American Express 2010 Annual Report Download - page 59

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Interest income declined $116 million or 8 percent to
$1.4 billion in 2010 compared to 2009, as a lower yield on
cardmember loans and a lower average loan balance were
partially offset by higher lending card fees.
Interest expense of $428 million in 2010 was flat as compared
to 2009, as lower average loan balances offset higher average
receivable levels.
Total revenues net of interest expense of $4.5 billion in 2009
were $203 million or 4 percent lower than 2008 due to lower
discount revenue, net card fees and other and decreased interest
income, partially offset by lower interest expense.
Provisions for Losses
Provisions for losses decreased $819 million or 68 percent to
$392 million in 2010 compared to 2009, primarily reflecting
lower reserve requirements due to improving cardmember loan
and charge card credit trends. The charge card net loss ratio (as a
percentage of charge volume) was 0.24 percent in 2010 versus
0.36 percent last year. The lending net write-off rate was
4.6 percent in 2010 versus 6.8 percent last year.
Provisions for losses increased $181 million or 18 percent to
$1.2 billion in 2009 compared to 2008, primarily reflecting a
higher lending reserve level.
Expenses
During 2010, ICS expenses increased $578 million or 19 percent
to $3.6 billion compared to 2009, due to higher marketing,
promotion, rewards and cardmember services and increased
salaries and employee benefits and other operating expenses.
Expenses in 2010, 2009 and 2008, included $19 million,
$4 million and $83 million, respectively, of reengineering
costs primarily related to the Company’s reengineering
initiatives in 2010, 2009 and 2008 as previously discussed.
Expenses in 2009 of $3.0 billion were $556 million or
15 percent lower than 2008, due to lower marketing,
promotion, rewards and cardmember services and decreased
salaries and employee benefits and other operating expenses.
Marketing, promotion, rewards and cardmember services
expenses increased $391 million or 32 percent to $1.6 billion
in 2010 compared to 2009, primarily due to higher marketing
and promotion expenses and greater volume-related rewards
costs. Marketing, promotion, rewards and cardmember services
expenses decreased $232 million or 16 percent to $1.2 billion in
2009 compared to 2008, reflecting reduced marketing and
promotion expenses through the first nine months of 2009
and lower reward costs.
Salaries and employee benefits and other operating expenses
increased $187 million or 10 percent to $2.0 billion in 2010
compared to 2009, reflecting the higher net reengineering costs
in 2010, higher technology development expenditures, increased
investments in sales-force, closing costs related to the
acquisition of Loyalty Partner and other business building
investments. Salaries and employee benefits and other
operating expenses decreased $324 million or 15 percent to
$1.8 billion in 2009 compared to 2008, primarily due to benefits
from the Company’s reengineering activities and lower net
charges during 2009 related to reengineering initiatives.
Income Taxes
The effective tax rate was 11 percent in 2010 versus negative
20 percent in 2009 and negative 209 percent in 2008. The tax
rate in 2010 reflects a benefit from the resolution of certain prior
years’ tax items. In addition, the tax rates in each of the periods
primarily reflect the impact of recurring tax benefits on varying
levels of pretax income. This segment reflects the favorable
impact of the consolidated tax benefit related to its ongoing
funding activities outside the U.S., which is allocated to ICS
under the Company’s internal tax allocation process.
GLOBAL COMMERCIAL SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2010 2009 2008
Revenues
Discount revenue, net card fees and other $ 4,622 $ 4,158 $ 5,082
Interest income 756
Interest expense 227 180 471
Net interest expense (220) (175) (465)
Total revenues net of interest expense 4,402 3,983 4,617
Provisions for losses 158 177 231
Total revenues net of interest expense
after provisions for losses 4,244 3,806 4,386
Expenses
Marketing, promotion, rewards and
cardmember services 442 332 377
Salaries and employee benefits and other
operating expenses 3,041 2,969 3,395
Total 3,483 3,301 3,772
Pretax segment income 761 505 614
Income tax provision 287 155 160
Segment income $ 474 $ 350 $ 454
57
AMERICAN EXPRESS COMPANY
2010 FINANCIAL REVIEW