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Previous: ALUMINUM CO OF AMERICA, 10-K/A, 1997-07-30 |
Next: VAN KAMPEN AMERICAN CAPITAL RESERVE FUND, NSAR-B, 1997-07-30 |
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) July 28, 1997
AMERICAN EXPRESS COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
- ------------------------- ---------- ------------------
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
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
--------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On July 28, 1997, the Registrant issued a press release announcing
its second quarter earnings and distributed an Earnings Conference
Call Summary. Such press release is filed herein as Exhibit 99.1,
and such Earnings Conference Call Summary is filed herein
as Exhibit 99.2.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
(c) Exhibits
99.1 Press release of American Express Company dated
July 28, 1997.
99.2 Second Quarter 1997 Earnings Conference Call
Summary of American Express Company.
<PAGE>
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: July 29, 1997
<PAGE>
EXHIBIT INDEX
Item No. Description
- --------- -----------
99.1 Press release of American Express Company dated
July 28, 1997.
99.2 Second Quarter 1997 Earnings Conference Call
Summary of American Express Company.
<PAGE>
Exhibit 99.1
NEW YORK, July 28, 1997 -- American Express Company today reported record
second quarter net income of $520 million, 15 percent higher than the same
period a year ago. On a per share basis, second quarter net income was
$1.08, an increase of 16 percent from $0.93. Revenues of $4.4 billion were
up 8.5 percent from a year ago. The Company's return on equity was 23.2
percent.
These results were in line with American Express' long-term targets of:
12-15 percent earnings per share growth, with at least 8 percent coming
from higher revenues; and a return on equity of 18-20 percent -- all on
average and over time.
Travel Related Services (TRS) reported record quarterly net income of $355
million, up 10 percent from $322 million a year ago.
TRS' net revenues increased 7 percent from the prior year, primarily due
to higher worldwide billed business and growth in Cardmember loans
outstanding. The growth in revenues also includes a benefit from increased
recognition of recoveries on abandoned property related to the Travelers
Cheque business, which was largely offset by higher investment spending on
business building initiatives. Excluding the impact of securitizing a
portion of the card portfolios and a reduction in investments related to
the consolidation of certain legal entities within the consumer lending
business, revenues rose 9 percent from last year's second quarter.
The improvement in billed business reflects a greater number of cards
outstanding and higher spending per cardmember. Spending increased in part
due to the benefits of rewards programs and expanded merchant coverage.
The growth in cards is largely attributable to the introduction of new
consumer and small business credit card products, consistent with the
company's strategy of building its lending portfolio through the issuance
of low- and no-fee credit cards.
The lending provision for losses rose, reflecting both higher outstanding
loans and loss rates. The increase in operating expenses resulted from the
cost of Cardmember loyalty programs and business growth.
American Express Financial Advisors (AEFA) reported record quarterly net
income of $183 million, a 20 percent increase from $153 million in the
same period last year.
Revenue and earnings growth benefited from higher fees due to an increase
in managed assets.
AEFA reported record sales of mutual funds in the second quarter. Sales of
investment certificates also increased over last year, while sales of
annuities and life and other insurance products declined.
The growth in Other Operating Expenses during the quarter primarily
reflects the cost of hedging activities designed to reduce the impact of
stock market volatility on management fees.
American Express Bank (AEB) reported second quarter net income of $21
million, up from $14 million in 1996.
The growth in earnings primarily reflects higher revenues due to increased
net interest income on loans and investments; a rise in Correspondent and
Commercial Banking commissions and fees; and improved global trading
results. The revenue increase was partially offset by higher operating
expenses, primarily in systems technology.
Corporate and Other reported net expenses of $39 million, compared with
$37 million a year ago.
American Express Company, (www.americanexpress.com), founded in 1850,
is a global travel, financial and network services provider.
<PAGE>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions, except per share amounts)
Quarter Ended
June 30,
-------------- Percentage
1997 1996 Inc/(Dec)
----- ----- ----------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,147 $2,934 7.3%
American Express Financial Advisors 1,143 1,017 12.4
American Express Bank 153 139 9.9
------ ------
4,443 4,090 8.6
Corporate and Other,
including adjustments
and eliminations (21) (14) (53.1)
------- -------
CONSOLIDATED REVENUES (A) $4,422 $4,076 8.5
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $493 $459 7.4
American Express Financial Advisors 265 231 14.5
American Express Bank 33 22 50.4
------ ------
791 712 11.0
Corporate and Other (89) (76) (15.5)
------ ------
PRETAX INCOME $702 $636 10.4
====== ======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $355 $322 10.1
American Express Financial Advisors 183 153 19.7
American Express Bank 21 14 45.6
------ ------
559 489 14.1
Corporate and Other (39) (37) (3.8)
------ ------
NET INCOME $520 $452 14.9
====== ======
NET INCOME PER COMMON SHARE $1.08 $0.93 16.1
====== ======
Cash dividends declared per
common share $0.225 $0.225
====== ======
Average common shares
outstanding (000's) 479,494 487,048
======= =======
Six Months Ended
June 30,
----------------Percentage
1997 1996 Inc/(Dec)
------ ------ ---------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $6,117 $5,711 7.1%
American Express Financial Advisors 2,227 2,020 10.2
American Express Bank 307 285 7.7
------- -------
8,651 8,016 7.9
Corporate and Other,
including adjustments
and eliminations (66) (30) #
------- -------
CONSOLIDATED REVENUES (A) $8,585 $7,986 7.5
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services $942 $875 7.7
American Express Financial Advisors 501 428 17.2
American Express Bank 65 51 27.6
------- -------
1,508 1,354 11.5
Corporate and Other (166) (154) (8.7)
------- -------
PRETAX INCOME $1,342 $1,200 11.8
======= =======
Net Income by Industry Segment
- ------------------------------
Travel Related Services $670 $609 10.1
American Express Financial Advisors 340 283 20.3
American Express Bank 41 33 24.3
------- -------
1,051 925 13.7
Corporate and Other (77) (76) (2.0)
------- -------
NET INCOME $974 $849 14.8
======= =======
NET INCOME PER COMMON SHARE $2.03 $1.73 17.3
===== =====
Cash dividends declared per
common share $0.45 $0.45
===== =====
Average common shares
outstanding (000's) 480,851 488,950
======= =======
(A) Revenues are reported net of interest expense,
where applicable.
# Denotes variance of more than 100%
<PAGE>
American Express Company
------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
June 30,
-------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Return on Average Equity* 23.2% 22.6% -
Common Shares Outstanding (millions) 468.9 476.6 (1.6%)
Book Value per Common Share:
Actual $18.82 $16.69 12.8
Pro Forma* $17.95 $15.57 15.3
Shareholders' Equity (billions) $8.8 $8.0 10.9
Six Months Ended
June 30,
---------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Return on Average Equity* 23.2% 22.6% -
Common Shares Outstanding (millions) 468.9 476.6 (1.6%)
Book Value per Common Share:
Actual $18.82 $16.69 12.8
Pro Forma* $17.95 $15.57 15.3
Shareholders' Equity (billions) $8.8 $8.0 10.9
* Excludes the effect of SFAS #115 and for ROE, also excludes
fourth quarter 1996 $300 million gain on the exchange of the
Company's DECs and $138 million restructuring charge.
<PAGE>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions, except per share amounts)
Quarter Ended
June 30,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,147
American Express Financial Advisors 1,143
American Express Bank 153
-------
4,443
Corporate and Other,
including adjustments and eliminations (21)
-------
CONSOLIDATED REVENUES (A) $4,422
=======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $493
American Express Financial Advisors 265
American Express Bank 33
-------
791
Corporate and Other (C) (89)
-------
PRETAX OPERATING INCOME $702
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $355
American Express Financial Advisors 183
American Express Bank 21
-------
559
Corporate and Other (C) (39)
-------
OPERATING INCOME $520
FDC Gain/(Restructuring) 0
-------
NET INCOME $520
=======
OPERATING INCOME PER COMMON SHARE $1.08
FDC Gain/(Restructuring) $0.00
-------
NET INCOME PER COMMON SHARE $1.08
=======
Cash dividends declared per common share $0.225
=======
Average common shares outstanding (000's) 479,494
========
Quarter Ended
March 31,
1997
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $2,970
American Express Financial Advisors 1,084
American Express Bank 153
-------
4,207
Corporate and Other,
including adjustments and eliminations (43)
-------
CONSOLIDATED REVENUES (A) $4,164
=======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $449
American Express Financial Advisors 236
American Express Bank 32
-------
717
Corporate and Other (C) (77)
-------
PRETAX OPERATING INCOME $640
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $315
American Express Financial Advisors 157
American Express Bank 20
-------
492
Corporate and Other (C) (38)
-------
OPERATING INCOME $454
FDC Gain/(Restructuring) 0
-------
NET INCOME $454
=======
OPERATING INCOME PER COMMON SHARE $0.94
FDC Gain/(Restructuring) $0.00
-------
NET INCOME PER COMMON SHARE $0.94
=======
Cash dividends declared per common share $0.225
=======
Average common shares outstanding (000's) 482,077
========
Quarter Ended
December 31,
1996
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,103
American Express Financial Advisors 1,069
American Express Bank 156
-------
4,328
Corporate and Other,
including adjustments and eliminations (27)
-------
CONSOLIDATED REVENUES (A) $4,301
=======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $403
American Express Financial Advisors 228
American Express Bank 26
-------
657
Corporate and Other (C) (78)
-------
PRETAX OPERATING INCOME $579
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $299
American Express Financial Advisors 155
American Express Bank 17
-------
471
Corporate and Other (C) (38)
-------
OPERATING INCOME $433
FDC Gain/(Restructuring) 162
-------
NET INCOME $595
=======
OPERATING INCOME PER COMMON SHARE $0.90
FDC Gain/(Restructuring) $0.33
-------
NET INCOME PER COMMON SHARE $1.23
=======
Cash dividends declared per common share $0.225
=======
Average common shares outstanding (000's) 482,065
========
Quarter Ended
September 30,
1996
--------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $2,958
American Express Financial Advisors 1,021
American Express Bank 151
-------
4,130
Corporate and Other,
including adjustments and eliminations (36)
-------
CONSOLIDATED REVENUES (A) $4,094
=======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $441
American Express Financial Advisors 230
American Express Bank 28
-------
699
Corporate and Other (C) (78)
-------
PRETAX OPERATING INCOME $621
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $323
American Express Financial Advisors 156
American Express Bank 18
-------
497
Corporate and Other (C) (39)
-------
OPERATING INCOME $458
FDC Gain/(Restructuring) 0
-------
NET INCOME $458
=======
OPERATING INCOME PER COMMON SHARE $0.95
FDC Gain/(Restructuring) $0.00
-------
NET INCOME PER COMMON SHARE $0.95
=======
Cash dividends declared per common share $0.225
=======
Average common shares outstanding (000's) 481,865
========
Quarter Ended
June 30,
1996
-------------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $2,934
American Express Financial Advisors 1,017
American Express Bank 139
-------
4,090
Corporate and Other,
including adjustments and eliminations (14)
-------
CONSOLIDATED REVENUES (A) $4,076
=======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $459
American Express Financial Advisors 231
American Express Bank 22
-------
712
Corporate and Other (C) (76)
-------
PRETAX OPERATING INCOME $636
=======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $322
American Express Financial Advisors 153
American Express Bank 14
-------
489
Corporate and Other (C) (37)
-------
OPERATING INCOME $452
FDC Gain/(Restructuring) 0
-------
NET INCOME $452
=======
OPERATING INCOME PER COMMON SHARE $0.93
FDC Gain/(Restructuring) $0.00
-------
NET INCOME PER COMMON SHARE $0.93
=======
Cash dividends declared per common share $0.225
=======
Average common shares outstanding (000's) 487,048
========
(A) Revenues are reported net of interest expense, where applicable.
(B) TRS' results for the quarter ended December 31, 1996 exclude a pretax
restructuring charge of $196 million ($125 million after-tax).
(C) Corporate and Other results for the quarter ended December 31, 1996
exclude a pretax gain of $480 million ($300 million after-tax) on
the exchange of the Company's DECs (Debt Exchangeable for Common Stock)
for shares of common stock of First Data Corporation and a $20 million
pretax charge ($13 million after-tax) related to the early retirement
of debt and certain restructuring costs.
<PAGE>
American Express Company
------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
June 30,
1997
-------------
Return on Average Equity* 23.2%
Common Shares Outstanding (millions) 468.9
Book Value per Common Share:
Actual $18.82
Pro Forma* $17.95
Shareholders' Equity (billions) $8.8
Quarter Ended
March 31,
1997
-------------
Return on Average Equity* 23.0%
Common Shares Outstanding (millions) 470.9
Book Value per Common Share:
Actual $17.80
Pro Forma* $17.44
Shareholders' Equity (billions) $8.4
Quarter Ended
December 31,
1996
-------------
Return on Average Equity* 22.8%
Common Shares Outstanding (millions) 472.9
Book Value per Common Share:
Actual $18.04
Pro Forma* $17.22
Shareholders' Equity (billions) $8.5
Quarter Ended
September 30,
1996
-------------
Return on Average Equity* 22.8%
Common Shares Outstanding (millions) 473.5
Book Value per Common Share:
Actual $17.41
Pro Forma* $16.19
Shareholders' Equity (billions) $8.2
Quarter Ended
June 30,
1996
-------------
Return on Average Equity* 22.6%
Common Shares Outstanding (millions) 476.6
Book Value per Common Share:
Actual $16.69
Pro Forma* $15.57
Shareholders' Equity (billions) $8.0
* Excludes the effect of SFAS #115 and for ROE, also excludes
fourth quarter 1996 $300 million gain on the exchange of the
Company's DECs and $138 million restructuring charge.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
------------------ Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Net Revenues:
Discount Revenue $1,407 $1,247 12.9%
Net Card Fees 403 414 (2.6)
Travel Commissions and Fees 381 362 4.9
Interest and Dividends 143 211 (32.2)
Other Revenues 509 451 13.0
------- -------
2,843 2,685 5.9
------- -------
Lending:
Finance Charge Revenue 458 371 23.4
Interest Expense 154 122 26.0
------- -------
Net Finance Charge Revenue 304 249 22.1
------- -------
Total Net Revenues 3,147 2,934 7.3
------- -------
Expenses:
Marketing and Promotion 244 252 (3.2)
Provision for Losses and Claims:
Charge Card 239 248 (3.6)
Lending 187 126 48.3
Other 21 26 (18.0)
------- -------
Total 447 400 11.8
------- -------
Interest Expense:
Charge Card 174 171 2.0
Other 52 114 (54.4)
------- -------
Total 226 285 (20.6)
Net Discount Expense 165 125 31.8
Human Resources 783 721 8.6
Other Operating Expenses 789 692 14.0
------- -------
Total Expenses 2,654 2,475 7.2
------- -------
Pretax Income 493 459 7.4
Income Tax Provision 138 137 1.0
------- -------
Net Income $355 $322 10.1
======= =======
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
June 30,
------------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ---------
Net Revenues:
Discount Revenue $1,407 $1,247 12.9%
Net Card Fees 404 414 (2.4)
Travel Commissions and Fees 381 362 4.9
Interest and Dividends 143 211 (32.2)
Other Revenues 466 409 14.1
------- -------
2,801 2,643 6.0
------- -------
Lending:
Finance Charge Revenue 505 403 25.2
Interest Expense 171 130 30.7
------- -------
Net Finance Charge Revenue 334 273 22.6
------- -------
Total Net Revenues 3,135 2,916 7.5
------- -------
Expenses:
Marketing and Promotion 244 252 (3.2)
Provision for Losses and Claims:
Charge Card 313 302 3.6
Lending 203 138 47.6
Other 21 26 (18.0)
------- -------
Total 537 466 15.4
------- -------
Interest Expense:
Charge Card 237 212 11.9
Other 52 114 (54.4)
------- -------
Total 289 326 (11.3)
Human Resources 783 721 8.6
Other Operating Expenses 789 692 14.0
------- -------
Total Expenses 2,642 2,457 7.6
------- -------
Pretax Income 493 459 7.4
Income Tax Provision 138 137 1.0
------- -------
Net Income $355 $322 10.1
======= =======
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
------------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Total Cards in Force (millions):
United States 29.7 27.5 7.8%
Outside the United States 12.6 11.8 6.8
------- -------
Total 42.3 39.3 7.5
======= =======
Basic Cards in Force (millions):
United States 23.2 20.9 10.6
Outside the United States 9.7 9.3 5.1
------- -------
Total 32.9 30.2 8.9
======= =======
Card Billed Business:
United States $37.2 $32.6 14.1
Outside the United States 14.7 13.2 11.7
------- -------
Total $51.9 $45.8 13.4
======= =======
Average Discount Rate* 2.74% 2.74% -
Average Basic Cardmember
Spending (dollars)* $1,602 $1,545 3.7
Average Fee per
Card (dollars)* $39 $43 (9.3)
Travel Sales $4.5 $4.0 10.5
Travel Commissions and
Fees/Sales** 8.5% 9.1% -
Travelers Cheque Sales $6.6 $6.7 (0.8)
Average Travelers
Cheques Outstanding $6.0 $6.1 (2.2)
Investments $6.7 $9.0 (25.8)
Travelers Cheques Outstanding $6.5 $6.6 (2.2)
Total Debt $24.0 $21.9 9.7
Shareholder's Equity $5.0 $4.9 1.6
Return on Average Equity*** 27.0% 24.8% -
Return on Average Assets*** 3.0% 2.6% -
* Computed excluding Cards issued by strategic alliance
partners and independent operators as well as business
billed on those Cards.
** Computed from information provided herein.
*** Excluding the effect of SFAS #115 and the fourth quarter 1996
restructuring charge of $125 million after-tax.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
------------------ Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.2 $20.6 7.9%
90 Days Past Due as
a % of Total 3.3% 3.7% -
Loss Reserves (millions) $976 $1,054 (7.4)
% of Receivables 4.4% 5.1% -
% of 90 Days Past Due 134% 138% -
Net Loss Ratio 0.50% 0.51% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.2 $10.5 25.3
Past Due Loans as a % of Total:
30-89 Days 2.5% 2.3% -
90+ Days 1.1% 0.9% -
Loss Reserves (millions):
Beginning Balance $533 $483 10.2
Provision 198 119 66.1
Net Charge-Offs/Other (197) (134) 46.6
-------- --------
Ending Balance $534 $468 14.1
======== ========
% of Loans 4.1% 4.5% -
% of Past Due 113% 135% -
Average Loans $13.2 $10.5 25.7
Net Write-Off Rate 6.0% 5.2% -
Net Interest Yield 8.7% 8.9% -
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1997
--------------
Net Revenues:
Discount Revenue $1,407
Net Card Fees 403
Travel Commissions and Fees 381
Interest and Dividends 143
Other Revenues 509
--------
2,843
--------
Lending:
Finance Charge Revenue 458
Interest Expense 154
--------
Net Finance Charge Revenue 304
--------
Total Net Revenues 3,147
--------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 239
Lending 187
Other 21
--------
Total 447
--------
Interest Expense:
Charge Card 174
Other 52
--------
Total 226
Net Discount Expense 165
Human Resources 783
Other Operating Expenses 789
--------
Total Expenses 2,654
--------
Pretax Income 493
Income Tax Provision 138
--------
Operating Income $355
========
Quarter Ended
March 31,
1997
-------------
Net Revenues:
Discount Revenue $1,306
Net Card Fees 405
Travel Commissions and Fees 336
Interest and Dividends 132
Other Revenues 503
--------
2,682
--------
Lending:
Finance Charge Revenue 431
Interest Expense 143
--------
Net Finance Charge Revenue 288
--------
Total Net Revenues 2,970
--------
Expenses:
Marketing and Promotion 202
Provision for Losses and Claims:
Charge Card 190
Lending 211
Other 24
--------
Total 425
--------
Interest Expense:
Charge Card 169
Other 35
--------
Total 204
Net Discount Expense 151
Human Resources 749
Other Operating Expenses 790
--------
Total Expenses 2,521
--------
Pretax Income 449
Income Tax Provision 134
--------
Operating Income $315
========
Quarter Ended
December 31,
1996
--------------
Net Revenues:
Discount Revenue $1,380
Net Card Fees 415
Travel Commissions and Fees 380
Interest and Dividends 156
Other Revenues 483
--------
2,814
--------
Lending:
Finance Charge Revenue 423
Interest Expense 134
--------
Net Finance Charge Revenue 289
--------
Total Net Revenues 3,103
--------
Expenses:
Marketing and Promotion 268
Provision for Losses and Claims:
Charge Card 113
Lending 214
Other 22
--------
Total 349
--------
Interest Expense:
Charge Card 176
Other 65
--------
Total 241
Net Discount Expense 174
Human Resources 794
Other Operating Expenses 874
--------
Total Expenses 2,700
--------
Pretax Income 403
Income Tax Provision 104
--------
Operating Income $299 *
========
Quarter Ended
September 30,
1996
-------------
Net Revenues:
Discount Revenue $1,256
Net Card Fees 418
Travel Commissions and Fees 354
Interest and Dividends 167
Other Revenues 508
--------
2,703
--------
Lending:
Finance Charge Revenue 377
Interest Expense 122
--------
Net Finance Charge Revenue 255
--------
Total Net Revenues 2,958
--------
Expenses:
Marketing and Promotion 278
Provision for Losses and Claims:
Charge Card 172
Lending 107
Other 28
--------
Total 307
--------
Interest Expense:
Charge Card 175
Other 72
--------
Total 247
Net Discount Expense 128
Human Resources 764
Other Operating Expenses 793
--------
Total Expenses 2,517
--------
Pretax Income 441
Income Tax Provision 118
--------
Operating Income $323
========
Quarter Ended
June 30,
1996
--------------
Net Revenues:
Discount Revenue $1,247
Net Card Fees 414
Travel Commissions and Fees 362
Interest and Dividends 211
Other Revenues 451
--------
2,685
--------
Lending:
Finance Charge Revenue 371
Interest Expense 122
--------
Net Finance Charge Revenue 249
--------
Total Net Revenues 2,934
--------
Expenses:
Marketing and Promotion 252
Provision for Losses and Claims:
Charge Card 248
Lending 126
Other 26
--------
Total 400
--------
Interest Expense:
Charge Card 171
Other 114
--------
Total 285
Net Discount Expense 125
Human Resources 721
Other Operating Expenses 692
--------
Total Expenses 2,475
--------
Pretax Income 459
Income Tax Provision 137
--------
Operating Income $322
========
* Excludes restructuring charge of $125 million after-tax
($196 million pretax).
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
June 30,
1997
--------------
Net Revenues:
Discount Revenue $1,407
Net Card Fees 404
Travel Commissions and Fees 381
Interest and Dividends 143
Other Revenues 466
--------
2,801
--------
Lending:
Finance Charge Revenue 505
Interest Expense 171
--------
Net Finance Charge Revenue 334
--------
Total Net Revenues 3,135
--------
Expenses:
Marketing and Promotion 244
Provision for Losses and Claims:
Charge Card 313
Lending 203
Other 21
--------
Total 537
--------
Interest Expense:
Charge Card 237
Other 52
--------
Total 289
Human Resources 783
Other Operating Expenses 789
--------
Total Expenses 2,642
--------
Pretax Income 493
Income Tax Provision 138
--------
Operating Income $355
========
Quarter Ended
March 31,
1997
-------------
Net Revenues:
Discount Revenue $1,306
Net Card Fees 405
Travel Commissions and Fees 336
Interest and Dividends 132
Other Revenues 453
--------
2,632
--------
Lending:
Finance Charge Revenue 478
Interest Expense 160
--------
Net Finance Charge Revenue 318
--------
Total Net Revenues 2,950
--------
Expenses:
Marketing and Promotion 202
Provision for Losses and Claims:
Charge Card 252
Lending 222
Other 24
--------
Total 498
--------
Interest Expense:
Charge Card 227
Other 35
--------
Total 262
Human Resources 749
Other Operating Expenses 790
--------
Total Expenses 2,501
--------
Pretax Income 449
Income Tax Provision 134
--------
Operating Income $315
========
Quarter Ended
December 31,
1996
--------------
Net Revenues:
Discount Revenue $1,380
Net Card Fees 415
Travel Commissions and Fees 380
Interest and Dividends 156
Other Revenues 450
--------
2,781
--------
Lending:
Finance Charge Revenue 463
Interest Expense 150
--------
Net Finance Charge Revenue 313
--------
Total Net Revenues 3,094
--------
Expenses:
Marketing and Promotion 268
Provision for Losses and Claims:
Charge Card 199
Lending 235
Other 22
--------
Total 456
--------
Interest Expense:
Charge Card 234
Other 65
--------
Total 299
Human Resources 794
Other Operating Expenses 874
--------
Total Expenses 2,691
--------
Pretax Income 403
Income Tax Provision 104
--------
Operating Income $299 *
========
Quarter Ended
September 30,
1996
-------------
Net Revenues:
Discount Revenue $1,256
Net Card Fees 414
Travel Commissions and Fees 354
Interest and Dividends 167
Other Revenues 463
--------
2,654
--------
Lending:
Finance Charge Revenue 420
Interest Expense 139
--------
Net Finance Charge Revenue 281
--------
Total Net Revenues 2,935
--------
Expenses:
Marketing and Promotion 278
Provision for Losses and Claims:
Charge Card 223
Lending 118
Other 28
--------
Total 369
--------
Interest Expense:
Charge Card 218
Other 72
--------
Total 290
Human Resources 764
Other Operating Expenses 793
--------
Total Expenses 2,494
--------
Pretax Income 441
Income Tax Provision 118
--------
Operating Income $323
========
Quarter Ended
June 30,
1996
-------------
Net Revenues:
Discount Revenue $1,247
Net Card Fees 414
Travel Commissions and Fees 362
Interest and Dividends 211
Other Revenues 409
--------
2,643
--------
Lending:
Finance Charge Revenue 403
Interest Expense 130
--------
Net Finance Charge Revenue 273
--------
Total Net Revenues 2,916
--------
Expenses:
Marketing and Promotion 252
Provision for Losses and Claims:
Charge Card 302
Lending 138
Other 26
--------
Total 466
--------
Interest Expense:
Charge Card 212
Other 114
--------
Total 326
Human Resources 721
Other Operating Expenses 692
--------
Total Expenses 2,457
--------
Pretax Income 459
Income Tax Provision 137
--------
Operating Income $322
========
* Excludes restructuring charge of $125 million after-tax
($196 million pretax).
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
1997
-------------
Total Cards in Force (millions):
United States 29.7
Outside the United States 12.6
--------
Total 42.3
========
Basic Cards in Force (millions):
United States 23.2
Outside the United States 9.7
--------
Total 32.9
========
Card Billed Business:
United States $37.2
Outside the United States 14.7
--------
Total $51.9
========
Average Discount Rate* 2.74%
Average Basic Cardmember
Spending (dollars)* $1,602
Average Fee per Card (dollars)* $39
Travel Sales $4.5
Travel Commissions and Fees/Sales** 8.5%
Travelers Cheque Sales $6.6
Average Travelers Cheques Outstanding $6.0
Investments $6.7
Travelers Cheques Outstanding $6.5
Total Debt $24.0
Shareholder's Equity $5.0
Return on Average Equity*** 27.0%
Return on Average Assets*** 3.0%
Quarter Ended
March 31,
1997
-------------
Total Cards in Force (millions):
United States 29.6
Outside the United States 12.3
--------
Total 41.9
========
Basic Cards in Force (millions):
United States 22.9
Outside the United States 9.6
--------
Total 32.5
========
Card Billed Business:
United States $34.6
Outside the United States 13.3
--------
Total $47.9
========
Average Discount Rate* 2.75%
Average Basic Cardmember
Spending (dollars)* $1,498
Average Fee per Card (dollars)* $39
Travel Sales $3.9
Travel Commissions and Fees/Sales** 8.6%
Travelers Cheque Sales $5.1
Average Travelers Cheques Outstanding $5.8
Investments $6.1
Travelers Cheques Outstanding $5.8
Total Debt $22.1
Shareholder's Equity $4.8
Return on Average Equity*** 26.3%
Return on Average Assets*** 2.9%
Quarter Ended
December 31,
1996
-------------
Total Cards in Force (millions):
United States 29.2
Outside the United States 12.3
--------
Total 41.5
========
Basic Cards in Force (millions):
United States 22.5
Outside the United States 9.6
--------
Total 32.1
========
Card Billed Business:
United States $36.2
Outside the United States 14.9
--------
Total $51.1
========
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,633
Average Fee per Card (dollars)* $41
Travel Sales $4.3
Travel Commissions and Fees/Sales** 8.8%
Travelers Cheque Sales $5.5
Average Travelers Cheques Outstanding $6.0
Investments $6.5
Travelers Cheques Outstanding $5.8
Total Debt $23.4
Shareholder's Equity $4.7
Return on Average Equity*** 25.6%
Return on Average Assets*** 2.8%
Quarter Ended
September 30,
1996
-------------
Total Cards in Force (millions):
United States 28.4
Outside the United States 11.9
--------
Total 40.3
========
Basic Cards in Force (millions):
United States 21.7
Outside the United States 9.4
--------
Total 31.1
========
Card Billed Business:
United States $32.7
Outside the United States 13.2
--------
Total $45.9
========
Average Discount Rate* 2.75%
Average Basic Cardmember
Spending (dollars)* $1,512
Average Fee per Card (dollars)* $43
Travel Sales $3.8
Travel Commissions and Fees/Sales** 9.3%
Travelers Cheque Sales $8.6
Average Travelers Cheques Outstanding $6.6
Investments $6.5
Travelers Cheques Outstanding $6.3
Total Debt $21.8
Shareholder's Equity $5.0
Return on Average Equity*** 25.1%
Return on Average Assets*** 2.7%
Quarter Ended
June 30,
1996
-------------
Total Cards in Force (millions):
United States 27.5
Outside the United States 11.8
--------
Total 39.3
========
Basic Cards in Force (millions):
United States 20.9
Outside the United States 9.3
--------
Total 30.2
========
Card Billed Business:
United States $32.6
Outside the United States 13.2
--------
Total $45.8
========
Average Discount Rate* 2.74%
Average Basic Cardmember
Spending (dollars)* $1,545
Average Fee per Card (dollars)* $43
Travel Sales $4.0
Travel Commissions and Fees/Sales** 9.1%
Travelers Cheque Sales $6.7
Average Travelers Cheques Outstanding $6.1
Investments $9.0
Travelers Cheques Outstanding $6.6
Total Debt $21.9
Shareholder's Equity $4.9
Return on Average Equity*** 24.8%
Return on Average Assets*** 2.6%
* Computed excluding Cards issued by strategic alliance
partners and independent operators as well as business
billed on those Cards.
** Computed from information provided herein.
*** Excluding the effect of SFAS #115 and the fourth quarter
1996 restructuring charge of $125 million after-tax.
<PAGE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
-------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
June 30,
1997
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.2
90 Days Past Due as a % of Total 3.3%
Loss Reserves (millions) $976
% of Receivables 4.4%
% of 90 Days Past Due 134%
Net Loss Ratio 0.50%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.2
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $533
Provision 198
Net Charge-Offs/Other (197)
--------
Ending Balance $534
========
% of Loans 4.1%
% of Past Due 113%
Average Loans $13.2
Net Write-Off Rate 6.0%
Net Interest Yield 8.7%
Quarter Ended
March 31,
1997
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $21.2
90 Days Past Due as a % of Total 3.5%
Loss Reserves (millions) $921
% of Receivables 4.3%
% of 90 Days Past Due 124%
Net Loss Ratio 0.50%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $12.9
Past Due Loans as a % of Total:
30-89 Days 2.6%
90+ Days 1.0%
Loss Reserves (millions):
Beginning Balance $488
Provision 201
Net Charge-Offs/Other (156)
--------
Ending Balance $533
========
% of Loans 4.1%
% of Past Due 115%
Average Loans $12.8
Net Write-Off Rate 5.1%
Net Interest Yield 8.7%
Quarter Ended
December 31,
1996
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $22.5
90 Days Past Due as a % of Total 3.2%
Loss Reserves (millions) $923
% of Receivables 4.1%
% of 90 Days Past Due 128%
Net Loss Ratio 0.51%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $12.7
Past Due Loans as a % of Total:
30-89 Days 2.4%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $427
Provision 220
Net Charge-Offs/Other (159)
--------
Ending Balance $488
========
% of Loans 3.8%
% of Past Due 117%
Average Loans $12.1
Net Write-Off Rate 5.2%
Net Interest Yield 8.6%
Quarter Ended
September 30,
1996
--------------
Owned and Managed Charge Card
Receivables:
Total Receivables $20.7
90 Days Past Due as a % of Total 3.6%
Loss Reserves (millions) $996
% of Receivables 4.8%
% of 90 Days Past Due 134%
Net Loss Ratio 0.54%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $11.2
Past Due Loans as a % of Total:
30-89 Days 2.3%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $468
Provision 98
Net Charge-Offs/Other (139)
--------
Ending Balance $427
========
% of Loans 3.8%
% of Past Due 119%
Average Loans $11.0
Net Write-Off Rate 5.1%
Net Interest Yield 8.4%
Quarter Ended
June 30,
1996
-------------
Owned and Managed Charge Card
Receivables:
Total Receivables $20.6
90 Days Past Due as a % of Total 3.7%
Loss Reserves (millions) $1,054
% of Receivables 5.1%
% of 90 Days Past Due 138%
Net Loss Ratio 0.51%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $10.5
Past Due Loans as a % of Total:
30-89 Days 2.3%
90+ Days 0.9%
Loss Reserves (millions):
Beginning Balance $483
Provision 119
Net Charge-Offs/Other (134)
--------
Ending Balance $468
========
% of Loans 4.5%
% of Past Due 135%
Average Loans $10.5
Net Write-Off Rate 5.2%
Net Interest Yield 8.9%
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
---------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ---------
Revenues:
Investment Income $586 $562 4.4%
Management and Distribution Fees 360 296 21.5
Other Revenues 197 159 23.6
----- -----
Total Revenues 1,143 1,017 12.4
----- -----
Expenses:
Provision for Losses
and Benefits:
Annuities 304 298 2.3
Insurance 113 102 11.3
Investment Certificates 58 48 19.6
----- -----
Total 475 448 6.2
Human Resources 294 252 16.7
Other Operating Expenses 109 86 26.0
----- -----
Total Expenses 878 786 11.8
----- -----
Pretax Income 265 231 14.5
Income Tax Provision 82 78 4.3
----- -----
Net Income $183 $153 19.7
===== =====
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
-------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ----------
Revenues, Net of Provisions $668 $570 17.2%
Investments (billions) $29.3 $27.9 5.2
Client Contract Reserves
(billions) $29.4 $28.3 3.9
Shareholder's Equity (billions) $3.4 $2.9 15.4
Return on Average Equity* 21.2% 19.9% -
Life Insurance in Force
(billions) $71.0 $63.0 12.6
Assets Owned and/or Managed
(billions):
Assets managed for institutions $39.3 $34.8 12.9
Assets owned and managed for
individuals:
Owned Assets:
Separate Account Assets 21.1 16.7 26.1
Other Owned Assets 35.2 33.0 6.8
------- -------
Total Owned Assets 56.3 49.7 13.3
Managed Assets 66.7 54.0 23.6
------- -------
Total $162.3 $138.5 17.2
======= =======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $2,260 $390 -
Other Owned Assets $265 $(131) -
Total Managed Assets $9,233 $2,254 -
Sales of Selected Products:
Mutual Funds $4,091 $3,762 8.8
Annuities $947 $1,125 (15.8)
Investment Certificates $285 $186 53.4
Life and Other Insurance Sales $100 $113 (11.9)
Number of Financial Advisors 8,476 7,997 6.0
Fees From Financial Plans
(thousands) $15,227 $11,584 31.4
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 66.3% 62.9% -
* Excluding the effect of SFAS #115.
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1997
-------------
Revenues:
Investment Income $586
Management and Distribution Fees 360
Other Revenues 197
--------
Total Revenues 1,143
--------
Expenses:
Provision for Losses and Benefits:
Annuities 304
Insurance 113
Investment Certificates 58
--------
Total 475
Human Resources 294
Other Operating Expenses 109
--------
Total Expenses 878
--------
Pretax Income 265
Income Tax Provision 82
--------
Net Income $183
========
Quarter Ended
March 31,
1997
-------------
Revenues:
Investment Income $570
Management and Distribution Fees 331
Other Revenues 183
--------
Total Revenues 1,084
--------
Expenses:
Provision for Losses and Benefits:
Annuities 305
Insurance 104
Investment Certificates 42
--------
Total 451
Human Resources 300
Other Operating Expenses 97
--------
Total Expenses 848
--------
Pretax Income 236
Income Tax Provision 79
--------
Net Income $157
========
Quarter Ended
December 31,
1996
-------------
Revenues:
Investment Income $576
Management and Distribution Fees 327
Other Revenues 166
--------
Total Revenues 1,069
--------
Expenses:
Provision for Losses and Benefits:
Annuities 309
Insurance 108
Investment Certificates 51
--------
Total 468
Human Resources 277
Other Operating Expenses 96
--------
Total Expenses 841
--------
Pretax Income 228
Income Tax Provision 73
--------
Net Income $155
========
Quarter Ended
September 30,
1996
--------------
Revenues:
Investment Income $560
Management and Distribution Fees 302
Other Revenues 159
--------
Total Revenues 1,021
--------
Expenses:
Provision for Losses and Benefits:
Annuities 303
Insurance 102
Investment Certificates 45
--------
Total 450
Human Resources 259
Other Operating Expenses 82
--------
Total Expenses 791
--------
Pretax Income 230
Income Tax Provision 74
--------
Net Income $156
========
Quarter Ended
June 30,
1996
--------------
Revenues:
Investment Income $562
Management and Distribution Fees 296
Other Revenues 159
--------
Total Revenues 1,017
--------
Expenses:
Provision for Losses and Benefits:
Annuities 298
Insurance 102
Investment Certificates 48
--------
Total 448
Human Resources 252
Other Operating Expenses 86
--------
Total Expenses 786
--------
Pretax Income 231
Income Tax Provision 78
--------
Net Income $153
========
<PAGE>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
1997
-------------
Revenues, Net of Provisions $668
Investments (billions) $29.3
Client Contract Reserves (billions) $29.4
Shareholder's Equity (billions) $3.4
Return on Average Equity* 21.2%
Life Insurance in Force (billions) $71.0
Assets Owned and/or Managed (billions):
Assets managed for institutions $39.3
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 21.1
Other Owned Assets 35.2
-------
Total Owned Assets 56.3
Managed Assets 66.7
-------
Total $162.3
=======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $2,260
Other Owned Assets $265
Total Managed Assets $9,233
Sales of Selected Products:
Mutual Funds $4,091
Annuities $947
Investment Certificates $285
Life and Other Insurance Sales $100
Number of Financial Advisors 8,476
Fees From Financial Plans (thousands) $15,227
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 66.3%
Quarter Ended
March 31,
1997
-------------
Revenues, Net of Provisions $633
Investments (billions) $28.9
Client Contract Reserves (billions) $29.1
Shareholder's Equity (billions) $3.1
Return on Average Equity* 20.8%
Life Insurance in Force (billions) $69.2
Assets Owned and/or Managed (billions):
Assets managed for institutions $36.4
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 18.4
Other Owned Assets 34.9
-------
Total Owned Assets 53.3
Managed Assets 60.0
-------
Total $149.7
=======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $(544)
Other Owned Assets $(244)
Total Managed Assets $(1,624)
Sales of Selected Products:
Mutual Funds $4,029
Annuities $870
Investment Certificates $190
Life and Other Insurance Sales $103
Number of Financial Advisors 8,426
Fees From Financial Plans (thousands) $13,336
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.6%
Quarter Ended
December 31,
1996
--------------
Revenues, Net of Provisions $601
Investments (billions) $28.6
Client Contract Reserves (billions) $28.9
Shareholder's Equity (billions) $3.2
Return on Average Equity* 20.4%
Life Insurance in Force (billions) $67.3
Assets Owned and/or Managed (billions):
Assets managed for institutions $37.3
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 18.5
Other Owned Assets 34.2
-------
Total Owned Assets 52.7
Managed Assets 59.4
-------
Total $149.4
=======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $735
Other Owned Assets $126
Total Managed Assets $3,264
Sales of Selected Products:
Mutual Funds $3,686
Annuities $1,085
Investment Certificates $233
Life and Other Insurance Sales $131
Number of Financial Advisors 8,340
Fees From Financial Plans (thousands) $13,205
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.9%
Quarter Ended
September 30,
1996
-------------
Revenues, Net of Provisions $570
Investments (billions) $28.2
Client Contract Reserves (billions) $28.6
Shareholder's Equity (billions) $3.0
Return on Average Equity* 20.2%
Life Insurance in Force (billions) $65.2
Assets Owned and/or Managed (billions):
Assets managed for institutions $35.8
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 17.5
Other Owned Assets 33.3
-------
Total Owned Assets 50.8
Managed Assets 56.3
-------
Total $142.9
=======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $354
Other Owned Assets $56
Total Managed Assets $2,380
Sales of Selected Products:
Mutual Funds $3,313
Annuities $946
Investment Certificates $182
Life and Other Insurance Sales $109
Number of Financial Advisors 8,092
Fees From Financial Plans (thousands) $11,660
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 64.7%
Quarter Ended
June 30,
1996
-------------
Revenues, Net of Provisions $570
Investments (billions) $27.9
Client Contract Reserves (billions) $28.3
Shareholder's Equity (billions) $2.9
Return on Average Equity* 19.9%
Life Insurance in Force (billions) $63.0
Assets Owned and/or Managed (billions):
Assets managed for institutions $34.8
Assets owned and managed for individuals:
Owned Assets:
Separate Account Assets 16.7
Other Owned Assets 33.0
-------
Total Owned Assets 49.7
Managed Assets 54.0
-------
Total $138.5
=======
Market Appreciation (Depreciation) During
the Period:
Owned Assets:
Separate Account Assets $390
Other Owned Assets ($131)
Total Managed Assets $2,254
Sales of Selected Products:
Mutual Funds $3,762
Annuities $1,125
Investment Certificates $186
Life and Other Insurance Sales $113
Number of Financial Advisors 7,997
Fees From Financial Plans (thousands) $11,584
Product Sales Generated from Financial
Plans as a Percentage of Total Sales 62.9%
* Excluding the effect of SFAS #115
<PAGE>
(Preliminary) American Express Bank
---------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
--------------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ---------
Net Revenues:
Interest Income $226 $204 10.6%
Interest Expense 148 134 10.0
-------- --------
Net Interest Income 78 70 11.5
Commissions, Fees and
Other Revenues 54 49 10.5
Foreign Exchange Income 21 20 2.7
-------- --------
Total Net Revenues 153 139 9.9
-------- --------
Provision for Credit Losses 1 4 (80.7)
-------- --------
Expenses:
Human Resources 58 54 9.6
Other Operating Expenses 61 59 2.3
-------- --------
Total Expenses 119 113 5.8
-------- --------
Pretax Income 33 22 50.4
Income Tax Provision 12 8 59.3
-------- --------
Net Income $21 $14 45.6
======== ========
<PAGE>
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
---------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
--------------------- Percentage
1997 1996 Inc/(Dec)
---- ---- ---------
Investments (billions) $2.9 $2.1 35.3%
Total Loans (billions) $6.4 $5.5 17.2
Reserve for Credit Losses $130 $113 14.8
Total Nonperforming Loans $80 $38 110.0
Other Real Estate Owned $4 $48 (91.9)
Deposits (billions) $9.0 $7.8 15.0
Shareholder's Equity $814 $755 7.8
Return on Average Assets* 0.65% 0.49% -
Return on Average
Common Equity* 11.05% 7.83% -
Risk-Based Capital Ratios:
Tier 1 8.4% 9.1% -
Total 11.3% 12.9% -
Leverage Ratio 5.5% 5.8% -
* Excluding the effect of SFAS #115.
<PAGE>
(Preliminary) American Express Bank
---------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
June 30,
1997
--------------
Net Revenues:
Interest Income $226
Interest Expense 148
---------
Net Interest Income 78
Commissions, Fees and Other Revenues 54
Foreign Exchange Income 21
---------
Total Net Revenues 153
---------
Provision for Credit Losses 1
---------
Expenses:
Human Resources 58
Other Operating Expenses 61
---------
Total Expenses 119
---------
Pretax Income 33
Income Tax Provision 12
---------
Net Income $21
=========
Quarter Ended
March 31,
1997
--------------
Net Revenues:
Interest Income $218
Interest Expense 136
---------
Net Interest Income 82
Commissions, Fees and Other Revenues 52
Foreign Exchange Income 19
---------
Total Net Revenues 153
---------
Provision for Credit Losses 2
---------
Expenses:
Human Resources 58
Other Operating Expenses 61
---------
Total Expenses 119
---------
Pretax Income 32
Income Tax Provision 12
---------
Net Income $20
=========
Quarter Ended
December 31,
1996
--------------
Net Revenues:
Interest Income $223
Interest Expense 140
---------
Net Interest Income 83
Commissions, Fees and Other Revenues 57
Foreign Exchange Income 16
---------
Total Net Revenues 156
---------
Provision for Credit Losses 10
---------
Expenses:
Human Resources 56
Other Operating Expenses 64
---------
Total Expenses 120
---------
Pretax Income 26
Income Tax Provision 9
---------
Net Income $17
=========
Quarter Ended
September 30,
1996
-------------
Net Revenues:
Interest Income $206
Interest Expense 128
---------
Net Interest Income 78
Commissions, Fees and Other Revenues 57
Foreign Exchange Income 16
---------
Total Net Revenues 151
---------
Provision for Credit Losses 5
---------
Expenses:
Human Resources 59
Other Operating Expenses 59
---------
Total Expenses 118
---------
Pretax Income 28
Income Tax Provision 10
---------
Net Income $18
=========
Quarter Ended
June 30,
1996
--------------
Net Revenues:
Interest Income $204
Interest Expense 134
---------
Net Interest Income 70
Commissions, Fees and Other Revenues 49
Foreign Exchange Income 20
---------
Total Net Revenues 139
---------
Provision for Credit Losses 4
---------
Expenses:
Human Resources 54
Other Operating Expenses 59
---------
Total Expenses 113
---------
Pretax Income 22
Income Tax Provision 8
---------
Net Income $14
=========
<PAGE>
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
June 30,
1997
--------------
Investments (billions) $2.9
Total Loans (billions) $6.4
Reserve for Credit Losses $130
Total Nonperforming Loans $80
Other Real Estate Owned $4
Deposits (billions) $9.0
Shareholder's Equity $814
Return on Average Assets* 0.65%
Return on Average Common Equity* 11.05%
Risk-Based Capital Ratios:
Tier 1 8.4%
Total 11.3%
Leverage Ratio 5.5%
Quarter Ended
March 31,
1997
-------------
Investments (billions) $2.8
Total Loans (billions) $6.1
Reserve for Credit Losses $131
Total Nonperforming Loans $46
Other Real Estate Owned $35
Deposits (billions) $9.1
Shareholder's Equity $787
Return on Average Assets* 0.69%
Return on Average Common Equity* 11.14%
Risk-Based Capital Ratios:
Tier 1 8.7%
Total 11.8%
Leverage Ratio 5.6%
Quarter Ended
December 31,
1996
--------------
Investments (billions) $2.8
Total Loans (billions) $5.9
Reserve for Credit Losses $117
Total Nonperforming Loans $35
Other Real Estate Owned $36
Deposits (billions) $8.7
Shareholder's Equity $799
Return on Average Assets* 0.55%
Return on Average Common Equity* 8.89%
Risk-Based Capital Ratios:
Tier 1 8.8%
Total 12.5%
Leverage Ratio 5.6%
Quarter Ended
September 30,
1996
-------------
Investments (billions) $2.5
Total Loans (billions) $5.6
Reserve for Credit Losses $116
Total Nonperforming Loans $31
Other Real Estate Owned $34
Deposits (billions) $8.4
Shareholder's Equity $777
Return on Average Assets* 0.62%
Return on Average Common Equity* 9.61%
Risk-Based Capital Ratios:
Tier 1 9.0%
Total 12.8%
Leverage Ratio 6.0%
Quarter Ended
June 30,
1996
-------------
Investments (billions) $2.1
Total Loans (billions) $5.5
Reserve for Credit Losses $113
Total Nonperforming Loans $38
Other Real Estate Owned $48
Deposits (billions) $7.8
Shareholder's Equity $755
Return on Average Assets* 0.49%
Return on Average Common Equity* 7.83%
Risk-Based Capital Ratios:
Tier 1 9.1%
Total 12.9%
Leverage Ratio 5.8%
* Excluding the effect of SFAS #115.
<PAGE>
Exhibit 99.2
[Logo of American Express Company]
Second Quarter 1997
Earnings Conference Call
Summary
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company"
or "AXP") Second Quarter 1997 Earnings Release.
This summary includes certain forward-looking statements, indicated by an
asterisk, which 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, as well
as affect the Company's ability to achieve its financial and other goals,
are set forth on pages 29 and 30 of the Company's 1996 10-K Annual Report
filed with the Securities and Exchange Commission.
<PAGE>
SECOND QUARTER 1997
HIGHLIGHTS
. 2Q `97 was the eighteenth consecutive quarter AXP met, or exceeded, targets
for EPS growth (16.1% increase) and ROE (23%). Revenue growth in the
quarter of 8.5% was in line with our targeted growth rate of at least 8%
for the first time since 1995.
. Strong growth was recorded in a number of key areas:
- Total cards in force increased 8% and basic cards by 9%;
- Worldwide billed business rose 13%;
- Worldwide lending balances of $14.2B were up 26%;
- AEFA assets owned and managed grew 17% to $162B.
. The corporate strategy progressed with new product and service offerings:
- We launched credit cards in Australia, Mexico and Argentina, and the
National MS Society Optima Card in the U.S.;
- Network agreements were signed with Credit Saison in Japan and Banco
Excel Economico in Brazil and, another network partner, Akbank in
Turkey, added an American Express Credit Card to its existing charge
card offering;
- American Express and Microsoft unveiled an on-line travel reservations
system for corporations;
- A smart card pilot with Hilton Hotels and IBM was inaugurated;
- AEB launched a consumer mortgage brokerage service in France and a
residential mortgage installment loan product in Hong Kong.
1
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
CONSOLIDATED
(millions, except per share amounts)
Quarter Ended Percentage
June 30, Inc/(Dec)
--------------------------------------
1997 1996
---- ----
Consolidated revenues $4,422 $4,076 8.5%
====== ======
Net income $520 $452 14.9%
====== ======
EPS $1.08 $0.93 16.1%
====== ======
. Consolidated Revenues:
- Revenue grew 8.5% as the benefits of strong card spending, greater loan
balances and higher managed assets more than offset declines in card
fees, lower investment income and reduced yields on travel sales.
-- We continue to believe the pipeline building of new and deeper
customer relationships should form a solid basis for future
revenue generation.*
- The 3Q `96 elimination of asset gross-ups at Centurion by Bank
negatively affected year-over-year comparisons by $38MM.
Revenues rose 9.7% excluding this item and the effect of securitizing a
portion of the cardmember receivable and lending portfolios.
. Consolidated Expenses: Increased 8.1% due to higher human resource and
operating expenses, as well as greater provisions for losses and benefits.
. Average shares: Were 479.5MM versus 487.0MM in 2Q `96 and 482.1MM in 1Q '97.
- Actual share activity (MM):
2Q `97 1Q `97 2Q `96
------ ------ ------
Shares outstanding - beginning of period 470.9 472.9 479.1
Repurchase of common shares (3.7) (5.2) (8.3)
Preferred stock conversion - - 4.7
Employee benefit plans, compensation
and other 1.7 3.2 1.1
----- ----- -----
Shares outstanding - end of period 468.9 470.9 476.6
===== ===== =====
- 69.4MM shares have been acquired since the inception of repurchase
programs in September, 1994.
2
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed asset basis)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
------------------------------ -----------
1997 1996
Net revenues: ---- ----
Discount revenue $1,407 $1,247 13%
Net card fees 404 414 (2)
Travel commissions and fees 381 362 5
Interest and dividends 143 211 (32)
Other revenues 466 409 14
------ ------
2,801 2,643 6
------ ------
Lending:
Finance charge revenue 505 403 25
Interest expense 171 130 31
------ ------
Net finance charge revenue 334 273 23
------ ------
Total net revenues 3,135 2,916 8
------ ------
Expenses:
Marketing and promotion 244 252 (3)
Provision for losses and claims:
Charge card 313 302 4
Lending 203 138 48
Other 21 26 (18)
----- ------
Total 537 466 15
----- ------
Interest expense:
Charge card 237 212 12
Other 52 114 (54)
----- ------
Total 289 326 (11)
----- ------
Human resources 783 721 9
Other operating expenses 789 692 14
----- ------
Total expenses 2,642 2,457 8
----- ------
Pretax income 493 459 7
Income tax provision 138 137 1
----- ------
Net income $355 $322 10
===== ======
. Revenues benefited from strong growth in worldwide billed business and
cardmember loans outstanding. Also included is a benefit from increased
recognition of recoveries on abandoned property related to the Travelers
Cheque business, which was largely offset by higher investment spending on
business building initiatives.
. 1996 results reflect a $33MM restatement of "Travel Commissions and Fees"
revenue and "Other Operating Expenses". AXP's practice was to report cost
reimbursements related to travel management fee-based contracts as a credit
in "Other Operating Expenses" instead of as travel revenue. Beginning 1Q
`97, these reimbursements are reported as revenue in "Travel Commissions and
Fees" for better consistency with our reporting for travel management
commission-based contracts where all the client and supplier payments that
offset the cost of providing travel services are included. This change did
not affect income.
. Excluding the effect of the asset gross-ups at Centurion Bank, revenues rose
8.9%.
. The tax rate decreased to 28% in 2Q `97 from 30% in 2Q `96 and 1Q `97 due
to timing and mix variances but was consistent with the full year rate for
1996.
. Note that effective 1Q `97 the average discount rate, spending per basic
card in force and card fee data included in the following discussion and
the earnings release statistical attachments have been restated to
eliminate the distorting effects of non-proprietary, or "network",
activities. Reported cards in force and billed business continue to
include alliance related cards and volumes. The discount rate, spending
per card and card fee statistics are computed using proprietary business
data only to present more clearly the results of our operations.
3
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. Discount Revenue: Higher billed business and stable discount rates resulted
in a 13% increase in discount revenue.
- The average discount rate of 2.74% in 2Q `97 was flat versus 2Q `96, and
down 1BP from 2.75% in 1Q `97.
-- Merchant pressure on discount rates is always present, but we believe
the AXP value proposition is compelling. However, changes in the mix
of business (e.g., growing acceptance at supermarkets, discounters and
universities), the continued shift to electronic data capture, volume
related pricing discounts, and selective repricing initiatives will
probably result in some rate erosion over time.*
Quarter Ended Percentage
June 30, Inc/(Dec)
----------------------- ----------
1997 1996
---- ----
Card billed business (billions):
United States $37.2 $32.6 14%
Outside the United States 14.7 13.2 12
----- -----
Total $51.9 $45.8 13
===== =====
Basic cards in force (millions):
United States 23.2 20.9 11%
Outside the United States 9.7 9.3 5
----- -----
Total 32.9 30.2 9
===== =====
Spending per basic card in force (dollars) (a):
United States $1,612 $1,575 2%
Outside the United States $1,578 $1,474 7
Total $1,602 $1,545 4
(a) Proprietary card activity only.
- Billed Business: Higher spending per cardmember worldwide (due in part
to expanded merchant coverage and the benefits of rewards programs) and
greater cards in force resulted in a 13% increase in billed business.
-- Spending per basic card in force grew despite the suppressing effect
of two items:
- First, we have added a substantial number of new, credit
card-related basic relationships which have not yet reached the
spending levels of our more mature products,
- Second, we now have customers with multiple basic consumer card
relationships (e.g., Green Card, plus Optima, Delta, Hilton,
Sheraton or Golf Card). This broadening is consistent with AXP's
strategy of capturing a larger portion of the various household
spending flows, but dilutes the average spending per basic card.
-- Excluding foreign exchange translation, billed business outside the
U.S. grew 15% versus the reported 12%, reflecting double digit
increases in Europe, Asia, Latin America, and Canada.
-- The retail and airline categories continued to be a particularly
strong component of worldwide business.
. Net Card Fees: Lower card fees result from a continuing decline in consumer
charge cards and the effect of the related AXP strategy of strengthening its
lending portfolio through the issuance of low- and no-fee credit cards.
- Success in building new card relationships through our expanded product
portfolio was evident in the increase of 7.5% in cards in force and 8.9%
in basic cards in force.
- The average fee per card in force was $39 in 2Q `97 versus $43 in 2Q `96.
4
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. Travel Commissions and Fees: Travel revenues were up 5% on 10% growth in
sales. The declining revenue earned per dollar of sales (8.5% in 2Q `97
versus 9.1% in 2Q `96) reflects continued efforts by airlines to reduce
distribution costs and by large corporate clients to contain travel and
entertainment expenses.
. Interest and Dividends: Lower interest revenue principally resulted from
the elimination of asset gross-ups at Centurion Bank caused by the
consolidation of assets from our Delaware Bank into our Utah Bank effective
7/1/96.
- The gross-up elimination had no effect on profit as "Other Interest
Expense" declined by a like amount, but it suppressed the revenue
comparison by $38MM in 2Q `97.
- Excluding the gross-up elimination effect, "Interest and Dividends" were
down 17% versus the 32% reported decline. This decrease reflects a
reduced investment pool at American Express Credit Corporation and lower
yields on our Travelers Cheque investment portfolio.
. Other Revenues: The 14% growth reflects higher fees, e.g., late and
overlimit fees, on lending card products and the increased recognition of
recoveries on abandoned property related to the Travelers Cheque business.
. Net Finance Charge Revenue: The 26% growth in worldwide lending balances
to $14.2B, partially offset by lower net interest yields on the U.S.
portfolio (8.7% in 2Q `97 versus 8.9% in 2Q `96), led to a 23% increase.
- The yield decline versus 2Q `96 was due to changes in the product mix and
a slightly higher proportion of the portfolio on introductory-rates.
- During 1Q `97, management responsibility for approximately $300MM of
consumer loans sold through AEFA was transferred back to that subsidiary;
therefore, the balances are no longer reported within TRS. Excluding
these loans from the 6/30/96 balance, U.S. cardmember loan growth was 29%
versus the reported 25% increase.
. Marketing and Promotion Expenses: The 3% decrease resulted from program
timing variances and the continuation of efforts to rationalize spending.
. Charge Card Interest Expense: Higher billed business volumes versus last
year were partially offset by a lower worldwide cost of funds (down 32BP).
. Other Interest Expense: This decline mirrors the decrease in "Interest
Revenue" relating to the elimination of the asset gross-up at Centurion Bank
and a lower investment pool at American Express Credit Corporation.
. Human Resource Expenses: The increase versus last year includes the effect
of higher employee levels, 2Q `97 merit increases and greater contract
programmer costs for technology related projects such as interactive
services and customized cardmember rewards.
- The employee count of approximately 60,700 was up 1,200 versus last year
due to business growth and global technology initiatives, which were
partially offset by initial staff reductions from the implementation of
4Q `96 restructuring charge activities.
. Other Operating Expenses: Higher loyalty program costs and cardmember
service related volume contributed to the 14% growth compared with 2Q `96.
5<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. Credit Quality:
- Overall, credit quality remains an area of concern. In light of the
continuation of a difficult industry-wide credit environment, we continue
to manage credit cautiously and conservatively.
- The provision for losses for charge card products increased 4% versus
last year reflecting volume growth, offset somewhat by improved credit
quality.
- The lending provision for losses increased 48% versus 2Q `96 due to
growth in outstanding loans and higher loss rates.
- Reserve coverage ratios at more than 100% of past due balances remain
strong both absolutely and compared with key industry competitors.
- Worldwide Charge Card:
-- Past due rates improved versus 2Q `96 and 1Q `97; the write-off rate
was stable compared with both periods.
6/97 3/97 6/96
------- ------- -------
Write-offs, net of recoveries 0.50% 0.50% 0.51%
Past due as a % of receivables 3.3% 3.5% 3.7%
-- Reserves remained strong.
6/97 3/97 6/96
------- ------- -------
Reserves (MM) $976 $921 $1,054
% of receivables 4.4% 4.3% 5.1%
% of past due accounts 134% 124% 138%
- U.S. Lending:
-- The write-off rate increased in 2Q `97 as bankruptcies continued at
high levels and loans from more recent product offerings aged. The
past due rate was up from 2Q `96, but remained flat with 1Q `97.
6/97 3/97 6/96
------- ------- -------
Write-offs, net of recoveries 6.0% 5.1% 5.2%
Past due as a % of loans 3.6% 3.6% 3.2%
-- Cardmember lending reserves were held steady as provisions covered
charge-offs during the quarter.
6/97 3/97 6/96
------- ------- -------
Reserves (MM) $534 $533 $468
% of total loans 4.1% 4.1% 4.5%
% of past due accounts 113% 115% 135%
- AXP coverage ratios continue to compare favorably with key industry
competitors.
6
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary)
Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
-------------------- ----------
1997 1996
---- ----
Revenues:
Investment income $586 $562 4%
Management and distribution fees 360 296 22
Other revenues 197 159 24
----- -----
Total revenues 1,143 1,017 12
----- -----
Expenses:
Provision for losses and benefits:
Annuities 304 298 2
Insurance 113 102 11
Investment certificates 58 48 20
----- -----
Total 475 448 6
Human resources 294 252 17
Other operating expenses 109 86 26
----- -----
Total expenses 878 786 12
----- -----
Pretax income 265 231 15
Income tax provision 82 78 4
----- -----
Net income $183 $153 20
===== =====
. Revenue and earnings growth reflect increased management fees from higher
managed asset levels (including separate account assets) and greater
distribution fees driven by mutual fund and variable annuity asset and sales
levels.
- The total revenue increase of 12% was suppressed by continued weak
investment income growth due to lower investment yields on a slightly
higher owned investment asset pool.
-- These results are consistent with the multi-year shift in the mix
of sales from fixed to variable return products and a lower yield
on more recent investments.
-- Revenue growth, net of provisions, was strong at +17% versus last
year.
. These revenue improvements were partially offset by higher
compensation-related and other operating expenses.
. The effective tax rate of 31% was down from a relatively high 34% in 2Q
`96.
. This decrease was caused by the realization of tax credits from low income
housing investments which should continue to provide benefits in future
quarters.*
Investment Income:
- Average yields of 7.8% were down slightly from 7.9% in 2Q `96.
- Average invested assets of $29.2B were up only 3% versus $28.4B in
2Q `96.
- Insurance spreads were down from last year, but those for annuities
were up. Certificate spreads increased substantially versus 2Q `96
following a one-year promotional client offering made in mid-1995.
Spreads on insurance were even with 1Q `97; those for annuities and
certificates were up.
- Asset Quality remains strong.
-- The level of non-performing assets remained low at only 0.2% of
invested assets which was flat with last year. Reserves cover 84% of
these non-performing assets.
-- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was a positive $251MM at 6/97, reflecting
appreciation during 2Q `97 of $265MM. As of 6/96, the mark-to-market
adjustment was $48MM.
-- Unrealized appreciation on securities held to maturity was $346MM
compared with $151MM at 6/96 and $116MM at 3/97.
7<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
. Management and Distribution Fees: The increase of 22% was due to higher
average assets under management (including separate account assets) and
distribution fees from greater mutual fund asset and sales levels.
- Assets Managed:
(billions) Percentage
June 30, Inc/(Dec)
--------------- -----------
1997 1996
---- ----
Assets managed for individuals $66.7 $54.0 24%
Assets managed for institutions 39.3 34.8 13
Separate account assets 21.1 16.7 26
------ ------
Total $127.1 $105.5 20
====== ======
-- The growth in managed assets since 2Q `96 resulted from $16.1B of
market appreciation and $5.5B of net new money.
- During 2Q `97, $0.8B of net new managed assets were added, and
market appreciation of $11.5B was recorded.
- Product Sales:
-- Mutual fund sales continue at record levels, increasing 9%, as
reasonably strong equity and money market in-flows more than
compensated for slower growth in bond fund sales. Both rear- and
no-load fund categories had double-digit improvement versus last year;
front-load sales were flat.
- At approximately 50% of the industry average, redemption rates
continued to compare favorably with the competition.
-- Overall, annuity sales were down 16% and sales of insurance products
declined 12%.
-- Certificate sales were up 53%, reflecting weakness in last year's
sales and some strengthening of sales through AEB.
-- Product sales generated through plans were a record 66% of total sales
in 2Q `97 versus 63% in 2Q `96 and 65% in 1Q `97.
. Other Revenues: Growth of 24% resulted from higher life insurance revenues
and financial planning and tax preparation fees.
- Financial Planning fees of $15.2MM were up 31% versus 2Q `96.
- Tax preparation fees more than doubled reflecting acquisitions and
business growth.
. Provisions for Losses and Benefits: Annuity product provisions were up
somewhat due to greater inforce levels, partially offset by a lower accrual
rate. Insurance provisions increased with higher policies inforce and
unfavorable claims experience in the life insurance business lines. For
certificate products, there were rising provisions for stock market
certificate products which track with the S&P 500.
. Human Resources: Costs were up because of larger field force
compensation-related expenses caused by growth in sales and asset levels,
as well as higher average full-time equivalent employees (+15%) primarily
within the technology and client services organizations and from recent
acquisitions.
- Advisor Force: 8,476 at 6/97; +479 planners, or 6%, versus 6/96; +50
planners versus 3/97.
-- We remain optimistic about advisors in the pipeline as we continue to
see a steady flow of applications for Series 7 licenses.*
-- The veteran advisor retention rates remain at record levels.
-- Planner productivity was strong for the quarter; the number of
clients and accounts per client were up 7% and 4%, respectively,
versus 2Q `96.
. Other Operating Expenses: The 26% increase reflects the cost of hedging
activities designed to reduce the impact of stock market volatility on
management fees. Over the life of these hedges, a gain or loss on the hedge
will be offset by a corresponding change in fee revenues. In any one
quarter, however, the impact of marking the hedge contracts to market value
may differ from the related impact on revenues, which was the case in the
second quarter.
Also included are higher costs related to the outsourcing of data processing
support services, increased usage of contract programmers for
technology-oriented initiatives, higher occupancy and equipment costs
from acquisitions and greater advertising and promotion expenditures.
8
<PAGE>
AMERICAN EXPRESS COMPANY
SECOND QUARTER 1997 OVERVIEW
AMERICAN EXPRESS BANK
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
June 30, Inc/(Dec)
----------------- ----------
1997 1996
---- ----
Net revenues:
Interest income $226 $204 11%
Interest expense 148 134 10
---- ----
Net interest income 78 70 12
Commissions, fees and
other revenues 54 49 10
Foreign exchange income 21 20 3
---- ----
Total net revenues 153 139 10
---- ----
Provision for credit losses 1 4 (81)
---- ----
Expenses:
Human resources 58 54 10
Other operating expenses 61 59 2
---- ----
Total expenses 119 113 6
---- ----
Pretax income 33 22 50
Income tax provision 12 8 59
---- ----
Net income $21 $14 46
==== ====
. AEB continues to improve revenue generating potential within its core
businesses and integrate further with AXP's other business activities.
. In 2Q '97, margins improved as 10% growth in revenues outpaced higher
expenses.
. The revenue improvement reflected rising net interest income on greater
loans and investments, better correspondent banking and trading results,
and fee contributions from new consumer mortgage and lending products.
. Total assets of $13.1B at 6/97 were up 14% versus 6/96 as investments and
loans increased 35% and 17%, respectively.
- Non-performing loans rose from unsustainably low levels in recent
quarters, while other real estate owned decreased by a like amount due
to a property sale and a reclass to the non-performing loan category.
-- The reserve for credit losses, which benefited in 1Q '97 from an $18MM
loan recovery on Peruvian LDC debt, was held steady and covered
non-performing loans by a strong 1.6 times.
- 8.4% Tier 1 and 11.3% total capital ratios were maintained in the "well
capitalized" range.
SECOND QUARTER 1997 OVERVIEW
CORPORATE AND OTHER
. The net expense of $39MM was consistent with 2Q `96 and recent quarters.
9
<PAGE>
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