American Express 2011 Annual Report Download - page 21

AMERICAN EXPRESS COMPANY
2011 FINANCIAL REVIEW
AMERICAN EXPRESS COMPANY
CONSOLIDATED RESULTS OF
OPERATIONS
Refer to “Glossary of Selected Terminology” for the definitions
of certain key terms and related information appearing in the
tables below.
The Company follows U.S. generally accepted accounting
principles (GAAP). For periods ended on or prior to
December 31, 2009, the Company’s securitized cardmember
loans and related debt securities issued to third parties by the
American Express Credit Account Master Trust (the Lending
Trust) were not included in the Consolidated Financial
Statements, as it was an unconsolidated variable interest entity
(VIE). 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 the January 1, 2010 prospective
adoption of the accounting standards related to transfers of
financial assets and consolidation of VIEs (new GAAP governing
consolidations and VIEs), the Company changed its accounting
for the Lending Trust, which is now consolidated and therefore
both the Company’s securitized and non-securitized
cardmember loans and related debt are included in the
consolidated financial statements. The components of net
securitization income for the cardmember loans and long-term
debt are now recorded in other commissions and fees, interest
income and interest expense. Prior period results were not
revised for the change in accounting for the Lending Trust. The
Company’s (i) 2011 and 2010 GAAP presentations and
(ii) managed basis presentations prior to 2010 are generally
comparable. Refer to Notes 1 and 7 to the Consolidated Financial
Statements for further discussion of the impacts of this adoption.
SUMMARY OF THE COMPANY’S FINANCIAL
PERFORMANCE
Years Ended December 31,
(Millions, except per share
amounts and ratio data) 2011 2010 2009
Total revenues net of interest expense $ 29,962 $ 27,582 $ 24,336
Provisions for losses $ 1,112 $ 2,207 $ 5,313
Expenses $ 21,894 $ 19,411 $ 16,182
Income from continuing operations $ 4,899 $ 4,057 $ 2,137
Net income $ 4,935 $ 4,057 $ 2,130
Earnings per common share from
continuing operations – diluted(a) $4.09$ 3.35 $ 1.54
Earnings per common share – diluted(a) $4.12$ 3.35 $ 1.54
Return on average equity(b) 27.7% 27.5% 14.6%
Return on average tangible
common equity(c) 35.8% 35.1% 17.6%
(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 $58 million, $51 million and $22 million for
the years ended December 31, 2011, 2010 and 2009, respectively.
(b) ROE is calculated by dividing (i) one-year period net income ($4.9 billion,
$4.1 billion and $2.1 billion for 2011, 2010 and 2009, respectively) by
(ii) one-year average total shareholders’ equity ($17.8 billion, $14.8 billion
and $14.6 billion for 2011, 2010 and 2009, respectively).
(c) Returnonaveragetangiblecommonequity is computed in the same manner
as ROE except the computation of average tangible common equity, a
non-GAAP measure, excludes from average total shareholders’ equity
average goodwill and other intangibles of $4.2 billion, $3.3 billion and $3.0
billion as of December 31, 2011, 2010 and 2009, respectively.
SELECTED STATISTICAL INFORMATION
Years Ended December 31,
(Millions, except percentages
and where indicated) 2011 2010 2009
Card billed business (billions)
United States $ 542.8 $ 479.3 $ 423.7
Outside the United States 279.4 234.0 196.1
Total $ 822.2 $ 713.3 $ 619.8
Total cards-in-force
United States 50.6 48.9 48.9
Outside the United States 46.8 42.1 39.0
Total 97.4 91.0 87.9
Basic cards-in-force(a)
United States 39.3 37.9 38.0
Outside the United States 37.4 33.7 31.1
Total 76.7 71.6 69.1
Average discount rate 2.54% 2.55% 2.51%
Average basic cardmember
spending (dollars)(b) $ 14,881 $ 13,259 $ 11,213
Average fee per card (dollars)(b) $39$38$36
Average fee per card adjusted (dollars)(b) $43$41$40
(a) Prior to and including the fourth quarter of 2010, the Company did not have
the data necessary to separately report Basic and Supplementary
cards-in-force (CIF) for Global Network Services; therefore, all
cards-in-force for Global Network Services was reported as Basic CIF.
Beginning in the first quarter of 2011, as the necessary data became
available, the Company began to separately report Basic and Supplementary
CIF for Global Network Services. The Company has accordingly revised
prior periods to conform with the current period presentation.
(b) Average basic cardmember spending and average fee per card are computed
from proprietary card activities only. Average fee per card is computed based
on net card fees, including the amortization of deferred direct acquisition
costs, plus card fees included in interest and fees on loans (including related
amortization of deferred direct acquisition costs), divided by average
worldwide proprietary cards-in-force. The card fees related to cardmember
loans included in interest and fees on loans were $265 million, $220 million
and $186 million for the years ended December 31, 2011, 2010 and 2009,
respectively. The adjusted average fee per card, which is a non-GAAP
measure, is computed in the same manner, but excludes amortization of
deferred direct acquisition costs (a portion of which is charge card related
and included in net card fees and a portion of which is lending related and
included in interest and fees on loans). The amount of amortization
excluded was $219 million, $207 million and $243 million for the years
ended December 31, 2011, 2010 and 2009, respectively. The Company
presents adjusted average fee per card because the Company believes this
metric presents a useful indicator of card fee pricing across a range of its
proprietary card products.
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