American Express 2009 Annual Report Download - page 23

2009 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
billion paid by the Company consisted of the contractual
purchase price of approximately $1.1 billion plus the
repayment of CPS’ $1.2 billion in outstanding debt as of the
acquisition date.
DISCONTINUED OPERATIONS
For the applicable periods, the operating results, assets and
liabilities, and cash flows of American Express Bank Ltd.
(AEB), which was sold to Standard Chartered PLC (Standard
Chartered) in 2008, and American Express International
Deposit Company (AEIDC), which was sold to Standard
Chartered in the third quarter of 2009, have been removed
from the Corporate & Other segment and reported separately
within the discontinued operations captions on the
Company’s Consolidated Financial Statements.
Refer to Note 2 to the Consolidated Financial Statements
for further discussion of the Company’s discontinued
operations.
FINANCIAL SUMMARY
A summary of the Company’s recent financial performance
follows:
Years Ended December 31,
(Millions, except per share
amounts and ratio data) 2009 2008
Percent
Decrease
Total revenues net of interest expense $24,523 $28,365 (14)%
Provisions for losses $ 5,313 $ 5,798 (8)%
Expenses $16,369 $18,986 (14)%
Income from continuing operations $ 2,137 $ 2,871 (26)%
Net income $ 2,130 $ 2,699 (21)%
Earnings per common share from
continuing operations —
diluted(a)(b) $ 1.54 $ 2.47 (38)%
Earnings per common share —
diluted(a) $ 1.54 $ 2.32 (34)%
Return on average equity(c) 14.6% 22.3%
Return on average tangible common
equity(d) 17.6% 28.0%
(a) Earnings per common share from continuing operations – diluted
and Earnings per common share – diluted were both reduced by
the impact of (i) accelerated preferred dividend accretion of $212
million for the year ended December 31, 2009 due to the
repurchase of $3.39 billion of preferred shares issued as part of the
Capital Purchase Program (CPP), (ii) preferred share dividends
and related accretion of $94 million for the year ended
December 31, 2009, and (iii) earnings allocated to participating
share awards and other items of $22 million and $15 million for
the years ended December 31, 2009 and 2008, respectively.
(b) Effective January 1, 2009, guidance for determining whether
instruments granted in share-based payment transactions are
participating securities requires that restricted stock awards be
included in the computation of basic and diluted earnings per
share pursuant to the two-class method. Accordingly, the
Company has retrospectively adjusted EPS for all prior periods
presented. Refer to Note 18 to the Company’s Consolidated
Financial Statements.
(c) ROE is calculated by dividing (i) net income ($2.1 billion and
$2.7 billion for 2009 and 2008, respectively), by (ii) average total
shareholders’ equity ($14.6 billion and $12.1 billion for 2009 and
2008, respectively).
(d) Return on average tangible common equity is computed in the
same manner as ROE except the computation of average tangible
common shareholders’ equity (TCE) excludes average goodwill
and other intangibles of $3.0 billion and $2.5 billion as of
December 31, 2009 and 2008, respectively. The Company believes
that return on average tangible common equity is a useful
measure of profitability of its business.
See Consolidated Results of Operations, beginning on page
31, for discussion of the Company’s results.
The Company follows U.S. generally accepted accounting
principles (GAAP). In addition to information provided on a
GAAP basis, the Company discloses certain data on a
“managed basis”. This information, which should be read
only as a supplement to GAAP information, assumes, in the
Consolidated Selected Statistical Information and U.S. Card
Services (USCS) segment, there have been no cardmember
loans securitization transactions. These managed basis
adjustments, and management’s rationale for such
presentation, are discussed further in the USCS section below
under “Differences between GAAP and Managed Basis
Presentation”.
Certain of the statements in this Annual Report are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. See Forward-
Looking Statements at the end of this discussion.
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