American Express 1998 Annual Report Download - page 27

Discount revenue rose 8 percent in 1998 and 13 per-
cent in 1997 as a result of higher billed business in the
United States and internationally. The 1998 increase was
particularly noteworthy because of the economic turmoil
in many international markets, slower growth in the U.S.
card industry and general tightening by corporations of
travel and entertainment expenses in the latter half of the
year. Net card fees decreased in both years due to declines
in consumer charge cards and the effect of TRS’ strategy
of building its lending portfolio through the issuance of
low- and no-fee credit cards. Travel commissions and fees
improved in 1998 as a result of travel acquisitions during
the year, which increased revenues and expenses but did not
have a material effect on net income. Both 1998 and 1997
reflect increased sales volumes, offset in part by the con-
tinued efforts by airlines to reduce distribution costs and
by corporate travel and entertainment expense containment
efforts. The increase in other revenues in 1998 and 1997
reflects higher card assessments and fees; 1998 also in-
cludes the effect of acquisitions. Lending net finance charge
revenue was reduced by $1 billion loan securitizations in
the second quarter of 1998, the third quarter of 1997 and
the second quarter of 1996. See TRS’ Liquidity and
Capital Resources discussion. Excluding the effect of
securitizations, lending net finance charge revenue rose
18 percent and 24 percent in 1998 and 1997, respectively.
The increase in both 1998 and 1997 is due to higher
worldwide lending balances and a widening of interest
margins in the U.S. portfolio resulting from a smaller por-
tion of the portfolio being subject to lower introductory
interest rates.
SELECTED STATISTICAL INFORMATION
(Amounts in billions, except percentages and where indicated)
Years Ended December 31, 1998 1997 1996
Total Cards in Force (millions):
United States 27.8 29.6 29.2
Outside the United States 14.9 13.1 12.3
Total 42.7 42.7 41.5
Basic Cards in Force (millions):
United States 21.7 23.3 22.5
Outside the United States 11.5 10.0 9.6
Total 33.2 33.3 32.1
Card Billed Business:
United States $ 165.6 $ 150.5 $ 131.0
Outside the United States 61.9 58.7 53.3
Total $ 227.5 $ 209.2 $ 184.3
Average Discount Rate* 2.73% 2.73% 2.75%
Average Basic Cardmember
Spending (dollars)* $ 6,885 $ 6,473 $ 6,074
Average Fee per Card (dollars)* $38$39$42
Travel Sales $ 19.9 $ 17.4 $ 15.8
Travel Commissions and Fees/Sales 8.3% 8.6% 9.0%
Owned and Managed Charge Card
Receivables:**
Total Receivables $ 24.0 $ 23.5 $ 22.5
90 Days Past Due as a % of Total 2.7% 3.1% 3.2%
Loss Reserves (millions) $897 $ 951 $ 923
% of Receivables 3.7% 4.0% 4.1%
% of 90 Days Past Due 138% 132% 128%
Net Loss Ratio 0.46% 0.50% 0.51%
Owned and Managed U.S. Cardmember
Lending:**
Total Loans $ 16.7 $ 14.6 $ 12.7
Past Due Loans as a % of Total:
30-89 Days 2.2% 2.4% 2.4%
90+ Days 0.9% 1.1% 0.9%
Loss Reserves (millions):
Beginning Balance $589 $ 488 $ 443
Provision 961 867 607
Net Charge-Offs/Other (931) (766) (562)
Ending Balance $619$ 589 $ 488
% of Loans 3.7% 4.0% 3.8%
% of Past Due 120% 116% 117%
Average Loans $ 15.0 $ 13.3 $ 10.8
Net Write-Off Rate 6.4% 6.0% 5.2%
Net Interest Yield 9.5% 9.1% 8.8%
* Computed excluding cards issued by strategic alliance partners and indepen-
dent operators as well as business billed on those cards.
** Owned and managed Cardmember receivables and loans include securitized
assets not reflected in the Consolidated Balance Sheets.
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