American Express 2010 Annual Report Download - page 11

Coming into 2010, we made some fundamental
assumptions about the needs of our customers
in a changing environment. We believed that
people would be looking for greater value
for their money, service they could count on,
financial control, convenient online experiences,
and connections that could help enhance their
lives and build their businesses. Our results say
that we are answering those needs.
Cardmembers spent a record $713 billion
on their American Express cards during 2010,
a 15percent increase from a year ago. We saw
broad-based growth in billings among consumers,
small businesses and large companies around
the world. Our billings grew faster than those
of any other major card issuer by a wide margin.
We also far outpaced economic indicators such
as retail sales growth. These accomplishments
show the quality of our premium customer base
and our ability to earn their loyalty by providing
industry-leading service, benefits and rewards.
Our cardmembers spent more; they also
spent responsibly. Fewer fell behind on payments.
Many paid down outstanding debt. These factors,
as well as steps we took to better manage risk,
helped improve our key credit indicators to
levels we had not seen since before the recession.
Write-offs in our worldwide lending portfolio
were 4.3 percent in the fourth quarter, down
from 7.4 percent a year earlier. Accounts 30-days
past due declined to 2.1 percent from 3.6 percent.
These results stood out as the best among all
major card issuers.
As credit trends improved, we reduced the
funds we set aside for problem loans, while still
keeping our reserves at appropriate levels. We set
aside $2.2 billion in provisions for losses, down
58 percent from 2009. This aided earnings and
gave us more money to invest in the business.
Total revenues net of interest expense rose
13 percent to $27.8 billion, although a required
accounting change drove much of this increase.
The benefits of higher cardmember spending were
partially oset by lower net interest income from
our managed lending portfolio. While we would
have liked to see higher absolute revenue growth,
we turned in a strong performance relative to our
peers who rely much more heavily on lending.
Growing the business remains a top priority, and
we have a wide range of eorts underway designed
to generate additional revenue.
GROWTH A N D E F FICIENCY
Where did we invest in 2010? Marketing and
promotion expenses rose 60 percent to support
customer acquisition, new products and brand
advertising. Spending on cardmember rewards,
which help to drive charge volume and credit
quality, rose 25 percent. We expanded the sales
forces in our commercial card and merchant
services organizations, staffed up to grow
new fee service businesses, and built out our
Enterprise Growth team. We also consolidated
and upgraded technology platforms and
made other infrastructure enhancements to
increase eciency.
We look for opportunities in challenging
times. That’s one reason why we chose to invest
heavily instead of letting more funds flow
directly to our bottom line. This isn’t a new
philosophy for us. Higher investment spending
in the latter half of 2009 contributed to our
strong business volumes in 2010. Similarly, we
think our investments in 2010 will help support
revenue growth in the years ahead. Some of
these investments are meant for short-term
payback, while others are for multi-year eorts
that lay a foundation for growth for the moderate
to long term.
We have built considerable flexibility into our
expense base to adjust investment spending—up
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AMERICAN E XPRESS C OMPANY