American Express 2009 Annual Report Download - page 56

2009 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
CALCULATION OF NET INTEREST YIELD ON
CARDMEMBER LOANS(a)(b)
Years Ended December 31,
(Millions, except percentages
and where indicated) 2009 2008
Managed Basis(b)
Net interest income(c) $5,219 $5,252
Average loans (billions)$ 54.9 $ 64.0
Adjusted net interest income $5,435 $5,809
Adjusted average loans (billions)$ 55.0 $ 64.1
Net interest yield on cardmember loans 9.9 % 9.1%
(a) See Glossary of Selected Terminology for the definitions of certain
key terms and related information.
(b) Refer to Calculation of Net Interest Yield on Cardmember
Loans – “Owned Basis” on page 33 for calculation of the ratio of
net interest income divided by average loans presented on an
owned basis.
(c) Includes the GAAP to managed basis securitization adjustments
to interest income and interest expense as set forth under USCS
Selected Financial Information managed basis presentation.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2009 – MANAGED BASIS
The following discussion of USCS is on a managed basis.
Discount revenue, net card fees and other in 2009
decreased $1.3 billion or 12 percent to $9.5 billion, due to
lower billed business volumes, reduced other commissions
and fees, decreased net card fees, lower other revenues and
reduced travel commissions and fees. 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. Interest income in 2009
of $6.3 billion decreased by $1.9 billion or 23 percent, due to a
decline in the average managed lending balance and a lower
portfolio yield, offset by the benefits of certain repricing
initiatives during 2009. 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 expense in 2009 decreased $1.9 billion or 63
percent to $1.1 billion, due to a lower market interest rate-
driven cost of funds and lower average managed cardmember
loans and receivable balances, as well as the movement of
liquidity-related interest expense to the Corporate & Other
segment. In 2008, interest expense 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. Provisions for losses decreased 1
percent in 2009, driven by a lower average loan and receivable
balance and improved charge card credit performance,
partially offset by a higher lending write-off level versus 2008.
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.
INTERNATIONAL CARD SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2009 2008 2007
Revenues
Discount revenue, net card fees and
other $3,404 $3,758 $3,499
Interest income 1,588 1,984 1,741
Interest expense 509 961 909
Net interest income 1,079 1,023 832
Total revenues net of interest expense 4,483 4,781 4,331
Provisions for losses 1,211 1,030 812
Total revenues net of interest expense
after provision for losses 3,272 3,751 3,519
Expenses
Marketing, promotion, rewards and
cardmember services 1,221 1,453 1,566
Salaries and employee benefits and
other operating expenses 1,821 2,145 1,836
Total 3,042 3,598 3,402
Pretax segment income 230 153 117
Income tax benefit (73) (198) (174)
Segment income $ 303 $ 351 $ 291
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