American Express 2007 Annual Report Download - page 66

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2007 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
due to share repurchases, dividends, changes in accumulated
other comprehensive income and accounting changes, among
other things; the actual amount to be spent by the Company on
marketing, promotion, rewards and Cardmember services based
on management’s assessment of competitive opportunities and
other factors affecting its judgment; the ability to control and
manage operating, infrastructure, advertising and promotion
expenses as business expands or changes, including the
ability to accurately estimate the provision for the cost of the
Membership Rewards program; fluctuations in foreign currency
exchange rates; the Company’s ability to grow its business and
meet or exceed its return on shareholders’ equity target by
reinvesting approximately 35 percent of annually-generated
capital, and returning approximately 65 percent of such capital
to shareholders, over time, which will depend on the Company’s
ability to manage its capital needs and the effect of business
mix, acquisitions and rating agency requirements; the success of
the Global Network Services business in partnering with banks
in the United States, which will depend in part on the extent
to which such business further enhances the Company’s brand,
allows the Company to leverage its significant processing scale,
expands merchant coverage of the network, provides Global
Network Services’ bank partners in the United States the
benefits of greater Cardmember loyalty and higher spend per
customer, and merchant benefits such as greater transaction
volume and additional higher spending customers; trends
in travel and entertainment spending and the overall level of
consumer confidence; the costs and integration of acquisitions;
the underlying assumptions and expectations related to the
sale of the American Express Bank Ltd. businesses proving
to be inaccurate or unrealized, including, among other things,
the likelihood of and expected timing for completion of the
transaction, the proceeds to be received by the Company in
the transaction and the transaction’s impact on the Company’s
earnings; the success, timeliness and financial impact (including
costs, cost savings and other benefits including increased
revenues), and beneficial effect on the Company’s operating
expense to revenue ratio, both in the short-term and over time,
of reengineering initiatives being implemented or considered
by the Company, including cost management, structural
and strategic measures such as vendor, process, facilities and
operations consolidation, outsourcing (including, among others,
technologies operations), relocating certain functions to lower-
cost overseas locations, moving internal and external functions to
the Internet to save costs, and planned staff reductions relating
to certain of such reengineering actions; the Company’s ability
to reinvest the benefits arising from such reengineering actions
in its businesses; bankruptcies, restructurings, consolidations
or similar events affecting the airline or any other industry
representing a significant portion of the Company’s billed
business, including any potential negative effect on particular
card products and services and billed business generally that
could result from the actual or perceived weakness of key business
partners in such industries; the triggering of obligations to make
payments to certain co-brand partners, merchants, vendors and
customers under contractual arrangements with such parties
under certain circumstances; a downturn in the Company’s
businesses and/or negative changes in the Company’s and its
subsidiaries’ credit ratings, which could result in contingent
payments under contracts, decreased liquidity and higher
borrowing costs; accuracy of estimates for the fair value of the
assets in the Company’s investment portfolio and, in particular,
those investments that are not readily marketable, including the
valuation of the interest-only strip relating to the Company’s
lending securitizations; the Company’s ability to invest in
technology advances across all areas of its business to stay on the
leading edge of technologies applicable to the payments industry;
the Company’s ability to protect its intellectual property rights
(IP) and avoid infringing the IP of other parties; the potential
negative effect on the Company’s businesses and infrastructure,
including information technology, of terrorist attacks, natural
disasters or other catastrophic events in the future; political or
economic instability in certain regions or countries, which could
affect lending and other commercial activities, among other
businesses, or restrictions on convertibility of certain currencies;
changes in laws or government regulations; accounting changes;
outcomes and costs associated with litigation and compliance
and regulatory matters; and competitive pressures in all of the
Company’s major businesses. See also “Risk Factors” in the
Company’s 2007 Form 10-K filed with the SEC.
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