American Express 2010 Annual Report Download - page 37

Assuming no changes in foreign exchange rates, total billed
business outside the United States grew 22 percent in Asia
Pacific, 18 percent in Latin America, 10 percent in Europe
and 9 percent in Canada.
During 2009, discount revenue decreased $1.6 billion or
11 percent to $13.4 billion compared to 2008 as a result of a
9 percent decrease in worldwide billed business. The greater
decrease in discount revenue compared to billed business
primarily reflected growth in billed business related to GNS
where the Company shares the discount rate with card issuing
partners, as well as a slight decline in the average discount rate.
The 9 percent decrease in worldwide billed business in 2009
reflected a decline in proprietary billed business of 11 percent,
offset by a 7 percent increase in billed business related to GNS.
Net card fees in 2010 decreased 2 percent, partially due to a
non-renewal reserve adjustment in the prior year. Net card fees
in 2009 remained unchanged compared to 2008 as the decline in
total proprietary cards-in-force was offset by an increase in the
average fee per card.
Travel commissions and fees increased $185 million or
12 percent to $1.8 billion in 2010 compared to 2009,
primarily reflecting a 19 percent increase in worldwide travel
sales, partially offset by a lower sales revenue rate. Travel
commissions and fees decreased $416 million or 21 percent to
$1.6 billion in 2009 compared to 2008, primarily reflecting a
28 percent decrease in worldwide travel sales, partially offset by
higher sales commission and fee rates.
Other commissions and fees increased $253 million or
14 percent to $2.0 billion in 2010 compared to 2009, driven
primarily by new GAAP effective January 1, 2010 where fees
related to securitized receivables are now recognized as other
commissions and fees. These fees were previously reported in
securitization income, net. The increase also reflects greater
foreign currency conversion revenues related to higher
spending, partially offset by lower delinquency fees in the
non-securitized cardmember loan portfolio. Other
commissions and fees decreased $529 million or 23 percent
to $1.8 billion in 2009 compared to 2008, due to lower
delinquency fees reflecting decreased owned loan balances
and the impacts of various customer assistance programs, in
addition to reduced spending-related foreign currency
conversion revenues.
Securitization income, net decreased $400 million to nil in
2010 compared to 2009, as the Company no longer reports
securitization income, net, in accordance with new GAAP
effective January 1, 2010. Securitization income, net
decreased $670 million or 63 percent to $400 million in
2009 compared to 2008, primarily due to lower excess
spread, net, driven by increased write-offs and a decrease in
interest income on cardmember loans and fee revenues. These
unfavorable impacts were partially offset by a decrease in
interest expense due to lower coupon rates paid on variable-
rate investor certificates, as well as a favorable fair value
adjustment of the interest-only strip.
Other revenues in 2010 decreased $160 million or 8 percent to
$1.9 billion compared to 2009, primarily reflecting the
$211 million gain on the sale of 50 percent of the Company’s
equity holdings in ICBC in 2009, lower insurance premium
revenues and higher partner investments which appear as a
contra-other revenue, partially offset by higher GNS partner-
related royalty revenues, greater merchant fee-related revenue
and higher publishing revenue. Other revenues in 2009
decreased $70 million or 3 percent to $2.1 billion compared
to 2008, primarily reflecting decreased revenues from CPS, due
to the migration of clients to the American Express network and
lower publishing revenues, partially offset by the ICBC gain.
Interest income increased $2.0 billion or 37 percent to
$7.3 billion in 2010 compared to 2009. Interest and fees on
loans increased $2.3 billion or 52 percent, driven by an increase
in the average loan balance resulting from the consolidation of
securitized receivables in accordance with new GAAP effective
January 1, 2010. Interest income related to securitized
receivables is reported in securitization income, net in prior
periods, but is now reported in interest and fees on loans. The
increase related to this consolidation was partially offset by a
lower yield on cardmember loans, reflecting higher payment
rates and lower revolving levels, and the implementation of
elements of the CARD Act. These reductions to yield were
partially offset by the benefit of certain repricing initiatives
effective during 2009 and 2010. Interest and dividends on
investment securities decreased $361 million or 45 percent,
primarily reflecting the elimination of interest on retained
securities driven by new GAAP effective January 1, 2010 and
lower short-term investment levels. Interest income from
deposits with banks and other increased $7 million or
12 percent primarily due to higher average deposit balances
versus the prior year. Interest income decreased $1.9 billion or
26 percent to $5.3 billion in 2009 compared to 2008. Interest
and fees on loans decreased $1.7 billion or 27 percent due to
decline in the average owned loan balance, reduced market
interest rates and the impact of various customer assistance
programs, partially offset by the benefit of certain repricing
initiatives. Interest and dividends on investment securities
increased $33 million or 4 percent, primarily reflecting
increased investment levels partially offset by reduced
investment yields. Interest income from deposits with banks
and other decreased $212 million or 78 percent, primarily due to
a reduced yield and a lower balance of deposits in other banks.
Interest expense increased $216 million or 10 percent to
$2.4 billion in 2010 compared to 2009. Interest expense
related to deposits increased $121 million or 28 percent, as
higher customer balances were partially offset by a lower cost
of funds. Interest expense related to short-term borrowings
decreased $34 million or 92 percent, reflecting lower
commercial paper levels versus the prior year and a lower
cost of funds. Interest expense related to long-term debt and
other increased $129 million or 7 percent, reflecting the
consolidation of long-term debt associated with securitized
loans previously held off-balance sheet in accordance with
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AMERICAN EXPRESS COMPANY
2010 FINANCIAL REVIEW