American Express Company · NYSE:AXP
American Express — Investor Presentation (August 2012)
61 slides from American Express's investor presentation, Aug 8, 2012
Slide 1: American Express Company Financial Community Meeting
American Express Company Financial Community Meeting Kenneth Chenault Chairman and Chief Executive Officer Edward Gilligan Vice Chairman August 8, 2012
Slide 2: Agenda
Agenda Year-to-Date Financial and Business Performance Growth Foundation Core Business Opportunities Q&A 2
Slide 3: Financial Performance
Financial Performance $ in billions; except per share amounts Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Total Revenues Net of Interest $7.6 $7.6 $7.7 $7.6 $8.0 Expense Growth vs. Prior Year 12% 9% 7% 8% 5% FX Adjusted Growth vs. Prior Year† 8% 6% 7% 9% 7% Income from Continuing Operations* $1.3 $1.2 $1.2 $1.3 $
Slide 4: Metric Trends
Metric Trends % increase/(decrease) vs. prior year Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Billed Business* 18% 16% 11% 12% 7% Billed Business FX Adjusted** 15% 13% 11% 13% 9% Total Cards In Force*** 6% 8% 7% 7% 6% Cardmember Loans 2% 2% 3% 4% 4% Worldwide Lending Write- 3.1% 2.6% 2.3% 2.3% 2.2% off Rate† *Ca
Slide 5: Billed Business Growth by Region
Billed Business Growth by Region % increase/(decrease) vs. prior year 25% 20% 15% 14% 12% 10% 9% 5% 4% 0% Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 US EMEA (FX Adj)* JAPA (FX Adj)* LACC (FX Adj)* Total (FX Adj)* *See Annex 1 for reported billings growth rates. 5
Slide 6: Billings Growth – U.S.
Billings Growth – U.S. % increase/(decrease) vs. prior year 15% 10% 5% 0% (5%) (10%) AXP MasterCard/Visa - Credit & Charge Volume* (15%) MasterCard/Visa - Total Payment Volume** (20%) Q2'08 Q4'08 Q2'09 Q4'09 Q2'10 Q4'10 Q2'11 Q4'11 Q2'12 SOURCE: Company filed reports. *Includes credit and charge onl
Slide 7: Billings Growth – Global
Billings Growth – Global FX adjusted† % increase/(decrease) vs. prior year 15% 10% 5% 0% (5%) AXP (10%) MasterCard/Visa - Credit & Charge Volume* (15%) Q2'08 Q4'08 Q2'09 Q4'09 Q2'10 Q4'10 Q2'11 Q4'11 Q2'12 †FX adjusted information assumes a constant exchange rate between the periods being compared f
Slide 8: First Half 2012 Relative Performance
First Half 2012 Relative Performance Total Billed Business $ in billions Growth 9% 12% 3% 1% 29% 6% vs. PY Ex Acq. 12%† $433 $183 $176 $94 $70 $52 AXP JPM** Citi* BofA*** CapOne † Discover †† Note: AXP “Billed Business” includes activities (including cash advances) related to proprietary cards, card
Slide 9: First Half 2012 Relative Performance
First Half 2012 Relative Performance Total Billed Business Ending Loans $ in billions $ in billions Growth Growth 9% 12% 3% 1% 29% 6% (3%) (1%) (10%) 42% 4% 4% vs. PY vs. PY Ex Acq. 12%† Ex Acq. (2%) † $433 $145 $125 $94 $183 $176 $61 $61 $94 $47 $70 $52 AXP JPM** Citi* BofA*** CapOne † Discover ††
Slide 10: AXP Revenue Growth vs. Issuing Competitors
AXP Revenue Growth vs. Issuing Competitors Q1'12 and Q2'12 % increase/(decrease) vs. prior year: 8% 6% 6% 5% (1%) (2%) (2%) (3%) Ex. (5%) (6%) HSBC Acq. (19%) (19%) AXP Discover* CapitalOne** Citi*** JPMorgan BofA Q1'12 Revenue Growth Q2'12 Revenue Growth Source: Company Reports. * Fiscal year ends
Slide 11: AXP Lending Net Write-off Rates vs. Competitors
AXP Lending Net Write-off Rates vs. Competitors 7.3% 6.8% 5.8% 5.1% 5.3% 5.2% 5.0% 4.4% 3.1% 2.8% 3.1% 2.2% Q2'11 Q2'12 AXP* Discover** JPMorgan*** CapOne† Bank of America†† Citi ††† *Rates include principal only. See Statistical tables in Q2'12 Earnings Release for net write-off rates including int
Slide 12: USCS Lending and Charge Credit Metrics
USCS Lending and Charge Credit Metrics U.S. Lending 30 Days Past Due Rate Number of Bankruptcy Filings USCS customers 1.5% x000 58 50 1.0% 46 June'11 Jan'12 June'12 41 42 U.S. Charge 30 Days Past Due Rate 2.0% 1.5% Q2'11 Q4'11 Q2'12 June'11 Jan'12 June'12 12
Slide 13: Q2'12 Peer Net Income vs. Adjusted Net Income
Q2'12 Peer Net Income vs. Adjusted Net Income Reported net income % increase/(decrease) vs. prior period $ in millions Impact of Reserve Activity* (52%) (6%) (14%) (44%) (11%) (13%) 3% 8% $1,339 $1,199 $929** $860 $718 $1,232 $537 $347†† $326 $624 $635 $684 $371 $466 $276 $320 AXP† USCS† BofA JPM Ci
Slide 14: Marketing and Promotion Expense
Marketing and Promotion Expense Marketing and Promotion Expense as % of Managed Revenue* 11.4% 9.3% 10.0% 10.4% 10.0% 9.5% 9.7% 8.3% 7.4% 8.3% 2007 2008 2009 2010 2011 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Note: Beginning in 2011, the Company reclassified certain contractual payments to partners as either c
Slide 15: Cardmember Rewards Expense
Cardmember Rewards Expense Cardmember Rewards as % of Proprietary Billed Business 97bps 90bps 88bps 77bps 81bps 78bps 78bps 81bps 77bps Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Note: Proprietary Billed Business includes card billings related to cards issued by American Express and exclu
Slide 16: Total Operating Expense Growth
Total Operating Expense Growth % increase/(decrease) vs. prior year 21% 21% 2-3 Year Target: Opex < Revenue Growth 13% 10% 7% 8% YoY Opex Growth 12% 4% 5% YoY Rev Growth (1%) 0% 5% YoY Adj Opex Growth* 2% (4%) (3%) Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Note: Operating Expense include
Slide 17: Expense to Revenue Ratio
Expense to Revenue Ratio Adjusted Expenses as % of Managed Revenue* 74% 75% 75% 75% 73% 71% 71% 67% 64% 63% 2007 2008 2009 2010 2011 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 *Adjusted Expenses as a % of Total managed revenues net of interest expense, a non-GAAP measure. Adjusted Expenses are Total Expenses on
Slide 18: Agenda
Agenda Year-to-Date Financial and Business Performance Growth Foundation Core Business Opportunities Q&A 18
Slide 19: H1'12 Update
H1'12 Update Global Corporate Payments Enterprise Growth Health of the AXP Franchise 19
Slide 20: Voice of the Customer
Voice of the Customer Improvement in Recommend to a Friend* (U.S.) Indexed to 2009 35% 2009 2010 May'12 YTD *Recommend to a Friend (RTF) measures a cardmember’s satisfaction with the level of servicing provided by American Express customer care professionals. The metric is calculated from ratings gi
Slide 21: USCS Cardmember Non-credit Attrition
USCS Cardmember Non-credit Attrition* Indexed to Q2'07 levels 1.2x 1.0x 0.8x 0.6x 0.6x 0.4x Q2'07 Q2'08 Q2'09 Q2'10 Q2'11 Q2'12 Note: Q4'08, Q1'09 and Q2'09 were normalized for inactive card cancellations of 300K cards in Q4'08, 500K cards in Q1'09 and 2.6MM cards in Q2'09. *Non-Credit attrition inc
Slide 22: H1'12 Update
H1'12 Update Global Corporate Payments Enterprise Growth Health of the AXP Franchise Visa/MasterCard Merchant Settlement 22
Slide 23: Agenda
Agenda Year-to-Date Financial and Business Performance Growth Foundation Core Business Opportunities Q&A 23
Slide 24: Foundational Changes
Foundational Changes 2007 to 2012 24
Slide 25: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Funding Mix 25
Slide 26: Improved Funding Mix and Liquidity Position
Improved Funding Mix and Liquidity Position Funding Mix 14% Deposits 23% Card ABS*† 47% Unsecured Term† 16% Short-term Debt** 2007 2011 *On January 1, 2010, the Company consolidated its off-balance sheet ABS funding onto the balance sheet in compliance with new GAAP governing transfer of financial a
Slide 27: Improved Funding Mix and Liquidity Position
Improved Funding Mix and Liquidity Position Funding Mix 4 Yr CAGR 14% 37% Deposits 25% 23% 21% Card ABS*† (5%) 47% Unsecured Term† (8%) 38% 16% 4% Short-term Debt** (30%) 2007 2011 *On January 1, 2010, the Company consolidated its off-balance sheet ABS funding onto the balance sheet in compliance wi
Slide 28: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Improved Funding Liquidity Mix 28
Slide 29: Improved Cash Liquidity Position
Improved Cash Liquidity Position 2007 2011 Cash Liquidity Horizon Note: The cash liquidity horizon represents the Company’s estimate of the amount of time the Company’s cash and readily-marketable securities would be able to meet the Company’s maturing funding obligations, in the event the Company i
Slide 30: Improved Cash Liquidity Position
Improved Cash Liquidity Position > 12 Months 2007 2011 Cash Liquidity Horizon Note: The cash liquidity horizon represents the Company’s estimate of the amount of time the Company’s cash and readily-marketable securities would be able to meet the Company’s maturing funding obligations, in the event t
Slide 31: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Reliance Funding Liquidity on Loans Mix 31
Slide 32: Reduced Reliance on Lending
Reduced Reliance on Lending Worldwide Managed Cardmember Loans $ in billions $77.1 YE 2007 YE 2011 Managed Net Interest Income as % of Managed Revenues 19% Note: Managed Net Interest Income as a % of total managed revenue net of interest expense is a non-GAAP measure. See Annex 4 for YE2007 loans on
Slide 33: Reduced Reliance on Lending
Reduced Reliance on Lending Worldwide Managed Cardmember Loans $ in billions $77.1 $62.6 (19%) YE 2007 YE 2011 Managed Net Interest Income as % of Managed Revenues 19% 15% Note: Managed Net Interest Income as a % of total managed revenue net of interest expense is a non-GAAP measure. See Annex 4 for
Slide 34: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Improved Risk Funding Reliance Liquidity Profile Mix on Loans 34
Slide 35: Lending Managed Net Write-off Rate
Lending Managed Net Write-off Rate* US Lending ICS Lending 10.0% 11.2% 7.1% 5.3% 4.3% 4.4% 2.2% 2.0% 2.9% Q2'07 Q2'08 Q2'09 Q2'10 Q2'11 Q2'12 Q2'07 Q2'08 Q2'09 Q2'10 Q2'11 Q2'12 AXP USCS Industry (Excluding AXP)** AXP ICS *Managed Net Write-off Rate (Principal Only). See Annex 7 for GAAP basis for U
Slide 36: Improved Risk Profile in US Lending Portfolio
Improved Risk Profile in US Lending Portfolio Loan Tenure* 76% 90% 24% 10% Q2'08 Q2'12 ≤ 2 years of Tenure > 2 years of Tenure *Tenure measures the longevity of the relationship with the cardmember from the time of acquisition (e.g. “≤ 2 years of Tenure” for Q2'12 reflects the % of US cardmember loa
Slide 37: Improved Risk Profile in US Lending Portfolio
Improved Risk Profile in US Lending Portfolio Loan Tenure* Transactor vs. Revolver Loans 76% 71% 90% 84% 24% 29% 10% 16% Q2'08 Q2'12 Q2'08 Q2'12 ≤ 2 years of Tenure > 2 years of Tenure % Transactor** % Revolver *Tenure measures the longevity of the relationship with the cardmember from the time of a
Slide 38: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Diversified Improved Funding Reliance Risk Billings Base Liquidity Mix on Loans Profile 38
Slide 39: AXP Share of U.S. Purchase Volume
AXP Share of U.S. Purchase Volume 26.3% 25.4% 23.7% 24.0% 23.8% 23.0% 22.2% 21.2% 20.6% 20.4% 19.9% 19.9% 19.5% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General Purpose Charge and Credit* SOURCE: The Nilson Report. *Excludes cash advances. 39
Slide 40: More Diversified Spend Profile
More Diversified Spend Profile $ in billions $161 Q2'07 Q2'12 % Billings from GNS 8% % Billings from International 28% Estimated Online Billings* N/A *Online Billings is a full-year number that primarily includes spending at pure online merchants and spending through known online channels for mercha
Slide 41: More Diversified Spend Profile
More Diversified Spend Profile $ in billions CAGR $222 $161 Q2'07 Q2'12 % Billings from GNS 8% 14% % Billings from International 28% 33% Estimated Online Billings* N/A $130B+ (FY'11) *Online Billings is a full-year number that primarily includes spending at pure online merchants and spending through
Slide 42: Reduced Dependence on T&E Spend
Reduced Dependence on T&E Spend % Billings from T&E 2007 34% Average discount rate represents the percentage of billed business (both proprietary and Global Network Services) retained by the Company from merchants it acquires, prior to payments to third parties unrelated to merchant acceptance. 42
Slide 43: Reduced Dependence on T&E Spend
Reduced Dependence on T&E Spend % Billings from T&E 2011 31% Average discount rate represents the percentage of billed business (both proprietary and Global Network Services) retained by the Company from merchants it acquires, prior to payments to third parties unrelated to merchant acceptance. 43
Slide 44: Reduced Dependence on T&E Spend
Reduced Dependence on T&E Spend % Billings from T&E Discount Rate 2011 2.56% 2.55% 2.54% 2.55% 2.54% 31% 2007 2009 2011 Average discount rate represents the percentage of billed business (both proprietary and Global Network Services) retained by the Company from merchants it acquires, prior to payme
Slide 45: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Strengthened Improved Diversified Capital Funding Reliance Risk Liquidity Billings Base Position Mix on Loans Profile 45
Slide 46: Stronger Capital Position
Stronger Capital Position 12.8% 9.7% Q4'08 Q2'12 Tier 1 Common Risk-Based* *Note, the Company became a bank holding company in Q4'08 and is thus the first period for which capital ratios are available. The Tier 1 Common Risk-Based Capital Ratio is calculated as Tier 1 Common Equity, a non-GAAP measu
Slide 47: Capital Ratios – CCAR 2012 Results
Capital Ratios – CCAR 2012 Results 12.3% 11.7% 10.8% 10.0% 9.9% 9.3% 8.7% 8.5% 7.8% 5.9% 6.0% 4.9% 5.4% 5.4% AXP BofA CapOne Citi JPM US Bank Wells Fargo Q3'11 Tier 1 Risk-Based Common Ratio* Fed Stress Scenario** *The Tier 1 Common Risk-Based Capital Ratio is calculated as Tier 1 Common Equity, a n
Slide 48: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Strengthened Improved Diversified Capital Funding Reliance Risk Liquidity Billings Base Position Mix on Loans Profile 48
Slide 49: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Strengthened Expanded Improved Diversified Growth Funding Reliance Risk Capital Liquidity Billings Base Opportunities Mix on Loans Profile Position 49
Slide 50: Significant Opportunities for Growth
Significant Opportunities for Growth 2012 2007 Plastic Penetration International/GNS 50
Slide 51: Significant Opportunities for Growth
Significant Opportunities for Growth 2012 Plastic Penetration International/GNS Digital Prepaid Fee Services 51
Slide 52: Foundational Changes
Foundational Changes 2007 to 2012 Diversified Lower Improved Strengthened Expanded Improved Diversified Funding Reliance Risk Capital Growth Liquidity Billings Base Mix on Loans Profile Position Opportunities 52
Slide 53: Slide 53
Slide 54: Annex 1
Annex 1 Billed Business - Reported & FX Adjusted* % increase/(decrease) vs. prior year: Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 U.S. 14% 13% 14% 15% 14% 13% 11% 12% 9% International Reported 19% 17% 16% 20% 27% 21% 10% 12% 3% FX Adjusted 16% 16% 15% 14% 15% 14% 11% 13% 10% EMEA Reporte
Slide 55: Annex 2
Annex 2 Billed Business - Reported & FX Adjusted* % increase/(decrease) vs. prior year: Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Total Reported 12% 8% (10%) (16%) (16%) (11%) 8% 16% 16% 14% 15% 17% 18% 16% 11% 12% 7% FX Adjusted 10% 7% (5%
Slide 56: Annex 3
Annex 3 ($ in millions) 2007 2008 2009 2010 2011 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 GAAP Total Revenues Net of Interest Expense $27,462 $28,227 $24,336 $27,582 $29,962 $7,618 $7,571 $7,742 $7,614 $7,965 Securitization Adjustments: Discount revenue, net card fees and other 310 400 331 NA NA NA NA NA NA NA
Slide 57: Annex 4
Annex 4 ($ in millions) 2007 2011 GAAP Total Revenues Net of Interest Expense $27,462 $29,962 Securitization Adjustments: Discount revenue, net card fees and other 310 NA Interest income 3,130 NA Securitization income, net (1,507) NA Interest expense (1,136) NA Managed Total Revenues Net of Interest
Slide 58: Annex 5
Annex 5 ($ in millions) Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 GAAP Total Operating Expenses $2,685 $3,195 $2,752 $2,915 $3,100 $3,197 $3,110 $3,210 Visa/MasterCard Settlement Payments 220 220 220 220 70 70 - - Adjusted Total Operating Expenses $2,905 $3,415 $2,972 $3,135 $3,170 $3,267 $3,1
Slide 59: Annex 6
Annex 6 The Tier 1 Common Risk-Based Capital Ratio is calculated as Tier 1 Common Equity, a non-GAAP measure, divided by Risk-weighted assets. Tier 1 Common Equity is calculated by reference to Total Shareholders’ Equity as shown below: Tier 1 Common Equity Reconciliation ($ in Millions) Q4’08 Q3’11
Slide 60: Annex 7
Annex 7 Owned/Managed Credit Data Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 USCS 30 Days Past Due Loans as a % of Total Cardmember Lending GAAP Basis 2.1% 2.4% 2.8% 3.4% 3.5% 3.9% 4.7% 5.1% 4.4% 4.2% 3.7% Cardmember Lending Managed Basis 2.1% 2.4% 2.8% 3.2% 3.3% 3.9% 4.7% 5.1
Slide 61: Annex 8
Annex 8 International Billed Business - Reported & FX Adjusted* $B 09-11 CAGR 1H’11-1H’12 CAGR Emerging Reported 23% 12% FX Adjusted 20% 18% Developed Reported 18% 5% FX Adjusted 16% 8% Total ‘09 ‘10 ‘11 1H '11 1H '12 Reported 19% 7% $196 $234 $279 $135 $145 FX Adjusted 17% 11% $203 $247 $279 $130 $
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