American Express 2010 Annual Report Download - page 57

The following table sets forth cardmember loan portfolio
financial information for the years ended December 31, 2010,
2009 and 2008. The December 31, 2010 financial information
was determined in accordance with the new GAAP effective
January 1, 2010. The December 31, 2009 and 2008 information
includes the “owned” (GAAP) basis presentation, together with
the adjustments for securitization activity to arrive at the
“managed” (non-GAAP) basis presentation. For additional
information, see “Cardmember Loan Portfolio
Presentation” above.
U.S. CARD SERVICES
SELECTED FINANCIAL INFORMATION MANAGED
BASIS PRESENTATION
Years Ended December 31,
(Millions) 2010 2009 2008
Discount revenue, net card fees and other:
Reported for the period (GAAP) $ 10,038 $ 9,105 $ 10,345
Securitization adjustments —331 400
Managed discount revenue, net card
fees and other $ 10,038 $ 9,436 $ 10,745
Interest income:
Reported for the period (GAAP) $ 5,390 $ 3,216 $ 4,425
Securitization adjustments —3,097 3,512
Managed interest income $ 5,390 $ 6,313 $ 7,937
Securitization income, net:
(a)
Reported for the period (GAAP) $—$ 400 $ 1,070
Securitization adjustments —(400) (1,070)
Managed securitization income, net $—$—$—
Interest expense:
Reported for the period (GAAP) $ 812 $ 568 $ 1,641
Securitization adjustments —244 830
Managed interest expense $ 812 $ 812 $ 2,471
Provisions for losses:
Reported for the period (GAAP) $ 1,591 $ 3,769 $ 4,389
Securitization adjustments —2,573
(b)
2,002
(b)
Managed provisions for losses $ 1,591 $ 6,342
(b)
$ 6,391
(b)
(a) In accordance with new GAAP effective January 1, 2010, the Company no
longer reports securitization income, net in its income statement.
(b) Includes provisions for losses for off-balance sheet cardmember loans based
on the same methodology as applied to on-balance sheet cardmember loans,
except that any quarterly adjustment to reserve levels for on-balance sheet
loans to address external environmental factors was not applied to adjust the
provision expense for the securitized portfolio.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2010 — MANAGED BASIS
The following discussion of USCS is on a managed basis.
Discount revenue, net card fees and other in 2010 increased
$602 million or 6 percent to $10.0 billion, reflecting higher billed
business volumes and increased travel revenues, partially offset
by lower commissions and fees. Discount revenue, net card fees
and other in 2009 decreased $1.3 billion or 12 percent to
$9.4 billion, due to lower billed business volumes, reduced
other commissions and fees, decreased net card fees, lower
other revenues and reduced travel commissions and fees.
Interest income in 2010 of $5.4 billion decreased by
$923 million or 15 percent, due to a decline in the average
loan balance and a lower portfolio yield driven by higher
payment rates, lower revolving levels and the CARD Act,
partially offset by repricing initiatives during 2009 and 2010.
Interest income in 2009 of $6.3 billion decreased by $1.6 billion
or 20 percent due to a decline in the average managed lending
balance and a lower portfolio yield, offset by the benefits of
certain repricing initiatives during 2009.
Interest expense in 2010 remained flat at $812 million, due to
an increase in the cost of funds and higher average cardmember
receivable balances, offset by reduced funding requirements due
to a lower average cardmember loan balance in the managed
portfolio. In 2009, interest expense decreased $1.7 billion or
67 percent to $812 million due to a lower market interest rate-
driven cost of funds and lower average managed cardmember
loans and receivable balances, as well as the movement of
liquidity-related interest expense to the Corporate &
Other segment.
Provisions for losses decreased $4.8 billion or 75 percent to
$1.6 billion in 2010, due to improving cardmember loan and
charge card credit performance and a lower average loan
balance. The lending net write-off rate was 5.8 percent in
2010 versus 8.7 percent in 2009. Provisions for losses
decreased 1 percent in 2009, driven by a lower average loan
and receivable balance and improved charge card credit
performance, partially offset by a higher lending write-off
level versus 2008.
INTERNATIONAL CARD SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2010 2009 2008
Revenues
Discount revenue, net card fees and other $ 3,685 $ 3,447 $ 3,782
Interest income 1,393 1,509 1,720
Interest expense 428 427 770
Net interest income 965 1,082 950
Total revenues net of interest expense 4,650 4,529 4,732
Provisions for losses 392 1,211 1,030
Total revenues net of interest expense
after provisions for losses 4,258 3,318 3,702
Expenses
Marketing, promotion, rewards and
cardmember services 1,612 1,221 1,453
Salaries and employee benefits and other
operating expenses 2,008 1,821 2,145
Total 3,620 3,042 3,598
Pretax segment income 638 276 104
Income tax provision (benefit) 72 (56) (217)
Segment income $ 566 $ 332 $ 321
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AMERICAN EXPRESS COMPANY
2010 FINANCIAL REVIEW