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2009 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
GLOBAL NETWORK & MERCHANT
SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2009 2008 2007
Revenues
Discount revenue, fees and other $3,625 $3,875 $3,549
Interest income 653
Interest expense (85) (222) (312)
Net interest income 91 227 315
Total revenues net of interest expense 3,716 4,102 3,864
Provisions for losses 135 127 103
Total revenues net of interest expense
after provisions for losses 3,581 3,975 3,761
Expenses
Marketing and promotion 521 553 595
Salaries and employee benefits and
other operating expenses 1,679 1,932 1,606
Total 2,200 2,485 2,201
Pretax segment income 1,381 1,490 1,560
Income tax provision 483 495 538
Segment income $ 898 $ 995 $1,022
SELECTED STATISTICAL INFORMATION(a)
As of or for the Years Ended December 31,
(Billions, except percentages
and where indicated) 2009 2008 2007
Global Card billed business(b) $619.8 $683.3 $647.3
Global Network & Merchant Services:
Total segment assets $ 7.3 $ 7.0 $ 6.5
Segment capital (millions) (c) $1,764 $1,451 $1,170
Return on average segment capital(d) 52.9% 75.4% 90.7%
Return on average tangible segment
capital(d) 54.1% 77.4% 93.4%
Global Network Services:
Card billed business $ 71.8 $ 67.4 $ 52.9
Total cards-in-force (millions) 26.3 24.8 20.3
(a) See Glossary of Selected Terminology for the definitions of certain
key terms and related information.
(b) Global Card billed business includes activities (including cash
advances) related to proprietary cards, cards issued under
network partnership agreements, and certain insurance fees
charged on proprietary cards.
(c) Segment capital at the end of each respective period represents
capital allocated to a segment based upon specific business
operational needs, risk measures, and regulatory capital
requirements.
(d) Return on average segment capital is calculated by dividing
(i) segment income ($898 million, $995 million and $1.0 billion
for 2009, 2008 and 2007, respectively) by (ii) average segment
capital ($1.7 billion, $1.3 billion and $1.1 billion for 2009, 2008
and 2007, 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 $36 million, $35 million and $33 million as of December 31,
2009, 2008 and 2007, respectively. The Company believes the
return on average tangible segment capital is a useful measure of
the profitability of its business.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2009
GNMS reported segment income of $898 million in 2009, a
$97 million or 10 percent decrease from $995 million in 2008,
which decreased $27 million or 3 percent from 2007.
Total Revenues Net of Interest Expense
GNMS’ total revenues net of interest expense decreased $386
million or 9 percent to $3.7 billion in 2009 compared to 2008,
due to decreased discount revenue, net card fees and other
and decreased interest expense credit. Discount revenue, fees
and other revenues decreased $250 million or 6 percent to
$3.6 billion in 2009 compared to 2008, reflecting a decline in
merchant-related revenues, due to the 9 percent decrease in
global card billed business, partially offset by higher
GNS-related revenues. Interest expense credit decreased $137
million or 62 percent to $85 million in 2009 compared to
2008, due to a lower rate-driven interest credit related to
internal transfer pricing, which recognizes the merchant
services’ accounts payable-related funding benefit. Total
revenues net of interest expense of $4.1 billion in 2008 were
$238 million or 6 percent higher compared to 2007 due to
increased discount revenue, fees and other revenues offset by
lower interest expense credit.
Provisions for Losses
Provisions for losses increased $8 million or 6 percent to $135
million in 2009 compared to 2008, primarily driven by the
higher provisions in GNS. Provisions for losses in 2008
increased $24 million or 23 percent to $127 million compared
to 2007, primarily reflecting merchant-related provisions.
Expenses
During 2009, GNMS’ expenses decreased $285 million or 11
percent to $2.2 billion compared to 2008. Expenses in 2009,
2008 and 2007, included $22 million, $31 million and $6
million of reengineering costs, respectively, primarily related
59