EX-99.1 CHARTER 4 pressrel.txt EXHIBIT 99.1- PRESS RELEASE Exhibit 99.1 News Release News Release News Release News Release Contact: Molly Faust 201/209-5595 molly.faust@aexp.com Michael J. O'Neill 201/209-5583 mike.o'neill@aexp.com FOR IMMEDIATE RELEASE New York - October 22, 2001 - AMERICAN EXPRESS COMPANY today reported third quarter net income of $298 million, down 60 percent from $737 million in the same period a year ago. Diluted earnings per share were $.22, down 59 percent from a year ago. Net revenues on a managed basis totaled $5.5 billion, down one percent from $5.6 billion a year ago. The company's return on equity was 14.2 percent. Results for the third quarter were negatively affected by two significant items: a previously announced restructuring charge of $352 million pre-tax ($232 million after-tax) and the impacts from the September 11th terrorist attacks. The September 11th events resulted in certain one-time costs and business interruption losses, including: provisions related to credit exposures to travel industry service establishments, insurance claims, and waived finance charges and late fees. The combination of these items totaled approximately $98 million pre-tax ($65 million after-tax). The company also incurred costs of approximately $42 million since September 11th, which are expected to be covered by insurance. Consequently, these costs did not impact the quarterly results. These include the cost of duplicate facilities and equipment associated with the relocation of the company's offices in lower Manhattan and certain other business recovery expenses. Costs associated with the damage to the company's offices, extra operating expenses and business interruption losses are still being evaluated. The company expects that a substantial portion of such costs and losses will be covered by insurance. -1- The third quarter restructuring charge includes severance costs for the elimination of approximately 6,100 jobs and asset impairment and other costs, all relating to the consolidation and reorganization of certain business units, the scale back of corporate lending in certain regions, the migration of certain processes to lower cost locations, the outsourcing of certain activities, and the transition of certain processing and service functions to the Internet. These initiatives are expected to produce expense savings of approximately $325 million in 2002. A portion of these savings is expected to flow through to earnings in the form of improved operating expense margins and the rest is expected to be reinvested back into high-growth areas of the business. In addition to the activities related to the restructuring charge, the company made strong progress on its global reengineering efforts initiated in the first half of the year and, as of September 30, had realized savings in excess of $700 million. Net income for the third quarter, adjusted for the restructuring and one-time costs related to September 11th, was approximately $595 million, down 19 percent. On a similar basis, earnings per share were $.45, down 17 percent. The company's adjusted return on equity was 16.7 percent. "While we were on target to meet prior consensus for third quarter earnings, the terrorist attacks obviously had a significant impact on the overall economy and we saw clear evidence of that as consumer spending, business travel and investment activity slowed after September 11th," said Kenneth I. Chenault, chairman and chief executive officer, American Express Company. "In light of the weak economy and financial markets, we are moving aggressively to lower our operating expenses. The progress we are making on -2- our reengineering initiatives has freed up substantial resources for investment in our businesses with the strongest growth potential. This, along with the anticipated benefit of lower interest rates and the strategies in place to grow our franchise, positions us well to benefit when we see even a modest improvement in the economy." TRAVEL RELATED SERVICES (TRS) reported quarterly net income of $248 million, down 51 percent from $507 million in the third quarter a year ago. Included in third quarter results are $195 million pre-tax ($127 million after-tax) of the restructuring charge noted earlier. Also included in the results are $87 million pre-tax ($57 million after-tax) of one-time costs and waived fees directly related to the September 11th terrorist attacks. Excluding these costs and the restructuring charge, TRS' net income would have been $432 million, down 15 percent from the third quarter last year. TRS' net revenues rose two percent, as growth in loans and fee revenues were partly offset by a three percent decline in billed business and a 28 percent fall in travel sales. These declines reflect a substantial decrease in corporate travel and entertainment spending and consumer travel since September 11th. Prior to September, billed business growth for the quarter was about two percent as higher consumer and small business spending offset a decline in corporate travel and entertainment spending. Net finance charge revenues were higher, due to balance growth and wider net interest yields. This increase reflects a smaller percentage of loan balances on introductory rates and the benefit of declining interest rates during the quarter. The provision for losses on the lending portfolios grew as a result of higher volumes and an increase in U.S. lending write-off rates and -3- delinquencies. Marketing and promotion expenses were lower as TRS scaled back certain marketing efforts in light of the weaker business environment. Operating expenses rose, reflecting increased Cardmember loyalty programs and business volumes. These expenses were partly offset by the benefits of reengineering and cost-control efforts. The above discussion presents TRS results "on a managed basis" as if there had been no securitization transactions, which conforms to industry practice. The attached financials present TRS results on both a managed and reported basis. Net income is the same in both formats. On a reported basis, TRS' results included securitization gains of $29 million pre-tax ($19 million after-tax) and $26 million pre-tax ($17 million after-tax) in the third quarters of 2001 and 2000, respectively. These gains were offset by expenses related to card acquisition activities and therefore had no material impact on net income or total expenses. AMERICAN EXPRESS FINANCIAL ADVISORS (AEFA) reported quarterly net income of $145 million, down 46 percent from $269 million in the third quarter a year ago. Net revenues decreased 14 percent. Included in third quarter results are $62 million pre-tax ($41 million after-tax) of the restructuring charge noted earlier and $11 million pre-tax ($8 million after-tax) of insurance claims directly related to September 11th. Excluding these items, AEFA's net income would have been $194 million, down 28 percent from last year. -4- AEFA results reflect continued weakness in equity markets and narrower spreads on the investment portfolio. The weakened equity markets led to significantly lower asset levels and lower sales of investment products. As a result, management and distribution fees fell 15 percent. Operating expenses, excluding the above-mentioned charges, decreased four percent from a year ago due primarily to lower sales commissions and continued reengineering and cost-control initiatives. As of September 30th, approximately 4 percent of the company's $33 billion investment portfolio consisted of high-yield securities, down from 12 percent a year ago and 8 percent last quarter. The reduction reflects the activities to date to lower the risk profile of the portfolio and concentrate on stronger credits. AMERICAN EXPRESS BANK (AEB) reported a quarterly net loss of $43 million, compared with $7 million of net income a year ago. Included in third quarter results are $84 million pre-tax ($57 million after-tax) of the restructuring charge noted earlier. Excluding these charges, AEB's net income would have been $15 million, approximately double the earnings recorded in the same period last year. While AEB sustained damage to its premises due to the September 11th terrorist attacks, the costs are expected to be covered by insurance. Consequently, these costs did not impact AEB's quarterly results. AEB's business results reflect strong performance in Personal Financial Services and Private Banking. Results also benefited from lower funding costs and lower operating expenses as a result of AEB's reengineering efforts. These were offset in part by higher provisions for losses due to higher Personal Financial Services loan balances, and lower revenue from Corporate Banking as the company continues to shift its focus to Personal Financial Services and Private Banking. -5- CORPORATE AND OTHER reported net expenses of $52 million, compared with $46 million a year ago. Included in third quarter 2001 results are $11 million pre-tax ($7 million after-tax) of the restructuring charge noted earlier. American Express Company (www.americanexpress.com), founded in 1850, is a global travel, financial and network services provider. *** Note: The 2001 Third Quarter Earnings Supplement will be available today on the American Express web site at http://ir.americanexpress.com. In addition, an investor conference call to discuss third quarter earnings results, operating performance and other topics that may be raised during the discussion will be held at 5:00 p.m. (ET) today. Live audio of the 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 also will be available today at the same web site address. *** THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES. THE WORDS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "AIM", "WILL", "SHOULD", AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY THESE FORWARD-LOOKING STATEMENTS. 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: FLUCTUATION IN THE EQUITY MARKETS, WHICH CAN AFFECT THE AMOUNT AND TYPES OF INVESTMENT PRODUCTS SOLD BY AEFA, THE MARKET VALUE OF ITS MANAGED ASSETS, AND MANAGEMENT AND DISTRIBUTION FEES RECEIVED BASED ON THOSE ASSETS; POTENTIAL DETERIORATION IN THE HIGH-YIELD SECTOR AND OTHER INVESTMENT AREAS, WHICH COULD RESULT IN FURTHER LOSSES IN AEFA'S INVESTMENT PORTFOLIO; THE ABILITY OF AEFA TO SELL CERTAIN HIGH-YIELD INVESTMENTS AT EXPECTED VALUES AND WITHIN ANTICIPATED TIME FRAMES AND TO MAINTAIN ITS HIGH-YIELD PORTFOLIO AT CERTAIN LEVELS IN THE FUTURE; DEVELOPMENTS RELATING TO AEFA'S NEW PLATFORM -6- STRUCTURE FOR FINANCIAL ADVISORS, INCLUDING THE ABILITY TO INCREASE ADVISOR PRODUCTIVITY, MODERATE THE GROWTH OF NEW ADVISORS AND CREATE EFFICIENCIES IN THE INFRASTRUCTURE; AEFA'S ABILITY TO EFFECTIVELY MANAGE THE ECONOMICS IN SELLING A GROWING VOLUME OF NON-PROPRIETARY PRODUCTS TO CLIENTS; INVESTMENT PERFORMANCE IN AEFA'S BUSINESSES; THE SUCCESS, TIMELINESS AND FINANCIAL IMPACT, INCLUDING COSTS, COST SAVINGS AND OTHER BENEFITS, 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, RELOCATING CERTAIN FUNCTIONS TO LOWER COST OVERSEAS LOCATIONS, MOVING INTERNAL AND EXTERNAL FUNCTIONS TO THE INTERNET TO SAVE COSTS, THE SCALE BACK OF CORPORATE LENDING IN CERTAIN REGIONS, AND PLANNED STAFF REDUCTIONS RELATING TO CERTAIN OF SUCH REENGINEERING ACTIONS; THE ABILITY TO CONTROL AND MANAGE OPERATING, INFRASTRUCTURE, ADVERTISING AND PROMOTION AND OTHER EXPENSES AS BUSINESS EXPANDS OR CHANGES, INCLUDING BALANCING THE NEED FOR LONGER TERM INVESTMENT SPENDING; THE COMPANY'S ABILITY TO RECOVER UNDER ITS INSURANCE POLICIES FOR LOSSES RESULTING FROM THE SEPTEMBER 11TH TERRORIST ATTACKS; CONSUMER AND BUSINESS SPENDING ON THE COMPANY'S TRAVEL RELATED SERVICES PRODUCTS, PARTICULARLY CREDIT AND CHARGE CARDS AND GROWTH IN CARD LENDING BALANCES, WHICH DEPEND IN PART ON THE ABILITY TO ISSUE NEW AND ENHANCED CARD PRODUCTS AND INCREASE REVENUES FROM SUCH PRODUCTS, ATTRACT NEW CARDHOLDERS, CAPTURE A GREATER SHARE OF EXISTING CARDHOLDERS' SPENDING, SUSTAIN PREMIUM DISCOUNT RATES, INCREASE MERCHANT COVERAGE, RETAIN CARDMEMBERS AFTER LOW INTRODUCTORY LENDING RATES HAVE EXPIRED, AND EXPAND THE GLOBAL NETWORK SERVICES BUSINESS; SUCCESSFULLY EXPANDING THE COMPANY'S ON-LINE AND OFF-LINE DISTRIBUTION CHANNELS AND CROSS-SELLING FINANCIAL, TRAVEL, CARD AND OTHER PRODUCTS AND SERVICES TO ITS CUSTOMER BASE, BOTH IN THE U.S. AND ABROAD; EFFECTIVELY LEVERAGING THE COMPANY'S ASSETS, SUCH AS ITS BRAND, CUSTOMERS AND INTERNATIONAL PRESENCE, IN THE INTERNET ENVIRONMENT; INVESTING IN AND COMPETING AT THE LEADING EDGE OF TECHNOLOGY ACROSS ALL BUSINESSES; INCREASING COMPETITION IN ALL OF THE COMPANY'S MAJOR BUSINESSES; FLUCTUATIONS IN INTEREST RATES, WHICH IMPACTS THE COMPANY'S BORROWING COSTS, RETURN ON LENDING PRODUCTS AND SPREADS IN THE INVESTMENT AND INSURANCE BUSINESSES; CREDIT TRENDS AND THE RATE OF BANKRUPTCIES, WHICH CAN AFFECT SPENDING ON CARD PRODUCTS, DEBT PAYMENTS BY INDIVIDUAL AND CORPORATE CUSTOMERS AND RETURNS ON THE COMPANY'S INVESTMENT PORTFOLIOS; FOREIGN CURRENCY EXCHANGE RATES; POLITICAL OR ECONOMIC INSTABILITY IN CERTAIN REGIONS OR COUNTRIES, WHICH COULD AFFECT COMMERCIAL LENDING ACTIVITIES, AMONG OTHER BUSINESSES; LEGAL AND REGULATORY DEVELOPMENTS, SUCH AS IN THE AREAS OF CONSUMER PRIVACY AND DATA PROTECTION; ACQUISITIONS; AND OUTCOMES IN LITIGATION. A FURTHER DESCRIPTION OF RISKS AND UNCERTAINTIES CAN BE FOUND IN THE COMPANY'S 10-K ANNUAL REPORT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000 AND OTHER REPORTS FILED WITH THE SEC. ### -7- (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (Dollars in millions)
Quarters Ended Nine Months Ended September 30, September 30, ------------------------ Percentage ------------------------ Percentage 2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec) ---- ---- --------- ---- ---- --------- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,466 $ 4,400 2 % $ 13,575 $ 12,898 5 % American Express Financial Advisors 908 1,052 (14) 1,876 3,153 (40) American Express Bank 165 146 13 481 447 8 --------- ----------- ---------- ---------- 5,539 5,598 (1) 15,932 16,498 (3) Corporate and Other, including adjustments and eliminations (61) (44) (37) (162) (127) (28) --------- ----------- ---------- ---------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,478 $ 5,554 (1) $ 15,770 $ 16,371 (4) ========= =========== ========== ========== PRETAX INCOME (LOSS)(B) Travel Related Services $ 316 $ 721 (56) $ 1,783 $ 2,073 (14) American Express Financial Advisors 194 387 (50) (243) 1,138 - American Express Bank (62) 8 - (30) 26 - --------- ----------- ---------- ---------- 448 1,116 (60) 1,510 3,237 (53) Corporate and Other (94) (87) (9) (262) (242) (9) --------- ----------- ---------- ---------- PRETAX INCOME (B) $ 354 $ 1,029 (66) $ 1,248 $ 2,995 (58) ========= =========== ========== ========== NET INCOME (LOSS) (B) Travel Related Services $ 248 $ 507 (51) $ 1,289 $ 1,460 (12) American Express Financial Advisors 145 269 (46) (110) 790 - American Express Bank (43) 7 - (22) 22 - --------- ----------- ---------- ---------- 350 783 (55) 1,157 2,272 (49) Corporate and Other (52) (46) (13) (143) (139) (2) --------- ----------- ---------- ---------- NET INCOME (B) $ 298 $ 737 (60) $ 1,014 $ 2,133 (52) ========= =========== ========== ==========
(A) Managed net revenues are reported net of interest expense, where applicable, and American Express Financial Advisors' provision for losses and benefits, and exclude the effect of TRS' securitization activities. (B) Included in 2001 income are two significant third quarter items, a restructuring charge of $352 million ($232 million after-tax), and one-time costs (including waived fees) of $98 million ($65 million after-tax) resulting from the September 11, 2001 terrorist attack on New York City. 9 (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (Unaudited)
Quarters Ended Nine Months Ended September 30, September 30, ------------------------ Percentage --------------------- Percentage 2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec) ---- ---- --------- ---- ---- --------- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.23 $ 0.56 (59)% $ 0.77 $ 1.61 (52)% =========== ========= ========= ======== Average common shares outstanding (millions) 1,324 1,326 - 1,323 1,328 - =========== ========= ========= ======== DILUTED Earnings Per Common Share $ 0.22 $ 0.54 (59) $ 0.76 $ 1.57 (52) =========== ========= ========= ======== Average common shares outstanding (millions) 1,335 1,361 (2) 1,338 1,361 (2) =========== ========= ========= ======== Cash dividends declared per common share $ 0.08 $ 0.08 - $ 0.24 $ 0.24 - =========== ========= ========= ========
SELECTED STATISTICAL INFORMATION (Unaudited)
Quarters Ended Nine Months Ended September 30, September 30, ------------------------ Percentage --------------------- Percentage 2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec) ---- ---- --------- ---- ---- --------- Return on Average Equity* 14.2 % 25.5 % - 14.2 % 25.5 % - Common Shares Outstanding (millions) 1,336 1,329 - 1,336 1,329 - Book Value per Common Share: Actual $ 9.16 $ 8.44 9% $ 9.16 $ 8.44 9% Pro Forma* $ 8.92 $ 8.68 3% $ 8.92 $ 8.68 3% Shareholders' Equity (billions) $ 12.2 $ 11.2 9% $ 12.2 $ 11.2 9%
* Excludes the effect on Shareholders' Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. 10 (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (Unaudited) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- NET REVENUES (MANAGED BASIS) (A) Travel Related Services $ 4,466 $ 4,644 $ 4,465 $ 4,543 $ 4,400 American Express Financial Advisors 908 162 806 1,066 1,052 American Express Bank 165 159 158 144 146 -------------- ------------ ------------ ------------- --------------- 5,539 4,965 5,429 5,753 5,598 Corporate and Other, including adjustments and eliminations (61) (55) (48) (39) (44) -------------- ------------ ------------ ------------- --------------- CONSOLIDATED NET REVENUES (MANAGED BASIS) (A) $ 5,478 $ 4,910 $ 5,381 $ 5,714 $ 5,554 ============== ============ ============ ============= =============== PRETAX INCOME (LOSS)(B) Travel Related Services $ 316 $ 730 $ 737 $ 641 $ 721 American Express Financial Advisors 194 (508) 70 344 387 American Express Bank (62) 18 14 8 8 -------------- ------------ ------------ ------------- --------------- 448 240 821 993 1,116 Corporate and Other (94) (87) (80) (80) (87) -------------- ------------ ------------ ------------- --------------- PRETAX INCOME (B) $ 354 $ 153 $ 741 $ 913 $ 1,029 ============== ============ ============ ============= =============== NET INCOME (LOSS) (B) Travel Related Services $ 248 $ 519 $ 522 $ 470 $ 507 American Express Financial Advisors 145 (307) 51 242 269 American Express Bank (43) 12 9 6 7 -------------- ------------ ------------ ------------- --------------- 350 224 582 718 783 Corporate and Other (52) (46) (44) (41) (46) -------------- ------------ ------------ ------------- --------------- NET INCOME (B) $ 298 $ 178 $ 538 $ 677 $ 737 ============== ============ ============ ============= ===============
(A) Managed net revenues are reported net of interest expense, where applicable, and American Express Financial Advisors' provision for losses and benefits, and exclude the effect of TRS' securitization activities. (B) Included in 2001 income are two significant third quarter items, a restructuring charge of $352 million ($232 million after-tax), and one-time costs (including waived fees) of $98 million ($65 million after-tax) resulting from the September 11, 2001 terrorist attack on New York City. 11 (Preliminary) AMERICAN EXPRESS COMPANY FINANCIAL SUMMARY (CONTINUED) (Unaudited)
Quarters Ended --------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- EARNINGS PER SHARE BASIC Earnings Per Common Share $ 0.23 $ 0.13 $ 0.41 $ 0.51 $ 0.56 ================ =========== ============ ============= ============= Average common shares outstanding (millions) 1,324 1,321 1,323 1,322 1,326 ================ =========== ============ ============= ============= DILUTED Earnings Per Common Share $ 0.22 $ 0.13 $ 0.40 $ 0.50 $ 0.54 ================ =========== ============ ============= ============= Average common shares outstanding (millions) 1,335 1,336 1,344 1,355 1,361 ================ =========== ============ ============= ============= Cash dividends declared per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 ================ =========== ============ ============= =============
SELECTED STATISTICAL INFORMATION (Unaudited)
Quarters Ended --------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Return on Average Equity* 14.2% 18.2% 23.5% 25.3% 25.5% Common Shares Outstanding (millions) 1,336 1,324 1,326 1,326 1,329 Book Value per Common Share: Actual $ 9.16 $ 8.88 $ 9.02 $ 8.81 $ 8.44 Pro Forma* $ 8.92 $ 8.84 $ 8.94 $ 8.92 $ 8.68 Shareholders' Equity (billions) $ 12.2 $ 11.8 $ 12.0 $ 11.7 $ 11.2
* Excludes the effect on Shareholders' Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. 12 (Preliminary) AMERICAN EXPRESS COMPANY RESTRUCTURING CHARGE SUMMARY QUARTER ENDED SEPTEMBER 30, 2001 (Unaudited)
(Dollars in millions) Restructuring Charge Expected Cost Savings ---------------------------------- Employee --------------------------------- Pre-tax After-tax Reductions 2002 2003 ------ --------- ---------- ---- ---- Travel Related Services $ 195 $ 127 4,700 $ 250 $ 260 American Express Financial Advisors 62 41 900 40 50 American Express Bank 84 57 400 25 35 Corporate and Other 11 7 100 10 15 --------------- --------------- -------------- -------------- -------------- TOTAL $ 352 $ 232 6,100 $ 325 $ 360 =============== =============== ============== ============== ==============
13 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, Managed Basis) (Dollars in millions)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Discount Revenue $ 1,870 $ 1,963 (4.8)% Net Card Fees 423 420 0.5 Lending: Finance Charge Revenue 1,187 1,052 12.8 Interest Expense 358 429 (16.6) -------------- -------------- Net Finance Charge Revenue 829 623 33.1 Travel Commissions and Fees 358 433 (17.4) Travelers Cheque Investment Income 103 103 - Other Revenues 883 858 2.9 -------------- -------------- Total Net Revenues 4,466 4,400 1.5 -------------- -------------- Expenses: Marketing and Promotion 298 358 (16.9) Provision for Losses and Claims: Charge Card 284 273 3.9 Lending 573 386 48.3 Other 34 29 20.6 -------------- -------------- Total 891 688 29.5 Charge Card Interest Expense 365 362 0.7 Human Resources 987 1,017 (2.8) Other Operating Expenses 1,335 1,254 6.4 Restructuring Charge 195 - - Disaster Recovery Charge (A) 79 - - -------------- -------------- Total Expenses 4,150 3,679 12.8 -------------- -------------- Pretax Income 316 721 (56.1) Income Tax Provision 68 214 (68.0) -------------- -------------- Net Income $ 248 $ 507 (51.0) ============== ==============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. These Statements of Income are provided on a Managed Basis for analytical purposes only. They present the income statements of TRS as if there had been no securitization transactions. On a GAAP reporting basis, TRS recognized pretax gains of $29 million ($19 million after-tax) and $26 million ($17 million after-tax) in the third quarters of 2001 and 2000, respectively, related to the securitization of U.S. receivables. These gains were invested in card acquisition activities and had no material impact on Net Income or Total Expenses in either quarter. For purposes of this presentation such gains and corresponding changes in Marketing and Promotion and Other Operating Expenses have been eliminated in each quarter. 14 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, GAAP Reporting Basis) (Dollars in millions)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Discount Revenue $ 1,870 $ 1,963 (4.8)% Net Card Fees 423 418 1.0 Lending: Finance Charge Revenue 458 504 (9.2) Interest Expense 236 272 (13.1) -------------- -------------- Net Finance Charge Revenue 222 232 (4.6) Travel Commissions and Fees 358 433 (17.4) Travelers Cheque Investment Income 103 103 - Other Revenues 1,252 1,190 5.4 -------------- -------------- Total Net Revenues 4,228 4,339 (2.6) -------------- -------------- Expenses: Marketing and Promotion 314 373 (15.8) Provision for Losses and Claims: Charge Card 284 236 20.3 Lending 302 267 13.2 Other 34 29 20.6 -------------- -------------- Total 620 532 16.7 Charge Card Interest Expense 369 312 17.8 Net Discount Expense - 119 - Human Resources 987 1,017 (2.8) Other Operating Expenses 1,348 1,265 6.5 Restructuring Charge 195 - - Disaster Recovery Charge (A) 79 - - -------------- -------------- Total Expenses 3,912 3,618 8.1 -------------- -------------- Pretax Income 316 721 (56.1) Income Tax Provision 68 214 (68.0) -------------- -------------- Net Income $ 248 $ 507 (51.0) ============== ==============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. 15 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (Unaudited) (Amounts in billions, except percentages and where indicated)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Total Cards in Force (millions): United States 34.7 32.9 5.5 % Outside the United States 20.2 17.5 14.9 -------------- -------------- Total 54.9 50.4 8.8 ============== ============== Basic Cards in Force (millions): United States 26.9 25.8 4.3 Outside the United States 15.4 13.4 15.1 -------------- -------------- Total 42.3 39.2 8.0 ============== ============== Card Billed Business: United States $ 54.4 $ 56.2 (3.3) Outside the United States 18.0 18.6 (3.2) -------------- -------------- Total $ 72.4 $ 74.8 (3.2) ============== ============== Average Discount Rate (A) 2.67 % 2.70 % - Average Basic Cardmember Spending (dollars) (A) $ 1,846 $ 2,041 (9.6) Average Fee per Card - Managed (dollars) (A) $ 34 $ 36 (5.6) Non-Amex Brand (B): Cards in Force (millions) 0.7 0.6 5.9 Billed Business $ 0.9 $ 0.8 9.9 Travel Sales $ 3.9 $ 5.4 (27.5) Travel Commissions and Fees/Sales (C) 9.2 % 8.0 % - Travelers Cheque: Sales $ 7.3 $ 7.7 (4.6) Average Outstanding $ 6.8 $ 6.9 (1.6) Average Investments $ 7.0 $ 6.7 4.5 Tax Equivalent Yield 8.8 % 8.8 % - Total Debt $ 38.0 $ 35.2 8.1 Shareholder's Equity $ 6.6 $ 6.3 5.2 Return on Average Equity (D) 27.0 % 32.6 % - Return on Average Assets (E) 2.6 % 3.0 % -
(A) Computed from proprietary card activities only. (B) This data relates to Visa and Eurocards issued in connection with joint venture activities. (C) Computed from information provided herein. (D) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (E) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. 16 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (CONTINUED) (Unaudited, Managed Basis) (Amounts in billions, except percentages and where indicated)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Charge Card Receivables: Total Receivables $ 24.8 $ 28.1 (11.8)% 90 Days Past Due as a % of Total 3.0 % 2.3 % - Loss Reserves (millions) $ 1,026 $ 987 4.0 % of Receivables 4.1 % 3.5 % - % of 90 Days Past Due 136 % 152 % - Net Loss Ratio 0.45 % 0.37 % - U.S. Lending: Total Loans $ 31.3 $ 27.1 15.4 Past Due Loans as a % of Total: 30-89 Days 2.2 % 1.8 % - 90+ Days 1.0 % 0.8 % - Loss Reserves (millions): Beginning Balance $ 959 $ 686 39.8 Provision 493 328 50.3 Net Charge-Offs/Other (434) (283) 53.3 -------------- -------------- Ending Balance $ 1,018 $ 731 39.3 ============== ============== % of Loans 3.3 % 2.7 % - % of Past Due 101 % 103 % - Average Loans $ 31.0 $ 26.6 16.1 Net Write-Off Rate 5.6 % 4.3 % - Net Interest Yield 8.8 % 7.8 % -
17 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, Managed Basis) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Discount Revenue $ 1,870 $ 2,007 $ 1,925 $ 2,062 $ 1,963 Net Card Fees 423 420 422 417 420 Lending: Finance Charge Revenue 1,187 1,159 1,120 1,090 1,052 Interest Expense 358 408 429 448 429 -------------- ------------ ------------- ------------- -------------- Net Finance Charge Revenue 829 751 691 642 623 Travel Commissions and Fees 358 427 418 442 433 Travelers Cheque Investment Income 103 100 98 95 103 Other Revenues 883 939 911 885 858 -------------- ------------ ------------- ------------- -------------- Total Net Revenues 4,466 4,644 4,465 4,543 4,400 -------------- ------------ ------------- ------------- -------------- Expenses: Marketing and Promotion 298 269 296 314 358 Provision for Losses and Claims: Charge Card 284 320 285 262 273 Lending 573 564 501 432 386 Other 34 25 24 19 29 -------------- ------------ ------------- ------------- -------------- Total 891 909 810 713 688 Charge Card Interest Expense 365 383 393 383 362 Human Resources 987 1,053 1,034 1,046 1,017 Other Operating Expenses 1,335 1,300 1,195 1,446 1,254 Restructuring Charge 195 - - - - Disaster Recovery Charge (A) 79 - - - - -------------- ------------ ------------- ------------- -------------- Total Expenses 4,150 3,914 3,728 3,902 3,679 -------------- ------------ ------------- ------------- -------------- Pretax Income 316 730 737 641 721 Income Tax Provision 68 211 215 171 214 -------------- ------------ ------------- ------------- -------------- Net Income $ 248 $ 519 $ 522 $ 470 $ 507 ============== ============ ============= ============= ==============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. These Statements of Income are provided on a Managed Basis for analytical purposes only. They present the income statements of TRS as if there had been no securitization transactions. On a GAAP reporting basis, TRS recognized pretax gains of $29 million ($19 million after-tax) in the third quarter of 2001, $84 million ($55 million after-tax) in the second quarter of 2001, $42 million ($27 million after-tax) in the first quarter of 2001 and $26 million ($17 million after-tax) in the third quarter of 2000, related to the securitization of U.S. receivables. These gains were invested in card acquisition activities and had no material impact on Net Income or Total Expenses in any quarter. For purposes of this presentation such gains and corresponding changes in Marketing and Promotion and Other Operating Expenses have been eliminated in each quarter. 18 (Preliminary) TRAVEL RELATED SERVICES STATEMENTS OF INCOME (Unaudited, GAAP Reporting Basis) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Discount Revenue $ 1,870 $ 2,007 $ 1,925 $ 2,062 $ 1,963 Net Card Fees 423 404 422 417 418 Lending: Finance Charge Revenue 458 467 518 498 504 Interest Expense 236 267 278 277 272 --------------- -------------- -------------- ------------- --------------- Net Finance Charge Revenue 222 200 240 221 232 Travel Commissions and Fees 358 427 418 442 433 Travelers Cheque Investment Income 103 100 98 95 103 Other Revenues 1,252 1,358 1,223 1,184 1,190 --------------- -------------- -------------- ------------- --------------- Total Net Revenues 4,228 4,496 4,326 4,421 4,339 --------------- -------------- -------------- ------------- --------------- Expenses: Marketing and Promotion 314 320 321 314 373 Provision for Losses and Claims: Charge Card 284 319 249 228 236 Lending 302 346 287 277 267 Other 34 25 24 19 29 --------------- -------------- -------------- ------------- --------------- Total 620 690 560 524 532 Charge Card Interest Expense 369 387 349 336 312 Net Discount Expense - (17) 113 114 119 Human Resources 987 1,053 1,034 1,046 1,017 Other Operating Expenses 1,348 1,333 1,212 1,446 1,265 Restructuring Charge 195 - - - - Disaster Recovery Charge (A) 79 - - - - --------------- -------------- -------------- ------------- --------------- Total Expenses 3,912 3,766 3,589 3,780 3,618 --------------- -------------- -------------- ------------- --------------- Pretax Income 316 730 737 641 721 Income Tax Provision 68 211 215 171 214 --------------- -------------- -------------- ------------- --------------- Net Income $ 248 $ 519 $ 522 $ 470 $ 507 =============== ============== ============== ============= ===============
(A) The disaster recovery charge excludes approximately $8 million of waived finance charges and late fees. 19 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (Unaudited) (Amounts in billions, except percentages and where indicated)
Quarters Ended ------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Total Cards in Force (millions): United States 34.7 34.6 34.2 33.3 32.9 Outside the United States 20.2 19.7 19.0 18.4 17.5 -------------- ------------ ------------ ------------- ------------- Total 54.9 54.3 53.2 51.7 50.4 ============== ============ ============ ============= ============= Basic Cards in Force (millions): United States 26.9 26.9 26.9 26.3 25.8 Outside the United States 15.4 15.0 14.4 13.9 13.4 -------------- ------------ ------------ ------------- ------------- Total 42.3 41.9 41.3 40.2 39.2 ============== ============ ============ ============= ============= Card Billed Business: United States $ 54.4 $ 58.8 $ 55.6 $ 59.0 $ 56.2 Outside the United States 18.0 18.5 18.4 20.0 18.6 -------------- ------------ ------------ ------------- ------------- Total $ 72.4 $ 77.3 $ 74.0 $ 79.0 $ 74.8 ============== ============ ============ ============= ============= Average Discount Rate (A) 2.67 % 2.67 % 2.68 % 2.69 % 2.70 % Average Basic Cardmember Spending (dollars) (A) $ 1,846 $ 1,986 $ 1,933 $ 2,113 $ 2,041 Average Fee per Card - Managed (dollars) (A) $ 34 $ 34 $ 35 $ 35 $ 36 Non-Amex Brand (B): Cards in Force (millions) 0.7 0.7 0.6 0.6 0.6 Billed Business $ 0.9 $ 0.8 $ 0.8 $ 1.1 $ 0.8 Travel Sales $ 3.9 $ 4.9 $ 5.0 $ 5.5 $ 5.4 Travel Commissions and Fees/Sales (C) 9.2 % 8.7 % 8.4 % 8.0 % 8.0 % Travelers Cheque: Sales $ 7.3 $ 6.5 $ 5.0 $ 5.1 $ 7.7 Average Outstanding $ 6.8 $ 6.5 $ 6.1 $ 6.2 $ 6.9 Average Investments $ 7.0 $ 6.5 $ 6.3 $ 6.2 $ 6.7 Tax Equivalent Yield 8.8 % 9.0 % 9.1 % 9.1 % 8.8 % Total Debt $ 38.0 $ 37.6 $ 35.5 $ 40.0 $ 35.2 Shareholder's Equity $ 6.6 $ 6.7 $ 6.7 $ 6.6 $ 6.3 Return on Average Equity (D) 27.0 % 32.0 % 33.0 % 33.0 % 32.6 % Return on Average Assets (E) 2.6 % 3.0 % 3.1 % 3.0 % 3.0 %
(A) Computed from proprietary card activities only. (B) This data relates to Visa and Eurocards issued in connection with joint venture activities. (C) Computed from information provided herein. (D) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (E) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. 20 (Preliminary) TRAVEL RELATED SERVICES SELECTED STATISTICAL INFORMATION (CONTINUED) (Unaudited, Managed Basis) (Amounts in billions, except percentages and where indicated)
Quarters Ended ----------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Charge Card Receivables: Total Receivables $ 24.8 $ 26.1 $ 26.4 $ 29.0 $ 28.1 90 Days Past Due as a % of Total 3.0% 2.9 % 2.7 % 2.3 % 2.3 % Loss Reserves (millions) $ 1,026 $ 1,034 $ 1,004 $ 964 $ 987 % of Receivables 4.1 % 4.0 % 3.8 % 3.3 % 3.5 % % of 90 Days Past Due 136 % 138 % 139 % 142 % 152 % Net Loss Ratio 0.45 % 0.42 % 0.35 % 0.36 % 0.37 % U.S. Lending: Total Loans $ 31.3 $ 31.2 $ 30.2 $ 28.7 $ 27.1 Past Due Loans as a % of Total: 30-89 Days 2.2 % 1.9 % 2.0 % 1.9 % 1.8 % 90+ Days 1.0 % 1.0 % 0.9 % 0.9 % 0.8 % Loss Reserves (millions): Beginning Balance $ 959 $ 907 $ 820 $ 731 $ 686 Provision 493 495 426 377 328 Net Charge-Offs/Other (434) (443) (339) (288) (283) ---------------- ------------- -------------- -------------- --------------- Ending Balance $ 1,018 $ 959 $ 907 $ 820 $ 731 ================ ============= ============== ============== =============== % of Loans 3.3 % 3.1 % 3.0 % 2.9 % 2.7 % % of Past Due 101 % 107 % 103 % 104 % 103 % Average Loans $ 31.0 $ 30.3 $ 28.9 $ 27.6 $ 26.6 Net Write-Off Rate 5.6 % 5.7 % 5.1 % 4.4 % 4.3 % Net Interest Yield 8.8% 8.6 % 8.3 % 7.7 % 7.8 %
21 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS STATEMENTS OF INCOME (Unaudited) (Dollars in millions)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Investment Income $ 490 $ 582 (15.8)% Management and Distribution Fees 595 700 (15.0) Other Revenues 307 258 18.5 --------------- -------------- Total Revenues 1,392 1,540 (9.7) Provision for Losses and Benefits: Annuities 242 253 (4.7) Insurance 171 146 17.3 Investment Certificates 71 89 (19.8) --------------- -------------- Total 484 488 (0.9) --------------- -------------- Net Revenues 908 1,052 (13.7) --------------- -------------- Expenses: Human Resources 469 527 (11.0) Other Operating Expenses 172 138 23.8 Restructuring Charge 62 - - Disaster Recovery Charge 11 - - --------------- -------------- Total Expenses 714 665 7.2 --------------- -------------- Pretax Income 194 387 (49.8) Income Tax Provision 49 118 (58.4) --------------- -------------- Net Income $ 145 $ 269 (46.1) =============== ==============
22 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in millions, except where indicated)
Quarters Ended September 30, --------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Investments (billions)* $ 32.9 $ 30.0 9.7 % Client Contract Reserves (billions) $ 32.6 $ 31.4 3.9 Shareholder's Equity (billions) $ 5.5 $ 4.2 31.5 Return on Average Equity ** 2.7 % 23.1 % - Life Insurance in Force (billions) $ 104.8 $ 95.8 9.4 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 47.8 $ 56.7 (15.6) Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 24.3 36.6 (33.6) Other Owned Assets 42.5 40.6 4.7 --------------- -------------- Total Owned Assets 66.8 77.2 (13.5) Managed Assets 91.2 122.0 (25.3) Administered Assets 28.6 38.0 (24.8) --------------- -------------- Total $ 234.4 $ 293.9 (20.3) =============== ============== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (4,470) $ (203) # Other Owned Assets $ 535 $ 163 # Total Managed Assets $ (15,719) $ (76) # Cash Sales: Mutual Funds $ 7,384 $ 11,698 (36.9) Annuities 1,308 1,465 (10.8) Investment Certificates 941 868 8.4 Life and Other Insurance Products 200 220 (8.7) Institutional 488 1,922 (74.6) Other 1,115 815 36.8 --------------- -------------- Total Cash Sales $ 11,436 $ 16,988 (32.7) =============== ============== Number of Financial Advisors 11,385 12,137 (6.2) Fees from Financial Plans and Advice Services $ 23.1 $ 26.1 (11.4) Percentage of Total Sales from Financial Plans and Advice Services 72.4 % 69.2 % -
* Excludes cash, derivatives, short term and other investments. ** Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. # Denotes a variance of more than 100%. 23 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions)
Quarters Ended -------------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Investment Income $ 490 $ (246) $ 368 $ 546 $ 582 Management and Distribution Fees 595 623 638 722 700 Other Revenues 307 290 277 273 258 --------------- ------------ ------------ -------------- -------------- Total Revenues 1,392 667 1,283 1,541 1,540 Provision for Losses and Benefits: Annuities 242 255 238 251 253 Insurance 171 152 157 134 146 Investment Certificates 71 98 82 90 89 --------------- ------------ ------------ -------------- -------------- Total 484 505 477 475 488 --------------- ------------ ------------ -------------- -------------- Net Revenues 908 162 806 1,066 1,052 --------------- ------------ ------------ -------------- -------------- Expenses: Human Resources 469 496 548 540 527 Other Operating Expenses 172 174 188 182 138 Restructuring Charge 62 - - - - Disaster Recovery Charge 11 - - - - --------------- ------------ ------------ -------------- -------------- Total Expenses 714 670 736 722 665 --------------- ------------ ------------ -------------- -------------- Pretax Income (Loss) 194 (508) 70 344 387 Income Tax Provision (Benefit) 49 (201) 19 102 118 --------------- ------------ ------------ -------------- -------------- Net Income (Loss) $ 145 $ (307) $ 51 $ 242 $ 269 =============== ============ ============ ============== ==============
24 (Preliminary) AMERICAN EXPRESS FINANCIAL ADVISORS SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in millions, except where indicated)
Quarters Ended -------------------------------------------------------------------------------- September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Investments (billions)* $ 32.9 $ 32.0 $ 31.2 $ 30.5 $ 30.0 Client Contract Reserves (billions) $ 32.6 $ 32.1 $ 31.7 $ 31.4 $ 31.4 Shareholder's Equity (billions) $ 5.5 $ 4.6 $ 4.7 $ 4.4 $ 4.2 Return on Average Equity** 2.7 % 5.4 % 17.8 % 22.6 % 23.1 % Life Insurance in Force (billions) $ 104.8 $ 102.3 $ 100.0 $ 98.1 $ 95.8 Assets Owned, Managed or Administered (billions): Assets Managed for Institutions $ 47.8 $ 54.3 $ 53.7 $ 55.0 $ 56.7 Assets Owned, Managed or Administered for Individuals: Owned Assets: Separate Account Assets 24.3 28.9 27.4 32.3 36.6 Other Owned Assets 42.5 41.6 42.0 41.3 40.6 --------------- ------------ ------------- -------------- -------------- Total Owned Assets 66.8 70.5 69.4 73.6 77.2 Managed Assets 91.2 104.0 99.8 112.0 122.0 Administered Assets 28.6 33.0 30.8 34.4 38.0 --------------- ------------ ------------- -------------- -------------- Total $ 234.4 $ 261.8 $ 253.7 $ 275.0 $ 293.9 =============== ============ ============= ============== ============== Market Appreciation (Depreciation) During the Period: Owned Assets: Separate Account Assets $ (4,470) $ 1,248 $ (5,204) $ (4,937) $ (203) Other Owned Assets $ 535 $ 229 $ 608 $ 153 $ 163 Total Managed Assets $ (15,719) $ 4,552 $ (16,657) $ (14,923) $ (76) Cash Sales: Mutual Funds $ 7,384 $ 8,394 $ 9,889 $ 9,890 $ 11,698 Annuities 1,308 1,406*** 1,427*** 1,493 1,465 Investment Certificates 941 1,017 954 722 868 Life and Other Insurance Products 200 233 244 225 220 Institutional 488 1,265 2,506 1,571 1,922 Other 1,115 1,058 1,955 1,508 815 --------------- ------------ ------------- -------------- -------------- Total Cash Sales $ 11,436 $ 13,373*** $ 16,975*** $ 15,409 $ 16,988 =============== ============ ============= ============== ============== Number of Financial Advisors 11,385 11,646 12,052 12,663 12,137 Fees from Financial Plans and Advice Services $ 23.1 $ 29.7 $ 27.6 $ 21.4 $ 26.1 Percentage of Total Sales from Financial Plans and Advice Services 72.4 % 72.3 % 73.0 % 70.3 % 69.2 %
* Excludes cash, derivatives, short term and other investments. ** Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. *** Revised from previous disclosure. 25 (Preliminary) AMERICAN EXPRESS BANK STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions)
Quarters Ended September 30, -------------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Net Revenues: Interest Income $ 174 $ 188 (7.7)% Interest Expense 98 125 (21.8) -------------- -------------- Net Interest Income 76 63 20.3 Commissions and Fees 51 54 (5.4) Foreign Exchange Income & Other Revenue 38 29 30.1 -------------- -------------- Total Net Revenues 165 146 12.8 -------------- -------------- Expenses: Human Resources 60 65 (8.2) Other Operating Expenses 69 67 3.2 Provision for Losses: Ongoing 14 6 # Restructuring related* 26 - - -------------- -------------- Total 40 6 # Restructuring Charge* 58 - - -------------- -------------- Total Expenses 227 138 64.3 -------------- -------------- Pretax (Loss) Income (62) 8 - Income Tax (Benefit) Provision (19) 1 - -------------- -------------- Net (Loss) Income $ (43) $ 7 - ============== ==============
* AEB recorded an aggregate third quarter 2001 restructuring charge of $84 million pretax consisting of $26 million of additional provision for losses and $58 million for severance, foreign currency translation losses previously recorded in shareholder's equity and other charges. # Denotes a variance of more than 100%. 26 (Preliminary) AMERICAN EXPRESS BANK SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in billions, except where indicated)
Quarters Ended September 30, ----------------------------- Percentage 2001 2000 Inc/(Dec) ---- ---- --------- Total Shareholder's Equity (millions) $ 771 $ 729 5.8 % Return on Average Common Equity (A) (2.4)% 4.1 % - Return on Average Assets (B) (0.13)% 0.24 % - Total Loans $ 5.6 $ 5.1 8.4 Total Non-performing Loans (millions) $ 133 $ 156 (14.3) Other Non-performing Assets (millions) $ 2 $ 37 (94.0) Reserve for Credit Losses (millions) (C) $ 149 $ 179 (17.0) Loan Loss Reserves as a % of Total Loans 2.6 % 3.1 % - Deposits $ 8.7 $ 8.0 8.3 Assets Managed (D) / Administered $ 11.3 $ 10.2 10.4 Assets of Non-Consolidated Joint Ventures $ 2.0 $ 2.3 (15.2) Risk-Based Capital Ratios: Tier 1 9.9 % 10.4 % - Total 10.6 % 11.9 % - Leverage Ratio 5.4 % 5.8 % -
(A) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (B) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. (C) Allocation: Loans $ 144 $ 158 Other Assets, primarily derivatives 3 16 Other Liabilities 2 5 -------------- -------------- Total Reserve for Credit Losses $ 149 $ 179 ============== ==============
(D) Includes assets managed by American Express Financial Advisors. 27 (Preliminary) AMERICAN EXPRESS BANK STATEMENTS OF OPERATIONS (Unaudited) (Dollars in millions)
Quarters Ended ------------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Net Revenues: Interest Income $ 174 $ 182 $ 187 $ 181 $ 188 Interest Expense 98 110 122 122 125 --------------- ------------ ------------- -------------- --------------- Net Interest Income 76 72 65 59 63 Commissions and Fees 51 51 52 52 54 Foreign Exchange Income & Other Revenue 38 36 41 33 29 --------------- ------------ ------------- -------------- --------------- Total Net Revenues 165 159 158 144 146 --------------- ------------ ------------- -------------- --------------- Expenses: Human Resources 60 62 62 60 65 Other Operating Expenses 69 65 66 68 67 Provision for Losses: Ongoing 14 14 16 8 6 Restructuring related* 26 - - - - --------------- ------------ ------------- -------------- --------------- Total 40 14 16 8 6 Restructuring Charge* 58 - - - - --------------- ------------ ------------- -------------- --------------- Total Expenses 227 141 144 136 138 --------------- ------------ ------------- -------------- --------------- Pretax (Loss) Income (62) 18 14 8 8 Income Tax (Benefit) Provision (19) 6 5 2 1 --------------- ------------ ------------- -------------- --------------- Net (Loss) Income $ (43) $ 12 $ 9 $ 6 $ 7 =============== ============ ============= ============== ===============
* AEB recorded an aggregate third quarter 2001 restructuring charge of $84 million pretax consisting of $26 million of additional provision for losses and $58 million for severance, foreign currency translation losses previously recorded in shareholder's equity and other charges. 28 (Preliminary) AMERICAN EXPRESS BANK SELECTED STATISTICAL INFORMATION (Unaudited) (Dollars in billions, except where indicated)
Quarters Ended ------------------------------------------------------------------------------------ September 30, June 30, March 31, December 31, September 30, 2001 2001 2001 2000 2000 ---- ---- ---- ---- ---- Total Shareholder's Equity (millions) $ 771 $ 767 $ 774 $ 754 $ 729 Return on Average Common Equity (A) (2.4)% 5.2 % 4.6 % 4.4 % 4.1 % Return on Average Assets (B) (0.13)% 0.30 % 0.26 % 0.26 % 0.24 % Total Loans $ 5.6 $ 5.5 $ 5.4 $ 5.3 $ 5.1 Total Non-performing Loans (millions) $ 133 $ 159 $ 187 $ 137 $ 156 Other Non-performing Assets (millions) $ 2 $ 4 $ 24 $ 24 $ 37 Reserve for Credit Losses (millions) (C) $ 149 $ 130 $ 164 $ 153 $ 179 Loan Loss Reserves as a % of Total Loans 2.6 % 2.3 % 2.8 % 2.6 % 3.1 % Deposits $ 8.7 $ 8.5 $ 8.5 $ 8.0 $ 8.0 Assets Managed (D) / Administered $ 11.3 $ 11.1 $ 10.7 $ 10.6 $ 10.2 Assets of Non-Consolidated Joint Ventures $ 2.0 $ 2.0 $ 2.1 $ 2.1 $ 2.3 Risk-Based Capital Ratios: Tier 1 9.9 % 10.4 % 10.7 % 10.1 % 10.4 % Total 10.6 % 11.1 % 11.4 % 11.4 % 11.9 % Leverage Ratio 5.4 % 5.8 % 5.8 % 5.9 % 5.8 %
(A) Excludes the effect on Shareholder's Equity of SFAS No. 115 and SFAS No. 133. The Company adopted SFAS No. 133 on January 1, 2001. (B) Excludes the effect on total assets of SFAS No. 115 and SFAS No. 133 to the extent that they directly affect Shareholder's Equity. (C) Allocation: Loans $ 144 $ 126 $ 149 $ 137 $ 158 Other Assets, primarily derivatives 3 3 12 14 16 Other Liabilities 2 1 3 2 5 --------------- ------------- ------------- -------------- --------------- Total Reserve for Credit Losses $ 149 $ 130 $ 164 $ 153 $ 179 =============== ============= ============= ============== ===============
(D) Includes assets managed by American Express Financial Advisors. 29 (Preliminary) American Express Bank Exposures By Country and Region (Unaudited) (Dollars in billions)
Net Guarantees 9/30/01 6/30/01 FX and and Total Total Country Loans Derivatives Contingents Other* Exposure** Exposure** -------------------------------------- ---------- ------------- ------------ --------- --------------- -------------- Hong Kong $ 1.0 $ - $ 0.1 $ 0.1 $ 1.2 $ 1.1 Indonesia - - - - 0.1 0.1 Singapore 0.5 - 0.1 0.1 0.7 0.6 Korea 0.1 - - 0.2 0.3 0.5 Taiwan 0.2 - - 0.1 0.3 0.2 Japan - - - 0.1 0.1 0.1 Other - - - 0.1 0.1 0.2 ---------- ------------- ------------ --------- --------------- --------------- Total Asia/Pacific Region** 1.9 - 0.2 0.7 2.9 2.9 ---------- ------------- ------------ --------- --------------- --------------- Chile 0.2 0.1 - 0.1 0.3 0.4 Brazil 0.3 - - - 0.4 0.4 Mexico - - - - 0.1 0.1 Peru - - - - 0.1 - Argentina 0.1 - - - 0.1 0.1 Other 0.3 - 0.2 0.1 0.7 0.6 ---------- ------------- ------------ --------- --------------- --------------- Total Latin America** 0.9 0.1 0.3 0.3 1.6 1.5 ---------- ------------- ------------ --------- --------------- --------------- India 0.3 - 0.1 0.3 0.7 0.7 Pakistan 0.1 - - 0.1 0.2 0.2 Other 0.1 - 0.1 0.1 0.2 0.2 ---------- ------------- ------------ --------- --------------- --------------- Total Subcontinent** 0.4 - 0.1 0.5 1.1 1.1 ---------- ------------- ------------ --------- --------------- --------------- Egypt 0.2 - - 0.2 0.4 0.4 Other 0.1 - - - 0.2 0.2 ---------- ------------- ------------ --------- --------------- --------------- Total Middle East & Africa** 0.3 - 0.1 0.2 0.6 0.6 ---------- ------------- ------------ --------- --------------- --------------- Total Europe 1.6 0.1 0.4 3.0 5.0 4.8 Total North America 0.3 - 0.3 1.7 2.3 2.1 ---------- ------------- ------------ --------- --------------- --------------- Total Worldwide** $ 5.6 $ 0.2 $ 1.5 $ 6.3 $ 13.6 $ 13.1 ========== ============= ============ ========= =============== ===============
* Includes cash, placements and securities. ** Individual items may not add to totals due to rounding. Note: Includes cross-border and local exposure and does not net local funding or liabilities against any local exposure. 30