American Express Company · NYSE:AXP
American Express — Debt Investor Presentation (November 2011)
42 slides from American Express's debt investor presentation, Nov 7, 2011
Slide 1: American Express Fixed Income Presentation
American Express Fixed Income Presentation November 2011
Slide 2: Agenda
Agenda ■ AXP Overview ■ Performance ■ AXP Capital & Funding Management 2
Slide 3: AXP Franchise
AXP Franchise • American Express is a global service company that provides customers with access to products, insights and experiences that enrich lives and build business success. • Our principal products are charge and credit cards, focusing on the premium market sector. We are the world's largest
Slide 4: Company Overview
Company Overview ($ in millions) AMERICAN EXPRESS COMPANY YTD’10 YTD’11 2010 Revenues Net of Interest Exp. $20,338 $22,220 $27,582 Income from Continuing Operations $2,995 $3,707 $4,057 Net Income $2,995 $3,743 $4,057 Return on Average Equity* 25.9% 27.8% 27.5% U.S. Card Services International Card
Slide 5: Payments Landscape
Payments Landscape Note: The trademarks, logos and service marks used on this slide and throughout this presentation are the property of their respective owners. 5
Slide 6: Spend-Centric Model
Spend-Centric Model The AXP spend-centric business model focuses primarily on generating revenues by driving spending on our cards, and secondarily finance charges and fees, allowing us to grow market share in the payments industry. Investments in Premium Value Attractive Premium Customer Base Econo
Slide 7: Agenda
Agenda ■ AXP Overview ■ Performance ■ AXP Capital & Funding Management 7
Slide 8: Summary Financial Performance
Summary Financial Performance ($ in millions, except per share amounts) Q3'11 Q3'10 % Inc/(Dec) Total Revenues Net of Interest Expense $7,571 $6,973 9% FX Adjusted † $7,118 6% Net Income $1,235 $1,093 13% Diluted EPS* $1.03 $0.90 14% Return on Average Equity 28% 26% Average Diluted Shares Outstandin
Slide 9: Metric Performance
Metric Performance 1Q'10 Q3'11 1Q'09 Q3'10 % Inc/Dec FX Adj.* Billed Business ($ in B)** $207.7 $179.3 16% 13% Total Cards In Force (MM) 95.8 89.0 8% Avg. Basic Cardmember $3,739 $3,330 12% 10% Spending (Dollars)† Cardmember Loans ($ in B) $58.2 $57.2†† 2% 2% WW Travel Sales ($ in B) $6.0 $5.3 13% 1
Slide 10: Historical Metric Trends
Historical 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 n
Slide 11: Charge Card Billed Business vs. Receivables Growth
Charge Card Billed Business vs. Receivables Growth $ in billions; % increase/(decrease) vs. prior year: 25% 15% 5% (5%) Proprietary Charge Card Billed Business* (15%) Total Ending Cardmember Receivables (25%) Q3'08 Q1'09 Q3'09 Q1'10 Q3'10 Q1'11 Q3'11 Ending Receivables $37.6 $30.3 $32.1 $33.7 $35.1
Slide 12: Lending Billed Business vs. Managed Loan Growth
Lending Billed Business vs. Managed Loan Growth % increase/(decrease) vs. prior year, Managed: 25% 15% 5% (5%) (15%) (25%) Q3'08 Q1'09 Q3'09 Q1'10 Q3'10 Q1'11 Q3'11 Proprietary Credit Card Billed Business* Ending Loans - Managed** Ending Loans Managed** $75.5 $65.0 $60.7 $57.6 $57.2 $57.8 $58.2 *Inc
Slide 13: USCS Net Interest Yield Managed Cardmember Loans
USCS Net Interest Yield Managed Cardmember Loans $ in billions; Total Cardmember Loans, Managed $48.7 $48.7 $51.6 $49.2 $49.9 9.3% 9.1% 9.1% 9.0% 8.7% Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 See Annex 2 for reconciliation of net interest income divided by average loans, a GAAP measure, and net interest yield,
Slide 14: YTD 2011 Relative Performance
YTD 2011 Relative Performance ($ in billions) †† ($ in billions) $603 AXP 8.3x $151 Industry 2.2x $127 $122 $262 $250 $142 $62 $58 $97 $46 $75 AXP Citi* JPM** BofA*** Cap One† Discover†† Citi* JPM** BofA*** Cap One† AXP Discover†† Growth Growth vs. PY 17% 5% 10% 3% 25% 8% vs. PY (4%) (7%) (12%) 1% 2
Slide 15: Charge Card Credit Performance
Charge Card Credit Performance USCS Net Write-off Rate ICS/GCS Net Loss Ratio 1.8% 1.7% 1.6% 1.5% 1.4% 0.09% 0.09% 0.09% 0.09% 0.10% Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Note: USCS Net write-off rates above include Principal only. See Statistical tables in Q3’11 Earnings Relea
Slide 16: AXP Lending Net Write-off Rates versus Competitors
AXP Lending Net Write-off Rates versus Competitors 10.2% 8.9% 8.7% 8.2% 7.7% 6.3% 5.6% 5.1% 4.7% 4.2% 3.9% 2.6% Q3’10 Q3’11 AXP* Discover** JPMorgan*** Cap One† Bank of America†† Citi††† *Rates include principal only. See Statistical tables in Q3’11 Earnings Release for net write-off rates including
Slide 17: AXP Lending Days Past Due Rates versus Competitors
AXP Lending 30 Days Past Due Rates versus Competitors 5.7% 4.7% 4.6% 4.6% 4.4% 3.9% 3.9% 3.3% 2.9% 2.5% 2.4% 1.5% Q3‘10 Q3'11 AXP Discover * JPMorgan ** Cap One*** Bank of † Citi †† America *Fiscal year ends November 30. US Card. ** Includes the impact of the Washington Mutual acquisition. ***Global
Slide 18: USCS Managed Lending Roll Rates and Bankruptcy Filings
USCS Managed Lending Roll Rates and Bankruptcy Filings Current to 30 Days Past Due Number of Bankruptcy Filings USCS Customers, x000 1.7% 73 71 71 69 65 63 58 54 50 0.5% Oct'09 Jan'10 Jul'10 Jan'11 Jun'11 Sep'11 30 Days Past Due to Write-off 50% 20% Oct'09 Jan'10 Jul'10 Jan'11 Jun'11 Sep'11 Q3'09 Q1
Slide 19: Peer Comparison Trust FICO Distributions
Peer Comparison Trust FICO Distributions* FICO <660 (“Sub-prime”)** FICO >720 (“Super-prime”) 76% 26% 63% 62% 22% 53% 52% 50% 45% 16% 17% 17% 12% 7% AXP AXP JP Morgan Citi Bank of Discover Cap One AXP AXP JP Morgan Citi Bank of Discover Cap One Charge Lending America Charge Lending America Trust† Tr
Slide 20: Agenda
Agenda ■ AXP Overview ■ Performance ■ AXP Capital & Funding Management 20
Slide 21: Capital Management
Capital Management (Regulatory Ratios, Debt Investor Expectations, Acquisition Capacity) (Organic growth and acquisition, dividends, repurchases, and capital-raising) 21
Slide 22: Capital Ratios
Capital Ratios Q3'11 Q2'11 Tier 1 Common Risk-Based* 12.3% 12.3% Tier 1 Leverage 9.8% 10.1% Tier 1 Risk-Based Capital 12.3% 12.3% Total Risk-Based Capital 14.3% 14.3% Tangible Common Equity to Risk- 12.0% 11.9% Weighted Assets (“TCE/RWA”)** *The Tier 1 Common Risk-Based Capital Ratio is calculated a
Slide 23: Funding & Liquidity
Funding & Liquidity • Our liquidity strategy is to target holding sufficient cash and readily marketable securities to meet all maturing funding obligations for the next 12 months, without having to access the unsecured or secured debt capital markets, or raise further retail deposits. • We continue
Slide 24: Funding & Liquidity Sources
Funding & Liquidity Sources Funding Sources Contingent Sources ■ Deposits ■ Cash & Readily Marketable Securities ■ ABS ■ Discount Window ■ Unsecured Term Debt ■ Committed Bank ■ Term Bank Facility Credit Facilities ■ Commercial Paper ■ Secured Borrowing through Conduit Facility* *Drawn balance of th
Slide 25: Q3'11 Liquidity Snapshot
Q3'11 Liquidity Snapshot ($ in billions) Resources Funding Maturities Cash* $20 Q4‘11 8 Readily Marketable 3 Q1'12 3 Securities Liquidity Portfolio 23 Q2'12 4 CP and Short-Term 4 (1) Q3‘12 Deposits Outstanding Twelve Month Excess Cash & Securities $22 $19** Maturities *Includes $24.9B classified as
Slide 26: US Retail Deposit Programs
US Retail Deposit Programs ($ in billions) Third Party Third Party Total Direct * CDs Sweep Deposits June 30, 2011 Balance $13.9 $8.6 $9.1 $31.6 Maturities (0.1) (0.6) - (0.7) Amount Raised 0.3 1.2 0.1 1.6 September 30, 2011 Balance $ 14.1 $9.2 $9.2 $32.5 Weighted Avg., Retail CD 19 Months Remaining
Slide 27: American Express Primary Issuance Structure
American Express Primary Issuance Structure American Express Company (AXP) Total Assets1: $148B Credit Ratings3: A3/BBB+/A+/A(High) Regulated By: FRB & SEC American Express Travel Related Services (TRS) American Express Total Assets1: $145B Issuance Trust (AEIT) Credit Ratings3: A2/BBB+/A+/A(High) R
Slide 28: AXP & TRS
AXP & TRS AXP and TRS are Bank and Financial Holding Companies American Express • Leading global payments and travel company Company (AXP) • Sources of funding: Credit Ratings1: A3/BBB+/A+/A(High) • Dividends from subsidiaries • Unsecured long-term notes • Issues corporate charge cards and prepaid p
Slide 29: Credco
Credco • Funds the following products: American Express • US and Non-US charge cards Travel Related Services (TRS) • Non-US revolving cards • Sources of funding: • Issuance of US and non-US unsecured long term debt • Asset backed securities (ABS) issued by American Express Issuance Trust • Borrowing
Slide 30: US Banks
US Banks American Express Travel Related Services (TRS) American Express American Express Centurion Bank (AECB) Bank, Federal Savings Bank (AEFSB) 100% owned by TRS 100% owned by TRS Credit Ratings1: A2/BBB+/A+/A(High) Credit Ratings1: A2/BBB+/A+/A(High) • Incorporated in 1987 • Incorporated in 2000
Slide 31: Outstanding Funding Composition
Outstanding Funding Composition ($ in Billions) $112.1 $106.0 9.0 2.3 $99.5 $98.5 15.5 3.4 3.6 26.3 Short-term Debt* 29.7 33.1 32.5 Deposits** 30.0 23.3 17.5 Card ABS*** 55.1 Unsecured Term 47.4 43.1 44.3 12/31/08 12/31/09 12/31/10 9/30/11 *Short-term Debt as of 9/30/11 includes $0.8B of Commercial
Slide 32: Term Maturity Profile – Debt and LT CDs
Term Maturity Profile – Debt and LT CDs ($ in Billions) $16.3 9/30/11 $14.3 0.5 $14.0 $14.3 1.2 1.7 3.2 3.2 $8.2 4.7 Long term CDs* 2.9 1.3 6.8 14.6 Card ABS $4.7 0.1 Unsecured 6.9 7.9 7.9 1.9 4.3 2.7 2011 2012 2013 2014 2015 Thereafter 12/31/10 $19.9 $18.2 5.6 2.9 $13.1 $11.9 Long term CDs* 5.3 6.8
Slide 33: American Express ABS Trusts
American Express ABS Trusts American Express American Express Credit Account Master Trust Issuance Trust (AEIT) (AMXCA) Trust Established • 1996 • 2005 Eligible loans and receivables • All US Consumer and Small Business • All US Consumer, Small Business and cardmember loans Corporate cardmember rece
Slide 34: Credit Account Master Trust Performance Trend
Credit Account Master Trust Performance Trend Days Delinquencies Past Due Rate vs. Default Rate $500 MM 7% 6% $400 MM 5% $300 MM 4% $200 MM 3% 2% $100 MM 1% $ MM 9/10 10/10 11/10 12/10 1/11 2/11 3/11 4/11 5/11 6/11 7/11 8/11 9/11 0% 9/10 10/10 11/10 12/10 1/11 2/11 3/11 4/11 5/11 6/11 7/11 8/11 9/11
Slide 35: Issuance Trust Performance Trend
Issuance Trust Performance Trend Days Delinquencies Past Due vs. Default Rate $80 MM 2.5% $60 MM 2.0% 1.5% $40 MM 1.0% $20 MM 0.5% $ MM 9/10 10/10 11/10 12/10 1/11 2/11 3/11 4/11 5/11 6/11 7/11 8/11 9/11 0.0% 9/10 10/10 11/10 12/10 1/11 2/11 3/11 4/11 5/11 6/11 7/11 8/11 9/11 31-60 61-90 90+ Annuali
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Slide 37: Annex 1
Annex 1 Worldwide Cardmember Lending ($ in billions, except percentages) Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Total Worldwide Ending Loans GAAP $ 45.7 $ 42.2 $ 36.7 $ 32.5 $31.5 $32.8 Growth vs PY (9%) (22%) (26%) (34%) (31%) (22%) Managed $ 75.5 $ 72.0 $ 65.0 $ 62.9 $60.7 $61.8 Growth vs PY 5% (7%)
Slide 38: Annex 2
Annex 2 ($ in millions, except percentages) 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 USCS - Net Interest Yield on Cardmember Loans Net interest income $1,124 $1,122 $1,091 $1,063 $1,128 Average loans (billions) $49.1 $49.8 $49.6 $49.7 $50.2 Adjusted net interest income (A) $1,150 $1,143 $1,112 $1,08
Slide 39: Annex 3
Annex 3 The Tier 1 Common Risk-Based Capital Ratio is calculated as Tier 1 Common Equity, a non-GAAP measure, divided by Risk-weighted assets. Tier 1 Common Equity is calculated by reference to Total Shareholders’ Equity as shown below: Tier 1 Common Equity Reconciliation as of September 30, 2011 ($
Slide 40: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address the Company's expected business and financial perfo
Slide 41: Forward-Looking Statements (Cont.)
Forward-Looking Statements (Cont.) • changes in technology or in the Company's ability to protect its intellectual property (such as copyrights, trademarks, patents and controls on access and distribution), and invest in and compete at the leading edge of technological developments across the Compan
Slide 42: Forward-Looking Statements (Cont.)
Forward-Looking Statements (Cont.) • changes affecting the Company's ability to accept or maintain deposits due to market demand or regulatory constraints, such as changes in interest rates and regulatory restrictions on the Company's ability to obtain deposit funding or offer competitive interest r
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