American Express Fixed income Presentation March 2010
Agenda ■ AXP Overview ■ Performance ■ AXP Capital & Funding Management 2 2
AXP Franchise • American Express is the world’s largest issuer of charge and credit cards as measured by purchase volume. • Our focus is on the premium market sector. • Average spending per card is substantially higher for us versus our network competitors. • The global diversity of our business includes: – 87.9 million cards in force worldwide, – More than 120 card issuing or merchant acquiring arrangements with banks and other institutions, – Over 900 American Express network branded products. • American Express is a brand recognized around the world for exceptional service and customer care. • American Express is ranked highest in overall satisfaction among 21 of the largest card issuers in the U.S. according to J.D. Power and Associates third annual nationwide credit card satisfaction study. • Our spend-centric model is a significant competitive advantage. 3
Company Overview ($ in millions, except percentages) AMERICAN EXPRESS COMPANY 2008 2009 Revenues Net of Interest Exp. $28,365 $24,523 Income from Continuing Ops $2,871 $2,137 Net Income $2,699 $2,130 Return on Avg. Common Equity * 22% 14% Global Commercial U.S. Card Services International Card Global Network & Corporate & Other Services Services Merchant Services 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 Revenues Net of $13,997 $11,891 $4,781 $4,483 $4,696 $4,046 $4,102 $3,716 $789 $387 Interest Exp. Segment Income $852 $249 $351 $303 $505 $390 $995 $898 $168 $297 Return on Avg. 18% 5% 17% 14% 16% 11% 75% 53% Segment Capital * U.S. Proprietary Consumer Int’l Proprietary Corporate Card Global Merchant Corporate HQ and Small Business Cards Consumer and Corporate Services Global Travelers and Services Small Business Purchasing Global Network Cheque and Pre- Cards and Services Solutions U.S. Consumer Travel Services paid Services Int’l Consumer Business Travel Network Global Network Publishing Travel Network Services Card Partnerships *Calculated by dividing one-year period net income attributable to common shareholders/segment income by one-year average common shareholders’ equity/average segment capital, respectively. 4
Spend-Centric Model The AXP spend-centric business model focuses primarily on generating revenues by driving spending on our cards, and secondarily finance charges and fees, allowing us to grow market share in the payments industry. Investments in Premium Value Attractive Premium Customer Base Economics High Average Spending 5
Agenda ■ AXP Overview ■ Performance ■ AXP Capital & Funding Management 6 6
Summary Financial Performance ($ in millions, except per share amounts) 4Q’09 4Q’08 % Inc/(Dec) Total Revenues Net of Interest Expense $6,489 $6,506 - Income from Continuing Ops* $710 $306 132% Diluted EPS from Continuing Ops** $0.59 $0.26 127% Return on Average Common Equity 14% 22% Average Diluted Shares Outstanding 1,184 1,155 3% *Net income, including results from discontinued operations, was $716MM and $240MM in 4Q’09 and 4Q’08, respectively, and incr eased more than 100% versus the prior year. **Attributable to common shareholders. Excludes earnings allocated to participating share awards and other items o f $9MM and $1MM for 4Q’09 and 4Q’08, respectively. Diluted EPS on a net income basis, including results from discontinued operations, was $0.60 and $0.21 in 4Q’09 and 4Q’08, respectively, and increased more than 100% versus the prior year. 7
Historical Financial Performance $ in Billions Total Revenues Net of $24.5 $27.6 $28.4 $5.9 $6.1 $6.0 $6.5 Interest Expense 11% 3% (18%) (18%) (16%) (0%) (14%) Year over Year % Change Income from Continuing $4.1 $2.9 $0.4 $0.3 $0.6** $0.7 $2.1 Operations* 14% (30%) (58%) (48%) (25%) 132% (26%) Year over Year % Change Return on Average 37% 22% 17% 12% 10% 14% 14% Common Equity *Net income, including results from discontinued operations, was $4.0B for 2007, 8% growth vs. the prior year; $2.7B for 2008, (33% decline) and $2.1B for 2009 (21% decline). Net income was $437MM for Q1’09, (56% decline); $337MM for Q2’09, (48% decline), $640MM in Q3’09 (21% decli ne), and $716MM in Q4’09, an increase of 198%. **Q3’09 results include a $180MM ($113MM after -tax) nonrecurring benefit associated with the com pany’s accounting for a net investment in consolidated foreign subsidiaries. 8
Full Year and 2009 Quarterly Metric Trends % increase/(decrease) vs. prior year: Billed Business* Total Cards In Force Avg. Basic Cardmember Spending** Mgd. Cardmember Loans*** Credit Performance *Card billed business includes activities (including cash advances) related to proprietary cards, cards issued under network partnership agreements, and certain insurance fees charged on proprietary cards. **Computed from proprietary card activities only. ***Managed basis includes owned and securitized loans. On a GAAP basis, owned loan growth was 26% in 2007, (22%) in 2008, (26)% in Q1'09, (34%) in Q2'09, (31%) in Q3'09, (22%) in Q4'09, and (22%) for the full year 2009. 9
Worldwide Billed Business ($ in billions) *FX adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars. (e.g., assumes foreign exchange rate used for Dec’09 applies to Dec’08; rate used for Nov’09 applies to Nov’08, etc.) 10
Q4'09 Relative Performance $ in millions $ in millions $173 $173 $161 $144 $95 $84 $69 $62 $55 $47 $27 $22 † †† † ‡ †† AXP Citi* JPM** BofA*** Cap One Discover Citi* BofA*** JPM** Cap One AXP Discover Growth Growth 8% (4%) (5%) (3%) (3%) (1%) vs. PY (4%) (12%) (11%) (14%) (14%) (4%) vs. PY *Includes Citi-Branded Cards and Citi Holdings Retail Partners North America Cards. **Excludes the impact of the Washington Mutual acquisition. Including Washington Mutual, billings of $87B declined 9% and loans of $163B declined 14%. Reported billings shown above include balance transfers. Sales volumes, which exclude balance transfers, increased 2% versus prior year. ***Credit Card, includes US consumer and foreign credit card. † Global Card. †† Fiscal year ends November 30. US Card. Billed business is credit card sales volume; disclosed credit card volume was $23B as of 11/30/09 and declined 8%. ‡On a GAAP basis, owned loans were $33B and decreased 22%. 11
AXP Lending Managed Net Write-off Rates versus Competitors 12.9% 11.9% 10.3% 9.7% 9.6% 9.4% 9.4% 8.8% 8.6% 7.3% 7.2% 7.0% 6.9% 6.5% 5.6% 5.3% Q4'08 Q4'09 † †† ‡ AXP * Discover ** JPMorgan *** Cap One Bank of Citi America *See Annex 1 for GAAP basis. **Fiscal year ends November 30. US Card. ***Excluding the impact of the Washington Mutual acquisition. Including Washington Mutual Q4’08, Q1’09, Q2’09, Q3’09 and Q4’09 rates were 5.6%, 7.7%, 10.0%, 10.3% and 9.3%, respectively. †Global Card. ††Credit Card, includes US consumer and foreign credit card. ‡ Citi-Branded Cards. 12
AXP Lending Managed 30 Day Past Due Rates versus Competitors 7.9% 7.2% 6.7% 5.9% 5.9% 5.6% 5.5% 5.4% 5.1% 5.0% 4.9% 4.7% 4.6% 4.4% 3.6% Q4'08 Q4'09 † †† ‡ * ** *** AXP Discover JPMorgan Cap One Bank of Citi America *See Annex 1 for GAAP basis. ** Fiscal year ends November 30. US Card. ***Excludes the impact of the Washington Mutual acquisition. Including Washington Mutual, Q4'08, Q1'09, Q2'09, Q3'09 and Q4'09 rates were 5.0%, 6.2%, 5.9%, 6.0% and 6.3%, respectively. †Global Card . ††Credit Card, includes US consumer and foreign credit card. ‡ Citi-Branded Cards. 13
Peer Comparison Trust FICO Distributions* FICO <660 (“Sub - prime”) FICO >720 (“Super - prime”) 73% 29% 57% 28% 56% 27% 25% 44% 43% 42% 40% 20% 17% 8% AXP AXP JP Morgan Bank of Cap One Discover Citi AXP AXP JP Morgan Bank of Citi Discover Cap One Charge Lending America Charge Lending America Trust** Trust† Trust** Trust† *Trust data as of March 2009 for Capital One (COMET), November 2009 for JP Morgan (CHAIT), December 2009 for Bank of America (BACCT), Citi (CCCIT), Discover (DCENT) and AXP Lending (AMXCA) and Charge (AEIT) Trusts. **Data on AEIT excludes the Commercial charge card accounts, a substantial portion of which do not have associated FICO scores. †For AMXCA, FICO > 720 (“Super - prime”) category includes 2/3’s of the A/R within the 700 – 759 category. 14 14
Agenda ■ AXP Overview ■ Performance ■ AXP Capital & Funding Management 15 15
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