American Express 2008 Annual Report Download - page 8

american express company
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by adjusting the models we use to run our
lending business. These efforts, which actually
began in mid-2007, involved using more so-
phisticated data in our evaluations. Focusing on
areas of high risk, we cancelled certain accounts,
reduced some lines of credit and adopted a more
targeted approach to new card acquisition. We
also assisted cardmembers experiencing tempo-
rary financial difficulty.
These decisions were made on a case-by-
case basis, after analyzing many variables in-
cluding a cardmember’s payment and spending
history, credit ratings, overall debt level and
employment data. We always want to make
well-informed choices based on the spending
and credit capacity of our cardmembers. While
this analysis led us to reduce lines of credit for
some cardmembers, it also led us to increase
credit lines for a smaller number of cardmem-
bers in 2008.
Our main goal in managing risk is to maxi-
mize profitable growth. This means allowing
good spending and continuing to lend responsi-
bly. Every time a cardmember uses his or her
American Express Card to make a purchase,
we are extending credit – a record $683 billion
worth in 2008. And although the overall slow-
down in consumer spending last year led to
lower loan balances, we continued to make exten-
sive amounts of revolving credit available to our
cardmembers. For example, we provided U.S.
consumer and small business cardmembers with
open credit lines of $211 billion, which was on a
par with year-ago levels despite the difficult
conditions in the marketplace. Ultimately, we
want to keep good customers in the franchise,
and attract new ones, by meeting their spending
and lending needs at a level they can manage.
Part of this responsibility means helping card-
members who have kept their accounts in good
standing over time but now face temporary fi-
nancial hardship. Some of our cardmembers have
become highly leveraged, especially as their assets
have declined significantly. Some have lost their
jobs. The level of debt they can reasonably handle
today is less than it was even a year ago. We are
working with many of these individuals to set up
payment plans and terms that can help them man-
age through trying times. Depending on individual
circumstances, options include extending repay-
ment time periods, suspending delinquency fees
and reducing interest rates on existing balances.
For all of our cardmembers, we are also pro-
viding enhanced services, including additional
online tools to help them better manage their
spending on our cards and protect their credit
profiles, assistance that is more important than
ever in these uncertain times.
Reengineering: Managing our company’s
overall expense base was another priority that
took on even greater importance in 2008. We
controlled operating costs by cutting back spend-
ing in virtually every area of the business. Beyond
basic cost cutting, we also implemented a major
reengineering program to increase efficiency and
reduce or stop activities that were not supporting
our highest priorities. As part of this effort, we
made the difficult decision to eliminate 7,000 jobs,
or about 10 percent of our global workforce.
By doing so, we were able to better match our
resources to our business needs in the current
environment. Cutting jobs is not a choice we
made lightly, but it was the right step to support
the health of the company over the long term.
Reengineering our expense base will free
up more resources to invest in growth oppor-
tunities. While we took a $421 million pre-tax
charge in the fourth quarter, primarily related
to severance costs, we expect to realize benefits
of $1.8 billion in 2009 from our reengineering