American Express Company · NYSE:AXP
American Express — Debt Investor Presentation (November 2012)
41 slides from American Express's debt investor presentation, Nov 21, 2012
Slide 1: American Express Company Fixed Income Presentation Q3'12
American Express Company Fixed Income Presentation Q3’12 November 2012
Slide 2: Table of Contents
Table of Contents • AXP Overview • Performance • AXP Capital & Funding Management 2
Slide 3: AXP Franchise
AXP Overview 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 wo
Slide 4: Company Overview
AXP Overview Company Overview ($ in millions) AMERICAN EXPRESS COMPANY H1’11 H1’12 2011 Revenues Net of Interest Exp. $14,649 $15,579 $29,962 Income from Continuing Operations $2,472 $2,595 $4,899 Net Income $2,508 $2,595 $4,935 Return on Average Equity* 28.2% 26.6% 27.7% U.S. Card Services Internat
Slide 5: Payments Landscape
AXP Overview Payments Landscape Note: The trademarks, logos and service marks used on this slide and throughout this presentation are the property of their respective owners. 5
Slide 6: Spend-Centric Model
AXP Overview Spend-Centric Model The AXP spend-centric business model focuses primarily on generating revenues by driving spending on our cards, and secondarily finance charges and fees, allowing us to grow market share in the payments industry. Investments in Premium Value Attractive Premium Custom
Slide 7: Table of Contents
Table of Contents • AXP Overview • Performance • AXP Capital & Funding Management 7
Slide 8: Q3'12 Summary Financial Performance
Performance Q3'12 Summary Financial Performance ($ in millions, except per share amounts) Q3'12 Q3'11 % Inc/(Dec) Total Revenues Net of Interest Expense $7,862 $7,571 4% FX Adjusted † $7,458 5% Pre-Tax Income $1,870 $1,711 9% Net Income $1,250 $1,235 1% Diluted EPS* $1.09 $1.03 6% Return on Average
Slide 9: Q3'12 Metric Performance
Performance Q3'12 Metric Performance 1Q'10 Q3'12 1Q'09 Q3'11 % Inc/Dec FX Adj.* Billed Business ($ in B)** $220.1 $207.7 6% 8% Total Cards In Force (MM) 101.4 95.8 6% Avg. Basic Cardmember Spending (Dollars)† $3,885 $3,739 4% 5% Cardmember Loans ($ in B) $61.8 $58.2†† 6% 6% *FX adjusted information
Slide 10: Metric Trends
Performance Metric Trends % increase/(decrease) vs. prior year Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Billed Business* 16% 11% 12% 7% 6% Billed Business FX Adjusted** 13% 11% 13% 9% 8% Total Cards In Force 8% 7% 7% 6% 6% Cardmember Loans 2% 3% 4% 4% 6% Worldwide Lending Write- 2.6% 2.3% 2.3% 2.2% 1.9% off Ra
Slide 11: First Half 2012 Relative Performance
Performance First Half 2012 Relative Performance Total Billed Business Ending Loans ($ in billions) ($ in billions) $433 $145 $125 $94 $89 $183 $176 $61 $47 $94 $80 $52 AXP JPM** Citi* BofA*** Cap One† Discover †† Citi* JPM** BofA*** Cap One† AXP Discover† † Growth Growth vs. PY 9% 12% 3% 1% 29% 6%
Slide 12: Charge Card Credit Performance
Performance Charge Card Credit Performance USCS Net Write-off Rate ICS/GCS Net Loss Ratio 2.3% 0.11% 1.9% 2.0% 0.10% 0.10% 0.10% 0.10% 1.8% 1.6% Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Note: USCS Net write-off rates above include Principal only. See Statistical tables in Q3’12 Ea
Slide 13: AXP Lending Net Write-off Rates versus Competitors
Performance AXP Lending Net Write-off Rates versus Competitors 6.3% 6.0% 4.7% 4.6% 4.7% 4.2% 3.9% 3.6% 3.2% 2.6% 2.4% 1.9% Q3'11 Q3'12 †† AXP* Discover** JPMorgan*** Cap One† Bank of America Citi ††† *Rates include principal only. See Statistical tables in Q3’12 Earnings Release for net write-off ra
Slide 14: AXP Lending 30 Days Past Due Rates versus Competitors
Performance AXP Lending 30 Days Past Due Rates versus Competitors 3.9% 3.9% 3.9% 3.7% 3.1% 3.1% 2.9% 2.4% 2.2% 1.8% 1.5% 1.3% Q3'11 Q3'12 AXP Discover* JPMorgan** Cap One*** Bank of America† Citi †† *Fiscal year ends November 30. US Card. **Results exclude Commercial Card. ***Global Card. Includes i
Slide 15: Peer Comparison - Trust FICO Distributions
Performance Peer Comparison - Trust FICO Distributions* FICO <660 (“Sub-prime”)** FICO >720 (“Super-prime”) 26% 76% 63% 60% 55% 54% 53% 52% 16% 17% 45% 14% 14% 15% 11% 8% AXP AXP JP Citi Bank of Barclays Discover Cap One AXP AXP JP Citi Barclays Bank of Discover Cap One Charge Lending Morgan America
Slide 16: Table of Contents
Table of Contents • AXP Overview • Performance • AXP Capital & Funding Management 16
Slide 17: Capital Management
Capital & Funding Management Capital Management (Regulatory Ratios, Debt Investor Expectations, Acquisition Capacity, CCAR) (Business growth, dividends, repurchases, and capital-raising) 17
Slide 18: Capital Ratios
Capital & Funding Management Capital Ratios Q3'12 Q2'12 Tier 1 Common Risk-Based* 12.7% 12.8% Tier 1 Leverage 10.8% 10.7% Tier 1 Risk-Based Capital 12.7% 12.8% Total Risk-Based Capital 14.7% 14.8% Tangible Common Equity to Risk- Weighted Assets (“TCE/RWA”)** 12.6% 12.6% *The Tier 1 Common Risk-Based
Slide 19: Funding & Liquidity
Capital & Funding Management 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 r
Slide 20: Funding & Liquidity Sources
Capital & Funding Management Funding & Liquidity Sources Funding Sources Contingent Sources ■ Deposits ■ Cash & Readily Marketable ■ ABS Securities ■ Unsecured Term Debt ■ Discount Window ■ Term Bank Facility ■ Committed Bank Credit ■ Commercial Paper Facilities ■ Secured Borrowing through Conduit F
Slide 21: 2012 Capital Market Issuance Volume
Capital & Funding Management 2012 Capital Market Issuance Volume ($ in billions) $5.8 Additional Q3’12 transactions included: $5.2 1.3 •Extended our $3.0B Charge Trust Q4'12* committed, revolving, secured financing 1.8 0.9 facility, with an original maturity date of Q3'12 December 17, 2013, to July
Slide 22: US Retail Deposit Programs
Capital & Funding Management US Retail Deposit Programs ($ in billions) Third Party Third Party Total Direct * CDs Sweep Deposits June 30, 2012 Balance $16.4 $9.1 $10.3 $35.8 Maturities (0.1) (0.3) - (0.4) Amount Raised 1.4 0.2 - 1.6 September 30, 2012 Balance $17.7 $9.0 $10.3 $37.0 Weighted Avg., R
Slide 23: Q3'12 Liquidity Snapshot
Capital & Funding Management Q3'12 Liquidity Snapshot ($ in billions) Resources Funding Maturities Cash* $18 Q4‘12 4 Readily Marketable 1 Q1'13 1 Securities Liquidity Portfolio 19 Q2'13 6 Commercial Paper (1) Q3‘13 5 Outstanding Twelve Month Excess Cash & Securities $18 Maturities $16** * Includes $
Slide 24: American Express Primary Issuance Structure
Capital & Funding Management American Express Primary Issuance Structure American Express Company (AXP) Total Assets*: $152.9B Credit Ratings † † : A3/BBB+/A+/A(High) Regulated By: FRB & SEC American Express Travel Related Services (TRS) American Express Total Assets*: $152.9B Issuance Trust (AEIT)
Slide 25: AXP & TRS
Capital & Funding Management AXP & TRS AXP and TRS are Bank and Financial Holding Companies • Leading global payments and travel company American Express • Sources of funding: Company (AXP) • Dividends from subsidiaries Credit Ratings*: A3/BBB+/A+/A(High) • Unsecured long-term notes • Issues corpora
Slide 26: Credco
Capital & Funding Management Credco • Funds the following products: American Express • US and Non-US charge cards Travel Related Services (TRS) • Non-US revolving cards • Sources of funding: • Issuance of US and non-US unsecured long term debt • Asset backed securities (ABS) issued by American Expre
Slide 27: US Banks
Capital & Funding Management US Banks American Express Travel Related Services (TRS) American Express American Express Centurion Bank (AECB) Bank, Federal Savings Bank (AEFSB) 100% owned by TRS 100% owned by TRS Credit Ratings*: A2/A-/A+/A(High) Credit Ratings*: A2/A-/A+/A(High) • Incorporated in 19
Slide 28: Outstanding Funding Composition
Capital & Funding Management Outstanding Funding Composition ($ in billions) $105.4 2.3 $98.9 $100.9 $96.6 3.6 4.3 4.0 26.3 Short-term Debt* 29.7 37.9 37.2 Deposits 30.0 23.3 20.9 15.6 Card ABS** † 46.8 42.3 39.8 37.8 Unsecured Term† 12/31/09 12/31/10 12/31/11 9/30/12 *Short-term Debt as of 9/30/12
Slide 29: Term Maturity Profile – Debt and LT CDs
Capital & Funding Management Term Maturity Profile – Debt and LT CDs ($ in billions) 9/30/12 $16.6 $13.0 $14.6 4.9 2.6 $10.6 0.3 Long-term CDs* 0.4 $6.7 1.7 4.1 4.0 $3.6 4.7 Card ABS** 0.6 11.0 0.9 7.6 8.0 Unsecured** 1.1 5.5 6.1 1.6 2012 2013 2014 2015 2016 Thereafter 12/31/11 $19.5 $14.3 4.8 $14.1
Slide 30: American Express ABS Trusts
Capital & Funding Management American Express ABS Trusts American Express American Express Credit Account Master Trust Issuance Trust (AEIT) (AMXCA) Trust Established • 1996 • 2005 Eligible loans and receivables • US Consumer and Small Business • US Consumer, Small Business and Corporate cardmember
Slide 31: Credit Account Master Trust - Performance Trend
Capital & Funding Management Credit Account Master Trust - Performance Trend Days Delinquencies 4% Past Due Rate vs. Default Rate $300 MM 3% $200 MM 2% $100 MM 1% $ MM 10/11 11/11 12/1 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 0% 10/11 11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/1
Slide 32: Issuance Trust - Performance Trend
Capital & Funding Management Issuance Trust - Performance Trend Days Delinquencies Past Due vs. Default Rate 2.0% $60 MM 1.5% $40 MM 1.0% $20 MM 0.5% $ MM 0.0% 10/11 11/11 12/1 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 10/11 11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 31-
Slide 33: Slide 33
Slide 34: Annex 1
Annex 1 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, 2012 Ti
Slide 35: Annex 2
Annex 2 The following table presents a comparison of the Company's Tier 1 and Tier 1 common risk-based capital under Basel I rules to its estimated Tier 1 and Tier 1 common risk-based capital under Basel III rules, for purposes of calculating the estimated Tier 1 and Tier 1, common capital ratios an
Slide 36: Total Payout Ratio
Total Payout Ratio Percentage of Capital Generated Returned to Shareholders 132% 94% 88% 56% 43% 35% 32% 29% 30% ($ in billions) 2007 2008 2009* 2010 2011 Q4'11 Q1'12 Q2'12 Q3'12 Share Repurchases $3.6 $0.2 - $0.6 $2.3 $0.3 $0.2 $1.8 $1.0 Note: Payout Ratio is calculated by dividing the total amount
Slide 37: 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 38: Forward Looking Statements
Forward Looking Statements •legal and regulatory developments wherever the Company does business, including legislative and regulatory reforms in the United States, such as the Dodd-Frank Reform Act’s stricter regulation of large, interconnected financial institutions; changes in requirements relati
Slide 39: Forward Looking Statements
Forward Looking Statements •data breaches and fraudulent activity, which could damage the Company’s brand, increase the Company’s costs or have regulatory implications, and changes in regulation affecting privacy and data security under federal, state and foreign law, which could result in higher co
Slide 40: Forward Looking Statements
Forward Looking Statements •the actual amount to be spent by the Company on investments in the business, including on marketing, promotion, rewards and cardmember services and certain operating expenses, which will be based in part on management’s assessment of competitive opportunities and the Comp
Slide 41: Forward Looking Statements
Forward Looking Statements •the failure of the U.S. Congress to renew legislation regarding the active financing exception to Subpart F of the Internal Revenue Code, which could increase the Company’s effective tax rate and have an adverse impact on net income; and •factors beyond the Company’s cont
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