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American Express Company Financial Community Meeting
Kenneth ChenaultChairman and Chief Executive Officer
Dan SchulmanGroup President, Enterprise Growth
August 3, 2011
■ Financial Performance
■ AXP: A Digital Evolution
– Digital Relevance in Core Businesses
– Enterprise Growth Strategy and Progress
■ Q & A
2
Agenda
Financial Performance
*Net income, including results from discontinued operations, was $885MM in Q1’10 (up 103%), $1,017MM in Q2’10 (an increase of 202%), $1,093MM in Q3’10 (up 71%), $1,062MM in Q4’10 (up 48%), $1,177MM in Q1’11 (an increase of 33%) and 1,331MM in Q2’11 (up 31%). **Q4’10 results include a $113MM ($74MM after-tax) charge related to reengineering costs. Excluding this charge, Q4’10 EPS would have been $0.94. ***Attributable to common shareholders. Excludes preferred share dividends and earnings allocated to participating share awards. Diluted EPS on a net income basis was $0.73 in Q1’10, $0.84 in Q2’10, $0.90 in Q3’10, $0.88 in Q4’10, $0.97 inQ1’11 and $1.10 in Q2’11. †See Annex 1 for a reconciliation to GAAP basis.
Total Revenues Net of Interest Expense
Income from Continuing Operations*
Growth vs. Prior Year
Growth vs. Prior Year
($ in billions)
Return on Average Common Equity
11%
$6.6
100%
$0.9
17%
Q3'10Q2'10Q1'10
Diluted EPS from Continuing Ops***
3
Growth vs. Prior Year (Managed) (1%)†
12%
$6.8
197%
$1.0
23%
(1%)
17%
$7.0
70%
$1.1
26%
5%
$0.73 $0.84 $0.90
Q4'10
13%
$7.2
50%
$1.1
27%
4%
$0.88**
Q1'11
7%
$7.0
33%
$1.2
28%
$0.97
Q2'11
12%
$7.6
27%
$1.3
28%
$1.07
Metric Trends
Mgd. Cardmember Loans****
Credit Performance
Avg. Basic Cardmember Spending***
Total Cards In Force**
*Card billed business includes activities (including cash advances) related to proprietary cards, cards issued under network partnership agreements (non-proprietary billed business), and certain insurance fees charged on proprietary cards. ** Q3’10 cards-in-force (CIF) was reduced by 1.6MM cards due to a change in the definition of CIF for certain retail co-brand cards in GNS. Adjusted for this change, CIF would have increased YoY2%, 5%, 7% and 8% in Q3’10, Q4’10, Q1’11 and Q2’11, respectively.***Computed from proprietary card activities only.****Managed basis includes non-securitized and securitized loans. On a GAAP basis, loan growth increased/(decreased) by 57% in Q1’10, 76% in Q2’10 , 82% in Q3’10 and by 86% in Q4’10.
Billed Business*
% increase/(decrease) vs. prior year:
4
(4%)
(11%)
Q1'10
16%
23%
(9%)
Q2'10
16%
21%
0%
(6%)
Q3'10
14%
15%
1%
(1%)
Q4'10
15%
13%
4%
Q1'11
17%
14%
5%
0%
Q2'11
18%
15%
6%
2%
% increase/(decrease) vs. prior year:
(20%)
(10%)
0%
10%
20%
30%
40%
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
USCSICS (FX Adj)*GCS (FX Adj)*GNS (FX Adj)*Total (FX Adj)*
Billed Business Growth by Segment
*See Annex 2 for reported billings growth rates.5
(25%)
(15%)
(5%)
5%
15%
25%
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
US
EMEA (FX Adj)*
JAPA (FX Adj)*
LACC (FX Adj)*
% increase/(decrease) vs. prior year:
Billed Business Growth by Region
*See Annex 3 for reported billings growth rates.
6
2009 2010
Online Commerce – AXP Global Online Spend*
7
*Primarily includes spending at pure online merchants and spending through known online channels for merchants with both online and offline presence. Also includes an estimate of online spend for merchants in industries where external and internal benchmarks around online spend are available.
$60B+
Estimated Spending:June YTD Online SpendFull Year Online Spend
$100B+
1H'10 1H'11
$154
$131 $126
$63 $59$45
Citi* BofA*** JPM** Cap One AXP Discover
$396
$172 $163
$107$62 $49
AXP Citi* JPM** BofA*** Cap One Discover
First Half 2011 Relative Performance
Growth vs. PY 18% 5% 11% 4% 23% 8%
*Includes Citi-Branded Cards and Citi Holdings Retail Partners North America Cards. **Includes the impact of the Washington Mutual acquisition. Reported billings shown above reflects sales volume, which excludes balance transfers. ***Credit Card, includes US consumer and foreign credit card. †Global Card. ††Fiscal year ends November 30. Billed business is credit card sales volume; disclosed total credit card volume was $53B for the first half 2011 ended 5/31/11 and increased 10%.
Growth vs. PY (4%) (9%) (12%) 1% 2% (1%)
($ in billions) ($ in billions)
† ††† ††
8
10%
4%
(1%) (3%)
(9%)
(19%)
AXP Discover Capital One
Citi** JPMorgan Bank of America*
Total Revenues YoY Growth
†AXP Bank of America*
Discover JPMorgan CapitalOne
Discount Revenue and Fees Net Interest Income
NOTE: Discount revenue and fees include discount revenue, interchange, card fees and all other non-interest revenues. *Card Services Segment. **Citi –Branded Cards. †Fiscal year ends November 30. Consolidated. ‡Consolidated. ††Card Services.
† ††
First Half 2011 Worldwide Revenue
9
‡ ‡
††
*Rates include principal only. See Statistical tables in Q2’11 Earnings Release for net write-off rates including interest and/or fees. **Fiscal year ends November 30. US Card. *** Includes the impact of the Washington Mutual acquisition. †Global Card. ††Credit Card, includes US consumer and foreign credit card. ††† Citi-Branded Cards.
AXP Lending Net Write-off Rates versus Competitors
10
6.0%
8.6%
10.2%9.4%
12.2%
9.7%
3.1%
5.0%5.8%
5.1%
7.1%6.2%
AXP* Discover** JPMorgan*** Cap One Bank of America CitiQ2’10 Q2’11
† †† †††
Investment Process
12
12-15% EPS Target
MasterCard & Visa Settlement Proceeds
Improving Credit Drives Reserve Releases
Acquisition
Brand PartnershipsRevenue Growth
Technology Development
New Business Initiatives
Loyalty
Investments by Category
% of Total Investment Spending as of June 30, 2011 YTD:
New Business Initiatives
Brand
Merchant & Network
Loyalty Acquisition
Technology Development
13
Global Proprietary New Cards and First Year Spend Acquired
*First Year Spend reflects the first 12 months of spending for a new card acquired. For cards acquired less than 12 months prior, internal estimates have been used for their expected spending over the 12 month period, i.e. a new card acquired on 2/1/11 includes 5 months of actual spend and 7 months of internally forecasted spend.
New Cards Acquired by Product Type
1H'10 1H'11
Charge Co-Brand Prop Lending
32%
1%
10%
YOY Growth
First Year Spend* by Product Type
Cards Acquired in 1H'10
Cards Acquired in 1H'11
40%
8%
10%
YOY Growth
14
Investments by Category
% of Total Investment Spending as of June 30, 2011 YTD:
New Business Initiatives
Brand
Merchant & Network
Loyalty Acquisition
Technology Development
15
Investments Driving Loyalty
16
0.6x
0.4x
0.6x
0.8x
1.0x
1.2x
Q1'05 Q1'06 Q1'07 Q1'08 Q1'09 Q1'10 Q1'11 Q2'11
USCS Cardmember Non-credit Attrition*; Indexed to Q1’05 levels:
Note: Q4’08, Q1’09 and Q2’09 were normalized for inactive card cancellations of 300K cards in Q4’08, 500K cards in Q1’09 and 2.6MM cards in Q2’09. *Non-Credit attrition includes voluntary attrition (cardmember initiated) and involuntary attrition (Amex initiated for non-activity, death, or the supplemental card cancellation by the basic cardmember).
17
Global Network & Merchant Services
Increase in 1H’2011 versus 1H’2010:
Generating 62% Return on Segment Capital with 41% PTI margins…
New Signings
Total New Booked Charge Volume Billed Business
Total Cards in Force
New Partner Banks
19.9%20.6%
19.9% 19.5%20.4%
21.2%22.2%
23.0%23.7% 24.0% 23.8%
25.4%26%+
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q1'11
General Purpose Charge and Credit*
AXP Share of U.S. Purchase Volume
Source: The Nilson Report. *Excludes cash advances.
18
Preliminary
Investments by Category
% of Total Investment Spending as of June 30, 2011 YTD:
Technology DevelopmentNew Business Initiatives
■ Digital Capabilities
■ Core Infrastructure
■ Workplace Efficiencies
19
Investment Process
20
12-15% EPS Target
MasterCard & Visa Settlement Proceeds
Improving Credit Drives Reserve Releases
Acquisition
Brand PartnershipsRevenue Growth
Technology Development
New Business Initiatives
Loyalty
Investment Process
21
As we exit 2011 and into 2012…
Investments
MasterCard & Visa Settlement Proceeds Expire
Reserve Releases
Revenues – Core Businesses
Revenues – New Initiatives
12-15% EPS Target
■ Financial Performance
■ AXP: A Digital Evolution
– Digital Relevance in Core Businesses
– Enterprise Growth Strategy and Progress
■ Q & A
22
Agenda
AXP Financial Targets
8% + 12-15% 25% +
On average and over time:
23
■ Financial Performance
■ AXP: A Digital Evolution
– Digital Relevance in Core Businesses
– Enterprise Growth Strategy and Progress
■ Q & A
24
Agenda
Digital Strategy
25
■ Retain AXP Leadership Position
■ Improve value for customers and partners
■ Fully leverage assets and capabilities
Objectives:
Digital Strategy
26
■ Go where our Customers go
■ Be Embedded in the Payment Path
■ Retain Optionality
Guiding Principles:
Mobile Payments – Recent Announcements
27
Visa Digital Wallet With One-Click Buying To Launch This Fall
MasterCard Starts Mobile Provisioning for NFC
Pay-by-Phone Dialed Back: Carriers Scrap Plans for Their Own Network, Look to Big Credit Card Companies
Wells Fargo, Chase, Bank of America jointly launch PayPal rival
Google, Citi, MasterCard, First Data and Sprint Team up to
Make Your Phone Your Wallet
Visa Going Mobile with Fundamo Deal
Note: The trademarks, logos and service marks used on this slide and throughout this presentation are property of their respective owners.
Digital Strategy
28
■ Go where our Customers go
■ Be Embedded in the Payment Path
■ Retain Optionality
■ Expand Franchise
Guiding Principles:
Competitive Advantages
■ Brand
■ Premium Positioning
■ Channels
■ Closed Loop Data
■ Travel Network
■ Processing Infrastructure
■ Rewards Bank
■ Marketing / Sales
■ Risk Management
■ Info Management
■ Servicing
■ Rewards/Loyalty
■ Ability to Partner
■ Reengineering
■ Affluent Customers
■ Merchants
■ Corporate Clients
■ Business Partners
■ GNS Partners
29
Competitive Advantages
Closed Loop
Information
30
■ Cardmembers
■ Loyalty program collectors
■ Travel clients
■ Serve users
■ Prepaid card users
Information
Digital Closed Loop
31
■ Industry
■ Sub Industry
■ Merchant
■ Geography
■ Time
Insights
Competitive Advantages
Cardmembers, merchants and
partners
32
Rewards Bank
Competitive Advantages
Loyalty Marketing
33
Competitive Advantages
Ability to Partner
34
Valuable Partnerships
35
Competitive Advantages
Brand
36
Competitive Advantages
■ Brand
■ Premium Positioning
■ Channels
■ Closed Loop Data
■ Travel Network
■ Processing Infrastructure
■ Rewards Bank
■ Marketing / Sales
■ Risk Management
■ Info Management
■ Servicing
■ Rewards/Loyalty
■ Ability to Partner
■ Reengineering
■ Affluent Customers
■ Merchants
■ Corporate Clients
■ Business Partners
■ GNS Partners
37
■ Financial Performance
■ AXP: A Digital Evolution
– Digital Relevance in Core Businesses
– Enterprise Growth Strategy and Progress
■ Q & A
38
Agenda
Shop with Points
Servicing App Launch
OPEN Forum App Launch
Zynga / MR Partnership
Small Business Saturday
Real-Time Card Offers
Search-Manager Launch
Smart Offer API
Digital Initiatives – Core Businesses
Insurance-Edge Launch
Instant Customer Notification
iTunes Promotion
South by Southwest
Refresh of americanexpress.com
Social Currency Advertising Campaign
‘Big Break for Small Businesses’
Launch of NEXTPEDITION
Apr’10 May’10 Jun’10 Aug’10 Sept’10 Nov’10 Feb’11 Mar’11 Apr’11 May’11 Jun’11 Jul’11
OpenTable / MR Partnership
Return Protection on Merchant Partner sites
Redeem MR for Facebook ads
National foursquare rollout
Link, Like, Love: CM Offers on Facebook
‘Go Social’ program for merchants
Multi-city “couponless” loyalty offers pilot
39
Digital Customer Service:Mobile Apps
Over one million downloads since US launch in April 2010; Launched in UK and Japan in November, Australia in February
Over 25,000 downloads since September launch
Developed 15 iPhone and 2 iPad apps in past year, including:
40
Digital Initiatives – Core Businesses
Apr’10 May’10 Jun’10 Aug’10 Sept’10 Nov’10 Feb’11 Mar’11 Apr’11 May’11 Jun’11 Jul’11
Smart Offer API
Shop with Points
Servicing App Launch
OPEN Forum App Launch
Zynga / MR Partnership
Small Business Saturday
Real-Time Card Offers
Search-Manager Launch
Insurance-Edge Launch
iTunes Promotion
South by Southwest
Refresh of americanexpress.com
Social Currency Advertising Campaign
‘Big Break for Small Businesses’
Launch of NEXTPEDITION
OpenTable / MR Partnership
Return Protection on Merchant Partner sites
Redeem MR for Facebook ads
National foursquare rollout
Link, Like, Love: CM Offers on Facebook
‘Go Social’ program for merchants
Multi-city “couponless” loyalty offers pilot
Instant Customer Notification
41
Digital Initiatives – Core Businesses
Apr’10 May’10 Jun’10 Aug’10 Sept’10 Nov’10 Feb’11 Mar’11 Apr’11 May’11 Jun’11 Jul’11
Shop with Points
Small Business Saturday
Smart Offer API
Servicing App Launch
OPEN Forum App Launch
Zynga / MR Partnership
Real-Time Card Offers
Search-Manager Launch
Insurance-Edge Launch
iTunes Promotion
South by Southwest
Refresh of americanexpress.com
Social Currency Advertising Campaign
‘Big Break for Small Businesses’
Launch of NEXTPEDITION
OpenTable / MR Partnership
Return Protection on Merchant Partner sites
Redeem MR for Facebook ads
National foursquare rollout
Link, Like, Love: CM Offers on Facebook
‘Go Social’ program for merchants
Multi-city “couponless” loyalty offers pilot
Instant Customer Notification
42
In just three weeks…
1.2 million Facebook Fans
2,500 PR placements in broadcast, print and online press
200,000 Registered Card enrollees
Over 150 partners
Connecting Cardmembers & Merchants:Small Business Saturday
43
Shop with Points
Servicing App Launch
OPEN Forum App Launch
Zynga / MR Partnership
Small Business Saturday
Real-Time Card Offers
Search-Manager Launch
Smart Offer API
Digital Initiatives – Core Businesses
Insurance-Edge Launch
Instant Customer Notification
iTunes Promotion
South by Southwest
Refresh of americanexpress.com
Social Currency Advertising Campaign
‘Big Break for Small Businesses’
Launch of NEXTPEDITION
Apr’10 May’10 Jun’10 Aug’10 Sept’10 Nov’10 Feb’11 Mar’11 Apr’11 May’11 Jun’11 Jul’11
OpenTable / MR Partnership
Return Protection on Merchant Partner sites
Redeem MR for Facebook ads
National foursquare rollout
Link, Like, Love: CM Offers on Facebook
‘Go Social’ program for merchants
Multi-city “couponless” loyalty offers pilot
44
Connecting Cardmembers & Merchants:Partnering with Foursquare
45
National rollout of Smart Offer API with foursquare to provide couponless, location-based offers with select merchants
National Offers Available
Shop with Points
Servicing App Launch
OPEN Forum App Launch
Zynga / MR Partnership
Small Business Saturday
Real-Time Card Offers
Search-Manager Launch
Smart Offer API
Digital Initiatives – Core Businesses
Insurance-Edge Launch
Instant Customer Notification
iTunes Promotion
South by Southwest
Refresh of americanexpress.com
Social Currency Advertising Campaign
‘Big Break for Small Businesses’
Launch of NEXTPEDITION
Apr’10 May’10 Jun’10 Aug’10 Sept’10 Nov’10 Feb’11 Mar’11 Apr’11 May’11 Jun’11 Jul’11
OpenTable / MR Partnership
Return Protection on Merchant Partner sites
Redeem MR for Facebook ads
National foursquare rollout
Link, Like, Love: CM Offers on Facebook
‘Go Social’ program for merchants
Multi-city “couponless” loyalty offers pilot
46
Digital Rewards:Membership Rewards in FacebookFirst ever rewards point redemption option for Facebook ads
47
Connecting Cardmembers & Merchants:“Link, Like, Love” on Facebook
48
Receive deals tailored to you…Register on “Link, Like, Love” Facebook page.
Cardmembers receive personalized couponless offers based their “Social Graph”, i.e. their likes, interests & social connections
21
Connecting Cardmembers & Merchants:Go Social
49
Connect social media accounts
Claim locations
Design an offer
Distribute through Facebook and foursquare
Couponless fulfillment
Track and measure outcomes
Social media tool for merchants to create, provide and track offers for Cardmembers through Facebook, foursquare and other social media sites
How It Works
Positive Industry Reactions
51
“160-Year-Old American Express Out-Innovates Google and Groupon.”
TechCrunch.com
"It's an inspired initiative. It will be the new retail and Amex has first mover advantage over Amazon Visa, Mastercard and every type of competitor on a 360 degree basis.“
Burt Flickinger, Strategic Resource Group in a Fox Business TV interview
“The Go Social area of the Amex site exudes the safety, security and gravitas of a mature financial institution.”
Paul Marsden, Social Commerce Today
Following the announcement of Link, Like, Love and Go Social…
Digital Closed Loop in Action
52
+
Shop with Points
Servicing App Launch
OPEN Forum App Launch
Zynga / MR Partnership
Small Business Saturday
Real-Time Card Offers
Search-Manager Launch
Smart Offer API
Digital Initiatives – Core Businesses
Insurance-Edge Launch
Instant Customer Notification
iTunes Promotion
South by Southwest
Refresh of americanexpress.com
Social Currency Advertising Campaign
‘Big Break for Small Businesses’
Launch of NEXTPEDITION
Apr’10 May’10 Jun’10 Aug’10 Sept’10 Nov’10 Feb’11 Mar’11 Apr’11 May’11 Jun’11 Jul’11
OpenTable / MR Partnership
Return Protection on Merchant Partner sites
Redeem MR for Facebook ads
National foursquare rollout
Link, Like, Love: CM Offers on Facebook
‘Go Social’ program for merchants
Multi-city “couponless” loyalty offers pilot
53
■ Financial Performance
■ AXP: A Digital Evolution
– Digital Relevance in Core Businesses
– Enterprise Growth Strategy and Progress
■ Q & A
54
Agenda
Enterprise Growth Group Business Units
55
106
Annex 1
($ in millions) Q1'10 Q2'10 Q3'10 Q4'10
GAAP Total Revenues Net of Interest Expense $6,560 $6,805 $6,973 $7,244
Securitization Adjustments:
Discount revenue, net card fees and other NA NA NA NA
Interest income NA NA NA NA
Securitization income, net NA NA NA NA
Interest expense NA NA NA NA
Managed Total Revenues Net of Interest Expense $6,560 $6,805 $6,973 $7,244
($ in millions) Q1'09 Q2'09 Q3'09 Q4'09
GAAP Total Revenues Net of Interest Expense $5,891 $6,056 $5,968 $6,421
Securitization Adjustments:
Discount revenue, net card fees and other 99 79 82 71
Interest income 886 771 714 726
Securitization income, net (141) 2 (71) (190)
Interest expense (83) (48) (58) (55)
Managed Total Revenues Net of Interest Expense $6,652 $6,860 $6,635 $6,973
Increase/(Decrease) vs. prior year:
GAAP Basis 11% 12% 17% 13%
Managed Basis (1%) (1%) 5% 4%
Annex 2
107
*FX adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars. (e.g., assumes foreign exchange rate used for Q2'11 applies to Q2'10; rate used for Q1’11 applies to Q1’10, etc.)
Segment Billed Business - Reported & FX Adjusted*
% increase/(decrease) vs. prior year:
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
ICS
Reported (20%) (12%) 14% 19% 12% 12% 12% 16% 24%
FX Adjusted (7%) (6%) 0% 6% 9% 10% 11% 10% 11%
GCS
Reported (23%) (14%) 8% 23% 21% 19% 16% 19% 19%
FX Adjusted (18%) (11%) 3% 18% 21% 19% 17% 17% 15%
GNS
Reported (3%) 2% 34% 36% 27% 24% 26% 29% 36%
FX Adjusted 6% 7% 22% 25% 23% 22% 24% 24% 25%
Total
Reported (16%) (11%) 8% 16% 16% 14% 15% 17% 18%
FX Adjusted (13%) (9%) 4% 12% 15% 14% 14% 15% 15%
Annex 3
108
*FX adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars. (e.g., assumes foreign exchange rate used for Q2'11 applies to Q2'10; rate used for Q1’11 applies to Q1’10, etc.)
Region Billed Business - Reported & FX Adjusted*
% increase/(decrease) vs. prior year:
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
U.S. (15%) (11%) 2% 11% 14% 13% 14% 15% 14%
EMEA
Reported (24%) (15%) 11% 16% 5% 5% 4% 13% 23%
FX Adjusted (13%) (8%) 2% 11% 11% 11% 10% 10% 11%
JAPA
Reported (12%) (1%) 34% 44% 34% 31% 29% 28% 36%
FX Adjusted 0% 1% 12% 22% 23% 23% 20% 18% 19%
LACC
Reported (19%) (11%) 20% 26% 24% 19% 18% 21% 22%
FX Adjusted (5%) (1%) 7% 11% 15% 15% 15% 16% 15%