UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported: October 22, 2007
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
or organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
None
--------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act
---- (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
---- (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
---- Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
---- Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION AND ITEM 7.01 REGULATION
FD DISCLOSURE
The following information is furnished under Item 2.02 - Results of
Operations and Financial Condition and Item 7.01 - Regulation FD Disclosure:
On October 22, 2007, American Express Company issued a press release
announcing its financial results for the third quarter of 2007. A copy of such
press release is attached to this report as Exhibit 99.1 and is hereby
incorporated herein by reference. In addition, in conjunction with the
announcement of its financial results, American Express Company distributed
additional financial information relating to its 2007 third quarter financial
results and a 2007 Third Quarter Earnings Supplement. Such additional financial
information and the 2007 Third Quarter Earnings Supplement are attached to this
report as Exhibits 99.2 and 99.3, respectively, and each is hereby incorporated
by reference.
EXHIBIT
99.1 Press Release, dated October 22, 2007, of American Express Company
announcing its financial results for the third quarter of 2007.
99.2 Additional financial information relating to the financial results of
American Express Company for the third quarter of 2007.
99.3 2007 Third Quarter Earnings Supplement of American Express Company.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By: /s/ Stephen P. Norman
Name: Stephen P. Norman
Title: Secretary
DATE: October 22, 2007
EXHIBIT INDEX
Exhibit
No. Description
--------- -----------
99.1 Press Release, dated October 22, 2007, of American Express Company
announcing its financial results for the third quarter of 2007.
99.2 Additional financial information relating to the financial
results of American Express Company for the third quarter of
2007.
99.3 2007 Third Quarter Earnings Supplement of American Express Company.
EXHIBIT 99.1
NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RELEASE NEWS RE
[LOGO OF AMERICAN EXPRESS COMPANY]
CONTACTS: Media: Joanna Lambert Michael O'Neill
212-640-9668 212-640-5951
joanna.g.lambert@aexp.com mike.o'neill@aexp.com
Investors/Analysts: Alex Hopwood Ron Stovall
212-640-5495 212-640-5574
alex.w.hopwood@aexp.com ronald.stovall@aexp.com
FOR IMMEDIATE RELEASE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
AMERICAN EXPRESS REPORTS STRONG RESULTS
ON HIGHER REVENUES AND RECORD CARDMEMBER SPENDING.
2.5 MILLION CARDS-IN-FORCE ADDED IN THE QUARTER.
(Millions, except per share amounts)
Quarters Ended Percentage Nine Months Ended Percentage
September 30, Inc/(Dec) September 30, Inc/(Dec)
------------- --------- ------------- ---------
2007 2006 2007 2006
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues net of interest expense $ 6,945 $ 6,265 11% $ 20,367 $ 18,479 10%
Income From Continuing Operations $ 1,074 $ 934 15% $ 3,209 $ 2,716 18%
(Loss) Income From Discontinued Operations $ (7) $ 33 # $ (28) $ 69 #
Net Income $ 1,067 $ 967 10% $ 3,181 $ 2,785 14%
Earnings Per Common Share - Basic:
Income From Continuing Operations $ 0.92 $ 0.78 18% $ 2.72 $ 2.23 22%
(Loss) Income From Discontinued Operations $ (0.01) $ 0.02 # $ (0.02) $ 0.06 #
Net Income $ 0.91 $ 0.80 14% $ 2.70 $ 2.29 18%
Earnings Per Common Share - Diluted:
Income From Continuing Operations $ 0.90 $ 0.76 18% $ 2.67 $ 2.19 22%
(Loss) Income From Discontinued Operations - $ 0.03 # $ (0.02) $ 0.05 #
Net Income $ 0.90 $ 0.79 14% $ 2.65 $ 2.24 18%
Average Common Shares Outstanding
Basic 1,170 1,202 (3%) 1,179 1,217 (3%)
Diluted 1,192 1,227 (3%) 1,202 1,242 (3%)
Return on Average Equity* 38.2% 33.6% 38.2% 33.6%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Computed on a trailing 12-month basis using net income over average total
shareholders' equity (including discontinued operations) as included in the
Consolidated Financial Statements prepared in accordance with U.S. generally
accepted accounting principles (GAAP).
# Denotes a variance of more than 100%.
-1-
New York - October 22, 2007 - AMERICAN EXPRESS COMPANY (NYSE: AXP) today
reported third quarter income from continuing operations of $1.1 billion, up
15 percent from $934 million a year ago. Diluted earnings per share were
$0.90, up 18 percent from $0.76.
As previously disclosed, the Company entered into an agreement to sell
its international banking subsidiary, American Express Bank Ltd.(AEB). Net
income, which includes AEB within discontinued operations, totaled $1.1
billion for the quarter, up 10 percent from $967 million a year ago. On a per
share basis, net income was $0.90, up 14 percent from $0.79.
Consolidated revenues net of interest expense rose 11 percent to $6.9
billion, up from $6.3 billion a year ago.
Consolidated expenses totaled $4.5 billion, up 9 percent from $4.2
billion a year ago.
The Company's return on equity (ROE) was 38.2 percent.
"Our strong earnings growth this quarter reflected a 16 percent rise in
combined spending by consumers, small businesses and corporate Cardmembers,"
said Kenneth I. Chenault, chairman and chief executive.
"Investments that expanded our service, rewards and loyalty programs
helped to add 2.5 million cards during the quarter while also generating
excellent spending increases from existing Cardmembers.
"While we continue to be cautious about the overall economy, our ongoing
focus on the premium sector and careful management of loan and investment
portfolios allowed us to maintain strong credit quality that compares
favorably to the industry.
"We continued to build on the momentum of recent periods, generating
excellent revenue growth and ending the quarter in a strong competitive
position."
-2-
The third quarter results included a $75 million tax benefit primarily
related to the resolution of prior years' tax items. Also included in results
was $81 million ($41 million after-tax) of previously disclosed charges
primarily related to the contracted sale of American Express International
Deposit Company (AEIDC), a wholly-owned subsidiary of the Company which issues
investment certificates to AEB's customers.
The year-ago quarter results included a $33 million ($24 million
after-tax) gain related to the sale of the Company's card operations in
Malaysia and Indonesia.
DISCONTINUED OPERATIONS
Discontinued operations included a loss of $7 million primarily
reflecting the results of AEB. In the year-ago period, discontinued operations
included income of $33 million.
SEGMENT RESULTS
As previously announced, the Company reorganized its businesses into two
customer-focused groups - the Global Consumer Group and the Global
Business-to-Business Group. The Company will continue to report the U.S. Card
Services segment and Global Network & Merchant Services segments consistent
with previous reporting. The previously reported International Card & Global
Commercial Services segment will now be reported as two separate segments: the
International Card Services segment and the Global Commercial Services
segment. The Company's U.S. Card Services and International Card Services
segments are aligned with the Global Consumer Group and the Company's Global
Network & Merchant Services and Global Commercial Services segments are
aligned with the Global Business-to-Business Group.
In addition, beginning with the third quarter of 2007, and for all prior
periods, AEB results have been removed from the Corporate & Other segment and
reported within the discontinued operations line on the Company's Consolidated
Statements of Income. In addition to the agreement to sell AEB to Standard
Chartered PLC, AEIDC was also contracted to be sold to Standard Chartered 18
months after the close of the AEB sale through a put/call agreement. AEIDC
will continue to be reflected in continuing operations within the Corporate &
Other segment until one year before the anticipated close of this portion of
the transaction. Based on the assumed completion of the AEB sale in the first
quarter of 2008, we expect to begin reporting AEIDC's results in the
discontinued operations line in the third quarter of 2008. The following
segment discussion, as well as the selected financial data for all periods
presented, reflect the changes noted above.
-3-
U.S. CARD SERVICES reported third quarter net income of $592 million, up
6 percent from $558 million a year ago.
Revenues net of interest expense for the third quarter increased 12
percent to $3.6 billion, reflecting higher spending and borrowing by consumers
and small businesses, which were partially offset by higher interest expense.
Total expenses increased 6 percent. Marketing, promotion, rewards and
cardmember services expenses increased 7 percent from the year-ago period
primarily due to higher rewards costs partially offset by a targeted decrease
in marketing and promotion expenses. Human resources and other operating
expenses increased 5 percent.
Strong growth in loans outstanding, along with write-off and delinquency
rates returning to levels more consistent with historical rates from the
unusually low levels of a year ago, resulted in a 44 percent increase in
provisions for losses. Results for the third quarter included $18 million of
the previously mentioned tax benefit.
INTERNATIONAL CARD SERVICES reported third quarter net income of $140
million, up 32 percent from $106 million a year ago.
Revenues net of interest expense increased 17 percent to $1.1 billion,
reflecting higher Cardmember spending, as well as higher loan balances.
Total expenses increased 27 percent. Human resources and other operating
expenses increased 17 percent from a year ago when these expenses included a
gain related to the sale of the Company's card operations in Malaysia and
Indonesia. Marketing, promotion, rewards and cardmember services expenses
increased 43 percent due to an increase in rewards and higher marketing
promotion costs.
Provisions for losses were unchanged from a year ago as growth in the
loan portfolio was offset by a lower level of write off and delinquency rates.
Results for the third quarter included $17 million of the previously
mentioned tax benefit and certain consolidated tax benefits arising from this
segment's ongoing non-U.S. funding activities.
GLOBAL COMMERCIAL SERVICES reported third quarter net income of $135
million, up 29 percent from $105 million a year ago. Revenues net of interest
expense increased 12 percent to $1.1 billion, reflecting higher spending by
corporate Cardmembers.
Total expenses increased 10 percent. Human resources and other operating
expenses increased 10 percent reflecting continued growth in the business.
Marketing, promotion, rewards and cardmember services expenses increased 8
percent.
Provisions for losses increased 24 percent from year-ago levels,
primarily reflecting higher volumes.
Results for the third quarter included $9 million of the previously
mentioned tax benefit.
-4-
GLOBAL NETWORK & MERCHANT SERVICES reported third quarter net income of
$266 million, up 25 percent from $212 million a year ago.
Revenues net of interest expense for the third quarter increased 17
percent to $980 million. The increase reflected continued strong growth in
merchant-related revenue primarily from higher company-wide billed business.
Spending on Global Network Services cards increased 45 percent from
year-ago levels reflecting continued growth in spending on cards issued by
bank partners. Cards-in-force issued by bank partners increased 32 percent.
Total expenses increased 12 percent, reflecting higher human resources
costs and expanded marketing and promotion activities.
Results for the third quarter included $22 million of the previously
mentioned tax benefit.
CORPORATE AND OTHER reported third quarter net expenses of $59 million,
compared with net expenses of $47 million a year ago. The increase was
primarily due to the previously mentioned charges at AEIDC.
***
-5-
American Express Company (www.americanexpress.com) is a leading global
payments, network and travel company founded in 1850.
Note: The 2007 Third Quarter Earnings Supplement will be available today
on the American Express web site at HTTP://IR.AMERICANEXPRESS.COM. An investor
conference call will be held with Chief Financial Officer, Daniel T. Henry, at
5:00 p.m. (EDT) today to discuss third quarter earnings results, operating
performance and other topics that may be raised during the discussion. Live
audio of the investor conference call will be accessible to the general public
on the American Express web site at HTTP://IR.AMERICANEXPRESS.COM. A replay of
the conference call will be available later today at the same web site
address.
***
THIS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO
RISKS AND UNCERTAINTIES. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"OPTIMISTIC," "INTEND," "PLAN," "AIM," "WILL," "MAY," "SHOULD," "COULD,"
"WOULD," "LIKELY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH
THEY ARE MADE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED
TO, THE FOLLOWING: THE COMPANY'S ABILITY TO MEET ITS ROE TARGET RANGE OF 33 TO
36 PERCENT ON AVERAGE AND OVER TIME, WHICH WILL DEPEND IN PART ON FACTORS SUCH
AS THE COMPANY'S ABILITY TO GENERATE SUFFICIENT REVENUE GROWTH AND ACHIEVE
SUFFICIENT MARGINS, FLUCTUATIONS IN THE CAPITAL REQUIRED TO SUPPORT ITS
BUSINESSES, THE MIX OF THE COMPANY'S FINANCINGS, AND FLUCTUATIONS IN THE LEVEL
OF THE COMPANY'S SHAREHOLDERS' EQUITY DUE TO SHARE REPURCHASES, DIVIDENDS,
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME AND ACCOUNTING CHANGES,
AMONG OTHER THINGS; THE ACTUAL AMOUNT SPENT BY THE COMPANY IN THE FOURTH
QUARTER OF 2007 ON MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES BASED
ON MANAGEMENT'S ASSESSMENT OF COMPETITIVE OPPORTUNITIES AND OTHER FACTORS
AFFECTING ITS JUDGMENT; THE COMPANY'S ABILITY TO GROW ITS BUSINESS AND MEET OR
EXCEED ITS RETURN ON SHAREHOLDERS' EQUITY TARGET BY REINVESTING APPROXIMATELY
35 PERCENT OF ANNUALLY-GENERATED CAPITAL, AND RETURNING APPROXIMATELY 65
PERCENT OF SUCH CAPITAL TO SHAREHOLDERS, OVER TIME, WHICH WILL DEPEND ON THE
COMPANY'S ABILITY TO MANAGE ITS CAPITAL NEEDS AND THE EFFECT OF BUSINESS MIX,
-6-
ACQUISITIONS AND RATING AGENCY REQUIREMENTS; CONSUMER AND BUSINESS SPENDING ON
THE COMPANY'S CREDIT AND CHARGE CARD PRODUCTS AND TRAVELERS CHEQUES AND OTHER
PREPAID PRODUCTS AND GROWTH IN CARD LENDING BALANCES, WHICH DEPEND IN PART ON
THE ABILITY TO ISSUE NEW AND ENHANCED CARD AND PREPAID PRODUCTS, SERVICES AND
REWARDS PROGRAMS, AND INCREASE REVENUES FROM SUCH PRODUCTS, ATTRACT NEW
CARDMEMBERS, REDUCE CARDMEMBER ATTRITION, CAPTURE A GREATER SHARE OF EXISTING
CARDMEMBERS' SPENDING, AND SUSTAIN PREMIUM DISCOUNT RATES ON ITS CARD PRODUCTS
IN LIGHT OF REGULATORY AND MARKET PRESSURES, INCREASE MERCHANT COVERAGE,
RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND
EXPAND THE GLOBAL NETWORK SERVICES BUSINESS; THE SUCCESS OF THE GLOBAL NETWORK
SERVICES BUSINESS IN PARTNERING WITH BANKS IN THE UNITED STATES, WHICH WILL
DEPEND IN PART ON THE EXTENT TO WHICH SUCH BUSINESS FURTHER ENHANCES THE
COMPANY'S BRAND, ALLOWS THE COMPANY TO LEVERAGE ITS SIGNIFICANT PROCESSING
SCALE, EXPANDS MERCHANT COVERAGE OF THE NETWORK, PROVIDES GLOBAL NETWORK
SERVICES' BANK PARTNERS IN THE UNITED STATES THE BENEFITS OF GREATER
CARDMEMBER LOYALTY AND HIGHER SPEND PER CUSTOMER, AND MERCHANT BENEFITS SUCH
AS GREATER TRANSACTION VOLUME AND ADDITIONAL HIGHER SPENDING CUSTOMERS;
FLUCTUATIONS IN INTEREST RATES (INCLUDING FLUCTUATIONS IN BENCHMARKS, SUCH AS
LIBOR AND OTHER BENCHMARK RATES, USED TO PRICE LOANS AND OTHER INDEBTEDNESS,
AS WELL AS CREDIT SPREADS IN THE PRICING OF LOANS AND OTHER INDEBTEDNESS),
WHICH IMPACT THE COMPANY'S BORROWING COSTS, RETURN ON LENDING PRODUCTS AND THE
VALUE OF THE COMPANY'S INVESTMENTS; THE CONTINUATION OF FAVORABLE TRENDS,
INCLUDING INCREASED TRAVEL AND ENTERTAINMENT SPENDING, AND THE OVERALL LEVEL
OF CONSUMER CONFIDENCE; THE COSTS AND INTEGRATION OF ACQUISITIONS; THE
UNDERLYING ASSUMPTIONS AND EXPECTATIONS RELATED TO THE SALE OF THE AMERICAN
EXPRESS BANK LTD. BUSINESSES PROVING TO BE INACCURATE OR UNREALIZED,
INCLUDING, AMONG OTHER THINGS, THE LIKELIHOOD OF AND EXPECTED TIMING FOR
COMPLETION OF THE TRANSACTION, THE PROCEEDS TO BE RECEIVED BY THE COMPANY IN
THE TRANSACTION AND THE TRANSACTION'S IMPACT ON THE COMPANY'S EARNINGS; THE
SUCCESS, TIMELINESS AND FINANCIAL IMPACT (INCLUDING COSTS, COST SAVINGS AND
OTHER BENEFITS INCLUDING INCREASED REVENUES), AND BENEFICIAL EFFECT ON THE
COMPANY'S OPERATING EXPENSE TO REVENUE RATIO, BOTH IN THE SHORT-TERM AND OVER
TIME, OF REENGINEERING INITIATIVES BEING IMPLEMENTED OR CONSIDERED BY THE
COMPANY, INCLUDING COST MANAGEMENT, STRUCTURAL AND STRATEGIC MEASURES SUCH AS
VENDOR, PROCESS, FACILITIES AND OPERATIONS CONSOLIDATION, OUTSOURCING
(INCLUDING, AMONG OTHERS, TECHNOLOGIES OPERATIONS), RELOCATING CERTAIN
FUNCTIONS TO LOWER-COST OVERSEAS LOCATIONS, MOVING INTERNAL AND EXTERNAL
FUNCTIONS TO THE INTERNET TO SAVE COSTS, AND PLANNED STAFF REDUCTIONS RELATING
TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE COMPANY'S ABILITY TO REINVEST
THE BENEFITS ARISING FROM SUCH REENGINEERING ACTIONS IN ITS BUSINESSES; THE
ABILITY TO CONTROL AND MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND
PROMOTION EXPENSES AS BUSINESS EXPANDS OR CHANGES, INCLUDING THE ABILITY TO
ACCURATELY ESTIMATE THE PROVISION FOR THE COST OF THE MEMBERSHIP REWARDS
PROGRAM; THE COMPANY'S ABILITY TO MANAGE CREDIT RISK RELATED TO CONSUMER DEBT,
BUSINESS LOANS, MERCHANT BANKRUPTCIES AND OTHER CREDIT TRENDS AND THE RATE OF
BANKRUPTCIES, WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT PAYMENTS BY
INDIVIDUAL AND CORPORATE CUSTOMERS AND BUSINESSES THAT ACCEPT THE COMPANY'S
CARD PRODUCTS AND RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS;
BANKRUPTCIES, RESTRUCTURINGS, CONSOLIDATIONS OR SIMILAR EVENTS AFFECTING THE
AIRLINE OR ANY OTHER INDUSTRY REPRESENTING A SIGNIFICANT PORTION OF THE
COMPANY'S BILLED BUSINESS, INCLUDING ANY POTENTIAL NEGATIVE EFFECT ON
PARTICULAR CARD PRODUCTS AND SERVICES AND BILLED BUSINESS GENERALLY THAT COULD
RESULT FROM THE ACTUAL OR PERCEIVED WEAKNESS OF KEY BUSINESS PARTNERS IN SUCH
INDUSTRIES; THE TRIGGERING OF OBLIGATIONS TO MAKE PAYMENTS TO CERTAIN CO-BRAND
PARTNERS, MERCHANTS, VENDORS AND CUSTOMERS UNDER CONTRACTUAL ARRANGEMENTS WITH
SUCH PARTIES UNDER CERTAIN CIRCUMSTANCES; A DOWNTURN IN THE COMPANY'S
BUSINESSES AND/OR NEGATIVE CHANGES IN THE COMPANY'S AND ITS SUBSIDIARIES'
CREDIT RATINGS, WHICH COULD RESULT IN CONTINGENT PAYMENTS UNDER CONTRACTS,
DECREASED LIQUIDITY AND HIGHER BORROWING COSTS; FLUCTUATIONS IN FOREIGN
CURRENCY EXCHANGE RATES; ACCURACY OF ESTIMATES FOR THE FAIR VALUE OF THE
ASSETS IN THE COMPANY'S INVESTMENT PORTFOLIO AND, IN PARTICULAR, THOSE
INVESTMENTS THAT ARE NOT READILY MARKETABLE, INCLUDING THE VALUATION OF THE
INTEREST-ONLY STRIP RELATING TO THE COMPANY'S LENDING SECURITIZATIONS; THE
COMPANY'S ABILITY TO INVEST IN TECHNOLOGY ADVANCES ACROSS ALL AREAS OF ITS
BUSINESS TO STAY ON THE LEADING EDGE OF TECHNOLOGIES APPLICABLE TO THE
PAYMENTS INDUSTRY; THE COMPANY'S ABILITY TO PROTECT ITS INTELLECTUAL PROPERTY
RIGHTS (IP) AND AVOID INFRINGING THE IP OF OTHER PARTIES; THE POTENTIAL
NEGATIVE EFFECT ON THE COMPANY'S BUSINESSES AND INFRASTRUCTURE, INCLUDING
INFORMATION TECHNOLOGY, OF TERRORIST ATTACKS, NATURAL DISASTERS OR OTHER
CATASTROPHIC EVENTS IN THE FUTURE; POLITICAL OR ECONOMIC INSTABILITY IN
CERTAIN REGIONS OR COUNTRIES, WHICH COULD AFFECT LENDING AND OTHER COMMERCIAL
ACTIVITIES, AMONG OTHER BUSINESSES, OR RESTRICTIONS ON CONVERTIBILITY OF
CERTAIN CURRENCIES; CHANGES IN LAWS OR GOVERNMENT REGULATIONS; ACCOUNTING
CHANGES; OUTCOMES AND COSTS ASSOCIATED WITH LITIGATION AND COMPLIANCE AND
REGULATORY MATTERS; AND COMPETITIVE PRESSURES IN ALL OF THE COMPANY'S MAJOR
BUSINESSES. A FURTHER DESCRIPTION OF THESE AND OTHER RISKS AND UNCERTAINTIES
CAN BE FOUND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2006, AND ITS OTHER REPORTS FILED WITH THE SEC.
-7-
All information in the following tables is presented on a basis prepared in
accordance with U.S. generally accepted accounting principles (GAAP), unless
otherwise indicated. Amounts herein reflect certain adjustments as noted in
the Company's Form 8-K dated March 30, 2007 filed with the U.S. Securities and
Exchange Commission (SEC). Amounts have also been revised to reflect American
Express Bank Ltd. (AEB) activities as discontinued operations. In addition,
amounts herein reflect certain modifications made to the Company's reportable
operating segment disclosures as noted in the Company's Form 8-K dated April
19, 2007 filed with the SEC. Segment disclosures have also been revised to
reflect the Company's organizational changes that became effective July 1,
2007 and to remove AEB from the Corporate & Other segment. See also pages 2-3
of the 2007 Third Quarter Earnings Supplement for a description of such
adjustments.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Discount revenue $ 3,659 $ 3,259 12% $ 10,684 $ 9,520 12%
Net card fees 522 462 13 1,506 1,515 (1)
Travel commissions and fees 484 427 13 1,412 1,328 6
Other commissions and fees 644 539 19 1,767 1,660 6
Securitization income, net 392 384 2 1,181 1,142 3
Other 362 417 (13) 1,175 1,161 1
-------- -------- -------- --------
Total 6,063 5,488 10 17,725 16,326 9
-------- -------- -------- --------
Interest income
Cardmember lending finance revenue 1,581 1,213 30 4,463 3,260 37
Other (including investment certificates) 309 291 6 969 860 13
-------- -------- -------- --------
Total 1,890 1,504 26 5,432 4,120 32
-------- -------- -------- --------
Total revenues 7,953 6,992 14 23,157 20,446 13
-------- -------- -------- --------
Interest expense
Cardmember lending 444 318 40 1,260 841 50
Charge card and other 564 409 38 1,530 1,126 36
-------- -------- -------- --------
Total 1,008 727 39 2,790 1,967 42
-------- -------- -------- --------
Revenues net of interest expense 6,945 6,265 11 20,367 18,479 10
-------- -------- -------- --------
Expenses
Marketing, promotion, rewards and cardmember services 1,810 1,586 14 5,098 4,772 7
Human resources 1,366 1,227 11 4,001 3,679 9
Professional services 539 562 (4) 1,637 1,621 1
Occupancy and equipment 374 346 8 1,054 1,012 4
Communications 118 104 13 342 322 6
Other 339 342 (1) 980 993 (1)
-------- -------- -------- --------
Total 4,546 4,167 9 13,112 12,399 6
-------- -------- -------- --------
Provisions for losses and benefits
Charge card 279 257 9 721 658 10
Cardmember lending 579 412 41 1,791 1,139 57
Other (including investment certificates) 124 118 5 306 331 (8)
-------- -------- -------- --------
Total 982 787 25 2,818 2,128 32
-------- -------- -------- --------
Pretax income from continuing operations 1,417 1,311 8 4,437 3,952 12
Income tax provision 343 377 (9) 1,228 1,236 (1)
-------- -------- -------- --------
Income from continuing operations 1,074 934 15 3,209 2,716 18
(Loss) Income from discontinued operations, net of tax (7) 33 # (28) 69 #
-------- -------- -------- --------
Net income $ 1,067 $ 967 10 $ 3,181 $ 2,785 14
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
-8-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Billions)
<Table>
<Caption>
September 30, December 31,
2007 2006
--------------- ---------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 8 $ 5
Accounts receivable 40 39
Investments 16 18
Loans 50 43
Other assets 10 9
Assets of discontinued operations 17 14
--------------- ---------------
Total assets $ 141 $ 128
=============== ===============
Liabilities and Shareholders' Equity
Short-term debt $ 15 $ 15
Long-term debt 54 43
Other liabilities 45 45
Liabilities of discontinued operations 16 14
--------------- ---------------
Total liabilities 130 117
--------------- ---------------
Shareholders' equity 11 11
--------------- ---------------
Total liabilities and shareholders' equity $ 141 $ 128
=============== ===============
</Table>
-9-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES NET OF INTEREST EXPENSE
U.S. Card Services $ 3,589 $ 3,203 12% $ 10,513 $ 9,271 13%
International Card Services 1,114 952 17 3,142 2,939 7
Global Commercial Services 1,064 949 12 3,141 2,918 8
Global Network & Merchant Services 980 841 17 2,823 2,428 16
-------- -------- -------- --------
6,747 5,945 13 19,619 17,556 12
Corporate & Other, including adjustments and
eliminations 198 320 (38) 748 923 (19)
-------- -------- -------- --------
CONSOLIDATED REVENUES NET OF INTEREST EXPENSE $ 6,945 $ 6,265 11 $ 20,367 $ 18,479 10
======== ======== ======== ========
PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS
U.S. Card Services $ 912 $ 839 9 $ 2,770 $ 2,600 7
International Card Services 110 121 (9) 298 236 26
Global Commercial Services 187 157 19 600 549 9
Global Network & Merchant Services 389 314 24 1,181 891 33
-------- -------- -------- --------
1,598 1,431 12 4,849 4,276 13
Corporate & Other (181) (120) 51 (412) (324) 27
-------- -------- -------- --------
PRETAX INCOME FROM CONTINUING OPERATIONS $ 1,417 $ 1,311 8 $ 4,437 $ 3,952 12
======== ======== ======== ========
NET INCOME (LOSS)
U.S. Card Services $ 592 $ 558 6 $ 1,816 $ 1,679 8
International Card Services 140 106 32 359 244 47
Global Commercial Services 135 105 29 426 360 18
Global Network & Merchant Services 266 212 25 768 578 33
-------- -------- -------- --------
1,133 981 15 3,369 2,861 18
Corporate & Other (59) (47) 26 (160) (145) 10
-------- -------- -------- --------
Income from continuing operations 1,074 934 15 3,209 2,716 18
(Loss) Income from discontinued operations, net
of tax (7) 33 # (28) 69 #
-------- -------- -------- --------
NET INCOME $ 1,067 $ 967 10 $ 3,181 $ 2,785 14
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
-10-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.92 $ 0.78 18% $ 2.72 $ 2.23 22%
(Loss) Income from discontinued operations (0.01) 0.02 # $ (0.02) 0.06 #
-------- -------- -------- --------
Net income $ 0.91 $ 0.80 14% $ 2.70 $ 2.29 18%
======== ======== ======== ========
Average common shares outstanding (millions) 1,170 1,202 (3)% 1,179 1,217 (3)%
======== ======== ======== ========
DILUTED
Income from continuing operations $ 0.90 $ 0.76 18% $ 2.67 $ 2.19 22%
(Loss) Income from discontinued operations - 0.03 # (0.02) 0.05 #
-------- -------- -------- --------
Net income $ 0.90 $ 0.79 14% $ 2.65 $ 2.24 18%
======== ======== ======== ========
Average common shares outstanding (millions) 1,192 1,227 (3)% 1,202 1,242 (3)%
======== ======== ======== ========
Cash dividends declared per common share $ 0.15 $ 0.15 -% $ 0.45 $ 0.42 7%
======== ======== ======== ========
</Table>
SELECTED STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Return on average equity (A) 38.2% 33.6% 38.2% 33.6%
Common shares outstanding (millions) 1,169 1,204 (3)% 1,169 1,204 (3)%
Book value per common share $ 9.32 $ 8.93 4% $ 9.32 $ 8.93 4%
Shareholders' equity (billions) $ 10.9 $ 10.8 1% $ 10.9 $ 10.8 1%
</Table>
# - Denotes a variance of more than 100%.
(A) Computed on a trailing 12-month basis using net income over average total
shareholders' equity (including discontinued operations) as included in the
Consolidated Financial Statements prepared in accordance with GAAP.
-11-
EXHIBIT 99.2
All information in the following tables is presented on a basis prepared in
accordance with U.S. generally accepted accounting principles (GAAP), unless
otherwise indicated. Amounts herein reflect certain adjustments as noted in
the Company's Form 8-K dated March 30, 2007 filed with the U.S. Securities and
Exchange Commission (SEC). Amounts have also been revised to reflect American
Express Bank Ltd. (AEB) activities as discontinued operations. In addition,
amounts herein reflect certain modifications made to the Company's reportable
operating segment disclosures as noted in the Company's Form 8-K dated April
19, 2007 filed with the SEC. Segment disclosures have also been revised to
reflect the Company's organizational changes that became effective July 1,
2007 and to remove AEB from the Corporate & Other segment. See also pages 2-3
of the 2007 Third Quarter Earnings Supplement for a description of such
adjustments.
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Discount revenue $ 3,659 $ 3,259 12% $ 10,684 $ 9,520 12%
Net card fees 522 462 13 1,506 1,515 (1)
Travel commissions and fees 484 427 13 1,412 1,328 6
Other commissions and fees 644 539 19 1,767 1,660 6
Securitization income, net 392 384 2 1,181 1,142 3
Other 362 417 (13) 1,175 1,161 1
-------- -------- -------- --------
Total 6,063 5,488 10 17,725 16,326 9
-------- -------- -------- --------
Interest income
Cardmember lending finance revenue 1,581 1,213 30 4,463 3,260 37
Other (including investment certificates) 309 291 6 969 860 13
-------- -------- -------- --------
Total 1,890 1,504 26 5,432 4,120 32
-------- -------- -------- --------
Total revenues 7,953 6,992 14 23,157 20,446 13
-------- -------- -------- --------
Interest expense
Cardmember lending 444 318 40 1,260 841 50
Charge card and other 564 409 38 1,530 1,126 36
-------- -------- -------- --------
Total 1,008 727 39 2,790 1,967 42
-------- -------- -------- --------
Revenues net of interest expense 6,945 6,265 11 20,367 18,479 10
-------- -------- -------- --------
Expenses
Marketing, promotion, rewards and cardmember services 1,810 1,586 14 5,098 4,772 7
Human resources 1,366 1,227 11 4,001 3,679 9
Professional services 539 562 (4) 1,637 1,621 1
Occupancy and equipment 374 346 8 1,054 1,012 4
Communications 118 104 13 342 322 6
Other 339 342 (1) 980 993 (1)
-------- -------- -------- --------
Total 4,546 4,167 9 13,112 12,399 6
-------- -------- -------- --------
Provisions for losses and benefits
Charge card 279 257 9 721 658 10
Cardmember lending 579 412 41 1,791 1,139 57
Other (including investment certificates) 124 118 5 306 331 (8)
-------- -------- -------- --------
Total 982 787 25 2,818 2,128 32
-------- -------- -------- --------
Pretax income from continuing operations 1,417 1,311 8 4,437 3,952 12
Income tax provision 343 377 (9) 1,228 1,236 (1)
-------- -------- -------- --------
Income from continuing operations 1,074 934 15 3,209 2,716 18
(Loss) Income from discontinued operations, net of tax (7) 33 # (28) 69 #
-------- -------- -------- --------
Net income $ 1,067 $ 967 10 $ 3,181 $ 2,785 14
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
-1-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Billions)
<Table>
<Caption>
September 30, December 31,
2007 2006
--------------- ---------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 8 $ 5
Accounts receivable 40 39
Investments 16 18
Loans 50 43
Other assets 10 9
Assets of discontinued operations 17 14
--------------- ---------------
Total assets $ 141 $ 128
=============== ===============
Liabilities and Shareholders' Equity
Short-term debt $ 15 $ 15
Long-term debt 54 43
Other liabilities 45 45
Liabilities of discontinued operations 16 14
--------------- ---------------
Total liabilities 130 117
--------------- ---------------
Shareholders' equity 11 11
--------------- ---------------
Total liabilities and shareholders' equity $ 141 $ 128
=============== ===============
</Table>
-2-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES NET OF INTEREST EXPENSE
U.S. Card Services $ 3,589 $ 3,203 12% $ 10,513 $ 9,271 13%
International Card Services 1,114 952 17 3,142 2,939 7
Global Commercial Services 1,064 949 12 3,141 2,918 8
Global Network & Merchant Services 980 841 17 2,823 2,428 16
-------- -------- -------- --------
6,747 5,945 13 19,619 17,556 12
Corporate & Other, including adjustments and
eliminations 198 320 (38) 748 923 (19)
-------- -------- -------- --------
CONSOLIDATED REVENUES NET OF INTEREST EXPENSE $ 6,945 $ 6,265 11 $ 20,367 $ 18,479 10
======== ======== ======== ========
PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS
U.S. Card Services $ 912 $ 839 9 $ 2,770 $ 2,600 7
International Card Services 110 121 (9) 298 236 26
Global Commercial Services 187 157 19 600 549 9
Global Network & Merchant Services 389 314 24 1,181 891 33
-------- -------- -------- --------
1,598 1,431 12 4,849 4,276 13
Corporate & Other (181) (120) 51 (412) (324) 27
-------- -------- -------- --------
PRETAX INCOME FROM CONTINUING OPERATIONS $ 1,417 $ 1,311 8 $ 4,437 $ 3,952 12
======== ======== ======== ========
NET INCOME (LOSS)
U.S. Card Services $ 592 $ 558 6 $ 1,816 $ 1,679 8
International Card Services 140 106 32 359 244 47
Global Commercial Services 135 105 29 426 360 18
Global Network & Merchant Services 266 212 25 768 578 33
-------- -------- -------- --------
1,133 981 15 3,369 2,861 18
Corporate & Other (59) (47) 26 (160) (145) 10
-------- -------- -------- --------
Income from continuing operations 1,074 934 15 3,209 2,716 18
(Loss) Income from discontinued operations, net
of tax (7) 33 # (28) 69 #
-------- -------- -------- --------
NET INCOME $ 1,067 $ 967 10 $ 3,181 $ 2,785 14
======== ======== ======== ========
</Table>
# - Denotes a variance of more than 100%.
-3-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.92 $ 0.78 18% $ 2.72 $ 2.23 22%
(Loss) Income from discontinued operations (0.01) 0.02 # $ (0.02) 0.06 #
-------- -------- -------- --------
Net income $ 0.91 $ 0.80 14% $ 2.70 $ 2.29 18%
======== ======== ======== ========
Average common shares outstanding (millions) 1,170 1,202 (3)% 1,179 1,217 (3)%
======== ======== ======== ========
DILUTED
Income from continuing operations $ 0.90 $ 0.76 18% $ 2.67 $ 2.19 22%
(Loss) Income from discontinued operations - 0.03 # (0.02) 0.05 #
-------- -------- -------- --------
Net income $ 0.90 $ 0.79 14% $ 2.65 $ 2.24 18%
======== ======== ======== ========
Average common shares outstanding (millions) 1,192 1,227 (3)% 1,202 1,242 (3)%
======== ======== ======== ========
Cash dividends declared per common share $ 0.15 $ 0.15 -% $ 0.45 $ 0.42 7%
======== ======== ======== ========
</Table>
SELECTED STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended Nine Months Ended
September 30, September 30,
-------------------- Percentage -------------------- Percentage
2007 2006 Inc/(Dec) 2007 2006 Inc/(Dec)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Return on average equity (A) 38.2% 33.6% 38.2% 33.6%
Common shares outstanding (millions) 1,169 1,204 (3)% 1,169 1,204 (3)%
Book value per common share $ 9.32 $ 8.93 4% $ 9.32 $ 8.93 4%
Shareholders' equity (billions) $ 10.9 $ 10.8 1% $ 10.9 $ 10.8 1%
</Table>
# - Denotes a variance of more than 100%.
(A) Computed on a trailing 12-month basis using net income over average total
shareholders' equity (including discontinued operations) as included in the
Consolidated Financial Statements prepared in accordance with GAAP.
-4-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
---------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Card billed business (A):
United States $ 115.2 $ 101.7 13%
Outside the United States 47.3 38.6 23
--------- ---------
Total $ 162.5 $ 140.3 16
========= =========
Total cards-in-force (millions) (B):
United States 51.7 46.8 10%
Outside the United States 33.0 29.7 11
--------- ---------
Total 84.7 76.5 11
========= =========
Basic cards-in-force (millions) (B):
United States 40.1 36.0 11%
Outside the United States 28.3 25.2 12
--------- ---------
Total 68.4 61.2 12
========= =========
Average discount rate (C) 2.57% 2.57%
Average basic cardmember spending (dollars) (D) $ 3,006 $ 2,782 8%
Average fee per card (dollars) (D) $ 36 $ 34 6%
</Table>
(A) 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.
(B) Total cards-in-force represents the number of cards that are issued and
outstanding. Proprietary basic consumer cards-in-force includes basic cards
issued to the primary account owner and does not include additional
supplemental cards issued on that account. Proprietary basic small business
and corporate cards-in-force include basic and supplemental cards issued to
employee cardmembers. Non-proprietary basic cards-in-force includes all cards
that are issued and outstanding under network partnership agreements.
(C) Computed as follows: Discount revenue from all card spending (proprietary
and Global Network Services) at merchants divided by all billed business
(proprietary and Global Network Services) generating discount revenue at such
merchants. Only merchants acquired by the Company are included in the
computation.
(D) Average basic cardmember spending and average fee per card are computed
from proprietary card activities only. Average fee per card is computed based
on net card fees excluding the amortization of deferred direct acquisition
costs.
-5-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION (CONTINUED)
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
---------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Worldwide cardmember receivables:
Total receivables $ 38.5 $ 35.0 10%
90 days past due as a % of total 2.8% 2.8%
Loss reserves (millions): $ 998 $ 947 5%
% of receivables 2.6% 2.7%
% of 90 days past due 91% 97%
Net loss ratio as a % of charge volume 0.26% 0.26%
Worldwide cardmember lending - owned basis (A):
Total loans $ 50.5 $ 38.3 32%
30 days past due loans as a % of total 3.0% 2.8%
Loss reserves (millions):
Beginning balance $ 1,417 $ 1,086 30%
Provision 543 381 43
Net write offs (499) (353) 41
Other 8 12 (33)
--------- ---------
Ending balance $ 1,469 $ 1,126 30
========= =========
% of loans 2.9% 2.9%
% of past due 97% 106%
Average loans $ 48.8 $ 37.5 30%
Net write-off rate 4.1% 3.8%
Net finance revenue(B)/average loans 9.3% 9.5%
Worldwide cardmember lending - managed basis (C):
Total loans $ 72.0 $ 58.5 23%
30 days past due loans as a % of total 2.8% 2.7%
Loss reserves (millions):
Beginning balance $ 1,917 $ 1,546 24%
Provision 762 512 49
Net write offs (696) (498) 40
Other 8 11 (27)
--------- ---------
Ending balance $ 1,991 $ 1,571 27
========= =========
% of loans 2.8% 2.7%
% of past due 97% 101%
Average loans $ 70.1 $ 57.6 22%
Net write-off rate 4.0% 3.5%
Net finance revenue(B)/average loans 9.4% 9.4%
</Table>
# - Denotes a variance of more than 100%.
(A) "Owned," a GAAP basis measurement, reflects only cardmember loans included
in the Company's Consolidated Balance Sheets.
(B) Computed on an annualized basis.
(C) Includes on-balance sheet cardmember loans and off-balance sheet
securitized cardmember loans. The difference between the "owned basis" (GAAP)
information and "managed basis" information is attributable to the effects of
securitization activities. Refer to the information set forth under U.S. Card
Services Selected Financial Information on page 20 for further discussion of
the managed basis presentation.
-6-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
<Table>
<Caption>
Quarters Ended
-------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues
Discount revenue $ 3,659 $ 3,670 $ 3,355 $ 3,458 $ 3,259
Net card fees 522 500 484 479 462
Travel commissions and fees 484 491 437 450 427
Other commissions and fees 644 587 536 573 539
Securitization income, net 392 332 457 347 384
Other 362 426 387 528 417
------------- ---------- ---------- ------------- -------------
Total 6,063 6,006 5,656 5,835 5,488
------------- ---------- ---------- ------------- -------------
Interest income
Cardmember lending finance revenue 1,581 1,514 1,368 1,326 1,213
Other (including investment certificates) 309 357 303 287 291
------------- ---------- ---------- ------------- -------------
Total 1,890 1,871 1,671 1,613 1,504
------------- ---------- ---------- ------------- -------------
Total revenues 7,953 7,877 7,327 7,448 6,992
------------- ---------- ---------- ------------- -------------
Interest expense
Cardmember lending 444 431 385 351 318
Charge card and other 564 508 458 422 409
------------- ---------- ---------- ------------- -------------
Total 1,008 939 843 773 727
------------- ---------- ---------- ------------- -------------
Revenues net of interest expense 6,945 6,938 6,484 6,675 6,265
------------- ---------- ---------- ------------- -------------
Expenses
Marketing, promotion, rewards and cardmember
services 1,810 1,826 1,462 1,732 1,586
Human resources 1,366 1,334 1,301 1,361 1,227
Professional services 539 580 518 648 562
Occupancy and equipment 374 352 328 372 346
Communications 118 112 112 112 104
Other 339 348 293 365 342
------------- ---------- ---------- ------------- -------------
Total 4,546 4,552 4,014 4,590 4,167
------------- ---------- ---------- ------------- -------------
Provisions for losses and benefits
Charge card 279 233 209 277 257
Cardmember lending 579 638 574 484 412
Other (including investment certificates) 124 106 76 137 118
------------- ---------- ---------- ------------- -------------
Total 982 977 859 898 787
------------- ---------- ---------- ------------- -------------
Pretax income from continuing operations 1,417 1,409 1,611 1,187 1,311
Income tax provision 343 369 516 292 377
------------- ---------- ---------- ------------- -------------
Income from continuing operations 1,074 1,040 1,095 895 934
(Loss) Income from discontinued operations, net of tax (7) 17 (38) 27 33
------------- ---------- ---------- ------------- -------------
Net income $ 1,067 $ 1,057 $ 1,057 $ 922 $ 967
============= ========== ========== ============= =============
</Table>
-7-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY
(Millions)
<Table>
<Caption>
Quarters Ended
-------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES NET OF INTEREST EXPENSE
U.S. Card Services $ 3,589 $ 3,560 $ 3,364 $ 3,349 $ 3,203
International Card Services 1,114 1,049 979 1,026 952
Global Commercial Services 1,064 1,083 994 982 949
Global Network & Merchant Services 980 966 877 916 841
------------- ---------- ---------- ------------- -------------
6,747 6,658 6,214 6,273 5,945
Corporate & Other, including adjustments and
eliminations 198 280 270 402 320
------------- ---------- ---------- ------------- -------------
CONSOLIDATED REVENUES NET OF INTEREST EXPENSE $ 6,945 $ 6,938 $ 6,484 $ 6,675 $ 6,265
============= ========== ========== ============= =============
PRETAX INCOME (LOSS) FROM CONTINUING OPERATIONS
U.S. Card Services $ 912 $ 827 $ 1,031 $ 723 $ 839
International Card Services 110 92 96 76 121
Global Commercial Services 187 218 195 167 157
Global Network & Merchant Services 389 418 374 297 314
------------- ---------- ---------- ------------- -------------
1,598 1,555 1,696 1,263 1,431
Corporate & Other (181) (146) (85) (76) (120)
------------- ---------- ---------- ------------- -------------
PRETAX INCOME FROM CONTINUING OPERATIONS $ 1,417 $ 1,409 $ 1,611 $ 1,187 $ 1,311
============= ========== ========== ============= =============
NET INCOME (LOSS)
U.S. Card Services $ 592 $ 580 $ 644 $ 473 $ 558
International Card Services 140 117 102 99 106
Global Commercial Services 135 162 129 117 105
Global Network & Merchant Services 266 266 236 201 212
------------- ---------- ---------- ------------- -------------
1,133 1,125 1,111 890 981
Corporate & Other (59) (85) (16) 5 (47)
------------- ---------- ---------- ------------- -------------
Income from continuing operations 1,074 1,040 1,095 895 934
(Loss) Income from discontinued operations, net
of tax (7) 17 (38) 27 33
------------- ---------- ---------- ------------- -------------
NET INCOME $ 1,067 $ 1,057 $ 1,057 $ 922 $ 967
============= ========== ========== ============= =============
</Table>
-8-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
FINANCIAL SUMMARY (CONTINUED)
<Table>
<Caption>
Quarters Ended
-------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
BASIC
Income from continuing operations $ 0.92 $ 0.88 $ 0.92 $ 0.75 $ 0.78
(Loss) Income from discontinued operations (0.01) 0.02 (0.03) 0.02 0.02
------------- ---------- ---------- ------------- -------------
Net income $ 0.91 $ 0.90 $ 0.89 $ 0.77 $ 0.80
============= ========== ========== ============= =============
Average common shares outstanding (millions) 1,170 1,179 1,187 1,196 1,202
============= ========== ========== ============= =============
DILUTED
Income from continuing operations $ 0.90 $ 0.86 $ 0.90 $ 0.73 $ 0.76
(Loss) Income from discontinued operations - 0.02 (0.03) 0.02 0.03
------------- ---------- ---------- ------------- -------------
Net income $ 0.90 $ 0.88 $ 0.87 $ 0.75 $ 0.79
============= ========== ========== ============= =============
Average common shares outstanding (millions) 1,192 1,203 1,210 1,224 1,227
============= ========== ========== ============= =============
Cash dividends declared per common share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15
============= ========== ========== ============= =============
</Table>
SELECTED STATISTICAL INFORMATION
<Table>
<Caption>
Quarters Ended
-------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Return on average equity (A) 38.2% 37.5% 36.6% 34.7% 33.6%
Common shares outstanding (millions) 1,169 1,182 1,188 1,199 1,204
Book value per common share $ 9.32 $ 9.00 $ 8.83 $ 8.76 $ 8.93
Shareholders' equity (billions) $ 10.9 $ 10.6 $ 10.5 $ 10.5 $ 10.8
</Table>
(A) Computed on a trailing 12-month basis using net income over average total
shareholders' equity (including discontinued operations) as included in the
Consolidated Financial Statements prepared in accordance with GAAP.
-9-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
-------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Card billed business (A):
United States $ 115.2 $ 115.7 $ 105.4 $ 109.7 $ 101.7
Outside the United States 47.3 45.4 40.8 43.8 38.6
------------- ---------- ---------- ------------- -------------
Total $ 162.5 $ 161.1 $ 146.2 $ 153.5 $ 140.3
============= ========== ========== ============= =============
Total cards-in-force (millions) (B):
United States 51.7 50.5 49.3 48.1 46.8
Outside the United States 33.0 31.7 30.6 29.9 29.7
------------- ---------- ---------- ------------- -------------
Total 84.7 82.2 79.9 78.0 76.5
============= ========== ========== ============= =============
Basic cards-in-force (millions) (B):
United States 40.1 39.2 38.1 37.1 36.0
Outside the United States 28.3 27.0 26.0 25.4 25.2
------------- ---------- ---------- ------------- -------------
Total 68.4 66.2 64.1 62.5 61.2
============= ========== ========== ============= =============
Average discount rate (C) 2.57% 2.57% 2.58% 2.55% 2.57%
Average basic cardmember spending (dollars) (D) $ 3,006 $ 3,049 $ 2,817 $ 2,985 $ 2,782
Average fee per card (dollars) (D) $ 36 $ 36 $ 35 $ 35 $ 34
</Table>
(A) 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.
(B) Total cards-in-force represents the number of cards that are issued and
outstanding. Proprietary basic consumer cards-in-force includes basic cards
issued to the primary account owner and does not include additional
supplemental cards issued on that account. Proprietary basic small business
and corporate cards-in-force include basic and supplemental cards issued to
employee cardmembers. Non-proprietary basic cards-in-force includes all cards
that are issued and outstanding under network partnership agreements.
(C) Computed as follows: Discount revenue from all card spending (proprietary
and Global Network Services) at merchants divided by all billed business
(proprietary and Global Network Services) generating discount revenue at such
merchants. Only merchants acquired by the Company are included in the
computation.
(D) Average basic cardmember spending and average fee per card are computed
from proprietary card activities only. Average fee per card is computed based
on net card fees excluding the amortization of deferred direct acquisition
costs.
-10-
<Page>
(Preliminary)
AMERICAN EXPRESS COMPANY
SELECTED STATISTICAL INFORMATION (CONTINUED)
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
------------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Worldwide cardmember receivables:
Total receivables $ 38.5 $ 38.4 $ 36.5 $ 37.4 $ 35.0
90 days past due as a % of total 2.8% 2.7% 2.9% 2.8% 2.8%
Loss reserves (millions): $ 998 $ 981 $ 979 $ 981 $ 947
% of receivables 2.6% 2.6% 2.7% 2.6% 2.7%
% of 90 days past due 91% 95% 93% 95% 97%
Net loss ratio as a % of charge volume 0.26% 0.24% 0.23% 0.26% 0.26%
Worldwide cardmember lending - owned basis (A):
Total loans $ 50.5 $ 48.3 $ 42.3 $ 43.3 $ 38.3
30 days past due loans as a % of total 3.0% 2.8% 3.0% 2.7% 2.8%
Loss reserves (millions):
Beginning balance $ 1,417 $ 1,271 $ 1,171 $ 1,126 $ 1,086
Provision 543 606 542 451 381
Net write offs (499) (473) (439) (405) (353)
Other 8 13 (3) (1) 12
------------- --------- --------- ------------ -------------
Ending balance $ 1,469 $ 1,417 $ 1,271 $ 1,171 $ 1,126
============= ========= ========= ============ =============
% of loans 2.9% 2.9% 3.0% 2.7% 2.9%
% of past due 97% 106% 100% 98% 106%
Average loans $ 48.8 $ 45.6 $ 42.4 $ 40.2 $ 37.5
Net write-off rate 4.1% 4.1% 4.1% 4.0% 3.8%
Net finance revenue(B)/average loans 9.3% 9.5% 9.4% 9.6% 9.5%
Worldwide cardmember lending - managed basis (C):
Total loans $ 72.0 $ 68.6 $ 63.2 $ 63.5 $ 58.5
30 days past due loans as a % of total 2.8% 2.6% 2.8% 2.6% 2.7%
Loss reserves (millions):
Beginning balance $ 1,917 $ 1,787 $ 1,622 $ 1,571 $ 1,546
Provision 762 780 797 608 512
Net write offs (696) (662) (628) (557) (498)
Other 8 12 (4) - 11
------------- --------- --------- ------------ -------------
Ending balance $ 1,991 $ 1,917 $ 1,787 $ 1,622 $ 1,571
============= ========= ========= ============ =============
% of loans 2.8% 2.8% 2.8% 2.6% 2.7%
% of past due 97% 106% 100% 97% 101%
Average loans $ 70.1 $ 65.9 $ 62.8 $ 60.4 $ 57.6
Net write-off rate 4.0% 4.0% 4.0% 3.7% 3.5%
Net finance revenue(B)/average loans 9.4% 9.3% 9.5% 9.4% 9.4%
</Table>
(A) "Owned," a GAAP basis measurement, reflects only cardmember loans included
in the Company's Consolidated Balance Sheets.
(B) Computed on an annualized basis.
(C) Includes on-balance sheet cardmember loans and off-balance sheet
securitized cardmember loans. The difference between the "owned basis" (GAAP)
information and "managed basis" information is attributable to the effects of
securitization activities. Refer to the information set forth under U.S. Card
Services Selected Financial Information on page 20 for further discussion of
the managed basis presentation.
-11-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
------------------ Percentage
2007 2006 Inc/(Dec)
-------- -------- ----------
<S> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $ 2,632 $ 2,358 12%
Cardmember lending finance revenue 1,224 928 32
Securitization income, net 392 384 2
-------- --------
Total revenues 4,248 3,670 16
-------- --------
Interest expense
Cardmember lending 402 260 55
Charge card and other 257 207 24
-------- --------
Revenues net of interest expense 3,589 3,203 12
-------- --------
Expenses
Marketing, promotion, rewards and cardmember services 1,191 1,117 7
Human resources and other operating expenses 848 805 5
-------- --------
Total 2,039 1,922 6
-------- --------
Provisions for losses 638 442 44
-------- --------
Pretax segment income 912 839 9
Income tax provision 320 281 14
-------- --------
Segment income $ 592 $ 558 6
======== ========
</Table>
-12-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED FINANCIAL INFORMATION
MANAGED BASIS PRESENTATION
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
------------------- Percentage
2007 2006 Inc/(Dec)
-------- -------- ----------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Discount revenue, net card fees and other:
Reported for the period (GAAP) $ 2,632 $ 2,358 12%
Securitization adjustments 67 51 31
-------- --------
Managed discount revenue, net card fees and other $ 2,699 $ 2,409 12
-------- --------
Cardmember lending finance revenue:
Reported for the period (GAAP) $ 1,224 $ 928 32
Securitization adjustments 821 749 10
-------- --------
Managed finance revenue $ 2,045 $ 1,677 22
-------- --------
Securitization income, net:
Reported for the period (GAAP) $ 392 $ 384 2
Securitization adjustments (392) (384) 2
-------- --------
Managed securitization income, net $ - $ - -
-------- --------
Cardmember lending interest expense:
Reported for the period (GAAP) $ 402 $ 260 55
Securitization adjustments 302 274 10
-------- --------
Managed cardmember lending interest expense $ 704 $ 534 32
-------- --------
Provisions for losses:
Reported for the period (GAAP) $ 638 $ 442 44
Securitization adjustments 226 144 57
-------- --------
Managed provisions for losses $ 864 $ 586 47
-------- --------
</Table>
For U.S. Card Services, the managed basis presentation assumes that there have
been no off-balance sheet securitization transactions, i.e., all securitized
cardmember loans and related income effects are reflected as if they were in
the Company's balance sheets and income statements, respectively. For the
managed basis presentation, revenue and expenses related to securitized
cardmember loans are reflected in other commissions and fees (included above
in discount revenue, net card fees and other), cardmember lending finance
revenue, cardmember lending interest expense, and provisions for losses. On a
managed basis, there is no securitization income, net, as the managed basis
presentation assumes no securitization transactions have occurred.
The Company presents U.S. Card Services information on a managed basis because
that is the way the Company's management views and manages the business.
Management believes that a full picture of trends in the Company's cardmember
lending business can only be derived by evaluating the performance of both
securitized and non-securitized cardmember loans. Management also believes
that use of a managed basis presentation presents a more accurate picture of
the key dynamics of the cardmember lending business. Irrespective of the on
and off-balance sheet funding mix, it is important for management and
investors to see metrics for the entire cardmember lending portfolio because
they are more representative of the economics of the aggregate cardmember
relationships and ongoing business performance and trends over time. It is
also important for investors to see the overall growth of cardmember loans and
related revenue in order to evaluate market share. These metrics are
significant in evaluating the Company's performance and can only be properly
assessed when all non-securitized and securitized cardmember loans are viewed
together on a managed basis. The Company does not currently securitize
international loans.
-13-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Card billed business $ 94.2 $ 83.4 13%
Total cards-in-force (millions) 42.9 39.9 8%
Basic cards-in-force (millions) 31.8 29.5 8%
Average basic cardmember spending (dollars) $ 2,986 $ 2,852 5%
U.S. Consumer Travel:
Travel sales (millions) $ 743 $ 577 29%
Travel commissions and fees/sales 8.5% 8.5%
Total segment assets $ 79.0 $ 66.6 19%
Segment capital $ 4.5 $ 4.5 -%
Return on segment capital (A) 50.5% 46.6%
Cardmember receivables:
Total receivables $ 19.4 $ 18.2 7%
90 days past due as a % of total 3.9% 3.5%
Net loss ratio as a % of charge volume 0.34% 0.33%
Cardmember lending - owned basis (B):
Total loans $ 40.0 $ 29.3 37%
30 days past due loans as a % of total 3.1% 2.7%
Average loans $ 38.6 $ 28.6 35%
Net write-off rate 3.7% 3.1%
Net finance revenue(C)/average loans 8.5% 9.2%
Cardmember lending - managed basis (D):
Total loans $ 61.5 $ 49.5 24%
30 days past due loans as a % of total 2.9% 2.6%
Average loans $ 60.0 $ 48.7 23%
Net write-off rate 3.7% 3.0%
Net finance revenue(C)/average loans 8.9% 9.3%
</Table>
(A) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
(B) "Owned," a GAAP basis measurement, reflects only cardmember loans included
in the Company's Consolidated Balance Sheets.
(C) Computed on an annualized basis.
(D) Includes on-balance sheet cardmember loans and off-balance sheet
securitized cardmember loans. The difference between the "owned basis" (GAAP)
information and "managed basis" information is attributable to the effects of
securitization activities. Refer to the information set forth under U.S. Card
Services Selected Financial Information on page 20 for further discussion of
the managed basis presentation.
-14-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
----------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $ 2,632 $ 2,642 $ 2,414 $ 2,481 $ 2,358
Cardmember lending finance revenue 1,224 1,179 1,055 1,018 928
Securitization income, net 392 332 457 347 384
------------- --------- --------- ------------ -------------
Total revenues 4,248 4,153 3,926 3,846 3,670
------------- --------- --------- ------------ -------------
Interest expense
Cardmember lending 402 363 313 288 260
Charge card and other 257 230 249 209 207
------------- --------- --------- ------------ -------------
Revenues net of interest expense 3,589 3,560 3,364 3,349 3,203
------------- --------- --------- ------------ -------------
Expenses
Marketing, promotion, rewards and cardmember services 1,191 1,266 944 1,220 1,117
Human resources and other operating expenses 848 827 808 876 805
------------- --------- --------- ------------ -------------
Total 2,039 2,093 1,752 2,096 1,922
------------- --------- --------- ------------ -------------
Provisions for losses 638 640 581 530 442
------------- --------- --------- ------------ -------------
Pretax segment income 912 827 1,031 723 839
Income tax provision 320 247 387 250 281
------------- --------- --------- ------------ -------------
Segment income $ 592 $ 580 $ 644 $ 473 $ 558
============= ========= ========= ============ =============
</Table>
-15-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED FINANCIAL INFORMATION
MANAGED BASIS PRESENTATION
(Millions)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Discount revenue, net card fees and other:
Reported for the period (GAAP) $ 2,632 $ 2,642 $ 2,414 $ 2,481 $ 2,358
Securitization adjustments 67 80 87 56 51
------------- --------- --------- ------------ -------------
Managed discount revenue, net card fees and other $ 2,699 $ 2,722 $ 2,501 $ 2,537 $ 2,409
------------- --------- --------- ------------ -------------
Cardmember lending finance revenue:
Reported for the period (GAAP) $ 1,224 $ 1,179 $ 1,055 $ 1,018 $ 928
Securitization adjustments 821 724 757 729 749
------------- --------- --------- ------------ -------------
Managed finance revenue $ 2,045 $ 1,903 $ 1,812 $ 1,747 $ 1,677
------------- --------- --------- ------------ -------------
Securitization income, net:
Reported for the period (GAAP) $ 392 $ 332 $ 457 $ 347 $ 384
Securitization adjustments (392) (332) (457) (347) (384)
------------- --------- --------- ------------ -------------
Managed securitization income, net $ - $ - $ - $ - $ -
------------- --------- --------- ------------ -------------
Cardmember lending interest expense:
Reported for the period (GAAP) $ 402 $ 363 $ 313 $ 288 $ 260
Securitization adjustments 302 274 273 279 274
------------- --------- --------- ------------ -------------
Managed cardmember lending interest expense $ 704 $ 637 $ 586 $ 567 $ 534
------------- --------- --------- ------------ -------------
Provisions for losses:
Reported for the period (GAAP) $ 638 $ 640 $ 581 $ 530 $ 442
Securitization adjustments 226 177 205 153 144
------------- --------- --------- ------------ -------------
Managed provisions for losses $ 864 $ 817 $ 786 $ 683 $ 586
------------- --------- --------- ------------ -------------
</Table>
See page 20 for discussion of managed basis presentation.
-16-
<Page>
(Preliminary)
U.S. CARD SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Card billed business $ 94.2 $ 94.6 $ 85.2 $ 90.8 $ 83.4
Total cards-in-force (millions) 42.9 42.1 41.5 40.7 39.9
Basic cards-in-force (millions) 31.8 31.2 30.7 30.1 29.5
Average basic cardmember spending (dollars) $ 2,986 $ 3,054 $ 2,801 $ 3,044 $ 2,852
U.S. Consumer Travel:
Travel sales $ 0.7 $ 0.8 $ 0.7 $ 0.6 $ 0.6
Travel commissions and fees/sales 8.5% 8.0% 7.5% 8.2% 8.5%
Total segment assets $ 79.0 $ 76.1 $ 68.4 $ 71.0 $ 66.6
Segment capital $ 4.5 $ 4.5 $ 4.5 $ 4.7 $ 4.5
Return on segment capital (A) 50.5% 49.9% 50.2% 47.4% 46.6%
Cardmember receivables:
Total receivables $ 19.4 $ 19.8 $ 19.0 $ 20.6 $ 18.2
90 days past due as a % of total 3.9% 3.6% 3.8% 3.3% 3.5%
Net loss ratio as a % of charge volume 0.34% 0.30% 0.25% 0.32% 0.33%
Cardmember lending - owned basis (B):
Total loans $ 40.0 $ 38.3 $ 33.0 $ 33.6 $ 29.3
30 days past due loans as a % of total 3.1% 2.7% 2.9% 2.7% 2.7%
Average loans $ 38.6 $ 35.9 $ 33.1 $ 30.9 $ 28.6
Net write-off rate 3.7% 3.7% 3.7% 3.5% 3.1%
Net finance revenue(C)/average loans 8.5% 9.1% 9.1% 9.4% 9.2%
Cardmember lending - managed basis (D):
Total loans $ 61.5 $ 58.6 $ 53.9 $ 53.8 $ 49.5
30 days past due loans as a % of total 2.9% 2.6% 2.8% 2.6% 2.6%
Average loans $ 60.0 $ 56.3 $ 53.4 $ 51.1 $ 48.7
Net write-off rate 3.7% 3.7% 3.7% 3.3% 3.0%
Net finance revenue(C)/average loans 8.9% 9.0% 9.3% 9.2% 9.3%
</Table>
(A) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
(B) "Owned," a GAAP basis measurement, reflects only cardmember loans included
in the Company's Consolidated Balance Sheets.
(C) Computed on an annualized basis.
(D) Includes on-balance sheet cardmember loans and off-balance sheet
securitized cardmember loans. The difference between the "owned basis" (GAAP)
information and "managed basis" information is attributable to the effects of
securitization activities. Refer to the information set forth under U.S. Card
Services Selected Financial Information on page 20 for further discussion of
the managed basis presentation.
-17-
<Page>
(Preliminary)
INTERNATIONAL CARD SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $ 953 $ 819 16%
Cardmember lending finance revenue 353 286 23
--------- ---------
Total revenues 1,306 1,105 18
--------- ---------
Interest expense
Cardmember lending 126 99 27
Charge card and other 66 54 22
--------- ---------
Revenues net of interest expense 1,114 952 17
--------- ---------
Expenses
Marketing, promotion, rewards and cardmember services 354 247 43
Human resources and other operating expenses 453 387 17
--------- ---------
Total 807 634 27
--------- ---------
Provisions for losses 197 197 -
--------- ---------
Pretax segment income 110 121 (9)
Income tax (benefit) provision (30) 15 #
--------- ---------
Segment income $ 140 $ 106 32
========= =========
</Table>
# - Denotes variance of more than 100%.
-18-
<Page>
(Preliminary)
INTERNATIONAL CARD SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Card billed business $ 24.7 $ 21.4 15%
Total cards-in-force (millions) 15.8 15.5 2%
Basic cards-in-force (millions) 11.2 11.1 1%
Average basic cardmember spending (dollars) $ 2,209 $ 1,908 16%
International Consumer Travel:
Travel sales (millions) $ 283 $ 247 15%
Travel commissions and fees/sales 8.8% 8.3%
Total segment assets $ 20.8 $ 18.6 12%
Segment capital (millions) $ 1,983 $ 1,936 2%
Return on segment capital (A) 24.4% 16.8%
Cardmember receivables:
Total receivables $ 6.1 $ 5.5 11%
90 days past due as a % of total 1.8% 2.6%
Net loss ratio as a % of charge volume 0.26% 0.27%
Cardmember lending:
Total loans $ 10.5 $ 9.0 17%
30 days past due loans as a % of total 2.7% 3.1%
Average loans $ 10.2 $ 8.9 15%
Net write-off rate 5.5% 5.9%
Net finance revenue(B)/average loans 8.9% 8.3%
</Table>
(A) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
(B) Computed on an annualized basis.
-19-
<Page>
(Preliminary)
INTERNATIONAL CARD SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $ 953 $ 900 $ 828 $ 884 $ 819
Cardmember lending finance revenue 353 333 310 304 286
------------- --------- --------- ------------ -------------
Total revenues 1,306 1,233 1,138 1,188 1,105
------------- --------- --------- ------------ -------------
Interest expense
Cardmember lending 126 120 109 105 99
Charge card and other 66 64 50 57 54
------------- --------- --------- ------------ -------------
Revenues net of interest expense 1,114 1,049 979 1,026 952
------------- --------- --------- ------------ -------------
Expenses
Marketing, promotion, rewards and cardmember services 354 293 281 280 247
Human resources and other operating expenses 453 453 418 460 387
------------- --------- --------- ------------ -------------
Total 807 746 699 740 634
------------- --------- --------- ------------ -------------
Provisions for losses 197 211 184 210 197
------------- --------- --------- ------------ -------------
Pretax segment income 110 92 96 76 121
Income tax (benefit) provision (30) (25) (6) (23) 15
------------- --------- --------- ------------ -------------
Segment income $ 140 $ 117 $ 102 $ 99 $ 106
============= ========= ========= ============ =============
</Table>
-20-
<Page>
(Preliminary)
INTERNATIONAL CARD SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Card billed business $ 24.7 $ 23.6 $ 21.5 $ 23.6 $ 21.4
Total cards-in-force (millions) 15.8 15.7 15.7 15.6 15.5
Basic cards-in-force (millions) 11.2 11.2 11.2 11.2 11.1
Average basic cardmember spending (dollars) $ 2,209 $ 2,123 $ 1,926 $ 2,106 $ 1,908
International Consumer Travel:
Travel sales $ 0.3 $ 0.3 $ 0.2 $ 0.3 $ 0.2
Travel commissions and fees/sales 8.8% 8.6% 8.4% 8.6% 8.3%
Total segment assets $ 20.8 $ 19.7 $ 18.5 $ 18.9 $ 18.6
Segment capital $ 2.0 $ 1.9 $ 1.8 $ 1.7 $ 1.9
Return on segment capital (A) 24.4% 22.8% 20.9% 17.9% 16.8%
Cardmember receivables:
Total receivables $ 6.1 $ 5.9 $ 5.4 $ 6.0 $ 5.5
90 days past due as a % of total 1.8% 2.0% 2.4% 2.3% 2.6%
Net loss ratio as a % of charge volume 0.26% 0.28% 0.29% 0.30% 0.27%
Cardmember lending:
Total loans $ 10.5 $ 10.0 $ 9.3 $ 9.7 $ 9.0
30 days past due loans as a % of total 2.7% 2.9% 3.1% 2.9% 3.1%
Average loans $ 10.2 $ 9.7 $ 9.4 $ 9.3 $ 8.9
Net write-off rate 5.5% 6.0% 5.7% 5.7% 5.9%
Net finance revenue(B)/average loans 8.9% 8.9% 8.7% 8.5% 8.3%
</Table>
(A) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
(B) Computed on an annualized basis.
-21-
<Page>
(Preliminary)
GLOBAL COMMERCIAL SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
-------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $ 1,180 $ 1,045 13%
--------- ---------
Interest expense
Charge card and other 116 96 21
--------- ---------
Revenues net of interest expense 1,064 949 12
--------- ---------
Expenses
Marketing, promotion, rewards and cardmember services 86 80 8
Human resources and other operating expenses 749 678 10
--------- ---------
Total 835 758 10
--------- ---------
Provisions for losses 42 34 24
--------- ---------
Pretax segment income 187 157 19
Income tax provision 52 52 -
--------- ---------
Segment income $ 135 $ 105 29
========= =========
</Table>
-22-
<Page>
(Preliminary)
GLOBAL COMMERCIAL SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Card billed business $ 29.9 $ 26.2 14%
Total cards-in-force (millions) 6.8 6.6 3%
Basic cards-in-force (millions) 6.8 6.6 3%
Average basic cardmember spending (dollars) $ 4,389 $ 3,974 10%
Global Corporate Travel:
Travel sales $ 4.9 $ 4.3 14%
Travel commissions and fees/sales 8.0% 8.3%
Total segment assets $ 21.8 $ 18.6 17%
Segment capital (millions) $ 2,230 $ 1,997 12%
Return on segment capital (A) 26.2% 27.6%
Cardmember receivables:
Total receivables $ 12.5 $ 10.9 15%
90 days past due as a % of total 1.6% 1.7%
Net loss ratio as a % of charge volume 0.11% 0.09%
</Table>
(A) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
-23-
<Page>
(Preliminary)
GLOBAL COMMERCIAL SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
----------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $ 1,180 $ 1,210 $ 1,098 $ 1,089 $ 1,045
------------- --------- --------- ------------ -------------
Interest expense
Charge card and other 116 127 104 107 96
------------- --------- --------- ------------ -------------
Revenues net of interest expense 1,064 1,083 994 982 949
------------- --------- --------- ------------ -------------
Expenses
Marketing, promotion, rewards and cardmember services 86 83 83 63 80
Human resources and other operating expenses 749 746 686 721 678
------------- --------- --------- ------------ -------------
Total 835 829 769 784 758
------------- --------- --------- ------------ -------------
Provisions for losses 42 36 30 31 34
------------- --------- --------- ------------ -------------
Pretax segment income 187 218 195 167 157
Income tax provision 52 56 66 50 52
------------- --------- --------- ------------ -------------
Segment income $ 135 $ 162 $ 129 $ 117 $ 105
============= ========= ========= ============ =============
</Table>
-24-
<Page>
(Preliminary)
GLOBAL COMMERCIAL SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Card billed business $ 29.9 $ 31.0 $ 29.0 $ 27.6 $ 26.2
Total cards-in-force (millions) 6.8 6.8 6.7 6.7 6.6
Basic cards-in-force (millions) 6.8 6.8 6.7 6.7 6.6
Average basic cardmember spending (dollars) $ 4,389 $ 4,583 $ 4,343 $ 4,170 $ 3,974
Global Corporate Travel:
Travel sales $ 4.9 $ 5.3 $ 4.8 $ 4.6 $ 4.3
Travel commissions and fees/sales 8.0% 7.5% 7.6% 8.1% 8.3%
Total segment assets $ 21.8 $ 21.7 $ 20.5 $ 18.9 $ 18.6
Segment capital $ 2.2 $ 2.1 $ 2.1 $ 1.9 $ 2.0
Return on segment capital (A) 26.2% 25.3% 25.7% 25.7% 27.6%
Cardmember receivables:
Total receivables $ 12.5 $ 12.2 $ 11.7 $ 10.3 $ 10.9
90 days past due as a % of total 1.6% 1.6% 1.6% 1.9% 1.7%
Net loss ratio as a % of charge volume 0.11% 0.10% 0.10% 0.09% 0.09%
</Table>
(A) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
-25-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Revenues
Discount revenue, fees and other $ 902 $ 773 17%
--------- ---------
Interest expense
Cardmember lending (33) (25) 32
Other (45) (43) 5
--------- ---------
Revenues net of interest expense 980 841 17
--------- ---------
Expenses
Marketing and promotion 151 118 28
Human resources and other operating expenses 417 390 7
--------- ---------
Total 568 508 12
--------- ---------
Provisions for losses 23 19 21
--------- ---------
Pretax segment income 389 314 24
Income tax provision 123 102 21
--------- ---------
Segment income $ 266 $ 212 25
========= =========
</Table>
-26-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
September 30,
--------------------- Percentage
2007 2006 Inc/(Dec)
--------- --------- ----------
<S> <C> <C> <C>
Global Card billed business (A) $ 162.5 $ 140.3 16%
Global Network & Merchant Services:
Total segment assets $ 4.6 $ 5.1 (10)%
Segment capital (millions) $ 1,125 $ 1,262 (11)%
Return on segment capital (B) 84.7% 57.9%
Global Network Services:
Card billed business $ 14.1 $ 9.7 45%
Total cards-in-force (millions) 19.2 14.5 32%
</Table>
(A) Global 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.
(B) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
-27-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
SELECTED INCOME STATEMENT DATA
(Millions)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues
Discount revenue, fees and other $ 902 $ 887 $ 800 $ 840 $ 773
------------- --------- --------- ------------ -------------
Interest expense
Cardmember lending (33) (31) (28) (29) (25)
Other (45) (48) (49) (47) (43)
------------- --------- --------- ------------ -------------
Revenues net of interest expense 980 966 877 916 841
------------- --------- --------- ------------ -------------
Expenses
Marketing and promotion 151 150 129 125 118
Human resources and other operating expenses 417 389 393 448 390
------------- --------- --------- ------------ -------------
Total 568 539 522 573 508
------------- --------- --------- ------------ -------------
Provisions for losses 23 9 (19) 46 19
------------- --------- --------- ------------ -------------
Pretax segment income 389 418 374 297 314
Income tax provision 123 152 138 96 102
------------- --------- --------- ------------ -------------
Segment income $ 266 $ 266 $ 236 $ 201 $ 212
============= ========= ========= ============ =============
</Table>
-28-
<Page>
(Preliminary)
GLOBAL NETWORK & MERCHANT SERVICES
SELECTED STATISTICAL INFORMATION
(Billions, except percentages and where indicated)
<Table>
<Caption>
Quarters Ended
--------------------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2007 2007 2007 2006 2006
------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Global Card billed business (A) $ 162.5 $ 161.1 $ 146.2 $ 153.5 $ 140.3
Global Network & Merchant Services:
Total segment assets $ 4.6 $ 4.3 $ 4.5 $ 4.4 $ 5.1
Segment capital $ 1.1 $ 1.1 $ 1.0 $ 1.3 $ 1.3
Return on segment capital (B) 84.7% 78.0% 69.2% 60.3% 57.9%
Global Network Services:
Card billed business $ 14.1 $ 12.3 $ 10.5 $ 11.5 $ 9.7
Total cards-in-force (millions) 19.2 17.6 16.0 15.0 14.5
</Table>
(A) Global 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.
(B) Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational needs,
risk measures, and regulatory capital requirements.
-29-
EXHIBIT 99.3
[LOGO OF AMERICAN EXPRESS COMPANY]
2007
THIRD QUARTER
EARNINGS SUPPLEMENT
THE ENCLOSED SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE TEXT AND
STATISTICAL TABLES INCLUDED IN AMERICAN EXPRESS COMPANY'S (THE
"COMPANY" OR "AXP") THIRD QUARTER EARNINGS RELEASE.
-------------------------------------------------------------------------
THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES AND SPEAK ONLY AS OF THE DATE ON
WHICH THEY ARE MADE. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS, INCLUDING
THE COMPANY'S FINANCIAL AND OTHER GOALS, ARE SET FORTH ON PAGES 62-63
IN THE COMPANY'S 2006 ANNUAL REPORT TO SHAREHOLDERS AND IN ITS 2006
ANNUAL REPORT ON FORM 10-K, AND OTHER REPORTS, ON FILE WITH THE
SECURITIES AND EXCHANGE COMMISSION.
-------------------------------------------------------------------------
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
HIGHLIGHTS
FINANCIAL RESULTS
o Third quarter diluted EPS from continuing operations of $0.90 increased
18% versus $0.76 last year. Revenues net of interest expense rose 11%.
For the trailing 12 months, return on equity (ROE) was 38%.
- 3Q '07 Income from continuing operations included:
-- An $81MM ($41MM after-tax) charge related to mark-to-market
adjustments and sales within the American Express International
Deposit Company ("AEIDC") investment portfolio resulting from
the announced sale during the quarter of American Express Bank,
Ltd. ("AEB") to Standard Chartered PLC ("Standard Chartered"),
as referenced further on page 2; and
-- A $75MM tax benefit, primarily related to the resolution of prior
years' tax items.
- 3Q '06 Income from continuing operations included a $33MM ($24MM
after-tax) gain on the sales of card-related operations in Malaysia
and Indonesia.
- 3Q '07 and 3Q '06 Income from continuing operations included $10MM
($7MM after-tax) and $11MM ($7MM after-tax), respectively, of
reengineering costs related to restructuring efforts primarily within
our corporate travel business.
- The DISCONTINUED OPERATIONS line in the Consolidated Financial
Statements contains the results, assets and liabilities related to
various business sales. In addition to AEB, referenced above,
discontinued operations also reflects the results from the
international banking operations in Brazil, sold in 2Q'06, Tax and
Business Services ("TBS"), sold in 3Q '05, and Ameriprise Financial,
Inc. (formerly American Express Financial Advisors), for which the
distribution of all outstanding shares was made on September 30,
2005.
-- 3Q '07 results reflected $7MM of losses from discontinued
operations, related to AEB's results which include substantial
compliance-related remediation costs, as well as the TBS
business, versus $33MM of income last year.
-- Including discontinued operations, diluted EPS on a net income basis
of $0.90 increased 14% versus last year.
BUSINESS METRICS
o Compared with the third quarter of 2006:
- Worldwide billed business of $162.5B increased 16% on continued
strong growth within both the proprietary and network businesses. A
comparatively weaker U.S. dollar resulted in a 2% benefit within the
reported worldwide growth rate.
- Worldwide total cards in force of 84.7MM increased 11%, up 8.2MM from
last year and 2.5MM during 3Q '07, as proprietary and network card
growth remained strong.
- Worldwide average spending per proprietary basic card in force
increased 8% versus last year despite the suppressing effect of
substantial card additions over the past few years.
- Worldwide lending balances of $50.5B on an owned basis increased
32%; on a managed basis, worldwide lending balances of $72.0B were
up 23%.
- Underlying card credit quality continued to be well controlled and
reserve coverage ratios remained strong.
CAPITAL RETURNED TO SHAREHOLDERS
o Including share repurchases and dividends, during 3Q '07 and the nine
months to-date we returned 84% and 85%, respectively, of capital
generated to shareholders. On a cumulative basis, since 1994, we have
returned 70% of capital generated.
- SHARE REPURCHASES: During both 3Q '07 and 2Q '07, 15MM shares were
repurchased versus 16MM shares in 3Q '06. Since the inception of
repurchase programs in December 1994, 652MM shares have been acquired
under cumulative Board authorizations to repurchase up to 770MM
shares, including purchases made under agreements with third parties.
<TABLE>
<CAPTION>
Millions of Shares
-----------------------------------------------
<S> <C> <C> <C>
- ACTUAL SHARE ACTIVITY: 3Q '07 2Q '07 3Q '06
------ ------ ------
Shares outstanding - beginning of period 1,182 1,188 1,216
Repurchase of common shares (15) (15) (16)
Employee benefit plans, compensation and other 2 9 4
------ ------ ------
Shares outstanding - end of period 1,169 1,182 1,204
===== ===== =====
</TABLE>
-1-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
HIGHLIGHTS
ADDITIONAL ITEMS OF NOTE
o Marketing, promotion, rewards and cardmember services expenses increased
14% versus 3Q '06, reflecting higher rewards costs in 3Q '07 and
increased marketing and promotion expenses. The higher rewards costs
continued to reflect volume growth, a higher redemption rate, and strong
cardmember program participation. Marketing expenses continued to reflect
card acquisition, brand and loyalty oriented programs, with an increased
emphasis on our non-U.S. activities.
o Total interest expense increased 39%, reflecting increased debt funding
levels in support of growth in cardmember receivable and lending balances
and a higher effective cost of funds.
o Total provisions for losses and benefits increased 25% versus 3Q '06,
reflecting growth in business volumes and the loan portfolio, as well as
increased write-off and delinquency rates within the U.S. versus last
year, which have risen from the unusually low levels during 2006
following the enactment of the October 2005 bankruptcy legislation.
o The 11% increase in human resources expense in 3Q '07 reflects the impact
of a higher level of employees, merit increases and larger benefit costs.
- Compared with last year, the total employee count of 65,100 increased
by 3,800 employees or 6%; compared with last quarter, the employee
count increased by 1,200 employees or 2%. The increases primarily
reflect employee additions related to customer service volumes and
initiatives and the acquisition of Harbor Payments, Inc. in 4Q '06
and Farrington American Express Travel Services Ltd. ("FAE Travel")
in 3Q '07.
o During 3Q '07, the Company announced that it entered into an agreement to
sell its international banking subsidiary, AEB, to Standard Chartered,
reflecting the Company's strategic focus on the high-growth, high-return
payments businesses that have driven its recent performance. The
approximate value of the transaction is $1.1B. The sale is subject to
certain regulatory approvals and is expected to be completed in 1Q '08.
Standard Chartered will pay the Company an amount equal to the net asset
value of the AEB businesses that are being sold at the closing date plus
$300MM. At September 30, 2007, this would have amounted to approximately
$825MM. The Company also expects to realize an additional amount
representing the net asset value of AEIDC, a subsidiary which issues
investment certificates to AEB customers. The contracted sale of AEIDC
will occur through a put/call agreement. As of September 30, 2007, the
net asset value of that business was $262MM. This value is expected to be
realized through dividends from the subsidiary to American Express and by
a subsequent payment from Standard Chartered when the business is
transferred to them eighteen months after the completion of the sale of
AEB. In aggregate, the transaction is expected to have an approximate
break-even impact on the Company's earnings, although separate components
will be recognized in different periods, such as the AEIDC charge
referenced above.
As a result of the agreement, beginning with 3Q '07, and for all prior
periods, AEB results, assets and liabilities have been removed from the
Corporate & Other segment and reported within Discontinued Operations on
the Company's Consolidated Financial Statements. AEIDC will continue to
be reflected in continuing operations within the Corporate & Other segment
until one year before the anticipated close of this portion of the
transaction. Assuming completion of the AEB sale in 1Q '08, AEIDC will be
reported in discontinued operations beginning in 3Q '08.
The previously mentioned $81MM ($41MM) after-tax charge related to AEIDC is
included in the 3Q '07 results from continuing operations within the
"Other revenues" line. The charge relates to the AEIDC investment
portfolio and results from the AEB sale agreement's impact on the holding
period for the investments. It principally reflects the reduction in value
within the AEIDC investment portfolio attributable to market interest rate
movements since the date that the investment securities were purchased.
The reclassification of the portfolio from its previous available-for-sale
status to its current trading status requires the Company to report
changes in the market value of AEIDC's investment portfolio within the
income statement until AEIDC is sold. The Company expects to report a net
gain in subsequent quarters from the disposition of AEB and other related
activities.
o Within the Consolidated Statements of Income, the Company has reclassified
certain prior period amounts from professional services and occupancy and
equipment expense to human resources and other expense, in order to
conform to its current presentation. This reclassification has no impact
on total expenses, pre-tax income, or net income. Additionally, the
historical trends of these financial statement line items remain
consistent after the reclassification.
REVISED SEGMENT AND STATEMENTS OF INCOME PRESENTATION
o The Company instituted organizational changes effective July 1, 2007
which reflect a reorganization of the Company into two distinct
customer-focused groups: the Global Consumer Group and the Global
Business-to-Business Group. The impact of these changes on the Company's
reportable operating segment disclosures is as follows:
- The Company continues to report the U.S. Card Services ("USCS")
segment and the Global Network & Merchant Services ("GNMS") segment
consistent with previous reporting.
- The previously reported International Card & Global Commercial
Services segment is now reported as two separate segments: the
International Card Services ("ICS") segment and the Global Commercial
Services ("GCS") segment.
- The U.S. Card Services and International Card Services segments are
aligned with the Global Consumer Group, and the Global Network &
Merchant Services and Global Commercial Services segments are aligned
with the Global Business-to-Business Group.
o In addition, as described in the Form 8-K filed with the SEC on March 30,
2007, beginning with 1Q '07, the Company revised the presentation of its
Consolidated Statements of Income. The revised Consolidated Statements of
Income include the separate presentation of certain interest income and
interest expense amounts which previously had been reported on a net
basis, and the separate presentation of the provisions for losses and
benefits from expenses. While these revisions impact the presentation of
revenues and expenses in the Company's Consolidated Statements of Income,
-2-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
HIGHLIGHTS
they have no impact on the Company's previously reported consolidated
pretax income, income taxes, net income, total assets, total liabilities,
or total shareholders' equity.
o In addition, in 1Q '07 the Travelers Cheque and Prepaid Services ("TCPS")
business, previously included in the USCS segment, was moved to the
Corporate & Other segment.
o In conjunction with the previously discussed AEB sale, the Company
further revised its presentation of its Consolidated Statements of
Income. Prior to the sale, the Consolidated Statements of Income
reflected interest income and expense from AEB's international banking
activities on the "International banking interest income" and
"International banking interest expense" lines. The revised presentation
contained herein no longer includes these lines, as the majority of the
revenues and expenses from international banking have been moved to
Discontinued Operations.
o "Total revenues" and "Revenues net of interest expense" are presented
separately within the revised Consolidated Statements of Income
presentation. "Revenues net of interest expense" is now the measure for
the Company's long-term revenue growth rate target. This target (of at
least 8 percent growth on average and over time) has not been changed as
a result of the revisions to the presentation of the Consolidated
Statements of Income.
o The revised consolidated presentation now includes the following:
- Gross cardmember lending finance charge revenue is presented in the
line entitled "Cardmember lending finance revenue" within the new
"Interest income" section of the Consolidated Statements of Income,
and the related gross interest expense is presented in the line
entitled "Cardmember lending" within the new "Interest expense"
section of the Consolidated Statements of Income. These amounts were
previously presented on a net basis as "Cardmember lending finance
charge revenue, net of interest" within the "Net revenues" section.
- Gross investment and other interest income are presented in the line
entitled "Other (including investment certificates)" within the new
"Interest income" section. These amounts were previously presented on
a net basis as "Other investment and interest income, net of
interest" within the "Net revenues" section.
- Other interest expense is presented in the line entitled "Charge card
and other" within the new "Interest expense" section, and certain
other interest income is presented in the line entitled "Other
(including investment certificates)" within the new "Interest income"
section. These amounts were previously reported on a net basis in
"Interest" within the "Expenses" section.
- "Provisions for losses and benefits" is presented in a new separate
section. These amounts were previously reported in the "Provisions
for losses and benefits" lines within the "Expenses" section. The
line under Provisions for Losses and Benefits that used to be called
"International banking and other (including investment certificates)"
is now called "Other (including investment certificates)."
- Certain other amounts were revised to conform to the method of
presentation or calculation that is being used in 2007.
o Corresponding revisions to the Selected Income Statement Data
presentation regarding the Company's reportable operating segments were
also made.
o Separately, in 1Q '07 the Company revised the method of reporting certain
credit statistics related to the charge card business to better align
these metrics with the way the Company manages credit risk as well as to
align such credit statistics with the method used for reporting the
Company's lending activities. Historically, the credit statistics for the
charge card business have been presented using the portion of the account
balance that was 90 days past due or more. However, the Company's
practices for managing credit risk and establishing reserves for
uncollectible amounts consider the entire amounts of customer accounts
for those accounts which have any portion that is past due by 90 days or
more, and thus certain statistics have been revised to reflect this.
Finally, the calculation of net finance revenue divided by average loans
for both consolidated reporting and the ICS segment has been corrected
for a computational error. This correction has a minimal impact on the
historic trends for this statistical information.
EXPANDED PRODUCTS AND SERVICES
o During the quarter, American Express continued to invest in growth
opportunities through expanded products and services.
In our proprietary issuing and network business we:
- Announced two new agent bank agreements with Harris and BankAtlantic,
allowing the distribution of our OPEN from American Express(R) small
business charge and credit products in Chicago and Florida,
respectively. In both cases, American Express will serve as the card
issuer and will partner with each institution to develop joint
marketing efforts for each region.
- Introduced The Plum Card(SM) from OPEN from American Express(R), a
new trade terms product which responds to small business owners' need
to better manage cash flow and free working capital by providing them
with the option to defer payment or receive early pay discounts for
purchases made on the Card.
- Added two new luxury fashion brands, Gucci and Salvatore Ferragamo,
to First Collection(SM), a private portfolio of premium partners and
rewards available exclusively to Platinum Card(R) and Centurion(R)
Card members enrolled in the Membership Rewards First program.
- Expanded merchant acceptance of the ExpressPay from American
Express(R) contactless payment product to include Office Depot's
1,100 nationwide locations, and Braum's Ice Cream and Dairy Stores's
276 retail stores in Oklahoma, Kansas, Texas, Missouri and Arkansas.
- Announced the acquisition by American Express Business Travel of the
remaining 63% share in the joint venture, Farrington American Express
Travel Services Ltd., a leading Hong Kong travel services provider.
Fully integrated, the acquisition will result in business travel
volume from the customer base across Greater China, including
Beijing, Shanghai, Guangzhou, Hong Kong and Taiwan of nearly $1B this
year.
-3-
- Unveiled a new Web-based management information data reporting
solution, American Express AXIS @ Work, from American Express
Business Travel, presenting corporate travel purchasers and managers
with centralized, online access to data resulting from their firms'
business expenditures. Additionally, American Express also introduced
a new specialty area dedicated to management information within its
Advisory Services group.
- Launched Gold Card Destinations, a collection of travel benefits
available on all consumer American Express(R) Gold Charge Cards,
enabling Cardmembers to enhance their vacation experiences with
special amenities on any trip from American Express Gold Card
Destinations travel partners, as well as provide Cardmembers access
to exclusive travel and entertainment packages on a dedicated Gold
Card Destinations web site.
- Signed three additional travel agencies in New York, Ohio and Utah to
the American Express Travel U.S. Representative Network.
- Expanded the American Express Airport Club Access Program for all
consumer and small business Platinum and Centurion Cards to include
access to American Airlines' 44 Admirals Club(R) lounges worldwide.
- Became an Official Patron of The Professional Golfers' Association
(PGA) of America, allowing the Company to provide a unique set of
golf benefits to Cardmembers year-round, including access to premier
championship experiences and exclusive golf opportunities.
- Added various new celebrity participants, such as Beyonce Knowles and
Tina Fey, to the Company's "Are You a Cardmember?(SM)" brand campaign,
designed to showcase the value of membership and its array of special
benefits and services.
- Awarded $2MM to the winner of The Members Project online initiative,
U.S. Fund for UNICEF. The funds will be used to provide millions of
children in the developing world with safe drinking water. This
initiative was part of American Express' "Are You a Cardmember"
campaign which also highlights the value of being part of the
American Express community.
In our Global Network Services ("GNS") business we:
- Announced a new card issuing partnership and launched our first
product with China CITIC Bank. The CITIC American Express Card will
be available in both Classic and Gold versions, will be denominated
in both Reminbi and US dollar currencies, and offers a strong value
proposition especially in the areas of travel rewards and benefits.
- Announced the first card issuing partnership with GE Consumer Finance
(a Japanese subsidiary of GE Money, a unit of General Electric
Company) to issue American Express-branded credit cards in Japan.
This is the world's first issuance of a card carrying the brands of
these two credit card companies.
- Announced our agreement with Mitsubishi UFJ NICOS Co., Ltd. to offer
American Express-branded Gold and Platinum credit cards in Japan,
targeting affluent customers and young executives.
- As part of our partnership with JSC "Kazkommertsbank", we launched in
Kazakhstan the American Express(R) Gold Card and The Platinum Card(R)
from American Express, both available in Kazakhstani tenge or US
dollar denominations. Kazkommertsbank is the exclusive issuer of
American Express Cards in the market and is also the merchant
acquirer in this region.
Also, on October 9th, JD Power and Associates released the findings of a
new nationwide study of 7,812 credit card users, ranking American Express
highest in overall satisfaction among the 10 largest card issuers in the
U.S.
-4-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
CONSOLIDATED
<TABLE>
<CAPTION>
(Preliminary)
STATEMENTS OF INCOME
(GAAP BASIS)
(Millions, except per share amounts) Quarters Ended Percentage
September 30, Inc/(Dec)
------------------------ ----------
2007 2006
---- ----
<S> <C> <C> <C>
Revenues
Discount revenue $3,659 $3,259 12%
Net card fees 522 462 13
Travel commissions and fees 484 427 13
Other commissions and fees 644 539 19
Securitization income, net 392 384 2
Other 362 417 (13)
------ ------
Total 6,063 5,488 10
------ ------
Interest income:
Cardmember lending finance revenue 1,581 1,213 30
Other (including investment certificates) 309 291 6
------ ------
Total 1,890 1,504 26
------ ------
Total Revenues 7,953 6,992 14
------ ------
Interest expense:
Cardmember lending 444 318 40
Charge card and other 564 409 38
------ ------
Total 1,008 727 39
------ ------
Revenues net of interest expense 6,945 6,265 11
Expenses
Marketing, promotion, rewards and cardmember services 1,810 1,586 14
Human resources 1,366 1,227 11
Professional services 539 562 (4)
Occupancy and equipment 374 346 8
Communications 118 104 13
Other 339 342 (1)
------ ------
Total 4,546 4,167 9
Provisions for losses and benefits:
Charge card 279 257 9
Cardmember lending 579 412 41
Other (including investment certificates) 124 118 5
------ ------
Total 982 787 25
------ ------
Pretax income from continuing operations 1,417 1,311 8
Income tax provision 343 377 (9)
------ ------
Income from continuing operations 1,074 934 15
(Loss) Income from discontinued operations, net of tax (7) 33 #
------ ------
Net income $1,067 $967 10
====== ======
EPS-Basic
Income from continuing operations $0.92 $0.78 18
====== ======
(Loss) Income from discontinued operations $(0.01) $0.02 #
====== ======
Net Income $(0.91) $0.80 14
====== ======
EPS-Diluted
Income from continuing operations $0.90 $0.76 18
====== ======
(Loss) Income from discontinued operations $(0.00) $0.03 #
====== ======
Net Income $0.90 $0.79 14
====== ======
Average Shares Outstanding
Basic 1,170 1,202 (3)
====== ======
Diluted 1,192 1,227 (3)
====== ======
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on pages 2-3.
# Denotes variance of more than 100%.
-5-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
CONSOLIDATED
o CONSOLIDATED REVENUES NET OF INTEREST EXPENSE: Consolidated revenues net
of interest expense increased 11%, reflecting increases versus last year
of 12% within USCS, 17% within ICS, 12% within GCS and 17% within GNMS.
Revenues net of interest expense increased due to greater discount
revenues, larger interest income, higher other commission and fees,
increased net card fees, greater travel commissions and fees, and higher
securitization income net, partially offset by increased interest expense
and lower other revenues. Translation of foreign currency benefited the
revenues net of interest expense growth rate by approximately 2%.
o CONSOLIDATED EXPENSES: Consolidated expenses increased 9%, reflecting an
increase of 6% within USCS, 27% within ICS, 10% within GCS and 12% within
GNMS. Expense growth reflected higher marketing, promotion, rewards and
cardmember services expense, greater human resources expense, increased
occupancy and equipment costs, higher communication expenses, and larger
other expenses, partially offset by lower professional services expenses.
Translation of foreign currency contributed approximately 2% to the
expense growth rate.
o CONSOLIDATED PROVISIONS FOR LOSSES AND BENEFITS: Consolidated provisions
for losses and benefits increased 25% versus last year, reflecting a 44%
increase in USCS, a 24% increase in GCS, a 21% increase in GNMS, and a
flat provision level in ICS. Provisions rose primarily due to increases
in the cardmember lending and charge card provisions. Translation of
foreign currency contributed approximately 2% to the provision growth
rate.
o PRE-TAX MARGIN: Was 20.4% in 3Q '07 compared with 20.3% in 2Q '07 and
20.9% in 3Q '06.
o EFFECTIVE TAX RATE: Was 24% in 3Q '07 versus 26% in 2Q '07 and 29% in 3Q
'06. The 3Q '07 rate reflects $75MM in tax benefits principally related
to the resolution of prior years' tax items. The 2Q '07 rate primarily
reflects a $65MM IRS benefit related to the treatment of prior years'
card fee income. The 3Q '06 rate reflects the favorable impacts of a net
interest receivable from the IRS, finalization of the 2005 U.S. Federal
tax return and an adjustment of 2006 estimated state taxes.
o DISCOUNT REVENUE: Rose 12% on a 16% increase in billed business. The
slower revenue versus billed business growth reflects the relatively
faster growth in billed business related to GNS, where we share discount
revenue with our card issuing partners, and higher cash-back rewards
costs and corporate incentive payments.
- The average discount rate* was 2.57% in 3Q '07, 2Q '07 and 3Q '06. As
indicated in prior quarters, selective repricing initiatives,
continued changes in the mix of business and volume-related pricing
discounts will likely result in some erosion of the average discount
rate over time.
<TABLE>
<CAPTION>
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------------- -------------
2007 2006
---- ----
<S> <C> <C> <C>
Card billed business* (billions):
United States $115.2 $101.7 13%
Outside the United States 47.3 38.6 23
-------- --------
Total $162.5 $140.3
======== ========
16
Total cards in force (millions):
United States 51.7 46.8 10
Outside the United States 33.0 29.7 11
-------- --------
Total 84.7 76.5 11
======== ========
Basic cards in force (millions):
United States 40.1 36.0 11
Outside the United States 28.3 25.2 12
-------- --------
Total 68.4 61.2 12
======== ========
Average basic cardmember spending**
United States $3,192 $3,040 5
Outside the United States $2,542 $2,175 17
Total $3,006 $2,782 8
</TABLE>
* For additional information about billed business and discount
rate calculations, please refer to the Third Quarter 2007
Earnings Release, American Express Company Selected Statistical
Information pages.
** Proprietary card activity only.
-6-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
CONSOLIDATED
- WORLDWIDE BILLED BUSINESS: The 16% increase in worldwide billed
business reflected a 13% increase in USCS, a 15% increase in ICS, a
14% increase in GCS and a 45% increase in GNS partner volume. The
table below summarizes selected billed business related statistics
for 3Q '07:
<TABLE>
<CAPTION>
Percentage
Increase
Assuming No
Changes in
Percentage Foreign
Increase Exchange Rates
------------- ------------------
<S> <C> <C>
WORLDWIDE*
Billed Business 16% 14%
Average spending per proprietary basic card 8 6
Basic cards-in-force 12
U.S.*
Billed Business 13
Average spending per proprietary basic card 5
Basic cards-in-force 11
Proprietary consumer card billed business** 12
Proprietary small business billed business** 15
Proprietary Corporate Services billed business*** 9
OUTSIDE THE U.S.*
Billed Business 23 14
Average spending per proprietary basic card 17 9
Basic cards-in-force 12
Proprietary consumer and small business billed
business**** 15 7
Proprietary Corporate Services billed business*** 24 15
</TABLE>
* Captions not designated as "proprietary" include
both proprietary and GNS data.
** Included in USCS.
*** Included in GCS.
**** Included in ICS.
-- U.S. non-T&E-related volume categories (which represented
approximately 68% of 3Q '07 U.S. billed business) grew 15%, while
T&E volumes rose 10%.
-- U.S. airline-related volume, which represented approximately 9% of
total U.S. volumes during the quarter, increased 5% due to a 5%
increase in transactions and a slightly higher average airline
charge.
-- Worldwide airline volumes, which represented approximately 11% of
total volumes during the quarter, increased 13% on 8% growth in
transactions and a 5% increase in the average airline charge.
-- Assuming no changes in foreign exchange rates: Total billed
business outside the U.S. reflected proprietary growth in Europe
and Latin America in the low double-digits and growth in Canada
and Asia Pacific in the high single-digits.
- TOTAL CARDS IN FORCE: Rose 11% worldwide due to an increase of 8% in
USCS, a 2% increase in ICS, a 3% increase in GCS and a 32% increase
in GNS. Continued strong card acquisitions within both proprietary
and GNS activities, as well as continued solid average customer
retention levels, drove these results.
-- 1.2MM and 1.3MM net cards were added during the quarter in the U.S.
and the non-U.S. businesses, respectively.
o NET CARD FEES: Increased 13% due to the benefit of card growth and a
higher average card fee. The average annual fee per proprietary card in
force was $36 in 3Q '07 and 2Q '07 versus $34 in 3Q '06.
o TRAVEL COMMISSIONS AND FEES: Increased 13% reflecting a 16% increase in
worldwide travel sales.
o OTHER COMMISSIONS AND FEES: Rose 19% on higher card-related conversion
revenues and greater assessment and service fees.
o SECURITIZATION INCOME, NET: Increased 2% as higher gains from issuances
and a greater average balance of securitized loans was partially offset
by an increase in write offs and greater interest expense, due to a
higher coupon rate paid to certificate holders. Securitization income,
net represents the non-credit provision components of the gains from
securitization activities within the USCS segment, fair value changes of
the related interest-only (I/O) strip, excess spread related to
securitized loans, net finance revenue on retained interests in
securitized loans, and servicing income, net of related discounts or
fees.
-7-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
CONSOLIDATED
<TABLE>
<CAPTION>
- Components of Securitization Income, Net:
Quarters Ended Percentage
September 30, Inc/(Dec)
----------------------------------- ------------
2007 2006
---- ----
<S> <C> <C> <C>
(millions)
Excess spread* $264 $279 (5)%
Servicing fees 108 100 8
Gains on sales from securitizations** 20 5 #
---- ----
Total securitization income $392 $384 2
==== ====
</TABLE>
# Denotes variance of more than 100%.
* Excess spread is the net positive cash flow from interest and fee
collections allocated to the investor's interests after deducting
the interest paid on investor certificates, credit losses,
contractual servicing fees, other expenses, and the changes in the
fair value of the I/O strip in 2007.
** Excludes $47MM and $(18)MM in 2007 and $13MM and $(15)MM in 2006
of impact from cardmember loan sales and maturities, respectively,
reflected in the credit provision.
- The average balance of Cardmember lending securitizations was $21.4B in 3Q
'07, compared with $20.0B in 3Q '06.
o OTHER REVENUES: Decreased 13% as the $81MM pre-tax AEIDC charge
previously mentioned was partially offset by higher network, merchant,
publishing and insurance-related revenues.
o CARDMEMBER LENDING FINANCE REVENUE: Increased 30% due to 30% growth in
average worldwide lending balances on an owned basis.
o OTHER (INCLUDING INVESTMENT CERTIFICATES) INTEREST INCOME: Increased 6%.
o CARDMEMBER LENDING INTEREST EXPENSE: Increased 40% reflecting the increased
loan balances and a higher cost of funds.
o CHARGE CARD AND OTHER INTEREST EXPENSE: Increased 38% reflecting a higher
cost of funds and an increased receivable balance.
o MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Increased
14%, reflecting higher volume-related rewards costs and greater marketing
and promotion expenses.
o HUMAN RESOURCES EXPENSE: Increased 11% due to a higher level of employees,
merit increases and larger benefit costs.
o PROFESSIONAL SERVICES EXPENSE: Declined 4%.
o OCCUPANCY AND EQUIPMENT EXPENSE: Rose 8%.
o COMMUNICATIONS EXPENSE: Increased 13% due to higher cardmember-related
communications activities.
o OTHER EXPENSE: Decreased 1% as a decrease in underlying expenses was
partially offset by the $33MM pre-tax gain related to the sales of our
operations in Malaysia and Indonesia in 3Q '06.
-8-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
CONSOLIDATED
CHARGE CARD PROVISION FOR LOSSES: Increased 9%, primarily reflecting higher
business volumes.
- WORLDWIDE CHARGE CARD:*
-- The loss ratio and past due rate increased versus last quarter, but
remained flat compared to last year.
<TABLE>
<CAPTION>
9/07 6/07 9/06
-------------- ------------- -------------
<S> <C> <C> <C>
Net loss ratio as a % of charge volume 0.26% 0.24% 0.26%
90 days past due as a % of receivables 2.8% 2.7% 2.8%
9/07 6/07 9/06
------------- ------------- -------------
Total Receivables (billions) $38.5 $38.4 $35.0
Reserves (millions) $998 $981 $947
% of receivables 2.6% 2.6% 2.7%
% of 90 day past due accounts 91% 95% 97%
</TABLE>
*There are no off-balance sheet Charge Card securitizations.
Therefore, all credit quality statistics for the Charge Card
portfolio are on an "Owned Basis."
Note: Amounts herein reflect certain revisions, as noted on
pages 2-3.
o CARDMEMBER LENDING PROVISION FOR LOSSES: Increased 41% due to increased
loan volumes and higher write-off and delinquency rates within the U.S.,
which have risen after the unusually low rates in 2006 that followed the
October 2005 change in the bankruptcy legislation.
- WORLDWIDE LENDING:*
-- The write-off rate was unchanged versus last quarter, but increased
versus last year. The past due rate increased versus last year and
last quarter.
<TABLE>
<CAPTION>
9/07 6/07 9/06
-------------- ------------- -------------
<S> <C> <C> <C>
Net write-off rate 4.1% 4.1% 3.8%
30 days past due as a % of loans 3.0% 2.8% 2.8%
9/07 6/07 9/06
------------- -------------- -------------
Total Loans (billions) $50.5 $48.3 $38.3
Reserves (millions) $1,469 $1,417 $1,126
% of total loans 2.9% 2.9% 2.9%
% of 30 days past due accounts 97% 106% 106%
</TABLE>
* All lending statistics are presented here on a GAAP or "Owned
Basis". "Managed Basis" credit quality statistics are available
in the Third Quarter 2007 Earnings Release on the American
Express Company Consolidated Selected Statistical Information
pages. Credit trends are generally consistent under both
reporting methods.
o OTHER (INCLUDING INVESTMENT CERTIFICATES) PROVISION FOR LOSSES AND BENEFITS:
Increased 5%.
-9-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
CONSOLIDATED
SUPPLEMENTAL INFORMATION - TANGIBLE COMMON EQUITY AND TOTAL ADJUSTED ASSETS
During the third quarter of 2006, the Company issued $750MM of 6.80%
Subordinated Debentures due 2036 ("Subordinated Debentures"), which are
automatically extendable until 2066 unless certain events occur prior to that
date. In connection with the Subordinated Debentures, the Company has
undertaken to disclose on a quarterly basis the amount of its "tangible common
equity" and "total adjusted assets". The Company's consolidated tangible
common equity amount as of the end of any fiscal quarter means the total
shareholders' equity, excluding preferred stock, of the Company as reflected
on its consolidated balance sheet prepared in accordance with GAAP as of such
fiscal quarter end minus (i) intangible assets and goodwill and (ii) deferred
acquisition costs, as determined in accordance with GAAP and reflected in such
consolidated balance sheet. The Company calculates total adjusted assets as of
the end of any fiscal quarter as the sum of (i) total consolidated assets as
reflected on the Company's balance sheet minus (ii) non-securitized Cardmember
lending receivables (without deduction for reserves), which are set forth on
the Company's balance sheet, plus (iii) managed (i.e., securitized and
non-securitized) worldwide Cardmember lending receivables as reported by the
Company for such fiscal quarter. As of September 30, 2007, the Company's
tangible common equity was $9B and its total adjusted assets were $162B. As of
September 30, 2007, the consolidated assets, as reflected on the Company's
balance sheet, were $141B.
CORPORATE & OTHER
Net expense was $59MM in 3Q '07 compared with net expense of $85MM in 2Q '07
and $47MM in 3Q '06. The 3Q '07 expense includes the previously mentioned
$41MM after-tax AEIDC charge. The 2Q '07 expense includes costs related to
regulatory and legal exposures and $2MM ($1MM after-tax) of reengineering
costs.
-10-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
U.S. CARD SERVICES
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
(Preliminary)
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------------- -----------------
(millions) 2007 2006
---- ----
Revenues
<S> <C> <C> <C>
Discount revenue, net card fees and other $2,632 $2,358 12%
Cardmember lending finance revenue 1,224 928 32
Securitization income, net 392 384 2
---- ----
Total revenues 4,248 3,670 16
Interest expense:
Cardmember lending 402 260 55
Charge card and other 257 207 24
---- ----
Revenues net of interest expense 3,589 3,203 12
---- ----
Expenses
Marketing, promotion, rewards and cardmember services 1,191 1,117 7
Human resources and other operating expenses 848 805 5
---- ----
Total 2,039 1,922 6
---- ----
Provisions for losses 638 442 44
---- ----
Pretax segment income 912 839 9
Income tax provision 320 281 14
---- ----
Segment income $592 $558 6
---- ----
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on pages 2-3.
<TABLE>
<CAPTION>
STATISTICAL INFORMATION
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------------- -----------------
2007 2006
---- ----
<S> <C> <C> <C>
Card billed business (billions) $94.2 $83.4 13%
Total cards in force (millions) 42.9 39.9 8
Basic cards in force (millions) 31.8 29.5 8
Average basic cardmember spending* (dollars) $2,986 $2,852 5
Segment capital (billions) $4.5 $4.5 -
Return on segment capital** 50.5% 46.6%
</TABLE>
* Proprietary cards only.
** Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational
needs, risk measures and regulatory capital requirements.
- BILLED BUSINESS: The 13% increase in USCS billed business reflects a
5% increase in average spending per proprietary basic card and 8%
growth in basic cards in force. -- Within the U.S. consumer business,
billed business grew 12%; small business volumes rose 15%.
- TOTAL CARDS IN FORCE: Increased by 3.0MM, or 8%, versus last year on
continued strong card acquisition activity and retention levels.
P&L DISCUSSION:
o NET INCOME: Increased 6% as revenues net of interest expense rose 12%,
expenses increased 6% and provisions for losses increased 44%.
- PRE-TAX MARGIN: Was 25.4% in 3Q '07 versus 23.2% in 2Q '07 and 26.2%
in 3Q '06.
- EFFECTIVE TAX RATE: Was 35% in 3Q '07 compared to 30% in 2Q '07 and
33% in 3Q '06. The 3Q '07 rate includes $18MM of the previously
mentioned tax benefits versus $56MM of benefits in 2Q '07.
o DISCOUNT REVENUE, NET CARD FEES AND OTHER REVENUES: Increased 12%,
largely due to greater billed business volumes, increased other
commissions and fees, higher net card fees, and greater travel revenues.
o CARDMEMBER LENDING FINANCE REVENUE: Increased 32% on 35% growth in
average owned lending balances and a slightly lower portfolio yield.
-11-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
U.S. CARD SERVICES
o SECURITIZATION INCOME, NET: Increased 2% as higher gains from issuances
and a greater average balance of securitized loans were partially offset
by an increase in write offs and greater interest expense, due to a
higher coupon rate paid to certificate holders.
o CARDMEMBER LENDING INTEREST EXPENSE: Increased 55% on greater loan
balances and a higher cost of funds.
o CHARGE CARD AND OTHER INTEREST EXPENSE: Increased 24% due to a higher
cost of funds and a larger receivable balance.
o MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Increased
7%, due to higher volume-driven rewards costs which were partially offset
by lower marketing and promotion expenses.
o HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Increased 5% primarily due to
higher technology and volume-related operating expenses.
o PROVISIONS FOR LOSSES: Increased 44% reflecting the impact of strong loan
and volume growth and higher write-off and delinquency rates, which have
risen after the unusually low rates following the enactment of the
October 2005 U.S. bankruptcy legislation.
- CHARGE CARD: *
-- The loss ratio and past due rates increased versus last year and last
quarter.
<TABLE>
<CAPTION>
9/07 6/07 9/06
------------- ------------ ------------
<S> <C> <C> <C>
Total Receivables (billions) $19.4 $19.8 $18.2
Net loss ratio as a % of charge volume 0.34% 0.30% 0.33%
90 days past due as a % of total 3.9% 3.6% 3.5%
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on
pages 2-3.
- CARDMEMBER LENDING: **
-- The write-off rate increased versus last year, but remained flat
versus last quarter. The past due rate increased versus last
year and last quarter, but remained well within historical
ranges.
<TABLE>
<CAPTION>
9/07 6/07 9/06
----------- ------------- -----------
<S> <C> <C> <C>
Total Loans (billions) $40.0 $38.3 $29.3
Net write-off rate 3.7% 3.7% 3.1%
30 days past due as a % of loans 3.1% 2.7% 2.7%
</TABLE>
* There are no off-balance sheet Charge Card securitizations.
Therefore, all credit quality statistics for the Charge Card
portfolio are on an "Owned Basis."
** Owned basis. See page 13-14 for "Managed Basis" Cardmember
lending information.
-12-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
U.S. CARD SERVICES
MANAGED BASIS
For USCS, the managed basis presentation assumes that there have been no
off-balance sheet securitization transactions, i.e., all securitized
cardmember loans and related income effects are reflected as if they were in
the Company's balance sheets and income statements, respectively. For the
managed basis presentation, revenue and expenses related to securitized
cardmember loans are reflected in net card fees and other, cardmember lending
finance revenue, cardmember lending interest expense and credit provision. On
a managed basis, there is no securitization income, net, as the managed basis
presentation assumes no securitization transactions have occurred.
The Company presents USCS information on a managed basis because that is the
way the Company's management views and manages the business. Management
believes that a full picture of trends in the Company's cardmember lending
business can only be derived by evaluating the performance of both securitized
and non-securitized cardmember loans. Management also believes that use of a
managed basis presentation presents a more accurate picture of the key
dynamics of the cardmember lending business. Irrespective of the on- and
off-balance sheet funding mix, it is important for management and investors to
see metrics for the entire cardmember lending portfolio because they are more
representative of the economics of the aggregate cardmember relationships and
ongoing business performance and trends over time. It is also important for
investors to see the overall growth of cardmember loans and related revenue in
order to evaluate market share. These metrics are significant in evaluating
the Company's performance and can only be properly assessed when all
non-securitized and securitized cardmember loans are viewed together on a
managed basis. The Company does not currently securitize international loans.
On a GAAP basis, revenue and expenses from securitized cardmember loans are
reflected in the Company's income statements in securitization income, net,
fees and commissions, and credit provision for cardmember lending. At the time
of a securitization transaction, the securitized cardmember loans are removed
from the Company's balance sheet, and the resulting gain on sale is reflected
in securitization income, net, as well as an impact to credit provision
(credit reserves are no longer recorded for the cardmember loans once sold).
Over the life of a securitization transaction, the Company recognizes
servicing fees and other net revenues (referred to as "excess spread") related
to the interests sold to investors (i.e. the investors' interests). These
amounts are reflected in securitization income, net, and fees and commissions.
The Company also recognizes cardmember lending finance revenue over the life
of the securitization transaction related to the interest it retains (i.e. the
seller's interest). At the maturity of a securitization transaction,
cardmember loans on the balance sheet increase, and the impact of the
incremental required loss reserves is recorded in credit provision.
As presented, in aggregate over the life of a securitization transaction, the
pretax income impact to the Company is the same whether or not the Company had
securitized cardmember loans or funded these loans through other financing
activities (assuming the same financing costs). The income statement
classifications, however, of specific items will differ.
The following information reconciles the GAAP basis presentation for
certain USCS income statement line items to the managed basis presentation,
where different:
<TABLE>
<CAPTION>
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
(millions) 2007 2006
---- ----
o DISCOUNT REVENUE, NET CARD FEES AND OTHER:
<S> <C> <C> <C>
Reported for the period (GAAP) $2,632 $2,358 12%
Securitization adjustments 67 51 31
---- ----
Managed discount revenue, net card fees and other $2,699 $2,409 12
====== ======
o CARDMEMBER LENDING FINANCE REVENUE:
Reported for the period (GAAP) $1,224 $928 32
Securitization adjustments 821 749 10
---- ----
Managed finance revenue $2,045 $1,677 22
====== =======
o SECURITIZATION INCOME, NET:
Reported for the period (GAAP) $392 $384 2
Securitization adjustments (392) (384) 2
---- ----
Managed securitization income, net $ - $ - -
====== =======
o CARDMEMBER LENDING INTEREST EXPENSE:
Reported for the period (GAAP) $402 $260 55
Securitization adjustments 302 274 10
---- ----
Managed cardmember lending interest expense $704 $534 32
---- ----
o PROVISIONS FOR LOSSES:
Reported for the period (GAAP) $638 $442 44
Securitization adjustments 226 144 57
---- ----
Managed provisions for losses $864 $586 47
---- ----
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on pages 2-3.
-13-
MANAGED P&L DISCUSSION
o DISCOUNT REVENUE, NET CARD FEES AND OTHER REVENUES: Increased 12%,
largely due to higher billed business volumes, greater other commissions
and fees, increased net card fees, and higher travel revenues.
o CARDMEMBER LENDING FINANCE REVENUE: Increased 22% due to 23% growth in
average managed lending balances and a slightly lower portfolio yield.
o CARDMEMBER LENDING INTEREST EXPENSE: Increased 32% on growth in lending
balances and a higher cost of funds.
o PROVISIONS FOR LOSSES: Increased 47% reflecting the impact of strong loan
and volume growth and higher write-off and delinquency rates, which have
risen after the unusually low rates following the enactment of the
October 2005 U.S. bankruptcy legislation.
- CARDMEMBER LENDING: *
-- The write-off rate increased versus last year, but remained flat
versus last quarter. The past due rate increased versus last
year and last quarter, but remained well within historical
ranges.
<TABLE>
<CAPTION>
9/07 6/07 9/06
----------- ------------- ------------
<S> <C> <C> <C>
Total Loans (billions) $61.5 $58.6 $49.5
Net write-off rate 3.7% 3.7% 3.0%
30 days past due as a % of loans 2.9% 2.6% 2.6%
</TABLE>
* Managed basis. There are no off-balance sheet Charge Card
securitizations. Therefore, all credit quality statistics for
the Charge Card portfolio are on an "Owned Basis," as
presented on page 12.
-14-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
INTERNATIONAL CARD SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
(Preliminary)
<TABLE>
<CAPTION>
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
(millions) 2007 2006
---- ----
<S> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $953 $819 16%
Cardmember lending finance revenue 353 286 23
------ ------
Total revenues 1,306 1,105 18
Interest expense:
Cardmember lending 126 99 27
Charge card and other 66 54 22
------ ------
Revenues net of interest expense 1,114 952 17
------ ------
Expenses
Marketing, promotion, rewards and cardmember services 354 247 43
Human resources and other operating expenses 453 387 17
------ ------
Total 807 634 27
------ ------
Provisions for losses 197 197 -
------ ------
Pretax segment income 110 121 (9)
Income tax (benefit) provision (30) 15 #
------ ------
Segment income $140 $106 32
------ ------
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on pages 2-3.
# Denotes variance of more than 100%.
STATISTICAL INFORMATION
<TABLE>
<CAPTION>
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
(millions) 2007 2006
---- ----
<S> <C> <C> <C>
Card billed business (billions) $24.7 $21.4 15
Total cards in force (millions) 15.8 15.5 2
Basic cards in force (millions) 11.2 11.1 1
Average basic cardmember spending* (dollars) $2,209 $1,908 16
Segment capital (millions)** $1,983 $1,936 2
Return on segment capital** 24.4% 16.8%
</TABLE>
* Proprietary cards only.
** Segment capital includes an allocation attributable to goodwill of $520MM
and $517MM in 3Q '07 and 3Q '06, respectively. Return on segment capital is
computed on a trailing 12-month basis using segment income and equity capital
allocated to segments based upon specific business operational needs, risk
measures and regulatory capital requirements.
- BILLED BUSINESS: The 15% increase in billed business reflects a 16%
increase in average spending per proprietary basic card and a 1%
increase in basic cards in force.
-- Adjusting for the impacts of foreign exchange translation,
billed business and spending per proprietary basic card in force
increased 7% and 8%, respectively, and volume growth within the
major geographic regions ranged from growth in the mid
single-digits to the low double-digits.
- TOTAL CARDS IN FORCE: Increased by 300K, or 2%, versus last year.
P&L DISCUSSION
o NET INCOME: Increased 32% versus last year as revenues net of interest
expense increased 17%, expenses rose by 27% and provisions for losses was
unchanged. Both revenue and expense growth rates were inflated by the
translation of foreign currency.
- 3Q '06 expenses included a $23MM ($17MM after-tax) gain related to
the completion of the sale of the Company's card operations in
Malaysia and Indonesia.
- PRE-TAX MARGIN: Was 9.9% in 3Q '07 versus 8.8% in 2Q '07 and 12.7% in 3Q '06.
- EFFECTIVE TAX RATE: Was (27%) in both 3Q '07 and 2Q '07,
respectively, versus 12% in 3Q '06. Going forward, this segment will
likely reflect an overall tax benefit since our internal tax
allocation process provides ICS with the consolidated benefit related
to its ongoing funding activities outside the U.S. In addition to
that recurring benefit, the 3Q '07 tax rate includes $17MM of the
previously mentioned tax benefits, while the 2Q '07 rate includes
several small favorable items primarily related to the finalization
of prior year's tax returns and settlements with tax authorities. The
3Q '06 rate reflects the relatively low tax benefit associated with
credit losses in Taiwan and the overall impact of ICS' global mix of
earnings.
-15-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
INTERNATIONAL CARD SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
o DISCOUNT REVENUE, NET CARD FEES AND OTHER REVENUES: The increase of 16%
versus 3Q '06 was driven primarily by the higher level of card spending,
increased net card fees, greater other revenues, higher other commissions
and fees, and increased travel revenues.
o CARDMEMBER LENDING FINANCE REVENUE: Increased 23% on 15% growth in average
lending balances and a higher portfolio yield.
o CARDMEMBER LENDING INTEREST EXPENSE: Increased 27% on higher loan
balances and an increased cost of funds.
o CHARGE CARD AND OTHER INTEREST EXPENSE: Increased 22% on a higher
receivable balance and a greater cost of funds.
o MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Increased
43%, reflecting volume-driven increases in rewards costs as well as
higher marketing and promotion expenses.
o HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Increased 17%, primarily
due to higher human resources and other operating expenses, which reflect
last year's gain on the business sales in Malaysia and Indonesia.
o PROVISIONS FOR LOSSES: Was unchanged from a year ago as lower write-off
and past due rates were partially offset by higher volumes and lending
balances.
- CHARGE CARD: *
-- The loss ratio and past due rate decreased versus last year and last
quarter.
<TABLE>
<CAPTION>
9/07 6/07 9/06
------------ ----------- -----------
<S> <C> <C> <C>
Total Receivables (billions) $6.1 $5.9 $5.5
Net loss ratio as a % of charge volume 0.26% 0.28% 0.27%
90 days past due as a % of total 1.8% 2.0% 2.6%
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on
pages 2-3.
- CARDMEMBER LENDING:*
-- The write-off and past due rates decreased versus last year and last
quarter.
<TABLE>
<CAPTION>
9/07 6/07 9/06
------------ ----------- -----------
<S> <C> <C> <C>
Cardmember Loans (billions) $10.5 $10.0 $9.0
Net write-off rate 5.5% 6.0% 5.9%
30 days past due as a % of loans 2.7% 2.9% 3.1%
</TABLE>
* There are no off-balance sheet Charge Card and currently no
off-balance sheet international lending securitizations. Therefore,
all credit quality statistics for the Charge Card and international
lending portfolio are on an "Owned Basis".
-16-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
GLOBAL COMMERCIAL SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
<TABLE>
<CAPTION>
(Preliminary)
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
(millions) 2007 2006
---- ----
<S> <C> <C> <C>
Revenues
Discount revenue, net card fees and other $1,180 $1,045 13%
------ ------
Charge card and other interest expense 116 96 21
------ ------
Revenues net of interest expense 1,064 949 12
------ ------
Expenses
Marketing, promotion, rewards and cardmember services 86 80 8
Human resources and other operating expenses 749 678 10
------ ------
Total 835 758 10
Provisions for losses 42 34 24
------ ------
Pretax segment income 187 157 19
Income tax provision 52 52 -
------ ------
Segment income $135 $105 29
====== ======
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on pages 2-3.
STATISTICAL INFORMATION
<TABLE>
<CAPTION>
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
(millions) 2007 2006
---- ----
<S> <C> <C> <C>
Card billed business (billions) $29.9 $26.2 14%
Total cards in force (millions) 6.8 6.6 3
Basic cards in force (millions) 6.8 6.6 3
Average basic cardmember spending* (dollars) $4,389 $3,974 10
Segment capital (millions)** $2,230 $1,997 12
Return on segment capital** 26.2% 27.6%
</TABLE>
* Proprietary cards only.
** Segment capital includes an allocation attributable to goodwill of
$767MM and $630MM in 3Q '07 and 3Q '06, respectively. Return on segment
capital is computed on a trailing 12-month basis using segment income and
equity capital allocated to segments based upon specific business
operational needs, risk measures and regulatory capital requirements.
- BILLED BUSINESS: The 14% increase in billed business reflects a 10%
increase in average spending per proprietary basic card and a 3%
increase in basic cards in force.
-- Adjusting for the impacts of foreign exchange translation,
billed business and spending per proprietary basic card in force
increased 11% and 7%, respectively, and volume growth within the
U.S. of 9% compared to growth within the Company's other major
geographic regions ranging from the mid-to-high teens.
- TOTAL CARDS IN FORCE: Increased by 200K, or 3%, versus last year.
P&L DISCUSSION
o NET INCOME: Increased 29% versus last year as revenues net of interest
expense increased 12%, expenses rose by 10% and provisions for losses
grew 24%. Both revenue and expense growth rates were inflated by the
translation of foreign currency.
- 3Q '06 included $10MM ($7MM after-tax) of the gain on the sale of the
Company's card-related operations in Malaysia and Indonesia.
- 3Q '07 included $9MM ($6MM after-tax) of reengineering expenses versus
$11MM ($7MM after-tax) in 3Q '06.
- PRE-TAX MARGIN: Was 17.6% in 3Q '07 versus 20.1% in 2Q '07 and 16.5% in
3Q '06.
- EFFECTIVE TAX RATE: Was 28% in 3Q '07 versus 26% in 2Q '07 and 33% in
3Q '06. The 3Q '07 and 2Q '07 rate reflects $9MM and $8MM,
respectively, of the previously mentioned tax benefits in those
periods.
o DISCOUNT REVENUE, NET CARD FEES AND OTHER REVENUES: The increase of 13%
versus 3Q '06 was driven primarily by the higher level of card spending,
greater travel revenues, and higher other commissions and fees.
o CHARGE CARD AND OTHER INTEREST EXPENSE: Increased 21% on a higher cost of
funds and a larger receivable balance.
-17-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
GLOBAL COMMERCIAL SERVICES
o MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES EXPENSES: Increased
8%, primarily due to greater volume-related rewards costs.
o HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Increased 10%, primarily
reflecting increased human resources costs and higher occupancy and
equipment expense, in part due to the acquisitions of Harbor Payments and
FAE Travel.
o PROVISIONS FOR LOSSES: Increased 24% reflecting higher volumes and loss
rates.
- CHARGE CARD: *
-- The loss ratio increased versus last year and last quarter. The
past due rate decreased versus last year, but was unchanged
versus last quarter.
<TABLE>
<CAPTION>
9/07 6/07 9/06
------------ ----------- -----------
<S> <C> <C> <C>
Total Receivables (billions) $12.5 $12.2 $10.9
Net loss ratio as a % of charge volume 0.11% 0.10% 0.09%
90 days past due as a % of total 1.6% 1.6% 1.7%
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on
pages 2-3.
* There are no off-balance sheet Charge Card securitizations.
Therefore, all credit quality statistics for the charge card
portfolio are on an "Owned Basis."
-18-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
GLOBAL NETWORK & MERCHANT SERVICES
CONDENSED STATEMENTS OF INCOME
(GAAP BASIS)
<TABLE>
<CAPTION>
(Preliminary)
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
(millions) 2007 2006
---- ----
<S> <C> <C> <C>
Revenues
Discount revenue, fees and other $902 $773 17%
------ ------
Interest expense:
Cardmember lending (33) (25) 32
Other (45) (43) 5
------ ------
Revenues net of interest expense 980 841 17
------ ------
Expenses
Marketing and promotion 151 118 28
Human resources and other operating expenses 417 390 7
------ ------
Total 568 508 12
------ ------
Provisions for losses 23 19 21
------ ------
Pretax segment income 389 314 24
Income tax provision 123 102 21
------ ------
Segment income $266 $212 25
====== ======
</TABLE>
Note: Amounts herein reflect certain revisions, as noted on pages 2-3.
<TABLE>
<CAPTION>
STATISTICAL INFORMATION
Quarters Ended Percentage
September 30, Inc/(Dec)
---------------------------- -----------------
2007 2006
---- ----
<S> <C> <C> <C>
Global card billed business*(billions) $162.5 $140.3 16%
Segment capital (millions) $1,125 $1,262 (11)
Return on segment capital** 84.7% 57.9%
Global Network Services:
Card billed business (billions) $14.1 $9.7 45%
Total cards in force (millions) 19.2 14.5 32
</TABLE>
* Includes activities related to proprietary cards (including cash advances),
cards issued under network partnership agreements, and certain insurance
fees charged on proprietary cards.
** Computed on a trailing 12-month basis using segment income and equity
capital allocated to segments based upon specific business operational
needs, risk measures and regulatory capital requirements.
P&L DISCUSSION
o NET INCOME: Increased 25% as revenues net of interest expense grew 17%,
expenses rose 12%, and provisions for losses increased 21%. Both revenue
and expense growth rates were inflated by translation of foreign
currency.
- PRE-TAX MARGIN: Was 39.7% in 3Q '07 versus 43.3% in 2Q '07 and 37.3% in
3Q '06.
- EFFECTIVE TAX RATE: Was 32% in 3Q '07 versus 36% in 2Q '07 and 32% in
3Q '06. The 3Q '07 rate reflects $22MM of the previously mentioned
tax benefits.
o DISCOUNT REVENUE, FEES AND OTHER REVENUE: Increased 17%, reflecting
growth in merchant-related revenues, primarily from the 16% increase in
global card billed business, and higher GNS-related revenues.
o CARDMEMBER LENDING INTEREST EXPENSE: The expense credit increased 32% due
to a larger volume and rate-driven interest credit related to internal
transfer pricing which recognizes the merchant services' accounts
payable-related funding benefit.
o OTHER INTEREST EXPENSE: The expense credit increased 5% as higher
interest on capital allocations was more than offset by a larger volume
and rate-driven interest credit related to internal transfer pricing
which recognizes the merchant services' accounts payable-related funding
benefit.
o MARKETING AND PROMOTION EXPENSES: Increased 28%, reflecting an increase
in brand and partner-related advertising costs versus last year.
-19-
AMERICAN EXPRESS COMPANY
THIRD QUARTER 2007 OVERVIEW
GLOBAL NETWORK & MERCHANT SERVICES
o HUMAN RESOURCES AND OTHER OPERATING EXPENSES: Increased 7% primarily due to
greater human resources and volume-related expenses.
o PROVISIONS FOR LOSSES: Increased 21% due to an increase in merchant-related
reserves, primarily driven by higher volumes.
-20-
INFORMATION RELATED TO FORWARD LOOKING STATEMENTS
THIS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE SUBJECT TO RISKS
AND UNCERTAINTIES. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "OPTIMISTIC,"
"INTEND," "PLAN," "AIM," "WILL," "MAY," "SHOULD," "COULD," "WOULD," "LIKELY,"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE
COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THESE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE
FOLLOWING: THE COMPANY'S ABILITY TO MEET ITS ROE TARGET RANGE OF 33 TO 36
PERCENT ON AVERAGE AND OVER TIME, WHICH WILL DEPEND IN PART ON FACTORS SUCH AS
THE COMPANY'S ABILITY TO GENERATE SUFFICIENT REVENUE GROWTH AND ACHIEVE
SUFFICIENT MARGINS, FLUCTUATIONS IN THE CAPITAL REQUIRED TO SUPPORT ITS
BUSINESSES, THE MIX OF THE COMPANY'S FINANCINGS, AND FLUCTUATIONS IN THE LEVEL
OF THE COMPANY'S SHAREHOLDERS' EQUITY DUE TO SHARE REPURCHASES, DIVIDENDS,
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME AND ACCOUNTING CHANGES,
AMONG OTHER THINGS; THE ACTUAL AMOUNT SPENT BY THE COMPANY IN THE FOURTH
QUARTER OF 2007 ON MARKETING, PROMOTION, REWARDS AND CARDMEMBER SERVICES BASED
ON MANAGEMENT'S ASSESSMENT OF COMPETITIVE OPPORTUNITIES AND OTHER FACTORS
AFFECTING ITS JUDGMENT; THE COMPANY'S ABILITY TO GROW ITS BUSINESS AND MEET OR
EXCEED ITS RETURN ON SHAREHOLDERS' EQUITY TARGET BY REINVESTING APPROXIMATELY
35 PERCENT OF ANNUALLY-GENERATED CAPITAL, AND RETURNING APPROXIMATELY 65
PERCENT OF SUCH CAPITAL TO SHAREHOLDERS, OVER TIME, WHICH WILL DEPEND ON THE
COMPANY'S ABILITY TO MANAGE ITS CAPITAL NEEDS AND THE EFFECT OF BUSINESS MIX,
ACQUISITIONS AND RATING AGENCY REQUIREMENTS; CONSUMER AND BUSINESS SPENDING ON
THE COMPANY'S CREDIT AND CHARGE CARD PRODUCTS AND TRAVELERS CHEQUES AND OTHER
PREPAID PRODUCTS AND GROWTH IN CARD LENDING BALANCES, WHICH DEPEND IN PART ON
THE ABILITY TO ISSUE NEW AND ENHANCED CARD AND PREPAID PRODUCTS, SERVICES AND
REWARDS PROGRAMS, AND INCREASE REVENUES FROM SUCH PRODUCTS, ATTRACT NEW
CARDMEMBERS, REDUCE CARDMEMBER ATTRITION, CAPTURE A GREATER SHARE OF EXISTING
CARDMEMBERS' SPENDING, AND SUSTAIN PREMIUM DISCOUNT RATES ON ITS CARD PRODUCTS
IN LIGHT OF REGULATORY AND MARKET PRESSURES, INCREASE MERCHANT COVERAGE,
RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND
EXPAND THE GLOBAL NETWORK SERVICES BUSINESS; THE SUCCESS OF THE GLOBAL NETWORK
SERVICES BUSINESS IN PARTNERING WITH BANKS IN THE UNITED STATES, WHICH WILL
DEPEND IN PART ON THE EXTENT TO WHICH SUCH BUSINESS FURTHER ENHANCES THE
COMPANY'S BRAND, ALLOWS THE COMPANY TO LEVERAGE ITS SIGNIFICANT PROCESSING
SCALE, EXPANDS MERCHANT COVERAGE OF THE NETWORK, PROVIDES GLOBAL NETWORK
SERVICES' BANK PARTNERS IN THE UNITED STATES THE BENEFITS OF GREATER
CARDMEMBER LOYALTY AND HIGHER SPEND PER CUSTOMER, AND MERCHANT BENEFITS SUCH
AS GREATER TRANSACTION VOLUME AND ADDITIONAL HIGHER SPENDING CUSTOMERS;
FLUCTUATIONS IN INTEREST RATES (INCLUDING FLUCTUATIONS IN BENCHMARKS, SUCH AS
LIBOR AND OTHER BENCHMARK RATES, USED TO PRICE LOANS AND OTHER INDEBTEDNESS,
AS WELL AS CREDIT SPREADS IN THE PRICING OF LOANS AND OTHER INDEBTEDNESS),
WHICH IMPACT THE COMPANY'S BORROWING COSTS, RETURN ON LENDING PRODUCTS AND THE
VALUE OF THE COMPANY'S INVESTMENTS; THE CONTINUATION OF FAVORABLE TRENDS,
INCLUDING INCREASED TRAVEL AND ENTERTAINMENT SPENDING, AND THE OVERALL LEVEL
OF CONSUMER CONFIDENCE; THE COSTS AND INTEGRATION OF ACQUISITIONS; THE
UNDERLYING ASSUMPTIONS AND EXPECTATIONS RELATED TO THE SALE OF THE AMERICAN
EXPRESS BANK LTD. BUSINESSES PROVING TO BE INACCURATE OR UNREALIZED,
INCLUDING, AMONG OTHER THINGS, THE LIKELIHOOD OF AND EXPECTED TIMING FOR
COMPLETION OF THE TRANSACTION, THE PROCEEDS TO BE RECEIVED BY THE COMPANY IN
THE TRANSACTION AND THE TRANSACTION'S IMPACT ON THE COMPANY'S EARNINGS; THE
SUCCESS, TIMELINESS AND FINANCIAL IMPACT (INCLUDING COSTS, COST SAVINGS AND
OTHER BENEFITS INCLUDING INCREASED REVENUES), AND BENEFICIAL EFFECT ON THE
COMPANY'S OPERATING EXPENSE TO REVENUE RATIO, BOTH IN THE SHORT-TERM AND OVER
TIME, OF REENGINEERING INITIATIVES BEING IMPLEMENTED OR CONSIDERED BY THE
COMPANY, INCLUDING COST MANAGEMENT, STRUCTURAL AND STRATEGIC MEASURES SUCH AS
VENDOR, PROCESS, FACILITIES AND OPERATIONS CONSOLIDATION, OUTSOURCING
(INCLUDING, AMONG OTHERS, TECHNOLOGIES OPERATIONS), RELOCATING CERTAIN
FUNCTIONS TO LOWER-COST OVERSEAS LOCATIONS, MOVING INTERNAL AND EXTERNAL
FUNCTIONS TO THE INTERNET TO SAVE COSTS, AND PLANNED STAFF REDUCTIONS RELATING
TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE COMPANY'S ABILITY TO REINVEST
THE BENEFITS ARISING FROM SUCH REENGINEERING ACTIONS IN ITS BUSINESSES; THE
ABILITY TO CONTROL AND MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND
PROMOTION EXPENSES AS BUSINESS EXPANDS OR CHANGES, INCLUDING THE ABILITY TO
ACCURATELY ESTIMATE THE PROVISION FOR THE COST OF THE MEMBERSHIP REWARDS
PROGRAM; THE COMPANY'S ABILITY TO MANAGE CREDIT RISK RELATED TO CONSUMER DEBT,
BUSINESS LOANS, MERCHANT BANKRUPTCIES AND OTHER CREDIT TRENDS AND THE RATE OF
BANKRUPTCIES, WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT PAYMENTS BY
INDIVIDUAL AND CORPORATE CUSTOMERS AND BUSINESSES THAT ACCEPT THE COMPANY'S
CARD PRODUCTS AND RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS;
BANKRUPTCIES, RESTRUCTURINGS, CONSOLIDATIONS OR SIMILAR EVENTS AFFECTING THE
AIRLINE OR ANY OTHER INDUSTRY REPRESENTING A SIGNIFICANT PORTION OF THE
COMPANY'S BILLED BUSINESS, INCLUDING ANY POTENTIAL NEGATIVE EFFECT ON
PARTICULAR CARD PRODUCTS AND SERVICES AND BILLED BUSINESS GENERALLY THAT COULD
RESULT FROM THE ACTUAL OR PERCEIVED WEAKNESS OF KEY BUSINESS PARTNERS IN SUCH
INDUSTRIES; THE TRIGGERING OF OBLIGATIONS TO MAKE PAYMENTS TO CERTAIN CO-BRAND
PARTNERS, MERCHANTS, VENDORS AND CUSTOMERS UNDER CONTRACTUAL ARRANGEMENTS WITH
SUCH PARTIES UNDER CERTAIN CIRCUMSTANCES; A DOWNTURN IN THE COMPANY'S
BUSINESSES AND/OR NEGATIVE CHANGES IN THE COMPANY'S AND ITS SUBSIDIARIES'
CREDIT RATINGS, WHICH COULD RESULT IN CONTINGENT PAYMENTS UNDER CONTRACTS,
DECREASED LIQUIDITY AND HIGHER BORROWING COSTS; FLUCTUATIONS IN FOREIGN
CURRENCY EXCHANGE RATES; ACCURACY OF ESTIMATES FOR THE FAIR VALUE OF THE
ASSETS IN THE COMPANY'S INVESTMENT PORTFOLIO AND, IN PARTICULAR, THOSE
INVESTMENTS THAT ARE NOT READILY MARKETABLE, INCLUDING THE VALUATION OF THE
INTEREST-ONLY STRIP RELATING TO THE COMPANY'S LENDING SECURITIZATIONS; THE
COMPANY'S ABILITY TO INVEST IN TECHNOLOGY ADVANCES ACROSS ALL AREAS OF ITS
BUSINESS TO STAY ON THE LEADING EDGE OF TECHNOLOGIES APPLICABLE TO THE
PAYMENTS INDUSTRY; THE COMPANY'S ABILITY TO PROTECT ITS INTELLECTUAL PROPERTY
RIGHTS (IP) AND AVOID INFRINGING THE IP OF OTHER PARTIES; THE POTENTIAL
NEGATIVE EFFECT ON THE COMPANY'S BUSINESSES AND INFRASTRUCTURE, INCLUDING
INFORMATION TECHNOLOGY, OF TERRORIST ATTACKS, NATURAL DISASTERS OR OTHER
CATASTROPHIC EVENTS IN THE FUTURE; POLITICAL OR ECONOMIC INSTABILITY IN
CERTAIN REGIONS OR COUNTRIES, WHICH COULD AFFECT LENDING AND OTHER COMMERCIAL
ACTIVITIES, AMONG OTHER BUSINESSES, OR RESTRICTIONS ON CONVERTIBILITY OF
CERTAIN CURRENCIES; CHANGES IN LAWS OR GOVERNMENT REGULATIONS; ACCOUNTING
CHANGES; OUTCOMES AND COSTS ASSOCIATED WITH LITIGATION AND COMPLIANCE AND
REGULATORY MATTERS; AND COMPETITIVE PRESSURES IN ALL OF THE COMPANY'S MAJOR
BUSINESSES. A FURTHER DESCRIPTION OF THESE AND OTHER RISKS AND UNCERTAINTIES
CAN BE FOUND IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2006, AND ITS OTHER REPORTS FILED WITH THE SEC.
-21-