American Express 2006 Annual Report Download - page 18

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products as well as the cards of our network partners, rose 16 percent to a record
$561.5 billion. This rate of growth outpaced that of all major issuers.
Growth in spending came from two sources. First is the expansion of our cardmember
base. We added 7 million cards-in-force in 2006, one of our largest annual increases,
which brought total cards-in-force to 78 million. Second, we continued to increase average
spending per card, which rose 7 percent year-over-year.
Cardmember spending, which generates discount revenue, is the foundation of our
business model. But we also earn interest and fees from lending, or revolving card balances.
This source of revenue is an important complement. Cardmember loans have risen along
with spending, increasing 17 percent on a managed basis and 31 percent on a GAAP basis in
2006. By contrast, most of the major card issuers experienced growth in the single digits.
Even as our cardmember base and lending portfolio grew, our overall credit quality
remained well controlled. Write-off rates in both our charge card and lending portfolios
improved from a year ago. Provisions for losses rose due to increased loan volumes globally and
higher loss rates in some international markets, most notably Taiwan. This was partially offset
by lower bankruptcy-related charge-offs and excellent credit quality in the United States.
Taken together, our spending and lending growth, the global expansion of our card
franchise and the quality of our lending portfolio underscore the momentum of our payments
business. We are continuing to benefi t from a model that taps multiple sources of growth:
a card-issuing business with leading positions in consumer, small-business, middle-market,
large corporate and prepaid categories, as well as a rapidly expanding global network of
partnerships with other fi nancial institutions.
We also have complementary businesses that reinforce our ability to assist customers
around the world. These include travel services for consumers and businesses, and an
international private bank that has relationships with wealthy individuals and more
than 1,700 financial institutions.
card billed business
(in billions)
02 06
$561
$484
$416
$352
$311
050403
cards-in-force
(in millions)
02 06
78.0
71.0
65.4
60.5
57.0
050403
Cardmember spending on American Express
cards rose 16 percent to a record $561 billion
worldwide in 2006.
We signifi cantly expanded our cardmember
base in 2006, adding 7 million cards-in-force,
which brought our total to 78 million cards
worldwide.
letter to shareholders
[ 16 ]