American Express 2008 Annual Report Download - page 53

2008 financial review
american express company
calculation of net interest yield on
cardmember loans(a)
(Millions, except percentages
and where indicated) 2008 2007
Managed Basis
Net interest income(b) $5,252 $4,466
Average loans (billions)(c) $ 64.0 $ 58.2
Adjusted net interest income $5,809 $5,286
Adjusted average loans (billions)$ 64.1 $ 58.3
Net interest yield on cardmember loans 9.1% 9.1%
(a) See Glossary of Selected Terminology for the definitions of certain key
terms and related information.
(b) Includes the GAAP to managed basis securitization adjustments to interest
income and interest expense as set forth under U.S. Card Services Selected
Financial Information managed basis presentation.
(c) 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 –
managed basis
The following discussion of U.S. Card Services is on a managed
basis.
Discount revenue, net card fees and other in 2008 increased
$204 million or 2 percent to $10.8 billion, largely due to higher
net card fees, greater other revenues, higher travel commissions
and fees, and increased discount revenues, which were partially
offset by lower other commissions and fees. Discount revenue, net
card fees and other in 2007 increased $1.1 billion or 11 percent
to $10.6 billion, due to higher discount revenues, greater other
commissions and fees, higher net card fees, and increased travel
commissions and fees. Interest income in 2008 of $8.2 billion
remained flat as lower market interest rate-driven yields more
than offset the 10 percent growth in average managed lending
balances. Interest income in 2007 increased $1.6 billion or
25 percent to $8.3 billion driven by interest and fees on loans
largely due to higher average managed loan balances and an
increased portfolio yield. Interest expense in 2008 decreased
$793 million or 21 percent to $3.0 billion due to a lower market
interest rate-driven cost of funds which more than offset higher
average managed receivable balances. In 2007, interest expense
increased $889 million or 31 percent in 2007 to $3.8 billion
due to higher average loan and receivables balances and higher
funding rates. Provisions for losses increased $2.5 billion or
65 percent to $6.4 billion in 2008, reflecting the impact of
higher write-off and delinquency rates and higher average
managed loan balances, partially offset by the credit-related
charge in 2007. Provisions for losses increased $1.7 billion or
78 percent to $3.9 billion in 2007 due to increased write-off
and delinquency rates, the impact of strong loan and volume
growth, and the credit-related charge previously discussed.
international card
services
selected income statement data
Years Ended December 31,
(Millions) 2008 2007 2006
Revenues
Discount revenue, net card fees and
other $3,758 $3,499 $3,243
Interest income 1,984 1,741 1,440
Interest expense 961 909 718
Net interest income 1,023 832 722
Total revenues net of interest expense 4,781 4,331 3,965
Provisions for losses 1,030 812 852
Total revenues net of interest expense
after provision for losses 3,751 3,519 3,113
Expenses
Marketing, promotion, rewards
and cardmember services 1,453 1,566 1,109
Salaries and employee benefits
and other operating expenses 2,145 1,836 1,692
Total 3,598 3,402 2,801
Pretax segment income 153 117 312
Income tax benefit (198) (174) (31)
Segment income $ 351 $ 291 $ 343
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