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AMERICAN EXPRESS BANK
Results of Operations
STATEMENTS OF INCOME
Years Ended December 31, (Millions) 2004 2003 2002
Net revenues:
Interest income $ 542 $ 575 $ 606
Interest expense 227 226 246
Net interest income 315 349 360
Commissions and
fees 283 238 215
Foreign exchange
income and other
revenues 227 214 170
Total net revenues 825 801 745
Expenses:
Human resources 298 271 236
Other operating
expenses 300 279 244
Provisions for losses 37 102 147
Restructuring Charges 44 (2) (3)
Total expenses 679 650 624
Pretax income 146 151 121
Income tax provision 50 49 41
Net income $96 $ 102 $ 80
AEB’s results before restructuring charges reflect the
positive impact of growth within Private Banking and
its Financial Institutions Group (FIG), partially offset by
loan and other activity reductions within Corporate
Banking, and within its Consumer Financial Services
(CFS) lending business, particularly Hong Kong.
AEB reported net income of $96 million in 2004, $102
million in 2003 and $80 million in 2002. 2004 results
include $44 million ($29 million after-tax) in aggregate
restructuring charges ($35 million recognized in the
fourth quarter as part of Company-wide restructuring
initiatives) incurred in connection with the decision to
sell certain AEB operations in Bangladesh, Egypt, Lux-
embourg and Pakistan. The aggregate charges include
$30 million of employee severance-related obligations
and $14 million of other costs primarily related to cur-
rency translation losses, previously recorded in share-
holder’s equity, and the early termination of certain real
estate property leases.
Net revenues rose 3 percent to $825 million in 2004 pri-
marily due to increased commissions and fees and
higher foreign exchange income and other revenues,
partially offset by lower net interest income. Net rev-
enues of $801 million in 2003 rose 7 percent primarily
due to higher commissions and fees as well as higher
foreign exchange income and other revenues.
Net interest income of $315 million in 2004 declined 10
percent primarily due to lower levels of CFS loans,
reflecting AEB’s decision to temporarily curtail loan
origination in Hong Kong, and lower spreads in the
investment portfolio. These decreases were partially
offset by the impact of growth in the Private Banking
loan portfolio. Net interest income declined 3 percent
in 2003 primarily due to lower levels of CFS loans and
declining Corporate Banking loan balances due to
AEB’s exit strategy, partially offset by lower funding
costs on the investment portfolio and strong growth in
Private Banking loans.
During 2004 and 2003, commissions and fees increased
19 percent and 11 percent, respectively, primarily due
to higher volumes in FIG and Private Banking, partially
offset by lower volumes in CFS.
Foreign exchange income and other revenues rose 6
percent to $227 million reflecting higher Private Bank-
ing client activity. In 2003, foreign exchange income
and other revenue of $214 million increased primarily
because of higher client activity in Private Banking and
higher mark-to-market gains on FIG seed capital
investments in mutual funds.
Human resources expenses rose 10 percent to $298
million in 2004 reflecting merit increases and higher
management incentive costs, partially offset by the
benefits of reengineering activities. Human resources
expenses of $271 million rose 15 percent in 2003
reflecting merit increases and increased employee
benefit and management incentive costs as well as
severance costs related to AEB’s downsizing of its
operations in Greece.
AXP
AR.04
65
Financial Review