American Express 2008 Annual Report Download - page 50

2008 financial review
american express company
selected statistical information(a)
Years Ended December 31,
(Billions, except percentages
and where indicated) 2008 2007 2006
Card billed business $ 382.0 $ 375.2 $ 333.4
Total cards-in-force (millions) 44.2 43.3 40.7
Basic cards-in-force (millions) 32.9 32.3 30.1
Average basic cardmember spending
(dollars) $11,594 $12,011 $11,521
U.S. Consumer Travel:
Travel sales (millions) $ 3,113 $ 2,975 $ 2,357
Travel commissions and fees/sales 8.2% 8.0% 8.4%
Total segment assets $ 77.8 $ 82.3 $ 71.0
Segment capital (millions) (b) $ 4,788 $ 4,454 $ 4,686
Return on average segment
capital(c) 18.0% 40.2% 47.4%
Return on average tangible
segment capital(c) 19.0% 41.8% 49.2%
Cardmember receivables:
Total receivables $ 17.8 $ 21.4 $ 20.6
30 days past due as a %
of total 3.7% N/A N/A
Average receivables $ 19.2 $ 19.7 $ 18.3
Net write-off rate(d) 3.6% N/A N/A
Cardmember lending —
owned basis(e):
Total loans(f) $ 32.7 $ 43.3 $ 33.5
30 days past due loans as a %
of total 4.7% 2.8% 2.1%
Average loans(f) $ 36.7 $ 37.1 $ 27.5
Net write-off rate 5.8% 3.1% 2.5%
Net interest yield on
cardmember loans(g) 8.5% 8.9% 8.9%
Cardmember lending —
managed basis(h):
Total loans(f) $ 62.4 $ 65.9 $ 53.7
30 days past due loans as a % of
total 4.7% 2.8% 2.2%
Average loans(f) $ 64.0 $ 58.2 $ 47.9
Net write-off rate 5.5% 3.1% 2.4%
Net interest yield on
cardmember loans(g) 9.1% 9.1% 9.1%
(a) See Glossary of Selected Terminology for the definitions of certain key
terms and related information.
(b) Segment capital represents capital allocated to a segment based upon
specific business operational needs, risk measures, and regulatory capital
requirements.
(c) Return on average segment capital is calculated by dividing (i) segment
income ($852 million, $1.8 billion, and $2.2 billion for 2008, 2007, and
2006, respectively) by (ii) average segment capital ($4.7 billion, $4.5 billion,
and $4.5 billion for 2008, 2007, and 2006, respectively). Return on average
tangible segment capital is computed in the same manner as return on
average segment capital except the computation of average tangible segment
capital excludes average goodwill and other intangibles of $243 million,
$170 million, and $171 million at December 31, 2008, 2007, and 2006,
respectively. The Company believes the return on average tangible segment
capital is a useful measure of the profitability.
(d) In the fourth quarter of 2008, the Company revised the time period in
which past due cardmember receivables in USCS are written off to 180 days
past due, consistent with applicable bank regulatory guidance. Previously,
receivables were written off when 360 days past due. The net write-offs
for 2008 include approximately $341 million resulting from this write-off
methodology change, which is not reflected in the table above. Including the
$341 million in write-offs, the net write-off rate was 5.4 percent for 2008.
(e) “Owned,” a GAAP basis measurement, reflects only cardmember loans
included on the Company’s Consolidated Balance Sheets.
(f) Loan balances used to calculate average loans for all periods presented have
been revised in connection with the Company’s conversion to a bank holding
company. Specifically, deferred card fees net of deferred direct acquisition
costs for cardmember loans were reclassified from other liabilities to
cardmember loans for all periods.
(g) See below for calculations of net interest yield on cardmember loans.
The Company believes net interest yield on cardmember loans (on both
an owned and managed basis) is useful to investors because it provides a
measure of profitability of the Company’s cardmember lending portfolio.
(h) Includes on-balance sheet cardmember loans and off-balance sheet
securitized cardmember loans. The difference between the “owned basis”
(GAAP) information and “managed basis” information is attributable to the
effects of securitization activities. Refer to the information set forth under
U.S. Card Services Selected Financial Information for further discussion of
the managed basis presentation.
calculation of net interest yield on
cardmember loans(a)
(Millions, except percentages
and where indicated) 2008 2007
Owned Basis:
Net interest income $2,570 $2,472
Average loans (billions)(b) $ 36.7 $ 37.1
Adjusted net interest income $3,127 $3,293
Adjusted average loans (billions) $ 36.8 $ 37.1
Net interest yield on
cardmember loans 8.5% 8.9%
(a) See Glossary of Selected Terminology for the definitions of certain key terms
and related information.
(b) Loan balances used to calculate average loans for all periods presented have
been revised in connection with the Company’s conversion to a bank holding
company. Specifically, deferred card fees net of deferred direct acquisition costs
for cardmember loans were reclassified from other liabilities to cardmember
loans for all periods.
results of operations for the three years
ended december 31, 2008 – gaap basis
The following discussion of U.S. Card Services’ segment results
of operations is presented on a GAAP basis.
U.S. Card Services reported segment income of $852 million
for 2008, a $971 million or 53 percent decrease from $1.8 billion
in 2007, which decreased $329 million or 15 percent from 2006.
Total Revenues Net of Interest Expense
In 2008, U.S. Card Services’ total revenues net of interest
expense decreased $225 million or 2 percent to $14.0 billion
due to lower securitization income, net, decreased other
commissions and fees and lower interest income, partially offset
by slightly higher discount revenue, net card fees and other, as
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