<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): January 26, 1998
--------------------------
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
--------------------------
New York 1-7657 13-4922250
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
---------------------------------------------------
(Former name or former address, if changed since last report)
===============================================================================
<PAGE>
Item 5. Other Events
On January 26, 1998, the Registrant issued a press release announcing
its fourth 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 January 26, 1998.
99.2 Fourth 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: January 28, 1998
<PAGE>
EXHIBIT INDEX
Item No. Description
- -------- -----------
99.1 Press release of American Express Company dated January 26, 1998.
99.2 Fourth Quarter 1997 Earnings Conference Call Summary of American
Express Company.
<PAGE>
<PAGE>
Exhibit 99.1
NEW YORK, January 26, 1998 -- American Express Company today reported record
net income for 1997 of $1.99 billion, 14 percent higher than operating income
of $1.74 billion a year ago. The 1996 results exclude two fourth-quarter
items: a $300 million gain (after-tax) on the exchange of DECS for shares of
common stock of First Data Corporation and a $138 million restructuring charge
(after-tax). On a per share basis, 1997 primary earnings were $4.16, an increase
of 17 percent from $3.57 a year ago. Diluted earnings per share of $4.15 also
increased 17 percent, compared with $3.56 last year. Revenues of $17.8 billion
were up 8.4 percent from a year ago. The Company's return on equity was 23.5
percent. These results exceeded American Express' long-term targets of: 12-15
percent earnings per share growth, at least 8 percent growth in revenues and
a return on equity of 18-20 percent.
For the fourth quarter, American Express reported net income of $493 million,
an increase of 14 percent, excluding the fourth-quarter 1996 gain and
restructuring charge.
Travel Related Services (TRS) reported record net income for 1997 of $1.35
billion, up 10 percent from $1.23 billion a year ago. The 1996 results exclude
a fourth-quarter restructuring charge of $125 million ($196 million pretax).
TRS' net revenues increased 8 percent compared with a year ago. Excluding the
1996 restructuring charge, TRS' expenses were up 7 percent compared with last
year.
The increase in net revenues is primarily attributable to higher worldwide
billed business, growth in cardmember loans outstanding and wider interest
margins. 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. The improvement in billed business reflects a
greater number of cards outstanding and higher spending per basic cardmember.
The growth in cards outstanding is largely attributable to the introduction
of new consumer and small business credit cards. Spending increased in part
due to the benefits of rewards programs and expanded merchant coverage.
Provisions for losses rose, reflecting both higher volumes and loss rates.
The increase in operating expenses resulted from the cost of cardmember
loyalty programs, business growth and investment spending.
TRS reported record fourth quarter net income in 1997 of $328 million,
compared with $299 million in the 1996 fourth quarter, excluding the
restructuring charge.
American Express Financial Advisors (AEFA) reported record net income for
1997 of $707 million, a 19 percent increase over the $594 million reported
a year ago.
Revenue and earnings growth benefited from higher fee revenues due to an
increase in managed assets. The growth in Other Operating Expenses primarily
reflects costs related to systems technology and higher business volumes.
AEFA reported record sales of mutual funds in 1997. Sales of investment
certificates increased over last year; sales of annuities and life and
other insurance products declined.
<PAGE>
AEFA reported record fourth quarter net income in 1997 of $183 million,
compared with $155 million in 1996.
American Express Bank (AEB) reported 1997 net income of $82 million, a 20
percent increase over the $68 million reported in 1996.
The growth in earnings reflects higher revenues, primarily due to strong
foreign exchange income. The revenue increase was partially offset by higher
operating expenses, including systems technology costs.
AEB reported fourth quarter net income of $19 million, compared with $17
million in the 1996 fourth quarter.
Corporate and Other reported 1997 net expenses of $152 million, compared with
$153 million a year ago. The 1996 figures exclude the $300 million after-tax
gain on the exchange of DECS ($480 million pre-tax) and a charge primarily
related to the early retirement of debt. Including these items, Corporate and
Other reported net income of $134 million in 1996. Both years include the
company's share of the Travelers Inc. revenue and net income participations
in accordance with an agreement related to the 1993 sale of the Shearson
Lehman Brothers Division, which was offset by expenses related to certain
business building initiatives.
For the 1997 fourth quarter, net expenses were $37 million compared with
$38 million a year ago, excluding the above gain and charge.
American Express Company, (www.americanexpress.com), founded in 1850, is
a global travel, financial and network services provider.
<PAGE>
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,351 $3,103 8.0 %
American Express
Financial Advisors 1,202 1,069 12.5
American Express Bank 167 156 7.1
------ ------
4,720 4,328 9.1
Corporate and Other,
including adjustments
and eliminations (46) (27) (58.1)
------ ------
CONSOLIDATED REVENUES (A) $4,674 $4,301 8.7
====== ======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services (B) $468 $403 16.1
American Express
Financial Advisors 259 228 13.9
American Express Bank 30 26 15.6
---- ----
757 657 15.3
Corporate and Other (C) (67) (78) 12.9
---- ----
PRETAX OPERATING INCOME $690 $579 19.2
==== ====
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $328 $299 10.0
American Express
Financial Advisors 183 155 18.1
American Express Bank 19 17 13.5
---- ----
530 471 12.8
Corporate and Other (C) (37) (38) 0.2
---- ----
OPERATING INCOME $493 $433 13.9
FDC Gain/(Restructuring) 0 162 -
---- ----
NET INCOME $493 $595 (17.1)
==== ====
<PAGE>
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $12,667 $11,773 7.6 %
American Express
Financial Advisors 4,599 4,110 11.9
American Express Bank 637 591 7.7
------- -------
17,903 16,474 8.7
Corporate and Other,
including adjustments
and eliminations (143) (94) (51.8)
------- -------
CONSOLIDATED REVENUES (A) $17,760 $16,380 8.4
======= =======
Pretax Income by Industry Segment
- ---------------------------------
Travel Related Services (B) $1,905 $1,719 10.8
American Express
Financial Advisors 1,022 885 15.5
American Express Bank 130 105 23.0
------ ------
3,057 2,709 12.8
Corporate and Other (C) (307) (309) 0.9
------ ------
PRETAX OPERATING INCOME $2,750 $2,400 14.6
====== ======
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $1,354 $1,230 10.1
American Express
Financial Advisors 707 594 19.1
American Express Bank 82 68 20.2
------ ------
2,143 1,892 13.3
Corporate and Other (C) (152) (153) -
------ ------
OPERATING INCOME $1,991 $1,739 14.5
FDC Gain/(Restructuring) 0 162 -
------ ------
NET INCOME $1,991 $1,901 4.7
====== ======
</TABLE>
(A) Revenues are reported net of interest expense, where
applicable.
(B) TRS' results for the quarter and year ended
December 31, 1996 exclude a pretax restructuring charge
of $196 million ($125 million after-tax).
(C) Corporate and Other results for the quarter and
year 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)
<PAGE>
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.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
EARNINGS PER SHARE
<S> <C> <C> <C>
Primary
- ------
Operating Income Per
Common Share $1.04 $0.90 15.6 %
FDC Gain/(Restructuring) 0.00 0.33 -
----- -----
Net Income Per Common Share $1.04 $1.23 (15.4)
===== =====
Average common shares
outstanding (millions) 475.0 482.1 (1.5)
===== =====
Basic
- -----
Operating Income Per
Common Share $1.07 $0.92 16.3
FDC Gain/(Restructuring) 0.00 0.35 -
----- -----
Net Income Per Common Share $1.07 $1.27 (15.7)
===== =====
Average common shares
outstanding (millions) 460.7 469.2 (1.8)
===== =====
Diluted
- -------
Operating Income Per
Common Share $1.04 $0.89 16.9
FDC Gain/(Restructuring) 0.00 0.34 -
----- -----
Net Income Per Common Share $1.04 $1.23 (15.4)
===== =====
Average common shares
outstanding (millions) 475.1 483.5 (1.7)
===== =====
Cash dividends declared
per common share $0.225 $0.225
====== ======
<PAGE>
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
EARNINGS PER SHARE
Primary
- -------
Operating Income Per
Common Share $4.16 $3.57 16.5 %
FDC Gain/(Restructuring) 0.00 0.33 -
----- -----
Net Income Per Common Share $4.16 $3.90 6.7
===== =====
Average common shares
outstanding (millions) 478.5 485.6 (1.5)
===== =====
Basic
- ------
Operating Income Per
Common Share $4.29 $3.67 16.9
FDC Gain/(Restructuring) 0.00 0.35 -
----- -----
Net Income Per Common Share $4.29 $4.02 6.7
===== =====
Average common shares
outstanding (millions) 464.2 472.2 (1.7)
===== =====
Diluted
- -------
Operating Income Per
Common Share $4.15 $3.56 16.6
FDC Gain/(Restructuring) 0.00 0.33 -
----- -----
Net Income Per Common Share $4.15 $3.89 6.7
===== =====
Average common shares
outstanding (millions) 479.2 488.3 (1.9)
===== =====
Cash dividends declared
per common share $0.90 $0.90
===== =====
Selected Statistical Information
--------------------------------
(Unaudited)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Return on Average Equity* 23.5% 22.8% -
Common Shares Outstanding (millions) 466.4 472.9 (1.4)%
<PAGE>
Book Value per Common Share:
Actual $20.53 $18.04 13.8 %
Pro Forma* $19.29 $17.22 12.0 %
Shareholders' Equity (billions) $9.6 $8.5 12.3 %
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Return on Average Equity* 23.5% 22.8% -
Common Shares Outstanding (millions) 466.4 472.9 (1.4)%
Book Value per Common Share:
Actual $20.53 $18.04 13.8 %
Pro Forma* $19.29 $17.22 12.0 %
Shareholders' Equity (billions) $9.6 $8.5 12.3 %
</TABLE>
* Excludes the effect of SFAS #115 and for ROE, also excludes
a fourth quarter 1996 $300 million gain on the exchange of
the Company's DECS and $138 million restructuring charge.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary
-----------------
(Unaudited)
(Dollars in millions)
Quarter Ended
-------------
December 31,
1997
----
Revenues by Industry Segment (A)
- --------------------------------
<S> <C>
Travel Related Services $3,351
American Express Financial Advisors 1,202
American Express Bank 167
------
4,720
Corporate and Other, including
adjustments and eliminations (46)
------
CONSOLIDATED REVENUES (A) $4,674
======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $468
American Express Financial Advisors 259
American Express Bank 30
----
757
Corporate and Other (C) (67)
----
<PAGE>
PRETAX OPERATING INCOME $690
====
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $328
American Express Financial Advisors 183
American Express Bank 19
----
530
Corporate and Other (C) (37)
----
OPERATING INCOME $493
FDC Gain/(Restructuring) 0
----
NET INCOME $493
====
Quarter Ended
-------------
September 30,
1997
----
Revenues by Industry Segment (A)
- --------------------------------
Travel Related Services $3,199
American Express Financial Advisors 1,169
American Express Bank 162
------
4,530
Corporate and Other, including
adjustments and eliminations (30)
------
CONSOLIDATED REVENUES (A) $4,500
======
Pretax Operating Income by Industry Segment
- -------------------------------------------
Travel Related Services (B) $494
American Express Financial Advisors 261
American Express Bank 34
----
789
Corporate and Other (C) (71)
----
PRETAX OPERATING INCOME $718
====
Operating Income by Industry Segment
- ------------------------------------
Travel Related Services (B) $356
American Express Financial Advisors 184
American Express Bank 21
----
561
Corporate and Other (C) (37)
----
OPERATING INCOME $524
FDC Gain/(Restructuring) 0
----<PAGE>
NET INCOME $524
====
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
====
Quarter Ended
-------------
March 31,
1997
----
<PAGE>
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
====
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
======
<PAGE>
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
====
</TABLE>
(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.
<TABLE>
<CAPTION>
American Express Company
------------------------
Financial Summary (continued)
-----------------------------
(Unaudited)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
EARNINGS PER SHARE
Primary
- -------
Operating Income Per Common Share $1.04
FDC Gain/(Restructuring) 0.00
-----<PAGE>
Net Income Per Common Share $1.04
=====
Average common shares outstanding (000's) 475.0
=====
Basic
- -----
Operating Income Per Common Share $1.07
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.07
=====
Average common shares outstanding (000's) 460.7
=====
Diluted
- -------
Operating Income Per Common Share $1.04
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.04
=====
Average common shares outstanding (000's) 475.1
=====
Cash dividends declared per common share $0.225
======
Quarter Ended
-------------
September 30,
1997
----
EARNINGS PER SHARE
Primary
- -------
Operating Income Per Common Share $1.10
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.10
=====
Average common shares outstanding (000's) 477.2
======
Basic
- -----
Operating Income Per Common Share $1.13
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.13
=====
Average common shares outstanding (000's) 463.0
=====
<PAGE>
Diluted
- -------
Operating Income Per Common Share $1.10
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.10
=====
Average common shares outstanding (000's) 477.9
=====
Cash dividends declared per common share $0.225
======
Quarter Ended
-------------
June 30,
1997
----
EARNINGS PER SHARE
Primary
- -------
Operating Income Per Common Share $1.08
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.08
=====
Average common shares outstanding (000's) 479.5
=====
Basic
- -----
Operating Income Per Common Share $1.12
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.12
=====
Average common shares outstanding (000's) 465.1
=====
Diluted
- -------
Operating Income Per Common Share $1.08
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $1.08
=====
Average common shares outstanding (000's) 480.1
=====
Cash dividends declared per common share $0.225
======
Quarter Ended
-------------
March 31,
1997
----
<PAGE>
EARNINGS PER SHARE
Primary
- -------
Operating Income Per Common Share $0.94
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $0.94
=====
Average common shares outstanding (000's) 482.1
=====
Basic
- -----
Operating Income Per Common Share $0.97
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $0.97
======
Average common shares outstanding (000's) 467.9
======
Diluted
- -------
Operating Income Per Common Share $0.94
FDC Gain/(Restructuring) 0.00
-----
Net Income Per Common Share $0.94
=====
Average common shares outstanding (000's) 483.0
=====
Cash dividends declared per common share $0.225
======
Quarter Ended
-------------
December 31,
1996
----
EARNINGS PER SHARE
Primary
- ------
Operating Income Per Common Share $0.90
FDC Gain/(Restructuring) 0.33
-----
Net Income Per Common Share $1.23
=====
Average common shares outstanding (000's) 482.1
=====
Basic
- -----
Operating Income Per Common Share $0.92
FDC Gain/(Restructuring) 0.35
-----
Net Income Per Common Share $1.27
=====
Average common shares outstanding (000's) 469.2
=====<PAGE>
Diluted
- -------
Operating Income Per Common Share $0.89
FDC Gain/(Restructuring) 0.34
-----
Net Income Per Common Share $1.23
=====
Average common shares outstanding (000's) 483.5
=====
Cash dividends declared per common share $0.225
======
Selected Statistical Information
-------------------------------
(Unaudited)
Quarter Ended
-------------
December 31,
1997
----
Return on Average Equity* 23.5%
Common Shares Outstanding (millions) 466.4
Book Value per Common Share:
Actual $20.53
Pro Forma* $19.29
Shareholders' Equity (billions) $9.6
Quarter Ended
-------------
September 30,
1997
----
Return on Average Equity* 23.3%
Common Shares Outstanding (millions) 465.8
Book Value per Common Share:
Actual $19.57
Pro Forma* $18.41
Shareholders' Equity (billions) $9.1
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
<PAGE>
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
</TABLE>
* Excludes the effect of SFAS #115 and for ROE, also excludes
a fourth quarter 1996 $300 million gain on the exchange
of the Company's DECS and $138 million restructuring charge.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,530 $1,380 10.9 %
Net Card Fees 397 415 (4.2)
Travel Commissions and Fees 402 380 5.8
Interest and Dividends 136 156 (12.9)
Other Revenues 552 483 14.2
Lending:
Finance Charge Revenue 487 423 15.2
Interest Expense 153 134 14.6
----- -----
<PAGE>
Net Finance Charge Revenue 334 289 15.4
----- -----
Total Net Revenues 3,351 3,103 8.0
----- -----
Expenses:
Marketing and Promotion 315 268 17.4
Provision for Losses and Claims:
Charge Card 201 113 77.5
Lending 239 214 12.0
Other 22 22 (0.9)
----- -----
Total 462 349 32.4
----- -----
Interest Expense:
Charge Card 213 176 21.4
Other 41 65 (37.7)
----- -----
Total 254 241 5.4
Net Discount Expense 139 174 (20.5)
Human Resources 826 794 4.0
Other Operating Expenses 887 874 1.6
----- -----
Total Expenses 2,883 2,700 6.8
----- -----
Pretax Income 468 403 16.1
Income Tax Provision 140 104 33.6
----- -----
Operating Income $328 $299 * 10.0
===== =====
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Net Revenues:
Discount Revenue $5,666 $5,024 12.8 %
Net Card Fees 1,604 1,668 (3.9)
Travel Commissions and Fees 1,489 1,422 4.7
Interest and Dividends 561 724 (22.5)
Other Revenues 2,103 1,867 12.8
Lending:
Finance Charge Revenue 1,848 1,575 17.3
Interest Expense 604 507 19.2
------ ------
Net Finance Charge Revenue 1,244 1,068 16.4
------ ------
Total Net Revenues 12,667 11,773 7.6
------ ------
Expenses:
Marketing and Promotion 1,062 998 6.4
Provision for Losses and Claims:
Charge Card 858 743 15.5
Lending 817 635 28.6
Other 88 101 (12.0)
------ ------
Total 1,763 1,479 19.2
------ ------
<PAGE>
Interest Expense:
Charge Card 743 688 7.9
Other 177 347 (48.9)
------ ------
Total 920 1,035 (11.1)
Net Discount Expense 597 554 7.8
Human Resources 3,154 2,984 5.7
Other Operating Expenses 3,266 3,004 8.8
------ ------
Total Expenses 10,762 10,054 7.1
------ ------
Pretax Income 1,905 1,719 10.8
Income Tax Provision 551 489 12.6
------ ------
Operating Income $1,354 $1,230 * 10.1
====== ======
</TABLE>
* Excludes restructuring charge of $125 million after-tax
($196 million pretax).
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Net Revenues:
Discount Revenue $1,530 $1,380 10.9 %
Net Card Fees 398 415 (3.9)
Travel Commissions and Fees 402 380 5.8
Interest and Dividends 132 156 (15.4)
Other Revenues 499 450 10.9
Lending:
Finance Charge Revenue 574 463 23.8
Interest Expense 186 150 24.2
------ ------
Net Finance Charge Revenue 388 313 23.6
------ ------
Total Net Revenues 3,349 3,094 8.2
------ ------
Expenses:
Marketing and Promotion 315 268 17.4
Provision for Losses and Claims:
Charge Card 255 199 27.6
Lending 269 235 14.9
Other 22 22 (0.9)
------ ------
Total 546 456 19.7
------ ------
<PAGE>
Interest Expense:
Charge Card 266 234 13.7
Other 41 65 (37.7)
------ ------
Total 307 299 2.5
Human Resources 826 794 4.0
Other Operating Expenses 887 874 1.6
------ ------
Total Expenses 2,881 2,691 7.0
------ ------
Pretax Income 468 403 16.1
Income Tax Provision 140 104 33.6
------ ------
Operating Income $328 $299 * 10.0
====== ======
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Net Revenues:
Discount Revenue $5,666 $5,024 12.8 %
Net Card Fees 1,609 1,664 (3.3)
Travel Commissions and Fees 1,489 1,422 4.7
Interest and Dividends 552 724 (23.7)
Other Revenues 1,903 1,714 11.0
Lending:
Finance Charge Revenue 2,105 1,691 24.5
Interest Expense 694 548 26.5
------ ------
Net Finance Charge Revenue 1,411 1,143 23.5
------ ------
Total Net Revenues 12,630 11,691 8.0
------ ------
Expenses:
Marketing and Promotion 1,025 998 2.7
Provision for Losses and Claims:
Charge Card 1,105 989 11.7
Lending 937 678 38.2
Other 88 101 (12.0)
------ ------
Total 2,130 1,768 20.5
------ ------
Interest Expense:
Charge Card 973 871 11.6
Other 177 347 (48.9)
------ ------
Total 1,150 1,218 (5.7)
Human Resources 3,154 2,984 5.7
Other Operating Expenses 3,266 3,004 8.8
------ ------
Total Expenses 10,725 9,972 7.6
------ ------
Pretax Income 1,905 1,719 10.8
Income Tax Provision 551 489 12.6
------ ------
Operating Income $1,354 $1,230 * 10.1
====== ======
/TABLE
<PAGE>
* Excludes restructuring charge of $125 million
after-tax ($196 million pretax).
This Statement of Income is provided on a Managed Asset Basis
for analytical purposes only. It presents the income statement
of TRS as if there had been no securitization transactions.
Under Statement of Financial Accounting Standards No. 125
(SFAS 125), which prescribes the accounting for securitized
loans and receivables, TRS recognized a pretax gain of
$37 million in the third quarter of 1997 ($24 million after-tax)
related to securitization of U.S. lending receivables. This
gain was invested in additional Marketing and Promotion expenses
and had no material impact on net income or total expenses in
1997. For purposes of this presentation such gain and a
corresponding $37 million increase in Marketing and Promotion
expenses have been eliminated in the Year Ended December 31,1997.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Total Cards in Force (millions):
United States 29.6 29.2 1.4 %
Outside the United States 13.1 12.3 6.4
---- ----
Total 42.7 41.5 2.9
==== ====
Basic Cards in Force (millions):
United States 23.3 22.5 3.3
Outside the United States 10.0 9.6 4.6
---- ----
Total 33.3 32.1 3.7
==== ====
Card Billed Business:
United States $40.7 $36.2 12.6
Outside the United States 16.0 14.9 7.1
----- -----
Total $56.7 $51.1 11.0
===== =====
Average Discount Rate* 2.73% 2.72% -
Average Basic Cardmember
Spending (dollars)* $1,731 $1,633 6.0
Average Fee per Card (dollars)* $38 $41 (7.3)
Travel Sales $4.8 $4.3 11.5
<PAGE>
Travel Commissions and
Fees/Sales** 8.4% 8.8% -
Travelers Cheque:
Sales $5.2 $5.5 (5.5)
Ending Outstanding $5.6 $5.8 (3.5)
Average Outstanding $5.7 $6.0 (3.7)
Ending Investments $5.6 $5.6 1.4
Tax Equivalent Yield 9.2% 9.5% -
Total Debt $26.9 $23.4 15.0
Shareholder's Equity $5.0 $4.7 8.0
Return on Average Equity*** 27.9% 25.6% -
Return on Average Assets*** 3.0% 2.8% -
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Total Cards in Force (millions):
United States 29.6 29.2 1.4 %
Outside the United States 13.1 12.3 6.4
---- ----
Total 42.7 41.5 2.9
==== ====
Basic Cards in Force (millions):
United States 23.3 22.5 3.3
Outside the United States 10.0 9.6 4.6
---- ----
Total 33.3 32.1 3.7
==== ====
Card Billed Business:
United States $150.5 $131.0 14.9
Outside the United States 58.7 53.3 10.1
------ ------
Total $209.2 $184.3 13.5
====== ======
Average Discount Rate* 2.73% 2.75% -
Average Basic Cardmember
Spending (dollars)* $6,473 $6,074 6.6
Average Fee per Card (dollars)* $39 $42 (7.1)
Travel Sales $17.4 $15.8 10.2
Travel Commissions and
Fees/Sales** 8.6% 9.0% -
Travelers Cheque:
Sales $25.0 $26.0 (4.0)
Ending Outstanding $5.6 $5.8 (3.5)
Average Outstanding $5.9 $6.0 (2.1)
Ending Investments $5.6 $5.6 1.4
Tax Equivalent Yield 9.2% 9.4% -
Total Debt $26.9 $23.4 15.0
Shareholder's Equity $5.0 $4.7 8.0
Return on Average Equity*** 27.9% 25.6% -
Return on Average Assets*** 3.0% 2.8% -
</TABLE>
<PAGE>
* 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.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5 $22.5 4.6 %
90 Days Past Due as a % of Total 3.1% 3.2% -
Loss Reserves (millions) $951 $923 3.1
% of Receivables 4.0% 4.1% -
% of 90 Days Past Due 132% 128% -
Net Loss Ratio 0.49% 0.51% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.6 $12.7 14.3
Past Due Loans as a % of Total:
30-89 Days 2.4% 2.4% -
90+ Days 1.1% 0.9% -
Loss Reserves (millions):
Beginning Balance $556 $427 30.0
Provision 247 220 12.7
Net Charge-Offs/Other (214) (159) 34.3
---- ----
Ending Balance $589 $488 20.8
==== ====
% of Loans 4.0% 3.8% -
% of Past Due 116% 117% -
Average Loans $13.9 $12.1 14.4
Net Write-Off Rate 6.3% 5.2% -
Net Interest Yield 9.4% 8.6% -
<PAGE>
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5 $22.5 4.6 %
90 Days Past Due as a % of Total 3.1% 3.2% -
Loss Reserves (millions) $951 $923 3.1
% of Receivables 4.0% 4.1% -
% of 90 Days Past Due 132% 128% -
Net Loss Ratio 0.50% 0.51% -
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.6 $12.7 14.3
Past Due Loans as a % of Total:
30-89 Days 2.4% 2.4% -
90+ Days 1.1% 0.9% -
Loss Reserves (millions):
Beginning Balance $488 $443 10.0
Provision 867 607 42.9
Net Charge-Offs/Other (766) (562) 36.2
---- ----
Ending Balance $589 $488 20.8
==== ====
% of Loans 4.0% 3.8% -
% of Past Due 116% 117% -
Average Loans $13.3 $10.8 22.7
Net Write-Off Rate 6.0% 5.2% -
Net Interest Yield 9.1% 8.8% -
</TABLE
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Net Revenues:
Discount Revenue $1,530
Net Card Fees 397
Travel Commissions and Fees 402
Interest and Dividends 136
Other Revenues 552
Lending:
Finance Charge Revenue 487
Interest Expense 153
-----<PAGE>
Net Finance Charge Revenue 334
-----
Total Net Revenues 3,351
-----
Expenses:
Marketing and Promotion 315
Provision for Losses and Claims:
Charge Card 201
Lending 239
Other 22
-----
Total 462
-----
Interest Expense:
Charge Card 213
Other 41
-----
Total 254
Net Discount Expense 139
Human Resources 826
Other Operating Expenses 887
-----
Total Expenses 2,883
-----
Pretax Income 468
Income Tax Provision 140
-----
Operating Income $328
=====
Quarter Ended
-------------
September 30,
1997
----
Net Revenues:
Discount Revenue $1,422
Net Card Fees 399
Travel Commissions and Fees 370
Interest and Dividends 150
Other Revenues 540
Lending:
Finance Charge Revenue 472
Interest Expense 154
-----
Net Finance Charge Revenue 318
-----
Total Net Revenues 3,199
-----
Expenses:
Marketing and Promotion 301
Provision for Losses and Claims:
Charge Card 228
Lending 179
Other 22
-----
Total 429
-----
<PAGE>
Interest Expense:
Charge Card 186
Other 50
-----
Total 236
Net Discount Expense 142
Human Resources 796
Other Operating Expenses 801
-----
Total Expenses 2,705
-----
Pretax Income 494
Income Tax Provision 138
-----
Operating Income $356
=====
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
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
<PAGE>
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
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
<PAGE>
Travel Commissions and Fees 380
Interest and Dividends 156
Other Revenues 483
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 *
=====
</TABLE>
* Excludes restructuring charge of $125 million after-tax
($196 million pretax).
<TABLE>
<CAPTION>
(Preliminary)
Travel Related Services
-----------------------
Statement of Income
-------------------
(Unaudited, Managed Asset Basis)
(Dollars in millions)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Net Revenues:
Discount Revenue $1,530
Net Card Fees 398
<PAGE>
Travel Commissions and Fees 402
Interest and Dividends 132
Other Revenues 499
Lending:
Finance Charge Revenue 574
Interest Expense 186
-----
Net Finance Charge Revenue 388
-----
Total Net Revenues 3,349
-----
Expenses:
Marketing and Promotion 315
Provision for Losses and Claims:
Charge Card 255
Lending 269
Other 22
-----
Total 546
-----
Interest Expense:
Charge Card 266
Other 41
-----
Total 307
Human Resources 826
Other Operating Expenses 887
-----
Total Expenses 2,881
-----
Pretax Income 468
Income Tax Provision 140
-----
Operating Income $328
=====
Quarter Ended
-------------
September 30,
1997
----
Net Revenues:
Discount Revenue $1,422
Net Card Fees 403
Travel Commissions and Fees 370
Interest and Dividends 145
Other Revenues 485
Lending:
Finance Charge Revenue 548
Interest Expense 177
-----
Net Finance Charge Revenue 371
-----
Total Net Revenues 3,196
-----
Expenses:
Marketing and Promotion 264
Provision for Losses and Claims:
<PAGE>
Charge Card 284
Lending 243
Other 22
-----
Total 549
-----
Interest Expense:
Charge Card 242
Other 50
-----
Total 292
Human Resources 796
Other Operating Expenses 801
-----
Total Expenses 2,702
-----
Pretax Income 494
Income Tax Provision 138
-----
Operating Income $356
=====
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
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
<PAGE>
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
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
=====
<PAGE>
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
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 *
=====
</TABLE>
* Excludes restructuring charge of $125 million
after-tax ($196 million pretax).
This Statement of Income is provided on a Managed Asset Basis
for analytical purposes only. It presents the income statement
of TRS as if there had been no securitization transactions.
Under Statement of Financial Accounting Standards No. 125
(SFAS 125), which prescribes the accounting for securitized
loans and receivables, TRS recognized a pretax gain of $37
million in the third quarter of 1997 ($24 million after-tax)
related to securitization of U.S. lending receivables.
This gain was invested in additional Marketing and Promotion
<PAGE>
expenses and had no material impact on net income or total
expenses in the third quarter of 1997. For purposes of this
presentation such gain and a corresponding $37 million increase
in Marketing and Promotion expenses have been eliminated in the
third quarter of 1997.
<TABLE>
<CAPTION>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Total Cards in Force (millions):
United States 29.6
Outside the United States 13.1
----
Total 42.7
====
Basic Cards in Force (millions):
United States 23.3
Outside the United States 10.0
----
Total 33.3
====
Card Billed Business:
United States $40.7
Outside the United States 16.0
-----
Total $56.7
=====
Average Discount Rate* 2.73%
Average Basic Cardmember
Spending (dollars)* $1,731
Average Fee per Card (dollars)* $38
Travel Sales $4.8
Travel Commissions and Fees/Sales** 8.4%
Travelers Cheque:
Sales $5.2
Ending Outstanding $5.6
Average Outstanding $5.7
Ending Investments $5.6
Tax Equivalent Yield 9.2%
Total Debt $26.9
Shareholder's Equity $5.0
Return on Average Equity*** 27.9%
Return on Average Assets*** 3.0%
<PAGE>
Quarter Ended
-------------
September 30,
1997
----
Total Cards in Force (millions):
United States 29.6
Outside the United States 12.8
----
Total 42.4
====
Basic Cards in Force (millions):
United States 23.2
Outside the United States 9.8
----
Total 33.0
====
Card Billed Business:
United States $38.0
Outside the United States 14.7
-----
Total $52.7
=====
Average Discount Rate* 2.72%
Average Basic Cardmember
Spending (dollars)* $1,616
Average Fee per Card (dollars)* $38
Travel Sales $4.2
Travel Commissions and Fees/Sales** 8.8%
Travelers Cheque:
Sales $8.1
Ending Outstanding $6.1
Average Outstanding $6.4
Ending Investments $5.7
Tax Equivalent Yield 9.0%
Total Debt $25.2
Shareholder's Equity $5.3
Return on Average Equity*** 27.4%
Return on Average Assets*** 3.0%
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
====
<PAGE>
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
Ending Outstanding $6.5
Average Outstanding $6.0
Ending Investments $6.0
Tax Equivalent Yield 9.3%
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
Ending Outstanding $5.8
<PAGE>
Average Outstanding $5.8
Ending Investments $5.6
Tax Equivalent Yield 9.3%
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
Ending Outstanding $5.8
Average Outstanding $6.0
Ending Investments $5.6
Tax Equivalent Yield 9.5%
Total Debt $23.4
Shareholder's Equity $4.7
Return on Average Equity*** 25.6%
Return on Average Assets*** 2.8%
</TABLE>
* 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>
<TABLE>
(Preliminary) Travel Related Services
-----------------------
Selected Statistical Information (continued)
--------------------------------------------
(Unaudited)
(Amounts in billions, except percentages and where indicated)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Owned and Managed Charge Card
Receivables:
Total Receivables $23.5
90 Days Past Due as a % of Total 3.1%
Loss Reserves (millions) $951
% of Receivables 4.0%
% of 90 Days Past Due 132%
Net Loss Ratio 0.49%
Owned and Managed U.S. Cardmember
Lending:
Total Loans $14.6
Past Due Loans as a % of Total:
30-89 Days 2.4%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $556
Provision 247
Net Charge-Offs/Other (214)
----
Ending Balance $589
====
% of Loans 4.0%
% of Past Due 116%
Average Loans $13.9
Net Write-Off Rate 6.3%
Net Interest Yield 9.4%
Quarter Ended
-------------
September 30,
1997
----
Owned and Managed Charge Card
Receivables:
Total Receivables $22.5
90 Days Past Due as a % of Total 3.2%
Loss Reserves (millions) $970
% of Receivables 4.3%
% of 90 Days Past Due 133%
Net Loss Ratio 0.52%
<PAGE>
Owned and Managed U.S. Cardmember
Lending:
Total Loans $13.5
Past Due Loans as a % of Total:
30-89 Days 2.5%
90+ Days 1.1%
Loss Reserves (millions):
Beginning Balance $534
Provision 220
Net Charge-Offs/Other (198)
----
Ending Balance $556
====
% of Loans 4.1%
% of Past Due 115%
Average Loans $13.4
Net Write-Off Rate 6.5%
Net Interest Yield 9.4%
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<PAGE>
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%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Revenues:
Investment Income $595 $576 3.4 %
Management and Distribution Fees 404 327 23.4
Other Revenues 203 166 22.6
----- -----
Total Revenues 1,202 1,069 12.5
----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 298 309 (3.8)
Insurance 121 108 12.7
Investment Certificates 53 51 5.1
----- -----
Total 472 468 1.0
Human Resources 321 277 16.1
Other Operating Expenses 150 96 54.8
----- -----
Total Expenses 943 841 12.2
----- -----
Pretax Income 259 228 13.9
Income Tax Provision 76 73 5.0
----- -----
Net Income $183 $155 18.1
===== =====
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Revenues:
Investment Income $2,339 $2,267 3.2 %
Management and Distribution Fees 1,486 1,205 23.3
Other Revenues 774 638 21.3
----- -----
Total Revenues 4,599 4,110 11.9
----- -----
Expenses:
Provision for Losses and Benefits:
Annuities 1,214 1,208 0.5
Insurance 452 420 7.7
Investment Certificates 200 197 1.5
----- -----
Total 1,866 1,825 2.3
<PAGE>
Human Resources 1,229 1,034 18.8
Other Operating Expenses 482 366 31.5
----- -----
Total Expenses 3,577 3,225 10.9
----- -----
Pretax Income 1,022 885 15.5
Income Tax Provision 315 291 8.0
----- -----
Net Income $707 $594 19.1
===== =====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Revenues, Net of Provisions $731 $601 21.5 %
Investments (billions) $30.7 $28.6 7.2
Client Contract Reserves (billions) $30.2 $28.9 4.4
Shareholder's Equity (billions) $3.7 $3.2 16.7
Return on Average Equity* 21.8 % 20.4 % -
Life Insurance in Force (billions) $74.5 $67.3 10.8
Assets Owned and/or Managed
(billions):
Assets managed for institutions $40.8 $37.3 9.4
Assets owned and managed for
individuals:
Owned Assets:
Separate Account Assets 23.2 18.5 25.2
Other Owned Assets 36.6 34.2 7.3
------ ------
Total Owned Assets 59.8 52.7 13.6
Managed Assets 72.8 59.4 22.5
------ ------
Total $173.4 $149.4 16.1
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(389) $735 -
Other Owned Assets $46 $126 (63.5)
Total Managed Assets $(415) $3,264 -
Sales of Selected Products:
Mutual Funds $4,563 $3,686 23.8
<PAGE>
Annuities $795 $1,085 (26.7)
Investment Certificates $423 $233 81.7
Life and Other Insurance Products $115 $131 (12.4)
Number of Financial Advisors 8,776 8,340 5.2
Fees From Financial Plans
(thousands) $16,708 $13,205 26.5
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 65.3 % 64.9 % -
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Revenues, Net of Provisions $2,732 $2,285 19.6 %
Investments (billions) $30.7 $28.6 7.2
Client Contract Reserves (billions) $30.2 $28.9 4.4
Shareholder's Equity (billions) $3.7 $3.2 16.7
Return on Average Equity* 21.8 % 20.4 % -
Life Insurance in Force (billions) $74.5 $67.3 10.8
Assets Owned and/or Managed
(billions):
Assets managed for institutions $40.8 $37.3 9.4
Assets owned and managed for
individuals:
Owned Assets:
Separate Account Assets 23.2 18.5 25.2
Other Owned Assets 36.6 34.2 7.3
------ ------
Total Owned Assets 59.8 52.7 13.6
Managed Assets 72.8 59.4 22.5
------ ------
Total $173.4 $149.4 16.1
====== ======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $3,170 $1,937 63.7
Other Owned Assets $262 $(232) -
Total Managed Assets $11,735 $9,063 29.5
Sales of Selected Products:
Mutual Funds $17,179 $14,331 19.9
Annuities $3,473 $4,311 (19.4)
Investment Certificates $1,194 $736 62.2
Life and Other Insurance Products $421 $449 (6.2)
Number of Financial Advisors 8,776 8,340 5.2
Fees From Financial Plans
(thousands) $60,809 $48,072 26.5
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 65.7% 64.0% -
</TABLE>
* Excluding the effect of SFAS #115.
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Statement of Income
------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Revenues:
Investment Income $595
Management and Distribution Fees 404
Other Revenues 203
-----
Total Revenues 1,202
-----
Expenses:
Provision for Losses and Benefits:
Annuities 298
Insurance 121
Investment Certificates 53
-----
Total 472
Human Resources 321
Other Operating Expenses 150
-----
Total Expenses 943
-----
Pretax Income 259
Income Tax Provision 76
-----
Net Income $183
=====
Quarter Ended
-------------
September 30,
1997
----
Revenues:
Investment Income $587
Management and Distribution Fees 391
Other Revenues 191
-----
Total Revenues 1,169
-----
Expenses:
Provision for Losses and Benefits:
Annuities 307
Insurance 114
Investment Certificates 48
-----
Total 469
<PAGE>
Human Resources 313
Other Operating Expenses 126
-----
Total Expenses 908
-----
Pretax Income 261
Income Tax Provision 77
-----
Net Income $184
=====
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
<PAGE>
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
=====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Preliminary) American Express Financial Advisors
-----------------------------------
Selected Statistical Information
-------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Revenues, Net of Provisions $731
Investments (billions) $30.7
Client Contract Reserves (billions) $30.2
Shareholder's Equity (billions) $3.7
Return on Average Equity* 21.8%
Life Insurance in Force (billions) $74.5
Assets Owned and/or Managed
(billions):
Assets managed for institutions $40.8
Assets owned and managed for
individuals:
Owned Assets:
Separate Account Assets 23.2
Other Owned Assets 36.6
------
Total Owned Assets 59.8
Managed Assets 72.8
------
Total $173.4
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $(389)
Other Owned Assets $46
Total Managed Assets ($415)
Sales of Selected Products:
Mutual Funds $4,563
Annuities $795
Investment Certificates $423
Life and Other Insurance Products $115
Number of Financial Advisors 8,776
Fees From Financial Plans
(thousands) $16,708
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 65.3%
<PAGE>
Quarter Ended
-------------
September 30,
1997
----
Revenues, Net of Provisions $701
Investments (billions) $29.9
Client Contract Reserves (billions) $29.8
Shareholder's Equity (billions) $3.6
Return on Average Equity* 21.6%
Life Insurance in Force (billions) $72.8
Assets Owned and/or Managed
(billions):
Assets managed for institutions $41.0
Assets owned and managed for
individuals:
Owned Assets:
Separate Account Assets 23.2
Other Owned Assets 36.0
------
Total Owned Assets 59.2
Managed Assets 71.5
------
Total $171.7
======
Market Appreciation (Depreciation)
During the Period:
Owned Assets:
Separate Account Assets $1,843
Other Owned Assets $195
Total Managed Assets $5,368
Sales of Selected Products:
Mutual Funds $4,496
Annuities $861
Investment Certificates $295
Life and Other Insurance Products $103
Number of Financial Advisors 8,592
Fees From Financial Plans
(thousands) $15,538
Product Sales Generated from
Financial Plans as a Percentage
of Total Sales 66.5%
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
<PAGE>
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 $8,406
Sales of Selected Products:
Mutual Funds $4,091
Annuities $947
Investment Certificates $285
Life and Other Insurance Products $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
<PAGE>
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 Products $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
<PAGE>
Sales of Selected Products:
Mutual Funds $3,686
Annuities $1,085
Investment Certificates $233
Life and Other Insurance Products $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%
</TABLE>
* Excluding the effect of SFAS #115.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank
---------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
<S> <C> <C> <C>
Net Revenues:
Interest Income $223 $223 -
Interest Expense 148 140 5.8%
---- ----
Net Interest Income 75 83 (9.7)
Commissions, Fees and Other Revenues 54 57 (4.7)
Foreign Exchange Income 38 16 #
---- ----
Total Net Revenues 167 156 7.1
---- ----
Provision for Credit Losses 10 10 (2.0)
---- ----
Expenses:
Human Resources 64 56 14.7
Other Operating Expenses 63 64 (1.7)
---- ----
Total Expenses 127 120 6.0
---- ----
Pretax Income 30 26 15.6
Income Tax Provision 11 9 19.4
---- ----
Net Income $19 $17 13.5
==== ====
<PAGE>
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Net Revenues:
Interest Income $897 $842 6.6%
Interest Expense 579 536 8.2
---- ----
Net Interest Income 318 306 3.8
Commissions, Fees and Other Revenues 218 213 2.4
Foreign Exchange Income 101 72 39.8
---- ----
Total Net Revenues 637 591 7.7
---- ----
Provision for Credit Losses 20 23 (12.1)
---- ----
Expenses:
Human Resources 242 224 7.8
Other Operating Expenses 245 239 2.8
---- ----
Total Expenses 487 463 5.2
---- ----
Pretax Income 130 105 23.0
Income Tax Provision 48 37 28.1
---- ----
Net Income $82 $68 20.2
==== ====
# Denotes variance of more than 100%
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Investments (billions) $2.3 $2.8 (20.1)%
Total Loans (billions) $6.2 $5.9 5.4
Reserve for Credit Losses $131 $117 12.0
Total Nonperforming Loans $47 $35 33.8
Other Real Estate Owned $4 $36 (88.5)
Deposits (billions) $8.5 $8.7 (1.2)
Shareholder's Equity $830 $799 3.9
Return on Average Assets* 0.58% 0.55% -
Return on Average Common Equity* 9.98% 8.89% -
Risk-Based Capital Ratios: -
Tier 1 8.8% 8.8% -
Total 12.3% 12.5% -
Leverage Ratio 5.3% 5.6% -
<PAGE>
Year Ended
December 31,
---------------- Percentage
1997 1996 Inc/(Dec)
------ ------ ----------
Investments (billions) $2.3 $2.8 (20.1)%
Total Loans (billions) $6.2 $5.9 5.4
Reserve for Credit Losses $131 $117 12.0
Total Nonperforming Loans $47 $35 33.8
Other Real Estate Owned $4 $36 (88.5)
Deposits (billions) $8.5 $8.7 (1.2)
Shareholder's Equity $830 $799 3.9
Return on Average Assets* 0.64% 0.57% -
Return on Average Common Equity* 10.83% 9.22% -
Risk-Based Capital Ratios: -
Tier 1 8.8% 8.8% -
Total 12.3% 12.5% -
Leverage Ratio 5.3% 5.6% -
</TABLE>
* Excluding the effect of SFAS #115.
<TABLE>
<CAPTION>
(Preliminary) American Express Bank
---------------------
Statement of Income
-------------------
(Unaudited)
(Dollars in millions)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Net Revenues:
Interest Income $223
Interest Expense 148
----
Net Interest Income 75
Commissions, Fees and Other Revenues 54
Foreign Exchange Income 38
----
Total Net Revenues 167
----
Provision for Credit Losses 10
----
Expenses:
Human Resources 64
Other Operating Expenses 63
----
Total Expenses 127
----
Pretax Income 30
Income Tax Provision 11
----
<PAGE>
Net Income $19
====
Quarter Ended
-------------
September 30,
1997
----
Net Revenues:
Interest Income $230
Interest Expense 148
----
Net Interest Income 82
Commissions, Fees and Other Revenues 57
Foreign Exchange Income 23
----
Total Net Revenues 162
----
Provision for Credit Losses 7
----
Expenses:
Human Resources 60
Other Operating Expenses 61
----
Total Expenses 121
----
Pretax Income 34
Income Tax Provision 13
----
Net Income $21
====
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
<PAGE>
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
----
<PAGE>
Pretax Income 26
Income Tax Provision 9
----
Net Income $17
====
</TABLE>
<TABLE>
<CAPTION>
(Preliminary) American Express Bank
---------------------
Selected Statistical Information
--------------------------------
(Unaudited)
(Dollars in millions, except where indicated)
Quarter Ended
-------------
December 31,
1997
----
<S> <C>
Investments (billions) $2.3
Total Loans (billions) $6.2
Reserve for Credit Losses $131
Total Nonperforming Loans $47
Other Real Estate Owned $4
Deposits (billions) $8.5
Shareholder's Equity $830
Return on Average Assets* 0.58%
Return on Average Common Equity* 9.98%
Risk-Based Capital Ratios:
Tier 1 8.8%
Total 12.3%
Leverage Ratio 5.3%
Quarter Ended
-------------
September 30,
1997
----
Investments (billions) $2.6
Total Loans (billions) $6.5
Reserve for Credit Losses $127
Total Nonperforming Loans $60
Other Real Estate Owned $5
Deposits (billions) $9.0
Shareholder's Equity $819
Return on Average Assets* 0.65%
Return on Average Common Equity* 11.16%
Risk-Based Capital Ratios:
Tier 1 8.6%
Total 11.6%
Leverage Ratio 5.4%
<PAGE>
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%
</TABLE>
* Excluding the effect of SFAS #115.
<PAGE>
<PAGE>
Exhibit 99.2
AMERICAN EXPRESS COMPANY
Fourth Quarter/Full Year 1997
Earnings Conference Call
Summary
[Logo of American Express Company]
The enclosed summary should be read in conjunction with the text and
statistical tables included in American Express Company's (the "Company" or
"AXP") Fourth Quarter 1997 Earnings Release.
This summary includes certain forward-looking statements, each 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>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997
HIGHLIGHTS
. With Primary EPS growth of 15.6% and ROE of 24%, 4Q `97 was the twentieth
consecutive quarter AXP met, or exceeded, its financial targets. Revenue
increased in the quarter by 8.7%, in line with our target of at least 8%.
. Strong performance was recorded in a number of key areas. Compared with the
fourth quarter of 1996:
- Total cards in force increased 3% and basic cards by 4%;
- Worldwide billed business rose 11% (14% for the full year);
- Worldwide lending balances of $15.8B were up 15%, and net interest
yields on the portfolio increased; and
- AEFA assets owned and managed of $173.4B were 16% higher.
. A number of new products and services were offered:
- The Global Network Services Group continued to build momentum through
new card launches from previously announced network partners:
-- Banco Comercial Portuguese introduced Personal and Gold American
Express Small Business Corporate Cards;
-- The Saison American Express Charge Card was launched in Japan;
-- The NatWest American Express Credit Card was introduced in the U.K.;
and
-- The Bital-American Express Corporate Card was launched in Mexico.
- The Platinum Card was introduced in Australia.
- We announced a joint venture, American Express Incentive Solutions LLC,
with Maritz Performance Improvement Company, dedicated to developing
and marketing reward access products (stored value cards and
certificates) and services to businesses in the U.S. and abroad.
- In conjunction with Continental Airlines and Hilton Hotels, another
pilot program was started using Smart Corporate Cards for faster
airport and hotel check-in/check-out.
- Marketing partnerships with 59 of the largest shopping malls across the
U.S. were formed to offer cardmembers special amenities and services.
- We agreed to join JCB, MasterCard and Visa to facilitate the adoption
of the Secure Electronic Transaction (SET) 1.0 protocol over the
internet.
- Tax and Business Services acquired Walpert, Smullain and Blumenthal,
one of Baltimore's largest local CPA firms.
- AXP Canada began test marketing Amex FundSource, a new direct mutual
fund program, to cardmembers in Ontario.
- AEFD announced an alliance with Microsoft in which InvestDirect, our
online brokerage service, is now available through Microsoft Investor.
- AEB's Personal Financial Services Group in France launched "Reponse
Expresse Placement", a new mutual fund service for its clients.
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
CONSOLIDATED
(millions, except per share amounts) Quarter Ended Percentage
December 31, Inc/(Dec)
--------------- ---------------
1997 1996
---- ----
<S> <C> <C> <C>
Consolidated revenues $4,674 $4,301 8.7%
- --------------------- ====== ======
Net income:
- ----------
From operations $493 $433 13.9%
Gain on DECS -- 300 --
Restructuring charge -- (138) --
------ ------
Consolidated $493 $595 (17.1)%
====== ======
EPS:
- ---
Primary- From Operations $1.04 $0.90 15.6%
====== ======
- Consolidated $1.04 $1.23 (15.4)%
====== ======
Basic - From Operations $1.07 $0.92 16.3%
====== ======
- Consolidated $1.07 $1.27 (15.7)%
====== ======
Diluted- From Operations $1.04 $0.89 16.9%
====== ======
- Consolidated $1.04 $1.23 (15.4)%
====== ======
</TABLE>
. CONSOLIDATED REVENUES: Revenues grew 8.7% as the benefits of strong card
spending, greater loan balances and higher managed assets more than offset
declines in card fees and lower interest and dividend revenues.
. CONSOLIDATED EXPENSES: Increased 7.1% due to higher operating, human
resource, and marketing and promotion expenses, as well as greater
provisions for losses and benefits.
. NET INCOME: Net operating income rose 14% compared with 4Q `96. Including
the 4Q `96 $300MM net gain on the exchange of DECS and $138MM net
restructuring charge, consolidated net income was down 17% versus last year.
<TABLE>
<CAPTION>
. Average shares: Millions of Shares
-------------------------
<S> <C> <C> <C>
4Q `97 3Q `97 4Q `96
------ ------ ------
Primary 475.0 477.2 482.1
===== ===== =====
Basic 460.7 463.0 469.2
===== ===== =====
Diluted 475.1 477.9 483.5
===== ===== =====
- ACTUAL SHARE ACTIVITY:
Shares outstanding - beginning of
period 465.8 468.9 473.5
Repurchase of common shares (4.2) (3.8) (2.8)
Lehman preferred stock exchange 4.4 -- --
Employee benefit plans,
compensation and other 0.4 0.7 2.2
----- ----- -----
Shares outstanding - end of period 466.4 465.8 472.9
===== ===== =====
</TABLE>
- 77.6MM shares have been acquired under authorizations totaling 100MM
shares since the inception of repurchase programs in September, 1994.
- On 12/16/97 Nippon Life exercised its right to exchange the 70% of
Lehman Brothers Cumulative Voting Preferred Stock Series B that it held
in return for AXP common shares. AXP granted Nippon Life the right to
exchange the Lehman Preferred stock into AXP shares at $81.46 per share
in 1990 when AXP repurchased the outstanding common shares of Shearson
Lehman. The shares issued by AXP are being offset by the Company's
ongoing share repurchase program. This exchange did not result in any
gain or loss.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed asset basis)
Quarter Ended Percentage
(millions) December 31, Inc/(Dec)
--------------- ---------------
1997 1996
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $1,530 $1,380 11%
Net card fees 398 415 (4)
Travel commissions and fees 402 380 6
Interest and dividends 132 156 (15)
Other revenues 499 450 11
Lending:
Finance charge revenue 574 463 24
Interest expense 186 150 24
----- -----
Net finance charge revenue 388 313 24
----- -----
Total net revenues 3,349 3,094 8
----- -----
Expenses:
Marketing and promotion 315 268 17
Provision for losses and claims:
Charge card 255 199 28
Lending 269 235 15
Other 22 22 (1)
----- -----
Total 546 456 20
----- -----
Interest expense:
Charge card 266 234 14
Other 41 65 (38)
----- -----
Total 307 299 3
----- -----
Human resources 826 794 4
Other operating expenses 887 874 2
----- -----
Total expenses 2,881 2,691 7
----- -----
Pretax income 468 403 16
Income tax provision 140 104 34
----- -----
Operating income $328 $299 10
===== =====
</TABLE>
. Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding and wider interest margins. 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.
. The tax rate of 30% in 4Q `97 compared with 28% in 3Q `97 and 26% in 4Q
`96.
. 1996 results reflect a $44MM 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 have been 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.
. 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 are calculated excluding 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 owned card operations. All 1996
calculations have been restated to reflect this change.
3
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. DISCOUNT REVENUE: Higher billed business and a slightly higher discount
rate resulted in a 11% increase in discount revenue.
- The AVERAGE DISCOUNT rate of 2.73% in 4Q `97 was up 1BP versus 2.72% in
4Q `96 and in 3Q `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 gas stations, the continued shift to electronic data capture,
volume related pricing discounts, and selective repricing initiatives
will probably result in some rate erosion over time.*
<TABLE>
<CAPTION>
Quarter Ended Percentage
December 31, Inc/(Dec)
-------------- --------------
1997 1996
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $40.7 $36.2 13%
Outside the United States 16.0 14.9 7
----- -----
Total $56.7 $51.1 11
===== =====
Cards in force (millions):
United States 29.6 29.2 1%
Outside the United States 13.1 12.3 6
----- -----
Total 42.7 41.5 3
===== =====
Basic cards in force (millions):
United States 23.3 22.5 3%
Outside the United States 10.0 9.6 5
----- -----
Total 33.3 32.1 4
===== =====
Spending per basic card
in force (dollars) (a):
United States $1,753 $1,633 7%
Outside the United States $1,675 $1,631 3
Total $1,731 $1,633 6
</TABLE>
(a) Proprietary card activity only.
- BILLED BUSINESS: Higher spending per basic cardmember worldwide (due in
part to expanded merchant coverage and the benefits of rewards
programs) and greater cards in force resulted in a 11% increase in
billed business.
--Spending per basic card in force grew 6% despite the suppressing
effect of two items:
- First, we have added a substantial number of new, credit
card-related, basic relationships which have not reached the
spending levels of our more mature products,
- Second, we now have customers with multiple basic card
relationships, e.g., Green Card, plus Optima, Corporate, Delta,
Hilton, Sheraton or Golf Card. This broadening is consistent with
AXP's strategy of capturing a larger portion of household
spending but dilutes the average spending per basic card.
--Excluding foreign exchange translation, billed business outside the
U.S. grew 16% versus the reported 7%, reflecting strong double digit
growth in Europe, Latin America and Canada, and high single digit
growth in the Asia/Pacific region. Network partnership volumes also
maintained their particularly strong growth trend.
--The retail and airline categories continued to be strong components
of worldwide business, despite relatively slower retail related
growth in 4Q `97 versus full year 1997.
- Success in building new card relationships through our expanded product
portfolio was evident in the increase of 3% in cards in force and 4% in
basic cards in force. The slower U.S. growth rates versus recent
quarters reflects:
--The 3Q `97 decision by AXP and Salomon Smith Barney (SSB) to cease
providing AXP cards as part of SSB's FMA account relationships,
--The cancellation by AXP during 1997 of certain poorly performing
credit card accounts in conjunction with the institution of an
ongoing, focused account profitability review program, and
--Reduced U.S. consumer card acquisition activities reflecting our
relative shift in strategy toward further penetrating existing
relationships.
4
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. NET CARD FEES: Lower card fees resulted from a continuing decline in
consumer charge cards and the effect of AXP's strategy of building its
lending portfolio through the issuance of low- and no-fee credit cards.
- The average fee per card in force was $38 in 4Q `97 versus $41 in 4Q `96.
. TRAVEL COMMISSIONS AND FEES: Travel revenues were up 6% on 12% growth in
sales. The declining revenue earned per dollar of sales (8.4% in 4Q `97
versus 8.8% in 4Q `96) reflects continued efforts by airlines to reduce
distribution costs and by large corporate clients to contain travel and
entertainment expenses.
. INTEREST AND DIVIDENDS: The 15% decrease reflects a reduced investment pool
at American Express Credit Corporation and a lower yield on a reduced
Travelers Cheque investment portfolio.
. OTHER REVENUES: The 11% 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 15% growth in worldwide lending balances to
$15.8B, coupled with higher net interest yields on the U.S. portfolio (9.4%
in 4Q `97 versus 8.6% in 4Q `96), led to a 24% increase.
- The higher yield compared with 4Q `96 was due to changes in the product
mix and a lower 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 12/31/96 balance, U.S. cardmember loan
growth was 17% versus the reported 14%.
. MARKETING AND PROMOTION EXPENSES: The 17% increase reflects stepped up
media advertising and promotional activities, higher merchant-related
cooperative advertising costs, and greater Small Business Services card and
balance acquisition efforts. These increases were partially offset by less
aggressive consumer card and balance acquisition activities and lower costs
for new product launches.
. CHARGE CARD INTEREST EXPENSE: Higher billed business volumes versus last
year were partially offset by a lower worldwide cost of funds (down 8BP).
. OTHER INTEREST EXPENSE: This decline mirrors the decrease in "Interest
Revenue" relating to the lower investment pool at American Express Credit
Corporation.
. HUMAN RESOURCE EXPENSES: The increase versus last year includes the effect
of higher average 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 at 12/31/97 of approximately 60,200 was up 60 versus
last year due to business growth and global technology initiatives,
which were offset by the November sale of Epsilon (approximately 800
employees) and staff reductions from the implementation of 4Q `96
restructuring charge activities.
. OTHER OPERATING EXPENSES: Higher costs for loyalty programs and cardmember
service related volume were mitigated by the benefits of ongoing cost
containment efforts.
5
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. CREDIT QUALITY:
- Management remains focused on credit quality. In light of the ongoing
difficult industry-wide environment, we continue to manage our
exposures cautiously and conservatively.
- The provision for losses on charge card products increased 28% versus
last year reflecting volume growth and a relatively low provision rate
in 4Q `96.
- The lending provision for losses increased 15% 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 were flat versus 4Q `96 and 3Q `97, and the write-off
rate was slightly lower compared with both periods.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12/97 9/97 12/96
------ ------ -----
Write-offs, net of recoveries 0.49% 0.52% 0.51%
Past due as a % of receivables 3.1% 3.2% 3.2%
--Reserves remained strong.
12/97 9/97 12/96
------ ------ -----
Reserves (MM) $951 $970 $923
% of receivables 4.0% 4.3% 4.1%
% of past due accounts 132% 133% 128%
</TABLE>
- U.S. LENDING:
--The write-off rate increased from the 4Q `96 level as bankruptcies
rose and loans from more recent product offerings aged; however, it
declined slightly from 3Q `97. The past due rate was up from 4Q `96
but even with 3Q `97.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12/97 9/97 12/96
------ ------ -----
Write-offs, net of recoveries 6.3% 6.5% 5.2%
Past due as a % of loans 3.5% 3.6% 3.3%
</TABLE>
--Cardmember lending reserves increased as provisions more than covered
charge-offs during the quarter.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12/97 9/97 12/96
------ ------ -----
Reserves (MM) $589 $556 $488
% of total loans 4.0% 4.1% 3.8%
% of past due accounts 116% 115% 117%
</TABLE>
- AXP coverage ratios continue to compare favorably with key industry
competitors.
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
December 31, Inc/(Dec)
-------------- ---------------
1997 1996
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $595 $576 3%
Management and distribution fees 404 327 23
Other revenues 203 166 23
----- -----
Total revenues 1,202 1,069 13
----- -----
Expenses:
Provision for losses and benefits:
Annuities 298 309 (4)
Insurance 121 108 13
Investment certificates 53 51 5
----- -----
Total 472 468 1
Human resources 321 277 16
Other operating expenses 150 96 55
----- -----
Total expenses 943 841 12
----- -----
Pretax income 259 228 14
Income tax provision 76 73 5
----- -----
Net income $183 $155 18
===== =====
</TABLE>
. 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 13% was suppressed by continued low
investment income growth due to moderately higher investment yields on
a slowly expanding owned investment asset pool.
-- These results are consistent with the multi-year shift in the mix of
sales from fixed to variable return products.
-- Revenue growth, net of provisions, was very strong at 22% over last
year.
- ASSETS OWNED AND/OR MANAGED:
<TABLE>
<CAPTION>
Percentage
(billions) December 31, Inc/(Dec)
--------------- -------------
1997 1996
---- ----
<S> <C> <C> <C>
Assets owned (excluding
separate accounts) $36.6 $34.2 7%
Separate account assets 23.2 18.5 25
Assets managed 113.6 96.7 17
------ ------
Total $173.4 $149.4 16
====== ======
</TABLE>
. These revenue improvements were partially offset by higher
compensation-related and other operating expenses.
. The effective tax rate was 30% compared with 32% in 4Q `96 and 30% in 3Q
`97. The decrease versus 4Q `96 reflects, in part, the realization during
1997 of tax credits from low income housing investments which should
continue to provide benefits in future quarters.*
. INVESTMENT INCOME:
- The average yield was 7.8% versus 7.6% in 4Q `96.
- Average invested assets of $30.3B were up 6% versus $28.7B in 4Q `96.
- Spreads on annuities were up from last year, but those for insurance
were flat and certificates were down. Compared with 3Q `97, spreads on
insurance and annuities were higher; those for certificates fell.
7
<PAGE>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
- ASSET QUALITY remains strong.
-- The level of non-performing assets remained low at only 0.2% of
invested assets, flat with last year. Reserve coverage was 109%.
-- The SFAS 115 related mark-to-market adjustment on the portfolio
(reported in assets pre-tax) was a positive $492MM at 12/97,
reflecting appreciation during 4Q `97 of $46MM. As of 12/96, the
mark-to-market adjustment for appreciation was $230MM.
-- Unrealized appreciation on investments held to maturity was $652MM
compared with $427MM at 12/96 and $547MM at 9/97.
. MANAGEMENT AND DISTRIBUTION FEES: The increase of 23% was due to higher
average assets under management (including separate account assets) and
distribution fees from greater mutual fund asset and sales levels.
<TABLE>
<CAPTION>
- ASSETS MANAGED:
Percentage
(billions) December 31, Inc/(Dec)
--------------- --------------
1997 1996
------ ------
<S> <C> <C> <C>
Assets managed for individuals $72.8 $59.4 23%
Assets managed for institutions 40.8 37.3 9
Separate account assets 23.2 18.5 25
------ ------
Total $136.8 $115.2 19
====== ======
</TABLE>
--The growth in managed assets since 4Q `96 resulted from $14.9B of
market appreciation and $6.7B of net new money.
- During 4Q `97, $1.9B of net new managed assets were added, but
market depreciation was $0.8B.
- PRODUCT SALES:
--Mutual fund sales continue at record levels, increasing 24%, as equity
and money market funds recorded strong double-digit growth versus
comparably slower growth in bond funds. Within the three pricing
categories, no- and front-load funds posted strong increases, while
rear-loads had high single-digit growth.
- At approximately 50% of the industry average, redemption rates
continued to compare favorably with the competition.
--Overall, annuity sales were down by 27%, and insurance product sales
decreased 12%.
--Certificate sales were up 82% primarily due to a product
promotion which ended in late November. --Product sales generated
through plans were 65% of total sales in 4Q `97 and 4Q `96, compared
with 67% in 3Q `97.
. OTHER REVENUES: Growth of 23% resulted from higher life and personal
property/casualty insurance premiums and financial planning and tax
preparation fees.
- Life insurance and personal property/casualty insurance
premiums each rose 14% versus 4Q '96.
- Financial Planning fees of $16.7MM were up 27% versus 4Q `96.
- Tax preparation fees more than tripled reflecting acquisitions and
business growth.
. PROVISIONS FOR LOSSES AND BENEFITS: Annuity provisions were down as greater
inforce levels were more than offset by lower accrual rates. Certificate
provisions were up from higher inforce levels and accrual rates. Insurance
provisions increased from unfavorable claims experience in the life
insurance business lines, as well as a larger inforce level.
. HUMAN RESOURCES: Greater field force compensation-related expenses from
growth in sales and asset levels and higher average full-time equivalent
employees (+16%), primarily within the technology and client services
organizations and from recent tax/accounting firm acquisitions, caused
costs to rise.
- ADVISOR FORCE: 8,776 at 12/97; +436 advisors, or 5%, versus 12/96; +184
advisors versus 9/97.
-- Reflecting the consistently large number of advisors in the pipeline,
the advisor count increased during 4Q `97 despite the departure of
approximately 100 advisors in the Detroit region during the quarter.
-- The veteran advisor retention rates remain at record levels.
-- Advisor productivity continued strong for the quarter; the number of
clients and accounts per client were up 7% and 5%, respectively,
versus 4Q `96.
. OTHER OPERATING EXPENSES: The 55% increase reflects higher costs related to
the outsourcing of data processing support services, increased usage of
contract programmers for technology-oriented initiatives, expanded
advertising activities and higher occupancy and equipment costs, partially
from acquisitions.
8
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FOURTH QUARTER 1997 OVERVIEW
AMERICAN EXPRESS BANK
(preliminary) Statement of Income
(unaudited)
(millions) Quarter Ended Percentage
December 31, Inc/(Dec)
------------- -------------
1997 1996
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $223 $223 --
Interest expense 148 140 6%
---- ----
Net interest income 75 83 (10)
Commissions, fees and
other revenues 54 57 (5)
Foreign exchange income 38 16 135
---- ----
Total net revenues 167 156 7
---- ----
Provision for credit losses 10 10 (2)
---- ----
Expenses:
Human resources 64 56 15
Other operating expenses 63 64 (2)
---- ----
Total expenses 127 120 6
---- ----
Pretax income 30 26 16
Income tax provision 11 9 19
---- ----
Net income $19 $17 14
==== ====
</TABLE>
. The 7% revenue improvement included very strong foreign exchange income,
which was partially offset by lower net interest income reflecting reduced
investment levels and higher funding costs.
. Operating expenses increased on greater systems technology spending and
higher management incentive compensation.
. The tax rate of 37% was up from 36% in 4Q `96.
. Total assets were $12.9B at 12/97 compared with $12.3B at 12/96. Loans
increased 5% to $6.2B, while investments of $2.3B declined 20% versus 4Q
`96.
- Non-performing loans of $47MM rose from 4Q `96 but decreased $13MM from
3Q `97. The reserve for credit losses was up versus last year and 3Q `97,
and covered non-performing loans by 2.8 times.
- Other real estate owned of $4MM was down from last year and flat with 3Q
`97.
- 8.8% Tier 1 and 12.3% total capital ratios were maintained in the "well
capitalized" range.
FOURTH QUARTER 1997 OVERVIEW
CORPORATE AND OTHER
. The net operating expense of $37MM was consistent with $38MM in 4Q `96 and
recent quarterly levels.
- Pretax revenues of $70MM and $56MM were recorded in 4Q `97 and 4Q `96,
respectively, from the earnings payouts related to the sale of Shearson
to Travelers. These were fully offset by costs associated with AXP
initiatives such as global systems development, Financial Direct and
interactive customer services in both periods.
. The 4Q `96 operating expense excludes the $300MM net gain from the DECS
settlement and a $13MM net charge, primarily for the early retirement of
high coupon debt. Including these non-operating items, Corporate and Other
had 4Q `96 net income of $249MM versus the net operating expense of $38MM.
9
<PAGE>
<TABLE>
<CAPTION>
FULL YEAR 1997 OVERVIEW
CONSOLIDATED
(millions, except per share amounts)
Year Ended Percentage
December 31, Inc/(Dec)
-------------------- ---------------
1997 1996
---- ----
<S> <C> <C> <C>
Consolidated revenues $17,760 $16,380 8.4%
- --------------------- ======= =======
Net income:
From operations $1,991 $1,739 14.5%
Gain on DECs -- 300 --
Restructuring charge -- (138) --
------- -------
Consolidated $1,991 $1,901 4.7
======= =======
EPS:
- ----
Primary- From Operations $4.16 $3.57 16.5%
======= =======
- Consolidated $4.16 $3.90 6.7%
======= =======
Basic - From Operations $4.29 $3.67 16.9%
======= =======
- Consolidated $4.29 $4.02 6.7%
======= =======
Diluted- From Operations $4.15 $3.56 16.6%
======= =======
- Consolidated $4.15 $3.89 6.7%
======= =======
</TABLE>
. CONSOLIDATED REVENUES:
- Revenues grew 8.4% reflecting the benefits of strong card spending,
greater loan balances and higher managed assets.
- The elimination of asset gross-ups at Centurion Bank negatively
impacted year over year interest and dividend revenue comparisons by
$82MM. Excluding this and the effect of securitizing a portion of the
cardmember receivable and lending portfolios, revenue increased 9%.
. CONSOLIDATED EXPENSES: Increased 7.4% due to higher provisions for credit
losses, and marketing and promotion, human resource and operating expenses.
. NET INCOME: Net operating income rose 14.5% compared with 1996. Including
the 4Q `96 $300MM net gain on the exchange of DECS and $138MM net
restructuring charge, consolidated net income was up 4.7% versus last year.
. AVERAGE SHARES:
<TABLE>
<CAPTION>
Millions of
Shares
-------------------------
<S> <C> <C>
1997 1996
---- ----
Primary 478.5 485.6
===== =====
Basic 464.2 472.2
===== =====
Diluted 479.2 488.3
===== =====
- Actual share activity:
Shares outstanding-
beginning of period 472.9 483.1
Repurchase of common shares (17.0) (22.2)
Lehman preferred stock exchange 4.4 --
Employee benefit plans,
compensation and other 6.1 12.0
----- -----
Shares outstanding-
end of period 466.4 472.9
===== =====
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1997 OVERVIEW
TRAVEL RELATED SERVICES
(preliminary) Statement of Income
(unaudited, managed asset basis)
Year Ended Percentage
(millions) December 31, Inc/(Dec)
--------------- ---------------
1997 1996
---- ----
<S> <C> <C> <C>
Net revenues:
Discount revenue $5,666 $5,024 13%
Net card fees 1,609 1,664 (3)
Travel commissions and fees 1,489 1,422 5
Interest and dividends 552 724 (24)
Other revenues 1,903 1,714 11
Lending:
Finance charge revenue 2,105 1,691 24
Interest expense 694 548 26
------- -------
Net finance charge revenue 1,411 1,143 24
------- -------
Total net revenues 12,630 11,691 8
------- -------
Expenses:
Marketing and promotion 1,025 998 3
Provision for losses and claims:
Charge card 1,105 989 12
Lending 937 678 38
Other 88 101 (12)
------- -------
Total 2,130 1,768 21
------- -------
Interest expense:
Charge card 973 871 12
Other 177 347 (49)
------- -------
Total 1,150 1,218 (6)
------- -------
Human resources 3,154 2,984 6
Other operating expenses 3,266 3,004 9
------- -------
Total expenses 10,725 9,972 8
------- -------
Pretax income 1,905 1,719 11
Income tax provision 551 489 13
------- -------
Operating income $1,354 $1,230 10
======= =======
</TABLE>
. Revenues benefited from higher worldwide billed business, growth in
cardmember loans outstanding and wider interest margins. 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.
. Excluding the effect of the asset gross-ups at Centurion Bank, revenues
rose 9%.
. Under Statement of Financial Accounting Standards No. 125 (SFAS 125), which
prescribes the accounting for securitized loans and receivables, TRS
recognized a pre-tax gain of $37MM ($24MM after-tax) in 3Q `97 related to
securitization of U.S. lending receivables. This gain was invested in
additional Marketing and Promotion expenses and therefore had no material
impact on net income. For purposes of the above "managed asset basis"
Statement of Income, which presents TRS' results as if there had been no
securitizations, such gain (reported as a reduction in the Lending
Provision for Losses on the GAAP Statement of Income) and corresponding
$37MM increase in Marketing and Promotion expenses have been eliminated.
. The tax rate of 29% in 1997 was consistent with 28% in 1996.
. Operating income of $1,354MM in 1997 was 10% above 1996. Net income rose
23% versus last year after including the 4Q `96 restructuring charge of
$125MM after-tax.
. 1996 results reflect a $143MM 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 have been 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.
11
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. DISCOUNT REVENUE: Higher billed business resulted in a 13% increase in
discount revenue, notwithstanding a slightly lower discount rate.
- The average discount rate of 2.73% in 1997 was down 2BP from 2.75% in
1996.
<TABLE>
<CAPTION>
Year Ended Percentage
December 31, Inc/(Dec)
----------------- -----------
1997 1996
---- ----
<S> <C> <C> <C>
Card billed business (billions):
United States $150.5 $131.0 15%
Outside the United States 58.7 53.3 10
------ ------
Total $209.2 $184.3 14
====== ======
Spending per basic card in force (dollars) (a):
United States $6,568 $6,149 7%
Outside the United States $6,233 $5,893 6
Total $6,473 $6,074 7
</TABLE>
(a) Proprietary card activity only.
- - Billed Business: Higher spending per basic cardmember worldwide (due in
part to expanded merchant coverage and the benefits of rewards programs)
and greater cards in force resulted in a 14% increase in billed
business.
--7% growth in spending per basic card in force was suppressed by two items:
- First, the addition of a substantial number of new, credit
card-related, basic relationships which have not reached the
spending levels of our more mature products,
- Second, we now have customers with multiple basic card
relationships, e.g., Green Card, plus Optima, Corporate, Delta,
Hilton, Sheraton or Golf Card. This broadening is consistent with
AXP's strategy of capturing a larger portion of household spending
but dilutes the average spending per basic card.
--Excluding foreign exchange translation, billed business outside the
U.S. grew 16% versus the reported 10%, reflecting strong double digit
growth in Latin America, Europe, Canada and the Asia/Pacific region.
--The retail and airline categories were strong contributors to
worldwide business growth throughout the year.
. NET CARD FEES: Lower card fees resulted from a continuing decline in
consumer charge cards and the effect of AXP's strategy of building its
lending portfolio through the issuance of low- and no-fee credit cards.
-The average fee per card in force was $39 in 1997 versus $42 in 1996.
. TRAVEL COMMISSIONS AND FEES: Travel revenues were up 5% on 10% growth in
sales. The declining revenue earned per dollar of sales (8.6% in 1997
versus 9.0% in 1996) reflects continued efforts by airlines to reduce
distribution costs and by large corporate clients to contain travel and
entertainment expenses.
. INTEREST AND DIVIDENDS: Approximately half of the 24% decline 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 July 1996. The remaining decrease reflects a reduced investment
pool at American Express Credit Corporation and a lower yield on a reduced
Travelers Cheque investment portfolio. - 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 $82MM in 1997.
. OTHER REVENUES: The 11% improvement 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 15% growth in worldwide lending balances
coupled with higher net interest yields on the U.S. portfolio (9.1% in
1997 versus 8.8% in 1996), led to a 24% increase.
- The higher yield was due to changes in product mix and a lower
proportion of the portfolio on introductory-rates in 1997.
12
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1997 OVERVIEW
TRAVEL RELATED SERVICES (Cont'd)
. MARKETING AND PROMOTION EXPENSES: The 3% growth versus 1996 reflects
higher media and merchant-related advertising costs, partially offset by
less aggressive U.S. consumer card acquisition efforts and lower costs for
new product launches.
. CHARGE CARD INTEREST EXPENSE: Higher billed business volumes versus last
year were partially offset by a lower worldwide cost of funds (down 30BP).
. OTHER INTEREST EXPENSE: The 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 Corp.
. HUMAN RESOURCE EXPENSES: The increase versus last year includes the effect
of higher average employee levels, 2Q `97 merit increases and greater
contract programmer costs for technology related projects such as
interactive services and customized cardmember rewards.
. OTHER OPERATING EXPENSES: Higher costs for loyalty programs and cardmember
service related volume were mitigated by the benefits of ongoing cost
containment efforts.
. CREDIT QUALITY:
-The provision for losses on charge card products increased 12% versus
last year primarily reflecting volume growth.
-Cardmember lending provisions increased 38% reflecting 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:
--Net write-offs declined slightly and past due account levels were flat
versus last year.
<TABLE>
<CAPTION>
<S> <C> <C>
12/97 12/96
------- ------
Write-offs, net of recoveries 0.50% 0.51%
Past Due as a % of Receivables 3.1% 3.2%
--Reserves remained strong.
12/97 12/96
------- ------
Reserves (MM) $951 $923
% of Receivables 4.0% 4.1%
% of Past Due Accounts 132% 128%
--U.S. LENDING:
--The net write-off rate for 1997 was up reflecting
a higher level of bankruptcies and the aging of
loans from more recent product offerings. Past due
account levels also rose somewhat.
12/97 12/96
------- ------
U.S. write-offs, net of recoveries 6.0% 5.2%
Past Due as a % of Loans 3.5% 3.3%
--Cardmember lending reserves increased as provisions
more than covered charge-offs.
12/97 12/96
------- ------
Reserves (MM) $589 $488
% of Total Loans 4.0% 3.8%
% of Past Due Accounts 116% 117%
</TABLE>
- AXP coverage ratios continue to compare favorably with key industry
competitors.
13
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS
(preliminary) Statement of Income
(unaudited)
(millions) Year Ended Percentage
December 31, Inc/(Dec)
--------------- ----------------
1997 1996
---- ----
<S> <C> <C> <C>
Revenues:
Investment income $2,339 $2,267 3%
Management and distribution fees 1,486 1,205 23
Other revenues 774 638 21
------ ------
Total revenues 4,599 4,110 12
------ ------
Expenses:
Provision for losses and benefits:
Annuities 1,214 1,208 1
Insurance 452 420 8
Investment certificates 200 197 1
------ ------
Total 1,866 1,825 2
Human resources 1,229 1,034 19
Other operating expenses 482 366 32
------ ------
Total expenses 3,577 3,225 11
------ ------
Pretax income 1,022 885 15
Income tax provision 315 291 8
------ ------
Net income $707 $594 19
====== ======
</TABLE>
. Revenue and earnings growth reflect increased management fees related to
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 was somewhat suppressed by slower growth in
investment income due to flat investment yields on a slowly expanding
owned investment asset pool.
-- Revenue growth, net of provisions, was strong at +20% versus last year.
. These revenue improvements were partially offset by higher operating and
compensation-related expenses.
. The effective tax rate was 31% compared with 33% in 1996.
. INVESTMENT INCOME:
-The average yield of 7.8% was flat with last year.
-Average invested assets of $29.6B rose 4% versus $28.5B in 1996.
-Overall, annuity and certificate spreads were up versus last year, but
insurance spreads were down.
14
<PAGE>
AMERICAN EXPRESS COMPANY
FULL YEAR 1997 OVERVIEW
AMERICAN EXPRESS FINANCIAL ADVISORS (Cont'd)
. MANAGEMENT AND DISTRIBUTION FEES: The increase of 23% was due to higher
average assets under management (including separate account assets) and
distribution fees from greater mutual fund and variable annuity asset and
sales levels.
- Product Sales:
-- Mutual funds were up 20%, reflecting strong equity, money market and
fixed income fund in-flows. Within the three fund load categories,
front- and no-loads were much stronger than rear-loads.
-- Sales of annuity and insurance products were down 19% and 6%,
respectively.
-- Certificate sales were up 62%.
-- Product sales generated through plans was 66% of total sales vs.
64% last year.
. OTHER REVENUES: Growth of 21% resulted from higher life insurance premiums
and financial planning and tax preparation fees.
- Life insurance premiums rose 13% versus last year.
- Financial Planning fees of $61MM were up 26% from 1996.
- Tax preparation fees nearly tripled reflecting acquisitions and business
growth.
. PROVISIONS FOR LOSSES AND BENEFITS: Annuity and certificate product
provisions were flat with last year as higher inforce levels were offset by
lower accrual rates. Insurance provisions increased from unfavorable claims
experience in the life insurance business lines, as well as a larger in
force level.
. HUMAN RESOURCES: Greater field force compensation-related expenses from
growth in sales and asset levels, as well as higher average full-time
equivalent employees (+18%) primarily within the technology and client
services organizations and from recent tax/accounting firm acquisitions,
caused costs to rise.
. OTHER OPERATING EXPENSES: The 32% increase reflects higher costs related to
the outsourcing of data processing support services, increased usage of
contract programmers for technology-oriented initiatives, expanded
advertising activities and higher occupancy and equipment costs, partially
from acquisitions.
Also impacting the expense comparison is a loss from 1997 hedging
activities designed to reduce the effect of stock market volatility on
management fee revenues.
15
<PAGE>
<TABLE>
<CAPTION>
AMERICAN EXPRESS COMPANY
FULL YEAR 1997 OVERVIEW
AMERICAN EXPRESS BANK
(preliminary) Statement of Income
(unaudited)
(millions) Year Ended Percentage
December 31, Inc/(Dec)
------------- ------------
1997 1996
---- ----
<S> <C> <C> <C>
Net revenues:
Interest income $897 $842 7%
Interest expense 579 536 8
---- ----
Net interest income 318 306 4
Commissions, fees and
other revenues 218 213 2
Foreign exchange income 101 72 40
---- ----
Total net revenues 637 591 8
---- ----
Provision for credit losses 20 23 (12)
---- ----
Expenses:
Human resources 242 224 8
Other operating expenses 245 239 3
---- ----
Total expenses 487 463 5
---- ----
Pretax income 130 105 23
Income tax provision 48 37 28
---- ----
Net income $82 $68 20
==== ====
</TABLE>
. The revenue improvement reflected strong foreign exchange results and
higher net interest income on greater loans.
. In 1997, pretax margins improved as 8% growth in revenues exceeded 5%
growth in expenses and provisions.
. The effective tax rate of 37% compared with 36% in 1996.
FULL YEAR 1997 OVERVIEW
CORPORATE AND OTHER
. Net operating expenses of $152MM for the year were consistent with $153MM in
1996.
- 1997 includes a $70MM pretax benefit due to an earnings payout from
Travelers (related to the Shearson sale) and a $7MM pretax benefit from
an earnings payout by Lehman (related to AXP 1994 spin-off). Both were
fully offset by costs associated with AXP business initiatives such as
global systems development, Financial Direct and interactive customer
services.
- 1996 included a $102MM pretax benefit from revenue and earnings payouts
by Travelers (related to Shearson sale) which was also fully offset by
costs associated with AXP business initiatives. 1996 was the last year
AXP was eligible to receive the revenue payout.
- The 1996 operating expense excludes the $300MM net gain from the DECS
settlement and the $13MM net charge. Including these non-operating
items, Corporate and Other had net income of $134MM in 1996.
16
<PAGE>
