American Express 2010 Annual Report Download - page 25

FINANCIAL SUMMARY
A summary of the Company’s recent financial
performance follows:
Years Ended December 31,
(Millions, except per share
amounts and ratio data) 2010 2009
Percent
Increase
(Decrease)
Total revenues net of interest expense $ 27,819 $ 24,523 13 %
Provisions for losses $ 2,207 $ 5,313 (58)%
Expenses $ 19,648 $ 16,369 20 %
Income from continuing operations $ 4,057 $ 2,137 90 %
Net income $ 4,057 $ 2,130 90 %
Earnings per common share from
continuing operations – diluted
(a)
$ 3.35 $ 1.54 #
Earnings per common share – diluted
(a)
$ 3.35 $ 1.54 #
Return on average equity
(b)
27.5% 14.6%
Return on average tangible common
equity
(c)
35.1% 17.6%
# Denotes a variance of more than 100 percent.
(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 $51 million and $22 million for the years ended
December 31, 2010 and 2009, respectively.
(b) ROE is calculated by dividing (i) one-year period net income ($4.1 billion and
$2.1 billion for 2010 and 2009, respectively), by (ii) one-year average total
shareholders’ equity ($14.8 billion and $14.6 billion for 2010 and
2009, respectively).
(c) Return on average tangible common equity is computed in the same manner
as ROE except the computation of average tangible common equity excludes
from average total shareholders’ equity average goodwill and other
intangibles of $3.3 billion and $3.0 billion as of December 31, 2010 and
2009, 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.
Upon adoption of new accounting standards related to
transfers of financial assets and consolidation of variable
interest entities (VIEs) effective on January 1, 2010 (new
GAAP effective January 1, 2010), the Company was required
to change its accounting for the American Express Credit
Account Master Trust (the Lending Trust), a previously
unconsolidated VIE which is now consolidated. Prior period
results have not been revised for the change in accounting for the
Lending Trust. Refer to Note 1 and Note 7 for further discussion.
The Company follows U.S. generally accepted accounting
principles (GAAP). For periods ended on or prior to
December 31, 2009, the Company’s non-securitized
cardmember loans and related debt performance information
on a GAAP basis was referred to as the “owned” basis
presentation. For such periods, the Company also provided
information on a non-GAAP “managed” basis. This
information assumes, in the Consolidated Selected Statistical
Information and U.S. Card Services (USCS) segment, there have
been no cardmember loans securitization transactions. Upon
adoption of new GAAP effective January 1, 2010, both the
Company’s securitized and non-securitized cardmember loans
are included in the consolidated financial statements. As a result,
the Company’s 2010 GAAP presentations and managed basis
presentations prior to 2010 are generally comparable. Refer to
“Cardmember Loan Portfolio Presentation” on page 54.
Certain reclassifications of prior year amounts have been
made to conform to the current presentation.
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AMERICAN EXPRESS COMPANY
2010 FINANCIAL REVIEW