American Express 2010 Annual Report Download - page 55

(c) Refer to “Cardmember Loan Portfolio Presentation” on page 54 for
discussion of GAAP and non-GAAP presentation of the Company’s U.S.
loan portfolio.
(d) Refer to “Consolidated Results of Operations — Selected Statistical
Information”, footnote (f) on page 32.
(e) Refer to “Consolidated Results of Operations — Selected Statistical
Information”, footnote (g) on page 32.
(f) Revised from prior disclosure due to the reclassification of certain
intercompany accounts.
CALCULATION OF NET INTEREST YIELD ON
CARDMEMBER LOANS
(a)
Years Ended December 31,
(Millions, except percentages or where indicated) 2010 2009
Calculation based on 2010 and 2009
GAAP information:
(b)
Net interest income $ 4,578 $ 2,648
Average loans (billions) $ 49.8 $ 25.9
Adjusted net interest income $ 4,684 $ 2,451
Adjusted average loans ( billions) $ 49.8 $ 26.0
Net interest income divided by average loans
(c)
9.2% 10.2%
Net interest yield on cardmember loans 9.4% 9.4%
Calculation based on 2010 and 2009
managed information:
(b)
Net interest income
(b)
$ 4,578 $ 5,501
Average loans (billions) $ 49.8 $ 54.9
Adjusted net interest income $ 4,684 $ 5,558
Adjusted average loans ( billions) $ 49.8 $ 55.0
Net interest yield on cardmember loans 9.4% 10.1%
(a) Refer to “Consolidated Results of Operations — Calculation of Net Interest
Yield on Cardmember Loans”, footnote (a) on page 33.
(b) Refer to “Cardmember Loan Portfolio Presentation” on page 54 for
discussion of GAAP and non-GAAP presentation of the Company’s U.S.
loan portfolio.
(c) Refer to “Consolidated Results of Operations — Selected Statistical
Information”, footnote (g) on page 32.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2010 — GAAP BASIS
The following discussion of USCS segment results of operations
is presented on a GAAP basis.
USCS reported segment income of $2.2 billion for 2010, a
$1.8 billion or greater than 100 percent increase from
$411 million in 2009, which decreased $567 million or
58 percent from 2008.
Total Revenues Net of Interest Expense
In 2010, USCS total revenues net of interest expense increased
$2.5 billion or 20 percent to $14.6 billion due to increases in
discount revenue, net card fees and other, and interest income
partially offset by increased interest expense.
Discount revenue, net card fees and other of $10.0 billion in
2010 increased $933 million or 10 percent from 2009, primarily
due to billed business growth of 11 percent. The growth in billed
business was driven by a 17 percent increase in average spending
per proprietary basic cards-in-force.This line also reflects higher
other commissions and fees, driven by the new GAAP effective
January 1, 2010, which led to the inclusion of fees formerly
recorded in securitization income, net and greater travel
commissions and fees, partially offset by lower net card fees.
Interest income of $5.4 billion in 2010 was $2.2 billion or
68 percent higher than in 2009, principally due to the new GAAP
effective January 1, 2010, partially offset by lower yields on
cardmember loans.
Interest expense of $812 million in 2010 increased
$244 million or 43 percent as compared to a year ago,
reflecting higher expense related to the new GAAP effective
January 1, 2010, a higher cost of funds and greater average
cardmember receivable balances, partially offset by reduced
funding requirements due to a reduction in average balances
of cardmember loans.
Total revenues net of interest expense of $12.2 billion in 2009
were $2.0 billion or 14 percent lower than 2008 as a result of
lower securitization income, net, decreased interest income and
lower discount revenue, net card fees and other, partially offset
by lower interest expense.
Provisions for Losses
Provisions for losses decreased $2.2 billion or 58 percent to
$1.6 billion for 2010 compared to 2009, principally reflecting
lower reserve requirements driven by improving cardmember
loan and charge card credit trends, partially offset by the
inclusion in 2010 of write-offs on securitized cardmember
loans and a higher charge card provision. The lending net
write-off rate decreased to 5.8 percent in 2010 from
9.1 percent in 2009. The charge card net write-off rate
decreased to 1.6 percent in 2010 from 3.8 percent in 2009.
Provisions for losses decreased $620 million or 14 percent to
$3.8 billion for 2009 compared to 2008 due to lower loan
balances and improving credit indicators during the second
half of 2009.
Expenses
During 2010, USCS expenses increased $1.7 billion or 22 percent
to $9.5 billion, due to increased marketing, promotion, rewards
and cardmember services expenses, and salaries and employee
benefits and total other operating expenses. Expenses in 2010,
2009 and 2008, included $55 million, $12 million and
$30 million, respectively, of charges related to reengineering
activities primarily related to the Company’s reengineering
initiatives in 2010, 2009 and 2008 as previously discussed.
Expenses in 2009 of $7.8 billion were $669 million or
8 percent lower than in 2008, due to lower marketing,
promotion, rewards and cardmember services expenses and
lower salaries and employee benefits and total
operating expenses.
Marketing, promotion, rewards and cardmember services
expenses increased $1.4 billion or 32 percent in 2010 to
$5.7 billion, reflecting increased marketing and promotion
expenses due to increased investment spending resulting from
better credit and business trends in 2010 and higher rewards
expense primarily due to greater rewards-related spending
volumes and higher co-brand expense. Rewards expense
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AMERICAN EXPRESS COMPANY
2010 FINANCIAL REVIEW