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AMERICAN EXPRESS COMPANY
2011 FINANCIAL REVIEW
GLOBAL NETWORK & MERCHANT
SERVICES
SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions) 2011 2010 2009
Revenues
Discount revenue, fees and other $ 4,713 $ 4,101 $ 3,586
Interest income 541
Interest expense (224) (200) (177)
Net interest income 229 204 178
Total revenues net of interest expense 4,942 4,305 3,764
Provisions for losses 75 61 135
Total revenues net of interest expense after
provisions for losses 4,867 4,244 3,629
Expenses
Marketing, promotion, rewards and
cardmember services 755 755 521
Salaries and employee benefits and other
operating expenses 2,133 1,900 1,659
Total 2,888 2,655 2,180
Pretax segment income 1,979 1,589 1,449
Income tax provision 686 564 510
Segment income $ 1,293 $ 1,025 $ 939
SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Billions, except percentages
and where indicated) 2011 2010 2009
Global Card billed business $ 822.2 $ 713.3 $ 619.8
Global Network & Merchant Services:
Total segment assets $ 17.8 $ 13.6 $ 12.3
Segment capital (millions) $ 2,037 $ 1,922 $ 1,443
Return on average segment capital(a) 66.3% 61.6% 65.8%
Return on average tangible segment
capital(a) 74.3% 64.3% 67.6%
Global Network Services:(b)
Card billed business $ 116.8 $ 91.7 $ 71.8
Total cards-in-force (millions) 34.2 29.0 26.3
(a) Return on average segment capital is calculated by dividing (i) one-year
period segment income ($1.3 billion, $1.0 billion and $939 million for 2011,
2010 and 2009, respectively) by (ii) one-year average segment capital ($1.9
billion, $1.7 billion and $1.4 billion for 2011, 2010 and 2009, respectively).
Return on average tangible segment capital is computed in the same manner
as return on average segment capital except the computation of average
tangible segment capital, a non-GAAP measure, excludes from average
segment capital average goodwill and other intangibles of $209 million, $70
million and $36 million as of December 31, 2011, 2010, and 2009,
respectively. The Company believes return on average tangible segment
capital is a useful measure of the profitability of its business.
(b) Since the third quarter of 2010, for non-proprietary retail co-brand partners,
Global Network Services metrics exclude cardmember accounts which have
no out-of-store spend activity during the prior 12-month period.
RESULTS OF OPERATIONS FOR THE THREE YEARS
ENDED DECEMBER 31, 2011
GNMS reported segment income of $1.3 billion in 2011, a $268
million or 26 percent increase from $1.0 billion in 2010, which
increased $86 million or 9 percent from 2009.
Total Revenues Net of Interest Expense
GNMS total revenues net of interest expense increased $637
million or 15 percent to $4.9 billion in 2011 compared to 2010,
due to increased discount revenue, net card fees and other and
increased interest expense credit.
Discount revenue, fees and other increased $612 million or 15
percent to $4.7 billion in 2011 compared to 2010, primarily due
to an increase in merchant-related revenues, driven by a 15
percent increase in global card billed business, as well as higher
volume-driven GNS-related revenues.
Interest expense credit increased $24 million or 12 percent to
$224 million in 2011 compared to 2010, due to a higher funding-
driven interest credit related to internal transfer pricing, which
recognizes the merchant services’ accounts payable-related
funding benefit.
Total revenues net of interest expense of $4.3 billion in 2010
increased $541 million or 14 percent compared to 2009 due to
increased discount revenue, net card fees and other and
increased interest expense credit.
Provisions for Losses
Provisions for losses increased $14 million or 23 percent to $75
million in 2011 compared to 2010, primarily due to higher
merchant-related debit balances. Provisions for losses in 2010
decreased $74 million or 55 percent to $61 million compared to
2009, primarily driven by lower merchant-related debit balances.
Expenses
During 2011, GNMS expenses increased $233 million or 9
percent to $2.9 billion compared to 2010 due to higher salaries
and employee benefits and other operating expenses. Expenses in
2010 of $2.7 billion were $475 million or 22 percent higher than
2009, due to higher salaries and employee benefits and other
operating expenses and an increase in marketing and promotion
expenses.
Marketing and promotion expenses were flat year over year at
$755 million in 2011 and 2010. Marketing and promotion
expenses increased $234 million or 45 percent in 2010 to $755
million compared to 2009, reflecting higher network, merchant-
related and brand marketing investments.
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