American Express 2009 Annual Report Download - page 66

2009 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
lower than expected write-offs; the ability to control and
manage operating, infrastructure, advertising and promotion
expenses as business expands or changes, including the ability
to accurately estimate the provision for the cost of the
Membership Rewards program; fluctuations in foreign
currency exchange rates; the Company’s ability to grow its
business and generate excess capital and earnings in a manner
and at levels that will allow the Company to return a portion
of capital to shareholders, which will depend on the
Company’s ability to manage its capital needs, and the effect
of business mix, acquisitions and rating agency and regulatory
requirements, including those arising from the Company’s
status as a bank holding company; the ability of the Company
to meet its objectives with respect to the growth of its
brokered retail CD program, brokerage sweep account
program and the direct deposit initiative, which will depend
in part on customer demand, the perception of the
Company’s brand and regulatory capital requirements; the
success of the Global Network Services business in partnering
with banks in the United States, which will depend in part on
the extent to which such business further enhances the
Company’s brand; allows the Company to leverage its
significant processing scale, expands merchant coverage of the
network, provides Global Network Services’ bank partners in
the United States the benefits of greater cardmember loyalty
and higher spend per customer, and merchant benefits such
as greater transaction volume and additional higher spending
customers; the ability of the Global Network Services business
to meet the performance requirements called for by the
Company’s settlements with MasterCard and Visa; trends in
travel and entertainment spending and the overall level of
consumer confidence; the uncertainties associated with
business acquisitions, including, among others, the failure to
realize anticipated business retention, growth and cost
savings, as well as the ability to effectively integrate the
acquired business into the Company’s existing operations; the
success, timeliness and financial impact (including costs, cost
savings, and other benefits, including increased revenues),
and beneficial effect on the Company’s operating expense to
revenue ratio, both in the short-term and over time, of
reengineering initiatives being implemented or considered by
the Company, including cost management, structural and
strategic measures such as vendor, process, facilities and
operations consolidation, outsourcing (including, among
others, technologies operations), relocating certain functions
to lower-cost overseas locations, moving internal and external
functions to the internet to save costs, and planned staff
reductions relating to certain of such reengineering actions,
including, the ability of the Company to generate an
annualized level of greater than $500 million of gross expense
savings by 2012 from reengineering actions in its Global
Services unit; the Company’s ability to reinvest the benefits
arising from such reengineering actions in its businesses;
bankruptcies, restructurings, consolidations or similar events
affecting the airline or any other industry representing a
significant portion of the Company’s billed business,
including any potential negative effect on particular card
products and services and billed business generally that could
result from the actual or perceived weakness of key business
partners in such industries; the triggering of obligations to
make payments to certain co-brand partners, merchants,
vendors and customers under contractual arrangements with
such parties under certain circumstances; a downturn in the
Company’s businesses and/or negative changes in the
Company’s and its subsidiaries’ credit ratings, which could
result in contingent payments under contracts, decreased
liquidity and higher borrowing costs; the ability of the
Company to satisfy its liquidity needs and execute on its
funding plans, which will depend on, among other things, the
Company’s future business growth, its credit ratings, market
capacity and demand for securities offered by the Company,
performance by the Company’s counterparties under its bank
credit facilities and other lending facilities, regulatory
changes, including changes to the policies, rules and
regulations of the Board of Governors of the Federal Reserve
System and the Federal Reserve Bank of San Francisco, the
Company’s ability to securitize and sell receivables and the
performance of receivables previously sold in securitization
transactions; accuracy of estimates for the fair value of the
assets in the Company’s investment portfolio and, in
particular, those investments that are not readily marketable;
the ability of the Company’s charge card and lending trusts to
maintain excess spreads at levels sufficient to avoid material
set-asides or early amortization of the Company’s charge card
and lending securitizations, which will depend on various
factors such as income derived from the relevant portfolios
and their respective credit performances; the increase in
excess spread resulting from the designation of discount
option receivables with respect to the American Express
Credit Account Master Trust, which will depend in part on
the monthly principal payment rate posted to accounts in,
and the credit performance of, the securitized lending
portfolio; the Company’s ability to invest in technology
advances across all areas of its business to stay on the leading
edge of technologies applicable to the payments industry; the
Company’s ability to attract and retain executive management
and other key employees; the Company’s ability to protect its
intellectual property rights (IP) and avoid infringing the IP of
other parties; the potential negative effect on the Company’s
businesses and infrastructure, including information
technology, of terrorist attacks, natural disasters, intrusion
into our infrastructure by “hackers” or other catastrophic
events in the future; political or economic instability in
certain regions or countries, which could affect lending and
other commercial activities, among other businesses, or
restrictions on convertibility of certain currencies; changes in
laws or government regulations; the administration’s proposal
to impose a Financial Crisis Responsibility Fee at the rate of
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