American Express 2004 Annual Report Download - page 68

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Other operating expenses increased 8 percent to $300
million in 2004 due to higher technology and business
volume-related expenses, partially offset by a gain on
the sale of securities received from a settlement with a
FIG client and the benefits of reengineering activities.
Other operating expenses increased 14 percent in 2003
reflecting higher technology expenses and currency
translation losses, previously recorded in shareholder’s
equity, resulting from AEB’s scaling back of activities in
Europe, partially offset by gains on the sale of real
estate properties in Greece.
Provision for losses decreased substantially in 2004 and
2003 to $37 million and $102 million, respectively, due
to lower CFS volumes and an improvement in
bankruptcy-related write-offs in the consumer lending
portfolio in Hong Kong.
On and effective January 21, 2005, AEB completed the
sale of the local Private Banking client assets in
Luxembourg. In connection with this transaction, AEB
received gross proceeds of approximately $6 million,
which were offset by cumulative pretax costs of
approximately $6 million consisting of: (i) $4 million
recorded in 2004 as part of AEB’s restructuring
charges; and (ii) $2 million recorded in January 2005
consisting primarily of incentive payments and
other costs.
Liquidity and Capital Resources
SELECTED BALANCE SHEET INFORMATION (GAAP BASIS)
December 31,
(Billions, except percentages and where indicated) 2004 2003
Total loans $ 6.9 $ 6.5
Total Non-CFS loans $ 5.5 $ 5.1
Non-CFS loan loss reserves
(millions):
Beginning balance $59 $92
Provision 59
Net charge-offs (9) (39)
Other 3(3)
Ending balance $58 $59
% of Non-CFS loans 1.0% 1.1%
Total non-performing loans
(millions) $37 $78
Total CFS loans $ 1.4 $ 1.4
Past due asa%oftotal CFS loans:
30–89 days past due 3.8% 5.6%
90+ days past due 0.7% 1.0%
CFS loan reserves (millions):
Beginning balance $54 $59
Provision 33 93
Net charge-offs (50) (99)
Other —1
Ending balance $37 $54
% of CFS loans 2.7% 4.0%
% of 30 days past due
CFS loans 61% 60%
Net write-off rate 3.8% 6.8%
Assets owned, managed*/
administered:
Owned $ 13.4 $ 14.2
Managed/administered 19.2 16.2
Total $ 32.6 $ 30.4
Assets of non-consolidated
joint ventures** $ 1.8 $ 1.7
Deposits $ 10.4 $ 10.8
Total liabilities $ 12.4 $ 13.3
Total shareholder’s equity
(millions) $ 924 $ 949
Return on average total assets 0.70% 0.74%
Return on average total
shareholder’s equity 10.0% 10.8%
Risk-based capital ratios:
Tier 1 11.0% 11.4%
Total 10.1% 11.3%
Leverage ratio 5.8% 5.5%
* Includes assets managed by AEFA.
** Excludes American Express International Deposit Company’s total assets
(which are 100% consolidated at AEFA).
See Glossary of Selected Terminology section for definitions of key terms.
AXP
AR.04
66
Financial Review