables
|
$ | 16.9 | $ | 15.8 | $ | 16.9 | $ | 15.9 | ||||||||
|
Net write-off rate
|
1.6 | % | 3.2 | % | 1.7 | % | 4.4 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember loans – (GAAP basis portfolio):
(c)
|
||||||||||||||||
|
Total loans
|
$ | 48.7 | $ | 22.7 | $ | 48.7 | $ | 22.7 | ||||||||
|
30 days past due loans as a % of total
|
2.5 | % | 4.2 | % | 2.5 | % | 4.2 | % | ||||||||
|
Average loans
|
$ | 49.1 | $ | 23.4 | $ | 49.7 | $ | 26.9 | ||||||||
|
Net write-off rate
|
5.2 | % | 9.8 | % | 6.2 | % | 9.4 | % | ||||||||
|
Net interest income divided by average loans
(d)(e)
|
9.1 | % | 11.0 | % | 9.3 | % | 10.1 | % | ||||||||
|
Net interest yield on cardmember loans
(d)
|
9.3 | % | 9.4 | % | 9.5 | % | 9.5 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember loans – (Managed basis portfolio):
(f)
|
||||||||||||||||
|
Total loans
|
$ | 48.7 | $ | 51.9 | $ | 48.7 | $ | 51.9 | ||||||||
|
30 days past due loans as a % of total
|
2.5 | % | 4.1 | % | 2.5 | % | 4.1 | % | ||||||||
|
Average loans
|
$ | 49.1 | $ | 52.9 | $ | 49.7 | $ | 55.8 | ||||||||
|
Net write-off rate
|
5.2 | % | 8.9 | % | 6.2 | % | 9.1 | % | ||||||||
|
Net interest yield on cardmember loans
(d)
|
9.3 | % | 9.8 | % | 9.5 | % | 10.2 | % | ||||||||
| (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 ($2.0 billion and $124 million for the 12 months ended September 30, 2010 and 2009,
respectively) by the (ii) one year average segment capital ($6.0 billion and $4.8 billion for
the 12 months ended September 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 $454 million and $383 million as of September 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 66 for a discussion of GAAP basis information.
|
|
| (d) |
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.
|
|
| (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
|
61
|
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) |
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 66 for a discussion of managed basis information.
|
62
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions, except percentages or where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Calculation based on 2010 and 2009 GAAP
information:
(b)
|
||||||||||||||||
|
Net interest income
|
$ | 1,124 | $ | 649 | $ | 3,456 | $ | 2,027 | ||||||||
|
Average loans
(billions)
|
$ | 49.1 | $ | 23.4 | $ | 49.7 | $ | 26.9 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,150 | $ | 558 | $ | 3,541 | $ | 1,914 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 49.2 | $ | 23.5 | $ | 49.7 | $ | 27.0 | ||||||||
|
Net interest income divided by average loans
(e)
|
9.1 | % | 11.0 | % | 9.3 | % | 10.1 | % | ||||||||
|
Net interest yield on cardmember loans
(f)
|
9.3 | % | 9.4 | % | 9.5 | % | 9.5 | % | ||||||||
|
|
||||||||||||||||
|
Calculation based on 2010 and 2009 managed
information:
(g)
|
||||||||||||||||
|
Net interest income
(h)
|
$ | 1,124 | $ | 1,305 | $ | 3,456 | $ | 4,209 | ||||||||
|
Average loans
(billions)
|
$ | 49.1 | $ | 52.9 | $ | 49.7 | $ | 55.8 | ||||||||
|
Adjusted net interest income
(c)
|
$ | 1,150 | $ | 1,315 | $ | 3,541 | $ | 4,250 | ||||||||
|
Adjusted average loans
(billions)
(d)
|
$ | 49.2 | $ | 53.0 | $ | 49.7 | $ | 55.9 | ||||||||
|
Net interest yield on cardmember loans
(f)
|
9.3 | % | 9.8 | % | 9.5 | % | 10.2 | % | ||||||||
| (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 segment’s 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 66 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) |
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) |
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.
|
|
| (g) |
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 66 for
a discussion of managed basis information.
|
|
| (h) |
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 67.
|
63
64
65
66
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Discount revenue, net card fees and other:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 2,540 | $ | 2,262 | $ | 7,391 | $ | 6,728 | ||||||||
|
Securitization adjustments
|
— | 82 | — | 260 | ||||||||||||
|
|
||||||||||||||||
|
Managed discount revenue, net card fees and other
|
$ | 2,540 | $ | 2,344 | $ | 7,391 | $ | 6,988 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest income:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 1,334 | $ | 776 | $ | 4,060 | $ | 2,462 | ||||||||
|
Securitization adjustments
|
— | 714 | — | 2,371 | ||||||||||||
|
|
||||||||||||||||
|
Managed interest income
|
$ | 1,334 | $ | 1,490 | $ | 4,060 | $ | 4,833 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Securitization income, net:
(a)
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | — | $ | 71 | $ | — | $ | 210 | ||||||||
|
Securitization adjustments
|
— | (71 | ) | — | (210 | ) | ||||||||||
|
|
||||||||||||||||
|
Managed securitization income, net
|
$ | — | $ | — | $ | — | $ | — | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Interest expense:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 210 | $ | 127 | $ | 604 | $ | 435 | ||||||||
|
Securitization adjustments
|
— | 58 | — | 189 | ||||||||||||
|
|
||||||||||||||||
|
Managed interest expense
|
$ | 210 | $ | 185 | $ | 604 | $ | 624 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Provisions for losses:
|
||||||||||||||||
|
Reported for the period (GAAP)
|
$ | 274 | $ | 850 | $ | 1,480 | $ | 3,423 | ||||||||
|
Securitization adjustments
|
— | 529 | (b) | — | 2,001 | (b) | ||||||||||
|
|
||||||||||||||||
|
Managed provisions for losses
|
$ | 274 | $ | 1,379 | (b) | $ | 1,480 | $ | 5,424 | (b) | ||||||
|
|
||||||||||||||||
| (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.
|
67
68
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, net card fees and other
|
$ | 932 | $ | 878 | $ | 2,679 | $ | 2,503 | ||||||||
|
|
||||||||||||||||
|
Interest income
|
342 | 384 | 1,047 | 1,125 | ||||||||||||
|
Interest expense
|
105 | 105 | 310 | 314 | ||||||||||||
|
|
||||||||||||||||
|
Net interest income
|
237 | 279 | 737 | 811 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
1,169 | 1,157 | 3,416 | 3,314 | ||||||||||||
|
Provisions for losses
|
64 | 250 | 312 | 887 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for losses
|
1,105 | 907 | 3,104 | 2,427 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing, promotion, rewards and cardmember services
|
428 | 302 | 1,154 | 847 | ||||||||||||
|
Salaries and employee benefits and other operating expenses
|
532 | 469 | 1,420 | 1,344 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
960 | 771 | 2,574 | 2,191 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income
|
145 | 136 | 530 | 236 | ||||||||||||
|
Income tax provision (benefit)
|
(8 | ) | 3 | 66 | (27 | ) | ||||||||||
|
|
||||||||||||||||
|
Segment income
|
$ | 153 | $ | 133 | $ | 464 | $ | 263 | ||||||||
|
|
||||||||||||||||
69
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card billed business
|
$ | 27.1 | $ | 24.2 | $ | 77.0 | $ | 67.4 | ||||||||
|
Total cards-in-force
(millions)
|
15.0 | 15.2 | 15.0 | 15.2 | ||||||||||||
|
Basic cards-in-force
(millions)
|
10.4 | 10.6 | 10.4 | 10.6 | ||||||||||||
|
Average basic cardmember spending
(dollars)
|
$ | 2,609 | $ | 2,273 | $ | 7,397 | $ | 6,162 | ||||||||
|
International Consumer Travel:
|
||||||||||||||||
|
Travel sales
(millions)
|
$ | 291 | $ | 258 | $ | 814 | $ | 707 | ||||||||
|
Travel commissions and fees/sales
|
7.9 | % | 8.5 | % | 7.7 | % | 8.5 | % | ||||||||
|
Total segment assets
|
$ | 21.4 | $ | 19.5 | $ | 21.4 | $ | 19.5 | ||||||||
|
Segment capital
(millions)
(a)
|
$ | 2,077 | $ | 2,251 | $ | 2,077 | $ | 2,251 | ||||||||
|
Return on average segment capital
(b)
|
24.8 | % | 13.2 | % | 24.8 | % | 13.2 | % | ||||||||
|
Return on average tangible segment capital
(b)
|
33.8 | % | 17.6 | % | 33.8 | % | 17.6 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 6.2 | $ | 5.6 | $ | 6.2 | $ | 5.6 | ||||||||
|
90 days past billing as a % of total
(c)
|
1.0 | % | 2.5 | % | 1.0 | % | 2.5 | % | ||||||||
|
Net loss ratio (as a % of charge volume)
(c)(d)
|
0.14 | % | 0.37 | % | 0.27 | % | 0.36 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember loans:
|
||||||||||||||||
|
Total loans
|
$ | 8.5 | $ | 8.8 | $ | 8.5 | $ | 8.8 | ||||||||
|
30 days past due loans as a % of total
|
2.8 | % | 3.7 | % | 2.8 | % | 3.7 | % | ||||||||
|
Average loans
|
$ | 8.3 | $ | 8.9 | $ | 8.5 | $ | 8.8 | ||||||||
|
Net write-off rate
|
4.3 | % | 7.1 | % | 4.9 | % | 7.0 | % | ||||||||
|
Net interest income divided by average loans
(e)(f)
|
11.3 | % | 12.4 | % | 11.6 | % | 12.3 | % | ||||||||
|
Net interest
yield on cardmember loans
(e)
|
11.1 | % | 12.4 | % | 11.3 | % | 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 ($533 million and $296 million for the 12 months ended September 30, 2010 and 2009,
respectively) by the (ii) one year average segment capital ($2.1 billion and $2.2 billion for
the 12 months ended September 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 $567 million and $551 million as of September 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 to 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 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.
|
|
| (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) |
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.
|
70
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions, except for percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Net interest income
|
$ | 237 | $ | 279 | $ | 737 | $ | 811 | ||||||||
|
Average loans
(billions)
|
$ | 8.3 | $ | 8.9 | $ | 8.5 | $ | 8.8 | ||||||||
|
Adjusted net interest income
(b)
|
$ | 231 | $ | 279 | $ | 718 | $ | 818 | ||||||||
|
Adjusted average loans
(billions)
(c)
|
$ | 8.2 | $ | 8.9 | $ | 8.4 | $ | 8.9 | ||||||||
|
Net interest income divided by average loans
(d)
|
11.3 | % | 12.4 | % | 11.6 | % | 12.3 | % | ||||||||
|
Net interest yield on cardmember loans
(e)
|
11.1 | % | 12.4 | % | 11.3 | % | 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 segment’s 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) |
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) |
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.
|
71
72
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, net card fees and other
|
$ | 1,200 | $ | 1,017 | $ | 3,407 | $ | 3,038 | ||||||||
|
|
||||||||||||||||
|
Interest income
|
2 | 1 | 5 | 4 | ||||||||||||
|
Interest expense
|
58 | 43 | 162 | 131 | ||||||||||||
|
|
||||||||||||||||
|
Net interest income
|
(56 | ) | (42 | ) | (157 | ) | (127 | ) | ||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
1,144 | 975 | 3,250 | 2,911 | ||||||||||||
|
Provisions for losses
|
22 | 40 | 128 | 140 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for losses
|
1,122 | 935 | 3,122 | 2,771 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing, promotion, rewards and cardmember services
|
110 | 81 | 330 | 234 | ||||||||||||
|
Salaries and employee benefits and other operating expenses
|
772 | 706 | 2,176 | 2,173 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
882 | 787 | 2,506 | 2,407 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income
|
240 | 148 | 616 | 364 | ||||||||||||
|
Income tax provision
|
81 | 46 | 248 | 114 | ||||||||||||
|
|
||||||||||||||||
|
Segment income
|
$ | 159 | $ | 102 | $ | 368 | $ | 250 | ||||||||
|
|
||||||||||||||||
73
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Card billed business
|
$ | 33.2 | $ | 27.9 | $ | 96.9 | $ | 80.2 | ||||||||
|
Total cards-in-force
(millions)
|
7.0 | 7.1 | 7.0 | 7.1 | ||||||||||||
|
Basic cards-in-force
(millions)
|
7.0 | 7.1 | 7.0 | 7.1 | ||||||||||||
|
Average basic cardmember spending
(dollars)
|
$ | 4,734 | $ | 3,907 | $ | 13,842 | $ | 11,189 | ||||||||
|
Global Corporate Travel:
|
||||||||||||||||
|
Travel sales
|
$ | 4.2 | $ | 3.5 | $ | 12.9 | $ | 10.5 | ||||||||
|
Travel commissions and fees/sales
|
9.3 | % | 8.8 | % | 8.1 | % | 8.8 | % | ||||||||
|
Total segment assets
|
$ | 21.3 | $ | 22.8 | $ | 21.3 | $ | 22.8 | ||||||||
|
Segment capital
(millions)
(a)
|
$ | 3,633 | $ | 3,679 | $ | 3,633 | $ | 3,679 | ||||||||
|
Return on average segment capital
(b)
|
13.0 | % | 6.6 | % | 13.0 | % | 6.6 | % | ||||||||
|
Return on average tangible segment capital
(b)
|
28.1 | % | 14.2 | % | 28.1 | % | 14.2 | % | ||||||||
|
|
||||||||||||||||
|
Cardmember receivables:
|
||||||||||||||||
|
Total receivables
|
$ | 12.2 | $ | 10.4 | $ | 12.2 | $ | 10.4 | ||||||||
|
90 days past billing as a % of total
(c)
|
0.8 | % | 1.5 | % | 0.8 | % | 1.5 | % | ||||||||
|
Net loss ratio (as a % of charge volume)
(c) (d)
|
0.06 | % | 0.23 | % | 0.13 | % | 0.21 | % | ||||||||
| (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 ($468 million and $236 million for the 12 months ended September 30, 2010
and 2009, respectively) by the (ii) one year average segment capital ($3.6 billion for the
12 months ended September 30, 2010 and 2009). 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 September 30, 2010 and 2009. 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 to 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.
The 90 days past billing as a percent of total metric for the three and nine months ended September 30, 2010 has been revised from amounts previously disclosed.
|
|
| (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.
|
74
75
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Revenues
|
||||||||||||||||
|
Discount revenue, fees and other
|
$ | 1,066 | $ | 937 | $ | 3,036 | $ | 2,616 | ||||||||
|
|
||||||||||||||||
|
Interest income
|
1 | — | 3 | — | ||||||||||||
|
Interest expense
|
(51 | ) | (39 | ) | (144 | ) | (133 | ) | ||||||||
|
|
||||||||||||||||
|
Net interest income
|
52 | 39 | 147 | 133 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense
|
1,118 | 976 | 3,183 | 2,749 | ||||||||||||
|
Provisions for losses
|
13 | 33 | 46 | 101 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues net of interest expense after provisions for
losses
|
1,105 | 943 | 3,137 | 2,648 | ||||||||||||
|
|
||||||||||||||||
|
Expenses
|
||||||||||||||||
|
Marketing and promotion
|
208 | 157 | 583 | 315 | ||||||||||||
|
Salaries and employee benefits and other
operating expenses
|
475 | 415 | 1,300 | 1,210 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
683 | 572 | 1,883 | 1,525 | ||||||||||||
|
|
||||||||||||||||
|
Pretax segment income
|
422 | 371 | 1,254 | 1,123 | ||||||||||||
|
Income tax provision
|
163 | 123 | 459 | 386 | ||||||||||||
|
|
||||||||||||||||
|
Segment income
|
$ | 259 | $ | 248 | $ | 795 | $ | 737 | ||||||||
|
|
||||||||||||||||
76
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Billions, except percentages and where indicated) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Global Card billed business
(a)
|
$ | 179.3 | $ | 156.6 | $ | 515.6 | $ | 447.2 | ||||||||
|
Global Network & Merchant Services:
|
||||||||||||||||
|
Total segment assets
|
$ | 12.7 | $ | 10.6 | $ | 12.7 | $ | 10.6 | ||||||||
|
Segment capital
(millions)
(b)
|
$ | 1,831 | $ | 1,493 | $ | 1,831 | $ | 1,493 | ||||||||
|
Return on average segment capital
(c)
|
63.1 | % | 71.0 | % | 63.1 | % | 71.0 | % | ||||||||
|
Return on average tangible segment capital
(c)
|
64.6 | % | 72.8 | % | 64.6 | % | 72.8 | % | ||||||||
|
|
||||||||||||||||
|
Global Network Services:
|
||||||||||||||||
|
Card billed business
(d)
|
$ | 23.1 | $ | 18.6 | $ | 64.8 | $ | 50.4 | ||||||||
|
Total cards-in-force
(millions)
|
27.1 | 26.3 | 27.1 | 26.3 | ||||||||||||
|
|
||||||||||||||||
| (a) |
Global Card billed business includes activities (including cash advances) related to
proprietary cards, cards issued under network partnership agreements (non-proprietary
billed business), and certain insurance fees charged on proprietary cards. In-store spend
activity within retail co-brand portfolios in Global Network Services from which the
Company earns no revenue is not included in non-proprietary billed business.
|
|
| (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 ($995 million and $980 million for the twelve months ended September 30,
2010 and 2009, respectively) by the (ii) one year average segment capital ($1.6 billion and
$1.4 billion for the twelve months ended September 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 $37 million and $35 million at September 30, 2010 and
2009, respectively. Management believes the return on average tangible segment capital is a
useful measure of the profitability of its business.
|
|
| (d) |
For non-proprietary retail co-brand partners, Global Network Services metrics exclude
cardmember accounts which have no out-of-store spend activity during the prior 12-month
period.
|
77
78
| • |
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.
|
79
| • |
changes in global economic and business conditions, including consumer and business spending,
the availability and cost of credit, unemployment and political conditions, all of which may
significantly affect spending on the Card, delinquency rates, loan balances and other aspects
of our business and results of operations;
|
|
| • |
changes in capital and credit market conditions, which may significantly affect the Company’s
ability to meet its liquidity needs, access to capital and cost of capital, including changes
in interest rates; changes in market conditions affecting the valuation of the Company’s
assets; or any reduction in the Company’s credit ratings or those of its subsidiaries, which
could materially increase the cost and other terms of the Company’s funding, restrict its
access to the capital markets or result in contingent payments under contracts;
|
|
| • |
litigation, such as class actions or proceedings brought by governmental and regulatory
agencies (including the lawsuit filed against the Company by the U.S. Department of Justice
and certain state attorneys general), that could result in (i) the imposition of behavioral
remedies against the Company or the Company’s voluntarily making certain changes to its
business practices, the effects of which in either case could have a material adverse impact
on the Company’s financial performance; (ii) the imposition of substantial monetary damages
in private actions against the Company; and/or (iii) damage to the Company’s global reputation
and brand;
|
|
| • |
legal and regulatory developments wherever the Company does business, including legislative
and regulatory reforms in the United States, such as the Dodd-Frank Act’s stricter regulation
of large, interconnected financial institutions, changes in requirements relating to
securitization and the establishment of the Bureau of Consumer Financial Protection, which
could make fundamental changes to many of the Company’s business practices or materially
affect its capital requirements, results of operations, ability to pay dividends or repurchase
the Company’s stock; or actions and potential future actions by the FDIC and credit rating
agencies applicable to securitization trusts, which could impact the Company’s ABS program;
|
|
| • |
the Company’s net interest yield on U.S. cardmember loans not trending over time to
historical levels as expected, which will be influenced by, among other things, the effects of
the CARD Act (including the regulations requiring the Company to periodically reevaluate APR
increases), interest rates, changes in consumer behavior that affect loan balances, such as
paydown rates, the Company’s cardmember
|
80
|
acquisition strategy, product mix, credit actions,
including line size and other adjustments to credit availability, and pricing changes;
|
||
| • |
changes in the substantial and increasing worldwide competition in the payments industry,
including competitive pressure that may impact the prices we charge merchants that accept the
Company’s Cards and the success of marketing, promotion or rewards programs;
|
|
| • |
changes in technology or in the Company’s ability to protect its intellectual property (such
as copyrights, trademarks, patents and controls on access and distribution), and invest in and
compete at the leading edge of technological developments across the Company’s businesses,
including technology and intellectual property of third parties whom we rely on, all of which
could materially affect the Company’s results of operations;
|
|
| • |
data breaches and fraudulent activity, which could damage the Company’s brand, increase the
Company’s costs or have regulatory implications, and changes in regulation affecting privacy
and data security under federal, state and foreign law, which could result in higher
compliance and technology costs to the Company or the Company’s vendors;
|
|
| • |
changes in the Company’s ability to attract or retain qualified personnel in the management
and operation of the company’s business, including any changes that may result from increasing
regulatory supervision of compensation practices;
|
|
| • |
changes in the financial condition and creditworthiness of the Company’s business partners,
such as bankruptcies, restructurings or consolidations, involving merchants that represent a
significant portion of the Company’s business, such as the airline industry, or the Company’s
partners in Global Network Services or financial institutions that we rely on for routine
funding and liquidity, which could materially affect the Company’s financial condition or
results of operations;
|
|
| • |
uncertainties associated with business acquisitions, including the ability to realize
anticipated business retention, growth and cost savings or effectively integrate the acquired
business into the Company’s existing operations;
|
|
| • |
changes affecting the success of the Company’s reengineering and other cost control
initiatives, which may result in the company not realizing all or a significant portion of
the benefits that we intend;
|
|
| • |
the effectiveness of the Company’s risk management policies and procedures, including credit
risk relating to consumer debt, liquidity risk in meeting business requirements and
operational risks;
|
|
| • |
changes affecting the Company’s ability to accept or maintain deposits due to market demand
or regulatory constraints, such as changes in interest rates and regulatory restrictions on
the Company’s ability to obtain deposit funding or offer competitive interest rates, which
could affect the Company’s liquidity position and the Company’s ability to fund the Company’s
business; and
|
|
| • |
factors beyond the Company’s control such as fire, power loss, disruptions in
telecommunications, severe weather conditions, natural disasters, terrorism, “hackers” or
fraud, which could affect travel-related spending or disrupt the Company’s global network
systems and ability to process transactions.
|
81
82
83
84
85
86
| Maximum | ||||||||||||||||
| Total Number | 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 | |||||||||||||
|
July 1-31, 2010
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | 100,018,968 | |||||||||||
|
Employee transactions (2)
|
1,914 | $ | 38.57 | N/A | N/A | |||||||||||
|
|
||||||||||||||||
|
August 1-31, 2010
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | 100,018,968 | |||||||||||
|
Employee transactions (2)
|
24,804 | $ | 44.59 | N/A | N/A | |||||||||||
|
|
||||||||||||||||
|
September 1-30, 2010
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | 100,018,968 | |||||||||||
|
Employee transactions (2)
|
158 | $ | 40.50 | N/A | N/A | |||||||||||
|
|
||||||||||||||||
|
Total
|
||||||||||||||||
|
Repurchase program (1)
|
— | $ | — | — | ||||||||||||
|
Employee transactions (2)
|
26,876 | $ | 44.14 | N/A | ||||||||||||
| (1) |
As of September 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: November 3, 2010
|
By |
/s/ Daniel T. Henry
|
||||||
|
|
Executive Vice President and | |||||||
|
|
Chief Financial Officer | |||||||
|
|
||||||||
|
Date: November 3, 2010
|
By |
/s/ Joan C. Amble
|
||||||
|
|
Executive Vice President and Comptroller | |||||||
|
|
(Principal Accounting Officer) | |||||||
89
| Exhibit | Description | |
|
|
||
|
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 |
|---|