American Express 2013 Annual Report Download - page 22

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AMERICAN EXPRESS COMPANY
2013 FINANCIAL REVIEW
Travel commissions and fees decreased $27 million or 1 percent in
2013 as compared to 2012, and $31 million or 2 percent in 2012 as
compared to 2011. The decrease in 2013 reflects flat sales in business
travel and a 2 percent decline in U.S. consumer travel sales. The
decrease in 2012 as compared to 2011 reflects a 1 percent decline in
worldwide travel sales. In 2012, business travel sales declined 4
percent, while U.S. consumer travel sales increased 12 percent.
Other commissions and fees increased $97 million or 4 percent in
2013 as compared to 2012, and $48 million or 2 percent in 2012 as
compared to 2011. The 2013 increase was primarily due to lower Card
Member reimbursements versus the prior year and marginally higher
late fees and foreign currency conversion revenues, as well as higher
revenue from the Company’s Loyalty Partner business. The increase in
2012 as compared to 2011 reflects higher revenues from the Loyalty
Partner business.
Other revenues decreased $151 million or 6 percent in 2013 as
compared to 2012, and increased $261 million or 12 percent in 2012 as
compared to 2011. The 2013 decrease reflects the effect of a benefit in
the first half of 2012 due to revised estimates of the liability for
uncashed Travelers Cheques in certain international countries. The
decrease also reflects the loss of revenue from the publishing business
in the fourth quarter of 2013, and higher Card Member
reimbursements within other revenue in 2013 as compared to 2012.
These decreases were partially offset by an increase in Loyalty Edge
revenue from additional client signings and a larger gain on the sale of
investment securities in 2013. The increase in 2012 as compared to
2011 reflects higher gains on the sale of investment securities, higher
GNS partner royalty revenues, and the previously mentioned favorable
effects of revised estimates in the liability for uncashed Travelers
Cheques in international countries.
Interest income increased $151 million or 2 percent in 2013 as
compared to 2012, and $158 million or 2 percent in 2012 as compared
to 2011. The increase in both years reflects an increase in interest on
loans driven by higher average Card Member loans, partially offset by
decreases in interest and dividends on investment securities driven by
lower average investment securities.
Interest expense decreased $268 million or 12 percent in 2013 as
compared to 2012, and $94 million or 4 percent in 2012 as compared
to 2011. The decrease in both years was due to lower interest on
deposits, reflecting a lower cost of funds, partially offset by increases
in average customer deposit balances. The decreases also reflect lower
interest on long-term debt and other, lower average long-term debt
balances and, in 2013, a lower cost of funds on long-term debt.
TABLE 3: PROVISIONS FOR LOSSES SUMMARY
Years Ended December 31,
(Millions, except percentages) 2013 2012 2011
Change
2013 vs. 2012
Change
2012 vs. 2011
Charge card $ 789 $ 742 $ 770 $ 47 6% $ (28) (4)%
Card Member loans 1,229 1,149 253 80 7 896 #
Other 92 99 89 (7) (7) 10 11
Total provisions for losses $ 2,110 $ 1,990 $ 1,112 $ 120 6% $ 878 79%
# Denotes a variance of more than 100 percent.
PROVISIONS FOR LOSSES
Charge card provision for losses increased $47 million or 6 percent in
2013 as compared to 2012, and decreased $28 million or 4 percent in
2012 as compared to 2011. The 2013 increase reflects higher average
Card Member receivable balances resulting in higher amounts of net
write-offs, partially offset by a higher reserve release in 2013 than
2012. The 2012 decrease reflects a net reserve release in 2012
compared to a reserve build in 2011. Card Member loans provision for
losses increased $80 million or 7 percent in 2013 as compared to 2012,
and $896 million or over 100 percent in 2012 as compared to 2011.
The 2013 increase reflects lower reserve releases as compared to the
prior year, partially offset by the benefit of lower net write-offs in 2013
due to improved credit performance. The 2012 increase from 2011
reflects a smaller reserve release in 2012 than in 2011. Other provision
for losses decreased $7 million or 7 percent in 2013 as compared to
2012, and increased $10 million or 11 percent in 2012 as compared to
2011.
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