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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2014

or

[   ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from             to             

Commission file No. 1-6908

AMERICAN EXPRESS CREDIT CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

   

11-1988350

 

(State or other jurisdiction of

incorporation or organization)

    (I.R.S. Employer Identification No.)  

200 Vesey Street New York, NY

   

10285

 
(Address of principal executive offices)     (Zip Code)  

Registrant’s telephone number including area code:                     (866) 572-4944                    

 

            None

 

(Former name, former address and former fiscal year, if changed since last report.)

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT IN ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED UNDER GENERAL INSTRUCTION H(2).

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    X              No                 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    X              No                 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ¨

    

Accelerated filer  ¨

Non-accelerated filer  x

    

Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes                    No     X          

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

     

Outstanding at November 6, 2014

 
Common Stock (par value $.10 per share)       1,504,938 Shares  


AMERICAN EXPRESS CREDIT CORPORATION

FORM 10-Q

INDEX

 

Part I.

  

Financial Information

     Page No.   
  

Item 1.

  

Financial Statements

  
     

Consolidated Statements of Income and Retained Earnings – Three and Nine Months Ended September 30, 2014 and 2013

     1   
     

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September  30, 2014 and 2013

     2   
     

Consolidated Balance Sheets – September 30, 2014 and December 31, 2013

     3   
     

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2014 and 2013

     4   
     

Notes to Consolidated Financial Statements

     5   
  

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     16   
  

Item 4.

  

Controls and Procedures

     26   

Part II.

  

Other Information

  

  

Item 1A.

  

Risk Factors

     27   
  

Item 5.

  

Other Information

     27   
  

Item 6.

  

Exhibits

     27   
  

Signatures

     28   
  

Exhibit Index

     E-1   


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

AND RETAINED EARNINGS

(Unaudited)

 

                                                                                           

 

 
      
 
Three Months Ended
September 30,
  
  
   
 
Nine Months Ended
September 30,
  
  

(Millions)

       2014        2013        2014        2013   

Revenues

          

Discount revenue earned from purchased Card Member receivables and loans

     $ 116      $ 136      $ 386      $ 433    

Interest income from affiliates

       105        98        296        316    

Other interest income

                     1          

Finance revenue

       11        12        36        34    
    

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

       232        246        719        785    
    

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

          

Provisions for losses

       42        32        151        108    

Interest expense

       131        139        390        460    

Interest expense to affiliates

       2        2        5          

Other, net

       (29     (19     (76     (72)   
    

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

       146        154        470        502    
    

 

 

   

 

 

   

 

 

   

 

 

 

Pretax income

       86        92        249        283    

Income tax (benefit) provision

       (1     1        (15     (85)   
    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

       87        91        264        368    

Retained earnings at beginning of period

       3,025        3,092        3,004        2,999    

Dividends

       (99     (166)        (255     (350)   
    

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings at end of period

     $ 3,013      $ 3,017      $ 3,013      $ 3,017    
    

 

 

   

 

 

   

 

 

   

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

1


AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

                                                                                           

 

 
      
 
Three Months Ended
September 30,
  
  
    
 
Nine Months Ended
September 30,
  
  

(Millions)

       2014        2013         2014        2013   

Net income

     $ 87      $ 91       $ 264      $ 368    

Other comprehensive (loss) income:

           

Foreign currency translation adjustments, net of tax of: 2014, $69 and $(6); 2013, $(11) and nil

       (129     49         (110     (326)   
    

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive (loss) income

       (129     49         (110     (326)   
    

 

 

   

 

 

    

 

 

   

 

 

 

Comprehensive (loss) income

     $ (42   $ 140       $ 154      $ 42    
    

 

 

   

 

 

    

 

 

   

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

2


AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

                                             

 

 

(Millions, except share data)

    
 
September 30,
2014
  
  
   
 
December 31,
2013
  
  

Assets

    

Cash and cash equivalents

   $ 80      $ 86    

Card Member receivables, less reserves: 2014, $98; 2013, $76

     17,048        14,458    

Card Member loans, less reserves: 2014, $1; 2013, $4

     355        519    

Loans to affiliates and other

     15,070        11,340    

Deferred charges and other assets

     390        143    

Due from affiliates

     2,168        3,380    
  

 

 

   

 

 

 

Total assets

   $ 35,111      $ 29,926    
  

 

 

   

 

 

 

Liabilities and Shareholder’s Equity

    

Liabilities

    

Short-term debt

   $      $ 200    

Short-term debt to affiliates

     4,628        3,583    

Long-term debt

     26,555        21,700    
  

 

 

   

 

 

 

Total debt

     31,183        25,483    

Due to affiliates

     1,110        1,323    

Accrued interest and other liabilities

     232        433    
  

 

 

   

 

 

 

Total liabilities

     32,525        27,239    
  

 

 

   

 

 

 

Shareholder’s Equity

    

Common stock, $0.10 par value, authorized 3 million shares; issued and outstanding 1.5 million shares

            —    

Additional paid-in capital

     161        161    

Retained earnings

     3,013        3,004    

Accumulated other comprehensive loss:

    

Foreign currency translation adjustments, net of tax of: 2014, $(40); 2013, $(34)

     (588     (478)   
  

 

 

   

 

 

 

Total accumulated other comprehensive loss

     (588     (478)   
  

 

 

   

 

 

 

Total shareholder’s equity

     2,586        2,687    
  

 

 

   

 

 

 

Total liabilities and shareholder’s equity

   $ 35,111      $ 29,926    
  

 

 

   

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

3


AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

                                             

 

 

Nine Months Ended September 30 (Millions)

       2014        2013   

Cash Flows from Operating Activities

      

Net income

     $ 264      $ 368    

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

      

Provisions for losses

       151        108    

Amortization and other

       18        16    

Deferred taxes

       2        (6)   

Changes in operating assets and liabilities:

      

Interest, taxes and other amounts due from affiliates, net

       124        (157

Other operating assets and liabilities

       (551     (432
    

 

 

   

 

 

 

Net cash provided by (used in) operating activities

       8        (103)   
    

 

 

   

 

 

 

Cash Flows from Investing Activities

      

Net (increase) in Card Member receivables and loans

       (2,699     (1,728)   

Net (increase) decrease in loans to affiliates and other

       (3,956     2,804    

Net decrease (increase) in due from affiliates

       917        (69)   
    

 

 

   

 

 

 

Net cash (used in) provided by investing activities

       (5,738     1,007    
    

 

 

   

 

 

 

Cash Flows from Financing Activities

      

Net increase in short-term debt to affiliates

       1,076        529    

Net (decrease) increase in short-term debt

       (200     13    

Issuance of long-term debt

       7,509        3,549    

Principal payments on long-term debt

       (2,402     (4,829)   

Dividends paid

       (255     (350)   
    

 

 

   

 

 

 

Net cash provided by (used in) financing activities

       5,728        (1,088)   
    

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

       (4     (6)   
    

 

 

   

 

 

 

Net (decrease) in cash and cash equivalents

       (6     (190)   

Cash and cash equivalents at beginning of period

       86        275    
    

 

 

   

 

 

 

Cash and cash equivalents at end of period

     $ 80      $ 85    
    

 

 

   

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

4


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Basis of Presentation

The Company

American Express Credit Corporation (Credco), together with its subsidiaries, is a wholly owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), which is a wholly owned subsidiary of American Express Company (American Express). American Express charge cards and American Express credit cards are collectively referred to herein as the card.

Credco is engaged in the business of financing non-interest-earning Card Member receivables arising from the use of the American Express® Green Card, the American Express® Gold Card, Platinum Card®, Corporate Card and other American Express cards issued in the United States and in certain countries outside the United States. Credco also finances certain interest-earning revolving loans generated by Card Member spending on American Express credit cards issued in non-U.S. markets, although interest-earning revolving loans are primarily funded by subsidiaries of TRS other than Credco.

Credco executes material transactions with its affiliates. The agreements between Credco and its affiliates provide that the parties intend that the transactions thereunder be conducted on an arm’s length basis; however, there can be no assurance that the terms of these arrangements are the same as would be negotiated between independent, unrelated parties.

American Express provides Credco with financial support with respect to maintenance of its minimum overall 1.25 fixed charge coverage ratio, which is achieved by charging appropriate discount rates on the purchases of receivables Credco makes from, and the interest rates on the loans Credco provides to, TRS and other American Express subsidiaries. Each monthly period, the discount and interest rates are determined to generate income for Credco that is sufficient to maintain its minimum fixed charge coverage ratio. The revenue earned by Credco from purchasing Card Member receivables and loans at a discount is reported as discount revenue on the Consolidated Statements of Income and Retained Earnings.

The accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in Credco’s Annual Report on Form 10-K for the year ended December 31, 2013 (Form 10-K).

The interim consolidated financial information in this report has not been audited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period consolidated financial information, have been made. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense. These accounting estimates reflect the best judgment of management, but actual results could differ.

Certain reclassifications of prior period amounts have been made to conform to the current period presentation. These reclassifications did not have a material impact on Credco’s financial position, results of operations or cash flows.

Recently Issued Accounting Standards

Accounting Standards Update No. 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers was issued on May 28, 2014. The guidance establishes the principles to apply to determine the amount and timing of revenue recognition, specifying the accounting for certain costs related to revenue, and requiring additional disclosures about the nature, amount, timing and uncertainty of revenues and related cash flows. The guidance supersedes most of the current revenue recognition requirements, and will be effective January 1, 2017. Credco is currently evaluating the impact this guidance, including the method of implementation, will have on its financial position, results of operations and cash flows, among other items.

 

5


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

2. Card Member Receivables and Loans

American Express’ charge and lending payment card products result in the generation of Card Member receivables and Card Member loans, respectively. For information on Credco’s Card Member receivables and Card Member loans, related accounting policies and Credco’s participation interests in TRS’ securitization program, refer to Note 3 on pages F-13 – F-16 of the Form 10-K.

The net volume of Card Member receivables purchased during the nine months ended September 30, 2014 and 2013 was approximately $164 billion and $161 billion, respectively. As of September 30, 2014 and December 31, 2013, Credco Receivables Corporation (CRC) owned approximately $4.8 billion and $2.5 billion, respectively, of participation interests in Card Member receivables purchased without recourse from Receivables Financing Corporation VIII LLC (RFC VIII).

Card Member receivables as of September 30, 2014 and December 31, 2013 consisted of:

 

                                         

 

 

(Millions)

       2014        2013   

U.S. Consumer and Small Business Services

     $ 4,822      $ 2,490   

International Card Services (a)

       1,244        (b

Global Commercial Services

       11,080        (b

International Card Services and Global Commercial Services (a)

       (b     12,044   
    

 

 

   

 

 

 

Card Member receivables (c)

       17,146        14,534   

Less: Reserve for losses

       98        76   
    

 

 

   

 

 

 

Card Member receivables, net (d)(e)

     $ 17,048      $ 14,458   
    

 

 

   

 

 

 

 

 

 

  (a)

International is comprised of consumer and small business services.

 

  (b)

Beginning in first quarter 2014, a split between International Card Services (ICS) and Global Commercial Services (GCS) for Card Member receivables has been provided to supplement the presentation of Card Member receivables aging for ICS.

 

  (c)

Net of deferred discount revenue totaling $22 million and $21 million as of September 30, 2014 and December 31, 2013, respectively.

 

  (d)

In the third quarter of 2014, Credco terminated its agreements to purchase Card Member receivables from the American Express joint ventures that issue American Express cards in certain countries (American Express joint ventures).

 

  (e)

Card Member receivables modified in a troubled debt restructuring (TDR) program were immaterial.

The net volume of Card Member loans purchased during both the nine months ended September 30, 2014 and 2013 was $2.9 billion.

Card Member loans as of September 30, 2014 and December 31, 2013 consisted of:

 

                                         

 

 

(Millions)

       2014        2013   

International Card Services

     $ 356      $ 523   

Less: Reserve for losses

       1        4   
    

 

 

   

 

 

 

Card Member loans, net (a)(b)

     $ 355      $ 519   
    

 

 

   

 

 

 

 

 

 

  (a)

Card Member loans modified in a TDR program were immaterial.

 

  (b)

In the third quarter of 2014, Credco terminated its agreements to purchase Card Member loans from the American Express joint ventures.

 

6


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Card Member Receivables and Card Member Loans Aging

Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date. The following table presents the aging of Card Member receivables and Card Member loans as of September 30, 2014 and December 31, 2013:

 

                                                                                                                  

 

 

2014 (Millions)

       Current       
 

 

 

30-59
Days

Past

Due

  
  

  

  

   
 

 

 

60-89
Days

Past

Due

  
  

  

  

   

 
 

 

90+

Days
Past

Due

  

  
 

  

     Total   

Card Member Receivables:

             

U.S. Consumer and Small

Business Services

     $ 4,773      $ 23      $ 9      $ 17       $ 4,822   

International Card Services (a)

       1,224        8        4        8         1,244   

Global Commercial Services

       (b     (b     (b     88         11,080   

Card Member Loans:

             

International Card Services

     $ 354      $ 1      $      $ 1       $ 356   

 

 

 

 

2013 (Millions)

       Current       
 
 

 

30-59
Days
Past

Due

  
  
 

  

   
 
 

 

60-89
Days
Past

Due

  
  
 

  

   

 
 

 

90+

Days
Past

Due

  

  
 

  

     Total   

Card Member Receivables:

             

U.S. Consumer and Small

Business Services

     $ 2,464      $ 12      $ 5      $ 9       $ 2,490   

International Card Services and

Global Commercial Services (a)

       (b     (b     (b     115         12,044   

Card Member Loans:

             

International Card Services

     $ 514      $ 4      $ 2      $ 3       $ 523   

 

 

 

  (a)

Beginning in first quarter 2014, as a result of system enhancements, delinquency data for ICS is now available and presented on a prospective basis for the indicated aging categories. Comparable data for prior periods is not available. For risk management purposes, Credco has historically utilized 90 days past billing for ICS as described below in (b).

 

  (b)

Delinquency data for periods other than 90 days past billing is not available due to system constraints. Therefore, such data has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances. For Card Member receivables in GCS as of September 30, 2014 and ICS and GCS as of December 31, 2013, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if Credco initiates collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes.

 

7


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Credit Quality Indicators for Card Member Receivables and Card Member Loans

The following tables present the key credit quality indicators as of or for the nine months ended September 30:

 

                                                               

 

 
       2014        2013   

 

      
 
 
Net
Write-off
Rate
 (a)
  
  
  
   
 

 
 

30 Days
Past Due

as a % of
Total

  
  

  
  

   
 
 
Net
Write-off
Rate
 (a)
  
  
  
   
 

 
 

30 Days
Past Due

as a % of
Total

  
  

  
  

Card Member Receivables:

          

U.S. Consumer and Small Business Services

       1.13     1.02     1.08     1.10%   

International Card Services

       1.96     1.61 %      (b            (b)     

Card Member Loans:

          

International Card Services

       1.13     0.56     0.86     1.71%   

 

 

 

 
       2014        2013   

 

      
 
 
 
 
Net Loss
Ratio as a
% of
Charge
Volume
 (c)
  
  
  
  
  
   
 
 
 
90 Days
Past Billing
as a % of
Receivables
  
  
  
  
   
 
 
 
 
Net Loss
Ratio as a
% of
Charge
Volume
 (c)
  
  
  
  
  
   
 
 
 
90 Days
Past Billing
as a % of
Receivables
  
  
  
  

Card Member Receivables:

          

Global Commercial Services

       0.07     0.79 %      (b            (b)     

International Card Services and Global Commercial Services

           (b         (b     0.06     0.83%   

 

 

 

  (a)

Credco’s net write-off rate represents the amount of Card Member receivables or Card Member loans owned by Credco that are written off, net of recoveries, expressed as a % of the average Card Member receivables or Card Member loans balances in each of the periods indicated.

 

  (b)

Historically, net loss ratio as a % of charge volume and 90 days past billings as a % of receivables were presented for ICS and GCS. Beginning in first quarter 2014, as a result of system enhancements, 30 days past due as a % of total and net write-off rate for ICS have been presented.

 

  (c)

Credco’s net loss ratio represents the amount of Card Member receivables owned by Credco that are written off, net of recoveries, expressed as a % of the volume of Card Member receivables purchased by Credco in each of the periods indicated.

Refer to Note 4 on pages F-16 – F-17 of the Form 10-K for additional indicators, including external environmental qualitative factors, management considers in its evaluation process for reserves for losses.

 

3. Reserves for Losses

Reserves for losses relating to Card Member receivables and loans represent management’s best estimate of the probable losses inherent in Credco’s outstanding portfolio of receivables and loans, as of the balance sheet date. Management’s evaluation process requires certain estimates and judgments. For information on Credco’s reserves for losses and the related accounting policies, refer to Note 4 on pages F-16 – F-17 of the Form 10-K.

 

8


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Changes in Card Member Receivables Reserve for Losses

The following table presents changes in the Card Member receivables reserve for losses for the nine months ended September 30:

 

                                         

 

 

(Millions)

       2014        2013   

Balance, January 1

     $ 76      $ 83    

Provisions (a)

       145        105    

Net write-offs (b)

       (131     (116)   

Other  (c)

       8        13    
    

 

 

   

 

 

 

Balance, September 30

     $ 98      $ 85    
    

 

 

   

 

 

 

 

 

 

  (a)

Provisions resulting from authorized transactions.

 

  (b)

Net write-offs include recoveries of $76 million and $87 million for the nine months ended September 30, 2014 and 2013, respectively.

 

  (c)

Primarily reserve balances applicable to net purchases of new groups of Card Member receivables from TRS and certain of its subsidiaries and participation interests from affiliates. The 2014 figure is net of a reduction in reserves driven by the sale of Card Member receivables to the American Express joint ventures following the termination of the agreements to purchase Card Member receivables in the third quarter of 2014. Credco purchases Card Member receivables at fair value but due to system constraints records the gross receivable amount and the corresponding reserve balance, which are included in its fair value estimate. Specifically, Credco’s systems do not have the ability to track multiple accounting bases for Card Member receivables. New groups of net Card Member receivables purchased totaled $3.0 billion and $1.9 billion for the nine months ended September 30, 2014 and 2013, respectively.

Changes in Card Member Loans Reserve for Losses

The following table presents changes in the Card Member loans reserve for losses for the nine months ended September 30:

 

                                         

 

 

(Millions)

       2014        2013   

Balance, January 1

     $ 4      $   

Provisions (a)

       6          

Net write-offs (b)

       (4     (3)   

Other (c)

       (5     —    
    

 

 

   

 

 

 

Balance, September 30

     $ 1      $   
    

 

 

   

 

 

 

 

 

 

  (a)

Provisions resulting from authorized transactions.

 

  (b)

Net write-offs include recoveries of $3 million and $4 million for the nine months ended September 30, 2014 and 2013, respectively.

 

  (c)

Primarily reserve balances applicable to sales of new groups of Card Member loans to the American Express joint ventures following the termination of the agreements to purchase Card Member loans in the third quarter of 2014. Credco sells Card Member loans at fair value but due to system constraints records the gross receivable amount and the corresponding reserve balance, which are included in its fair value estimate. Specifically, Credco’s systems do not have the ability to track multiple accounting bases for Card Member loans. New groups of net Card Member loans sold totaled $183 million and nil for the nine months ended September 30, 2014 and 2013, respectively.

 

4. Derivatives and Hedging Activities

Credco uses derivative financial instruments (derivatives) to manage exposures to various market risks. Derivatives derive their value from an underlying variable or multiple variables, including interest rate and foreign exchange rate. These instruments enable end users to increase, reduce or alter exposure to various market risks and, for that reason, are an integral component of Credco’s market risk management. Credco does not engage in derivatives for trading purposes. For information on Credco’s derivative instruments and the related accounting policies, refer to Note 7 on pages F-19 – F-23 of the Form 10-K.

In relation to Credco’s credit risk, under the terms of the derivative agreements it has with its various counterparties, Credco is not required to either immediately settle any outstanding liability balances or post collateral upon the occurrence of a specified credit risk-related event. Based on the assessment of credit risk of Credco’s derivative counterparties as of September 30, 2014 and December 31, 2013, Credco does not have derivative positions that warrant credit valuation adjustments.

 

9


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Credco’s derivatives are carried at fair value on the Consolidated Balance Sheets. Refer to Note 2 on pages F-10 – F-13 of the Form 10-K for a description of Credco’s methodology for determining the fair value of derivatives.

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of September 30, 2014 and December 31, 2013:

 

                                                                                   

 

 
      
 
 
Deferred Charges and
Other Assets
Fair Value
  
  
  
   
 
 
Accrued Interest and
Other Liabilities
Fair Value
  
  
  

(Millions)

       2014        2013        2014        2013   

Derivatives designated as hedging instruments:

          

Interest rate contracts

          

Fair value hedges

     $ 87      $ 181      $ 27      $   

Foreign exchange contracts

          

Net investment hedges

       161        17                 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives designated as hedging instruments

       248        198        27          

Derivatives not designated as hedging instruments:

          

Foreign exchange contracts

       38        16        92        42    
    

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives, gross

       286        214        119        50    

Less: Cash collateral netting (a)

       (42     (167     (27     —    

Derivative asset and derivative liability netting (b)

       (59     (9     (59     (9)   
    

 

 

   

 

 

   

 

 

   

 

 

 

Total derivatives, net (c)

     $ 185      $ 38      $ 33      $ 41    
    

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

  (a)

Represents the offsetting of derivative instruments and the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instrument(s) executed with the same counterparty under an enforceable master netting arrangement. Additionally, Credco received noncash collateral from a counterparty in the form of security interests in U.S. Treasury securities with a fair value of $63 million and nil as of September 30, 2014 and December 31, 2013, respectively, none of which was sold or repledged. Such noncash collateral economically reduces Credco’s risk exposure to $122 million as of September 30, 2014, but does not reduce the net exposure on Credco’s Consolidated Balance Sheets. Additionally, Credco posted $97 million and $26 million as of September 30, 2014 and December 31, 2013, respectively, as initial margin on its centrally cleared interest rate swaps; such amounts are recorded within deferred charges and other assets on Credco’s Consolidated Balance Sheets and are not netted against the derivative balances.

 

  (b)

Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement.

 

  (c)

Credco has no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterparty. The total net derivative assets and derivative liabilities are presented within deferred charges and other assets and accrued interest and other liabilities on Credco’s Consolidated Balance Sheets.

A majority of Credco’s derivative assets and liabilities as of September 30, 2014 and December 31, 2013 are subject to master netting agreements with its derivative counterparties. In addition, Credco has no derivative amounts subject to enforceable master netting arrangements that are not offset on Credco’s Consolidated Balance Sheets.

Derivative Financial Instruments that Qualify for Hedge Accounting

Refer to Note 7 on pages F-21 – F-23 of the Form 10-K for information on derivatives that qualify for hedge accounting.

Fair Value Hedges

Credco is exposed to interest rate risk associated with its fixed-rate long-term debt. Credco uses interest rate swaps to economically convert certain fixed-rate debt obligations to floating-rate obligations at the time of issuance. As of September 30, 2014 and December 31, 2013, Credco hedged $15.9 billion and $12.4 billion, respectively, of its fixed-rate debt to floating-rate debt using interest rate swaps.

 

10


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The following table summarizes the impact on the Consolidated Statements of Income and Retained Earnings associated with Credco’s hedges of its fixed-rate long-term debt for the three and nine months ended September 30:

 

                                                                               

 

 
For the Three Months Ended September 30: (Millions)   

 

 
 

Gains (losses) recognized in income

  

 

Derivative contract

  

 

Hedged item

  

   

 

Net hedge

ineffectiveness

  

  

 

Income Statement Line Item

    Amount     

Income Statement Line Item

    Amount     

Derivative relationship

      2014        2013          2014        2013        2014        2013   

Interest rate contracts

  Other expenses   $ (77   $ (8   Other expenses   $ 81      $ 4      $ 4      $ (4)   

 

 

 

 
For the Nine Months Ended September 30: (Millions)   

 

 
 

Gains (losses) recognized in income

  

 

Derivative contract

  

 

Hedged item

  

   

 

Net hedge

ineffectiveness

  

  

 

Income Statement Line Item

    Amount     

Income Statement Line Item

    Amount     

Derivative relationship

      2014        2013          2014        2013        2014        2013   

Interest rate contracts

  Other expenses   $ (119   $ (187   Other expenses   $ 128      $ 185      $ 9      $ (2)   

 

 

Credco also recognized a net reduction in interest expense on long-term debt of $50 million and $53 million for the three months ended September 30, 2014 and 2013, respectively, and $145 million and $193 million, for the nine months ended September 30, 2014 and 2013, respectively, primarily related to the net settlements (interest accruals) on Credco’s interest rate derivatives designated as fair value hedges.

Net Investment Hedges

The effective portion of the gain or (loss) on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment, was $116 million and $(19) million for the three months ended September 30, 2014 and 2013, respectively, and $(10) million and nil for the nine months ended September 30, 2014 and 2013, respectively. Any ineffective portion of the gain or (loss) on net investment hedges is recognized in other expenses during the period of change. No ineffectiveness or other amounts associated with net investment hedges were reclassified from AOCI into income for the three and nine months ended September 30, 2014 or 2013.

Derivatives Not Designated as Hedges

For information on derivatives not designated as hedges, refer to Note 7 on page F-23 of the Form 10-K.

The following table summarizes the impact on pretax earnings of derivatives not designated as hedges, as reported on the Consolidated Statements of Income and Retained Earnings for the three and nine months ended September 30:

 

                                                                               

 

 
         Pretax (losses) gains   
        
 
For the Three Months Ended
September 30,
  
  
   
 
For the Nine Months Ended
September 30,
  
  
        
Amount
  
   
Amount
  

Description (Millions)

     Income Statement Line Item     2014        2013        2014        2013   

Foreign exchange contracts

     Other expenses   $ (14   $ 21      $ 49      $ 71   
      

 

 

   

 

 

   

 

 

   

 

 

 

Total

       $ (14   $ 21      $ 49      $ 71   
      

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

11


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

5. Fair Values

Financial Assets and Financial Liabilities Carried at Fair Value

For information about Credco’s valuation techniques for financial assets and financial liabilities measured at fair value and the fair value hierarchy, refer to Note 2 on pages F-10 – F-11 of the Form 10-K. Refer to Note 7 on pages F-19 – F-23 of the Form 10-K for additional information about the fair value of Credco’s derivative financial instruments.

The following table summarizes Credco’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s valuation hierarchy as Level 2, as of September 30, 2014 and December 31, 2013:

 

                                         

 

 

(Millions)

       2014        2013   

Assets:

      

Derivatives (a)

     $ 286      $ 214   
    

 

 

   

 

 

 

Total assets

       286        214   
    

 

 

   

 

 

 

Liabilities:

      

Derivatives (a)

       119        50   
    

 

 

   

 

 

 

Total liabilities

     $ 119      $ 50   
    

 

 

   

 

 

 

 

 

 

  (a)

Refer to Note 4 for the fair values of derivative assets and liabilities, on a further disaggregated basis.

Financial Assets and Financial Liabilities Carried at Other Than Fair Value

For information about the valuation techniques used in the measurement of financial assets and financial liabilities carried at other than fair value, refer to Note 2 on pages F-11 – F-13 of the Form 10-K.

The following table discloses the estimated fair value for Credco’s financial assets and financial liabilities that are not required to be carried at fair value on a recurring basis, as of September 30, 2014 and December 31, 2013. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of September 30, 2014 and December 31, 2013, and require management judgment. These figures may not be indicative of their future fair values. The fair value of Credco cannot be reliably estimated by aggregating the amounts presented.

 

                                                                                   

 

 
      

 

Carrying

Value

  

  

    Corresponding Fair Value Amount   

2014 (Billions)

         Total        Level 2        Level 3   

Financial Assets:

          

Financial assets for which carrying values equal or approximate fair value

     $ 19.4      $ 19.4      $ 19.4      $   

Financial assets carried at other than fair value

          

Card Member loans, net

       0.4        0.4               0.4   

Loans to affiliates and others

       15.1        15.1        12.0        3.1   

Financial Liabilities:

          

Financial liabilities for which carrying values equal or approximate fair value

       5.9        5.9        5.9          

Financial liabilities carried at other than fair value

          

Long-term debt

     $ 26.6      $ 26.8      $ 26.8      $   

 

 

 

12


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

                                                                                   

 

 
      

 

Carrying

Value

  

  

    Corresponding Fair Value Amount   

2013 (Billions)

         Total        Level 2        Level 3   

Financial Assets:

          

Financial assets for which carrying values equal or approximate fair value

     $ 18.0      $ 18.0      $ 18.0      $   

Financial assets carried at other than fair value

          

Card Member loans, net

       0.5        0.5               0.5   

Loans to affiliates (a)

       11.3        11.4        8.2        3.2   

Financial Liabilities:

          

Financial liabilities for which carrying values equal or approximate fair value

       5.4        5.4        5.4          

Financial liabilities carried at other than fair value

          

Long-term debt

     $ 21.7      $ 22.0      $ 22.0      $   

 

 

 

  (a)

In 2013, there were no outstanding loans to the American Express joint ventures.

Nonrecurring Fair Value Measurements

Credco did not have any assets that were measured at fair value for impairment on a nonrecurring basis during the nine months ended September 30, 2014 or during the year ended December 31, 2013.

 

6. Variable Interest Entity

Credco has established a variable interest entity (VIE), American Express Canada Credit Corporation. For information about Credco’s VIE refer to Note 8 on page F-23 of the Form 10-K. Total assets as of September 30, 2014 and December 31, 2013 were $2.2 billion and $2.3 billion, respectively, the majority of which were eliminated in consolidation. Total liabilities as of September 30, 2014 and December 31, 2013 were $2.1 billion and $2.2 billion, respectively, and were primarily recorded in long-term debt. As of September 30, 2014 and December 31, 2013, $0.3 billion and nil, respectively, of liabilities were eliminated in consolidation. The assets of the VIE are not used solely to settle the obligations of the VIE. The note holders of the VIE have recourse to Credco.

 

13


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

7. Changes In Accumulated Other Comprehensive (Loss) Income

AOCI is comprised of items that have not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes in each component of AOCI for the three and nine months ended September 30, 2014 and 2013 were as follows:

 

                               

 

 

For the Three Months Ended September 30, 2014 (Millions), net of tax

      
 
 
 
Foreign
Currency
Translation
Adjustments
  
  
  
  
   
 
 
 
Accumulated
Other
Comprehensive
(Loss) Income
  
  
  
  

Balances as of June 30, 2014

     $ (459   $ (459)   
    

 

 

   

 

 

 

Net translation (loss) of investments in foreign operations

       (245     (245)   

Net gains related to hedges of investment in foreign operations

       116        116    
    

 

 

   

 

 

 

Net change in accumulated other comprehensive (loss)

       (129     (129)   
    

 

 

   

 

 

 

Balances as of September 30, 2014

     $ (588   $ (588)   
    

 

 

   

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2014 (Millions), net of tax

      
 
 
 
Foreign
Currency
Translation
Adjustments
  
  
  
  
   
 
 
 
Accumulated
Other
Comprehensive
(Loss) Income
  
  
  
  

Balances as of December 31, 2013

     $ (478   $ (478)   
    

 

 

   

 

 

 

Net translation (loss) of investments in foreign operations

       (100     (100)   

Net (losses) related to hedges of investment in foreign operations

       (10     (10)   
    

 

 

   

 

 

 

Net change in accumulated other comprehensive (loss)

       (110     (110)   
    

 

 

   

 

 

 

Balances as of September 30, 2014

     $ (588   $ (588)   
    

 

 

   

 

 

 

 

 

 

 

For the Three Months Ended September 30, 2013 (Millions), net of tax

      
 
 
 
Foreign
Currency
Translation
Adjustments
  
  
  
  
   
 
 
 
Accumulated
Other
Comprehensive
(Loss) Income
  
  
  
  

Balances as of June 30, 2013

     $ (367   $ (367)   
    

 

 

   

 

 

 

Net translation gain of investments in foreign operations

       68        68    

Net (losses) related to hedges of investment in foreign operations

       (19     (19)   
    

 

 

   

 

 

 

Net change in accumulated other comprehensive income

       49        49    
    

 

 

   

 

 

 

Balances as of September 30, 2013

     $ (318   $ (318)   
    

 

 

   

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2013 (Millions), net of tax

      
 
 
 
Foreign
Currency
Translation
Adjustments
  
  
  
  
   
 
 
 
Accumulated
Other
Comprehensive
(Loss) Income
  
  
  
  

Balances as of December 31, 2012

     $ 8      $   
    

 

 

   

 

 

 

Net translation (loss) of investments in foreign operations

       (326     (326)   
    

 

 

   

 

 

 

Net change in accumulated other comprehensive (loss)

       (326     (326)   
    

 

 

   

 

 

 

Balances as of September 30, 2013

     $ (318   $ (318)   
    

 

 

   

 

 

 

 

 

No amounts were reclassified out of AOCI into the Consolidated Statements of Income and Retained Earnings for the three and nine months ended September 30, 2014 and 2013.

 

14


AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

8. Income Taxes

The results of operations of Credco are included in the consolidated U.S. federal income tax return of American Express. Under an agreement with American Express, provision for income taxes is recognized on a separate company basis. If benefits for net operating losses, future tax deductions and foreign tax credits cannot be recognized on a separate company basis, such benefits are then recognized based upon a share, derived by formula, of those deductions and credits that are recognizable on an American Express consolidated reporting basis.

American Express is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which American Express has significant business operations. The tax years under examination and open for examination vary by jurisdiction. The IRS has completed its field examination of American Express’ federal tax returns for years through 2007; however, refund claims for those years continue to be reviewed by the IRS. In addition, American Express is currently under examination by the IRS for the years 2008 through 2011.

Credco believes it is reasonably possible that its unrecognized tax benefits could decrease within the next 12 months by as much as $432 million principally as a result of potential resolutions of prior years’ tax items with various taxing authorities. The prior years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution of taxable income to a particular jurisdiction or jurisdictions. Of the $432 million of unrecognized tax benefits, approximately $430 million relates to amounts that, if recognized, would be recorded to shareholder’s equity and would not impact Credco’s results of operations or the effective tax rate.

The effective tax rates were (1.2) percent and (6.0) percent for the three and nine months ended September 30, 2014, respectively, and 1.1 percent and (30.0) percent for the three and nine months ended September 30, 2013, respectively. The tax rate in each of the periods reflects the geographic mix of expenses in the United States attracting a 35 percent statutory benefit and foreign earnings taxed at lower rates, which are indefinitely reinvested. In addition, the effective tax rates for each of the periods reflect the impact of certain prior years’ tax items.

The tax rates in both periods reflect the favorable impact of the tax benefit related to Credco’s ongoing funding activities outside the United States. Credco’s provision for income taxes for interim financial periods is not based on an estimated annual effective rate due to volatility in certain components of revenues and expenses that prevents Credco from projecting a reliable estimate of full year pretax income. A discrete calculation of the provision for income taxes is calculated for each interim period.

 

15


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

American Express Credit Corporation (Credco), together with its subsidiaries, is a wholly owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), which is a wholly owned subsidiary of American Express Company (American Express). Both American Express and TRS are bank holding companies.

Credco is engaged in the business of financing non-interest-earning Card Member receivables arising from the use of the American Express® Green Card, the American Express® Gold Card, Platinum Card®, Corporate Card and other American Express cards issued in the United States and in certain countries outside the United States. Credco also finances certain interest-earning revolving loans generated by Card Member spending on American Express credit cards issued in non-U.S. markets, although interest-earning and revolving loans are primarily funded by subsidiaries of TRS other than Credco. American Express charge cards and American Express credit cards are collectively referred to herein as the card.

Certain of the statements in this Form 10-Q report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to the “Cautionary Note Regarding Forward-Looking Statements” section.

Current Business Environment/Outlook

Management’s discussion of the results of Credco is in the context of the following wider business environment for American Express.

American Express’ results for the third quarter of 2014 reflect increased spending by Card Members, growth in average Card Member loans and continued low write-off rates. Card Member billed business increased 9 percent over the prior year, both within and outside the United States, in line with growth rates in the second quarter.

Competition remains extremely intense across American Express’ payments business. Traditional competitors and new entrants deploy increasingly greater financial and other resources to attract customers and business partners and to develop new platforms and technologies. To remain competitive, American Express needs to continue to demonstrate the value it delivers to merchants, customers and business partners in all aspects of its relationships. While American Express’ business is diversified by product and geography, the global economic environment remains challenging. In addition, American Express’ results could be adversely affected by volatility in foreign exchange rates, changes in interest rates or the failure of the U.S. Congress to renew legislation regarding American Express’ active financing income, which could increase its effective tax rate and have an adverse impact on net income in 2015 and beyond.

Results of Operations for the Nine Months Ended September 30, 2014 and 2013

Pretax income depends primarily on the volume of Card Member receivables and loans purchased, the discount factor used to determine purchase price, interest earned, interest expense and collectability of Card Member receivables and loans purchased.

Credco’s consolidated net income decreased $104 million or 28 percent for the nine months ended September 30, 2014 as compared to the same period in 2013. The year-over-year decrease is primarily due to lower income tax benefit, higher provision for losses, lower discount revenues earned from purchased Card Member receivables and loans and lower interest income from affiliates, partially offset by lower interest expense.

 

16


The following table summarizes the changes attributable to the increase (decrease) in key revenue and expense accounts for the nine months ended September 30:

 

                                           

 

 

(Millions)

       2014        2013   

Discount revenue earned from purchased Card Member receivables and loans:

      

Volume of receivables and loans purchased

     $ 9      $ 33    

Discount rates

       (56     (5)   
    

 

 

   

 

 

 

Total

     $ (47   $ 28    
    

 

 

   

 

 

 

Interest income from affiliates:

      

Average loans to affiliates and other

     $ 53      $   

Interest rates

       (73     (73)   
    

 

 

   

 

 

 

Total

     $ (20   $ (65)   
    

 

 

   

 

 

 

Other interest income:

      

Average deposits outstanding

     $ (1   $ (3)   

Interest rates

              (1)   
    

 

 

   

 

 

 

Total

     $ (1   $ (4)   
    

 

 

   

 

 

 

Finance revenue:

      

Average Card Member loans outstanding

     $ 1      $   

Interest rates

       1        (1)   
    

 

 

   

 

 

 

Total

     $ 2      $   
    

 

 

   

 

 

 

Interest expense:

      

Average debt outstanding

     $ 30      $   

Interest rates

       (100     (97)   
    

 

 

   

 

 

 

Total

     $ (70   $ (95)   
    

 

 

   

 

 

 

Interest expense to affiliates:

      

Average debt outstanding

     $      $   

Interest rates

       (1     (11)   
    

 

 

   

 

 

 

Total

     $ (1   $ (10)   
    

 

 

   

 

 

 

 

 

Discount revenue earned from purchased Card Member receivables and loans

Discount revenue decreased 11 percent or $47 million to $386 million for the nine months ended September 30, 2014, as compared to $433 million for the same period in 2013. This change was primarily driven by a 3 basis points decrease in the discount rate charged on Card Member receivables and loans, partially offset by a 2 percent or $3 billion increase in net volume of purchased receivables and loans, which were $167 billion and $164 billion for the nine months ended September 30, 2014 and 2013, respectively.

Interest income from affiliates

Interest income from affiliates decreased 6 percent or $20 million to $296 million for the nine months ended September 30, 2014, as compared to $316 million for the same period in 2013. This change was primarily driven by a decrease of 71 basis points in the annualized effective interest rate charged to affiliates to 2.90 percent for the nine months ended September 30, 2014 as compared to 3.61 percent for the same period in 2013, partially offset by an increase in average loan balances with affiliates by 17 percent or $1.9 billion to $13.6 billion for the nine months ended September 30, 2014 as compared to $11.7 billion for the same period in 2013.

Other interest income

Other interest income decreased by $1 million to $1 million for the nine months ended September 30, 2014 primarily driven by lower average deposit balances during 2014.

 

17


Finance revenue

Finance revenue increased 6 percent or $2 million to $36 million for the nine months ended September 30, 2014, as compared to $34 million for the same period in 2013. This change was primarily driven by an increase in the average Card Member loan balance outstanding during 2014.

Provisions for losses

Provisions for losses increased 40 percent or $43 million to $151 million for the nine months ended September 30, 2014, as compared to $108 million for the same period in 2013. This change was primarily driven by reserve builds for the nine months ended September 30, 2014, driven by higher average Card Member receivables, as compared to reserve releases for the same period in 2013 and higher net write-offs during the nine months ended September 30, 2014.

Interest expense

Interest expense decreased 15 percent or $70 million to $390 million for the nine months ended September 30, 2014, as compared to $460 million for the same period in 2013. This change was primarily driven by a decrease in annualized effective interest rates on average debt outstanding by 55 basis points to 2.16 percent for the nine months ended September 30, 2014, from 2.71 percent for the same period in 2013, partially offset by increase in average debt outstanding by $1.5 billion for the nine months ended September 30, 2014, as compared to the same period in 2013.

Interest expense to affiliates

Interest expense to affiliates decreased 17 percent or $1 million to $5 million for the nine months ended September 30, 2014, as compared to $6 million for the same period in 2013. This change was primarily driven by a decrease in the annualized effective interest rate on average debt to affiliates outstanding by 2 basis points to 14 basis points for the nine months ended September 30, 2014 from 16 basis points for the same period in 2013.

Other, net

The benefit recorded in Other, net increased $4 million to a benefit of $76 million for the nine months ended September 30, 2014, from a benefit of $72 million for the same period in 2013. This change was primarily driven by an increase in fair value hedge ineffectiveness gain of $11 million partially offset by a $5 million decrease in the forward points gain generated by foreign exchange forward contracts. Credco uses foreign exchange forward contracts to manage foreign exchange risk for certain cross-currency funding activities. At inception, the difference between the spot rate and the contractual forward rate, referred to as the forward points, generates gains (or losses) as a component of the derivative contract’s valuation.

Income taxes

The effective tax rates for the nine months ended September 30, 2014 and 2013 were (6.0) percent and (30.0) percent, respectively. The tax rates in each of the periods primarily reflect the favorable impact of the tax benefit related to Credco’s ongoing funding activities outside the United States as well as the impact of prior years’ tax items.

Card Member Receivables and Card Member Loans

As of September 30, 2014 and December 31, 2013, Credco owned $17.1 billion and $14.5 billion 1, respectively, of gross Card Member receivables. Card Member receivables represent amounts due on American Express charge card products and are recorded at the time they are purchased from the seller. Included in Card Member receivables are Credco Receivables Corporation’s (CRC) purchases of the participation interests from American Express Receivables Financing Corporation VIII LLC (RFC VIII) in conjunction with TRS’ securitization program. As of September 30, 2014 and December 31, 2013, CRC owned approximately $4.8 billion and $2.5 billion, respectively, of such participation interests.

Gross Card Member receivables owned as of September 30, 2014 increased approximately $2.6 billion from December 31, 2013, primarily as a result of an increase in Card Member receivables purchased driven by an increase in the seller’s interest in the American Express Issuance Trust II (the Charge Trust).

As of September 30, 2014 and December 31, 2013, Credco owned gross Card Member loans totaling $356 million and $523 million 2, respectively. These loans represent revolving amounts due on American Express lending card products.

 

 

  1

Includes Card Member receivables purchased from the American Express joint ventures. However, in the third quarter of 2014, Credco terminated its agreements to purchase Card Member receivables from these joint ventures.

  2

Includes Card Member loans purchased from the American Express joint ventures. However, in the third quarter of 2014, Credco terminated its agreements to purchase Card Member loans from these joint ventures.

 

18


The following table summarizes selected information related to the Card Member receivables portfolio as of or for the nine months ended September 30:

 

                                         

 

 

(Millions, except percentages)

       2014        2013   

Total gross Card Member receivables (a)(b)

     $ 17,146      $ 17,005   

Loss reserves – Card Member receivables

     $ 98      $ 85   

Loss reserves as a % of receivables

       0.57     0.50

Average life of Card Member receivables (# in days) (c)

       29        29   

U.S. Consumer and Small Business gross Card Member receivables

     $ 4,822      $ 4,987   

30 days past due as a % of total

       1.02     1.10

Average receivables

     $ 4,732      $ 5,426   

Write-offs, net of recoveries

     $ 40      $ 44   

Net write-off rate (d)

       1.13     1.08

International Card Services gross Card Member receivables

     $ 1,244        (e

30 days past due as a % of total

       1.61 %      (e

Average receivables

     $ 1,225        (e

Write-offs, net of recoveries

     $ 18        (e

Net write-off rate (d)

       1.96 %      (e

Global Commercial gross Card Member receivables

     $ 11,080        (e

90 days past billing as a % of total

       0.79 %      (e

Write-offs, net of recoveries

     $ 73        (e

Net loss ratio (f)

       0.07 %      (e

International and Global Commercial gross Card Member receivables

       (e   $ 12,018   

90 days past billing as a % of total

       (e     0.83

Write-offs, net of recoveries

       (e   $ 72   

Net loss ratio (f)

       (e     0.06

 

 

 

  (a)

As of September 30, 2014, $223 million of Card Member credit balances were reclassified from Card Member receivables to due to affiliates.

 

  (b)

In the third quarter of 2014, Credco terminated its agreements to purchase Card Member receivables from the American Express joint ventures.

 

  (c)

Represents the average life of Card Member receivables owned by Credco, based upon the ratio of the average amount of both billed and unbilled receivables owned by Credco at the end of each month, during the period indicated, to the volume of Card Member receivables purchased by Credco.

 

  (d)

Credco’s net write-off rate represents the amount of Card Member receivables owned by Credco that are written off, net of recoveries, expressed as a % of the average Card Member receivables balances in each of the periods indicated.

 

  (e)

Beginning in first quarter 2014, a split between International Card Services (ICS) and Global Commercial Services (GCS) for Card Member receivables has been provided to supplement the presentation of Card Member receivables aging for ICS. Historically 90 days past billing as a % of total, write-offs, net of recoveries and net loss ratio were presented for ICS and GCS. Beginning in first quarter 2014, as a result of system enhancements, 30 days past due as a % of total and net write-off rate have been presented for ICS.

 

  (f)

Credco’s net loss ratio represents the amount of Card Member receivables owned by Credco that are written off, net of recoveries, expressed as a % of the volume of Card Member receivables purchased by Credco in each of the periods indicated.

 

19


Loans to Affiliates and Other

These loans represent floating-rate interest-bearing borrowings by other wholly owned subsidiaries of TRS and the American Express joint ventures.

The components of loans to affiliates and other as of September 30, 2014 and December 31, 2013 were as follows:

 

                                         

 

 

(Millions)

       2014        2013   

American Express Company

     $ 5,406      $ 819   

American Express Services Europe Limited

       3,215        3,185   

American Express Australia Limited

       2,727        3,119   

Amex Bank of Canada

       2,584        3,161   

American Express Co. (Mexico) S.A. de C.V.

       540        535   

American Express Bank (Mexico) S.A.

       417        415   

American Express International, Inc.

       101        106   

Amex (Saudi Arabia) Limited

       67          

Alpha Card S.C.R.L./C.V.B.A.

       13          
    

 

 

   

 

 

 

Total  (a)

     $ 15,070      $ 11,340   
    

 

 

   

 

 

 

 

 

 

  (a)

As of September 30, 2014, Credco had $15.1 billion of outstanding loans to affiliates and other, of which approximately $5.4 billion were collateralized by the underlying Card Member receivables and Card Member loans transferred with recourse, $9.6 billion were uncollateralized loans primarily with affiliated banks and American Express Company and the remaining $80 million represents loans to the American Express joint ventures. As of December 31, 2013, Credco had $11.3 billion of outstanding loans to affiliates, of which approximately $5.8 billion were collateralized by the underlying Card Member receivables and Card Member loans transferred with recourse and the remaining $5.5 billion were uncollateralized loans primarily with affiliated banks and American Express Company.

Due from/to Affiliates

As of September 30, 2014 and December 31, 2013, amounts due from affiliates were $2.2 billion and $3.4 billion, respectively. As of September 30, 2014 and December 31, 2013, amounts due to affiliates were $1.1 billion and $1.3 billion, respectively. These amounts relate primarily to timing differences from the purchase of Card Member receivables, net of remittances from TRS, as well as from operating activities.

Short-term Debt to Affiliates

Short-term debt to affiliates consists primarily of master note agreements for which there is no stated term. Credco does not expect any changes to its short-term funding strategies with affiliates.

Components of short-term debt to affiliates as of September 30, 2014 and December 31, 2013 were as follows:

 

                                         

 

 

(Millions)

       2014        2013   

AE Exposure Management Ltd.

     $ 2,612      $ 2,541   

American Express Europe LLC

       1,228        261   

American Express Swiss Holdings

       416        419   

American Express Holdings (Netherlands) C.V.

       188        188   

Amex Card Services Company

       146        51   

Amex Funding Management (Europe) Limited

       38          

National Express Company, Inc.

              123   
    

 

 

   

 

 

 

Total

     $ 4,628      $ 3,583   
    

 

 

   

 

 

 

 

 

 

20


Service Fees to Affiliates

Certain affiliates do not explicitly charge Credco a servicing fee for the servicing of receivables purchased. Instead Credco receives a lower discount rate on the receivables sold to Credco than would be the case if servicing fees were charged. If a servicing fee had been charged by these affiliates from which Credco purchases receivables, fees to affiliates for servicing receivables would have been approximately $165 million3 and $100 million for the nine months ended September 30, 2014 and 2013, respectively. Correspondingly, discount revenue would have increased by approximately the same amounts in these periods.

Consolidated Capital Resources and Liquidity

Credco’s balance sheet management objectives are to maintain:

 

   

A broad, deep and diverse set of funding sources to finance its assets and meet operating requirements; and

 

   

Liquidity programs that enable Credco to continuously meet expected future financing obligations and business requirements for at least a 12-month period, even in the event it is unable to continue to raise new funds under its traditional funding programs during a substantial weakening in economic conditions.

Funding Strategy

American Express has in place an enterprise-wide funding policy. The principal funding objective is to maintain broad and well-diversified funding sources to allow American Express, including Credco, to meet its maturing obligations, cost-effectively finance current and future asset growth in its global businesses as well as to maintain a strong liquidity profile. The diversity of funding sources by type of debt instrument, by maturity and by investor base, among other factors, provides additional insulation from the impact of disruptions in any one type of debt, maturity or investor. The mix of Credco’s funding in any period will seek to achieve cost efficiency consistent with both maintaining diversified sources and achieving its liquidity objectives. Credco’s funding strategy and activities are integrated into its asset-liability management activities.

Credco, like many financial services companies, has historically relied on the debt capital markets to fulfill a substantial amount of its funding needs. It has a variety of funding sources available to access the debt capital markets, including senior unsecured debentures and commercial paper. One of the principal tenets of Credco’s funding strategy is to issue debt with a wide range of maturities to distribute its refinancing requirements across future periods. Credco continues to assess its funding needs and investor demand and could change the mix of its existing sources as well as add new sources to its funding mix. Credco’s funding plan is subject to various risks and uncertainties, such as the disruption of financial markets or market capacity and demand for securities offered by Credco as well as any regulatory changes or changes in its long-term or short-term credit ratings. Many of these risks and uncertainties are beyond Credco’s control.

American Express seeks to raise funds to meet the financing needs, including seasonal and other working capital needs, of itself and all of its subsidiaries, including Credco, while also seeking to maintain sufficient highly liquid assets to meet net cash flow needs under stressed environments, which include the scheduled maturities of funding obligations.

Credco’s funding strategy is designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Dominion Bond Rating Services (DBRS), Fitch Ratings (Fitch), Moody’s Investor Services (Moody’s) and Standard & Poor’s (S&P). Such ratings help support Credco’s access to cost-effective unsecured funding as part of its overall funding strategy.

 

  3

Beginning the third quarter of 2014, Credco has enhanced the methodology to estimate the service fees applicable on the Card Member receivables and loans portfolio purchased.

 

21


Credco’s short-term ratings, long-term ratings and outlook as disclosed by the four major credit rating agencies are as follows:

 

 

Credit

Agency

    

Short-Term

Ratings

 

Long-Term

Ratings

 

Outlook

DBRS

    

R-1

(middle)

 

A

(high)

  Stable

Fitch

     F1   A+   Stable

Moody’s

     Prime-1   A2   Stable

S&P

     A-2   A-   Stable

 

Downgrades in the ratings of Credco’s unsecured debt could result in higher funding costs, as well as higher fees related to borrowings under its unused lines of credit. Declines in credit ratings could also reduce Credco’s borrowing capacity in the unsecured term debt and commercial paper markets. The overall level of the funding provided by Credco to other American Express affiliates is impacted by a variety of factors, among them Credco’s ratings. To the extent that Credco is subject to a higher cost of funds, whether due to an adverse ratings action or otherwise, the affiliates could continue to use, or could increase their use of, alternative sources of funding for their receivables that offer better pricing.

Short-term Funding Programs

Credco’s issuance and sale of commercial paper is primarily utilized for working capital needs. The amount of short-term borrowings issued in the future will depend on Credco’s funding strategy, its needs and market conditions. As of September 30, 2014 and December 31, 2013, Credco had nil and $0.2 billion, respectively, of commercial paper outstanding. The average commercial paper outstanding was nil and $0.1 billion during the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively.

Long-term Debt Programs

Long-term debt is raised through the offering of debt securities in the United States and capital markets outside the United States. Long-term debt is generally defined as any debt with an original maturity greater than 12 months.

Credco had the following long-term debt outstanding as of September 30, 2014 and December 31, 2013:

 

                                         

 

 

(Billions)

       2014        2013   

Long-term debt outstanding

     $ 26.6      $ 21.7   

Average long-term debt (a)

     $ 24.1      $ 22.3   

 

 

 

  (a)

Average long-term debt outstanding during the nine and twelve months ended September 30, 2014 and December 31, 2013, respectively.

Credco has the ability to issue debt securities under shelf registrations filed with the Securities and Exchange Commission (SEC). The latest shelf registration statement filed with the SEC is for an unspecified amount of debt securities. As of September 30, 2014 and December 31, 2013, Credco had $19.6 billion and $14.2 billion, respectively, of debt securities outstanding, issued under the SEC registration statement. During the third quarter of 2014, Credco issued $2.9 billion dual-tranche senior unsecured notes consisting of (i) $1.5 billion of fixed-rate senior notes with a maturity of five years at a coupon of 2.25 percent, (ii) $0.4 billion of floating-rate senior notes with a maturity of five years at a rate of 3-month LIBOR plus 49 basis points, (iii) $0.7 billion of fixed-rate senior notes with a maturity of three years at a coupon of 1.55 percent and (iv) $0.3 billion of floating-rate senior notes with a maturity of three years at a rate of 3-month LIBOR plus 30 basis points.

Credco has established a program for the issuance of debt instruments outside the United States, which is listed on the Luxembourg Stock Exchange. The prospectus for this program expired in February 2013. Credco expects to renew the prospectus as management deems appropriate. As of both September 30, 2014 and December 31, 2013, $1.2 billion of debt instruments were outstanding under this program.

Credco has also established a program in Australia for the issuance of debt securities of up to approximately $5.3 billion (AUD $6.0 billion). During the nine months ended September 30, 2014, no notes were issued under this program. As of both September 30, 2014 and December 31, 2013, the entire amount of approximately $5.3 billion of notes were available for issuance under this program and the outstanding notes were nil as of such dates.

 

22


Credco has also established a medium-term note program in Canada providing for the issuance of notes by American Express Canada Credit Corporation (AECCC), an indirect wholly owned subsidiary of Credco. The prospectus for this program expired in September 2014. Credco expects to renew the prospectus as management deems appropriate. All notes issued by AECCC under this program are guaranteed by Credco. For the nine months ended September 30, 2014, no notes were issued under this program. As of September 30, 2014 and December 31, 2013, AECCC had $1.8 billion and $2.2 billion, respectively, of medium-term notes outstanding under this program. The financial results of AECCC are included in the consolidated financial results of Credco.

The covenants of debt instruments issued by Credco impose the requirement that Credco maintain a minimum consolidated net worth of $50 million, which limits the amount of dividends Credco can pay to its parent. As of September 30, 2014, management believed Credco was in compliance with all restrictive covenants contained in its debt agreements. During the nine months ended September 30, 2014 and 2013, Credco paid $255 million and $350 million, respectively, of cash dividends to TRS. The decrease in the amount of dividends is driven by lower levels of net income from periods prior to the third quarter of 2014 as compared to net income from comparable periods prior to the third quarter of 2013. When considering the amount of dividends it pays, Credco takes into account the amount of capital required to maintain capital strength, support business growth, and meet the expectations of debt investors. To the extent excess capital is available, it may be distributed to TRS, Credco’s parent company, via dividends. There are no significant restrictions on the ability of Credco to obtain funds from its subsidiaries by dividend or loan. Additionally, there are no limitations on the amount of debt that can be issued by Credco, provided it maintains the minimum required fixed charge coverage ratio of 1.25.

Liquidity Management

General principles and the overall framework for managing liquidity risk across American Express on an enterprise-wide basis are set out in American Express’ Liquidity Risk Policy. The liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. American Express and its subsidiaries, including Credco, maintain liquidity sources in amounts sufficient to meet business requirements and expected future financial obligations for a period of at least twelve months, in the event they are unable to raise new funds under their regular funding programs during a substantial weakening in economic conditions.

Credco manages this objective by regularly accessing capital through its various funding programs, as well as by maintaining a variety of contingent sources of cash and financing, such as access to securitizations of Card Member receivables through sales of receivables to TRS for securitization by RFC VIII and the Charge Trust, as well as committed bank facilities.

American Express, including Credco, incurs and accepts liquidity risk arising in the normal course of its activities. This liquidity risk exposure can arise from a variety of sources, and thus the enterprise-wide liquidity management strategy includes a variety of parameters, assessments and guidelines, including, but not limited to:

 

   

Maintaining a diversified set of funding sources (refer to Funding Strategy section for more details);

 

   

Maintaining unencumbered liquid assets and off-balance sheet liquidity sources available to meet obligations;

 

   

Projecting cash inflows and outflows from a variety of sources and under a variety of scenarios, including contingent liquidity exposures such as collateral requirements for derivative transactions; and

 

   

Trade-offs between the risk of insufficient liquidity and profitability are incorporated into the Internal Capital Adequacy Assessment Process.

As of September 30, 2014, Credco had cash and cash equivalents of approximately $80 million. In addition to its actual holdings of cash and cash equivalents, Credco maintains access to additional liquidity, in the form of cash and cash equivalents held by certain affiliates, through intercompany loan agreements.

 

23


Committed Bank Credit Facilities

Credco maintained committed syndicated bank credit facilities as of September 30, 2014 of $7 billion through facilities in the United States and Australia, of which the amount outstanding (drawn) was $4 billion.

Credco’s total committed bank credit facilities expire as follows:

 

                    

 

 

(Billions)

    

 

 

 

2016

     $ 2.2   

2017

       4.8   
    

 

 

 

Total

     $ 7.0   
    

 

 

 

 

 

The availability of the credit lines is subject to Credco’s compliance with certain financial covenants that require maintenance of a 1.25 ratio of earnings to fixed charges. The ratio of earnings to fixed charges for Credco was 1.63 for the nine months ended September 30, 2014. The ratio of earnings to fixed charges for American Express for the nine months ended September 30, 2014 was 6.03.

The committed bank credit facilities do not contain material adverse change clauses, which might otherwise preclude borrowing under the credit facilities, nor are they dependent on Credco’s credit rating.

 

24


Cautionary Note Regarding Forward-Looking Statements

Various statements have been made in this Quarterly Report on this Third Quarter 2014 Form 10-Q that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be made in Credco’s other reports filed with or furnished to the SEC and in other documents. In addition, from time to time, Credco, through its management, may make oral forward-looking statements. Forward-looking statements are subject to risks and uncertainties, including those identified above and below, which could cause actual results to differ materially from such statements. The words “believe,” “expect,” “estimate,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar expressions are intended to identify forward-looking statements. Credco cautions readers that the risk factors described above and in Credco’s Annual Report on Form 10-K for the year ended December 31, 2013 and other factors described below are not exclusive. There may also be other risks that Credco is unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Credco undertakes no obligation to update or revise any forward-looking statements.

Factors that could cause actual results to differ materially from Credco’s forward-looking statements include, but are not limited to:

 

   

credit trends, which will depend in part on the economic environment, including, among other things, the housing market and the rates of bankruptcies, which can affect spending on card products and debt payments by individual and corporate customers;

 

   

the effectiveness of Credco’s risk management policies and procedures, including Credco’s ability to accurately estimate the provisions for losses in Credco’s outstanding portfolio of Card Member receivables and loans, and operational risk;

 

   

fluctuations in foreign currency exchange rates;

 

   

negative changes in Credco’s credit ratings, which could result in decreased liquidity and higher borrowing costs;

 

   

changes in laws or government regulations affecting American Express’ business, including the potential impact of regulations adopted by federal bank regulators relating to certain credit and charge card practices, and the impact of the Dodd-Frank Reform Act, which is subject to further rulemaking, the implications of which are not fully known at this time;

 

   

the effect of fluctuating interest rates, which could affect Credco’s borrowing costs;

 

   

the impact on American Express’ business resulting from continuing geopolitical uncertainty;

 

   

the impact on American Express’ business that could result from litigation such as class actions or proceedings brought by governmental and regulatory agencies (including the lawsuit filed against American Express by the DOJ and certain states’ attorneys general);

 

   

the ability to satisfy Credco’s liquidity needs and execute on its funding plans, which will depend on, among other things, Credco’s future business growth, the impact of global economic, political and other events on market capacity, Credco’s credit ratings, demand for securities offered by Credco, performance by Credco’s counterparties under its bank credit facilities and other lending facilities, and regulatory changes; and

 

   

the potential failure of the U.S. Congress to renew legislation regarding the active financing exception to Subpart F of the Internal Revenue Code, which could increase Credco’s effective tax rate and have an adverse impact on net income.

 

25


ITEM 4. CONTROLS AND PROCEDURES

Credco’s management, with the participation of Credco’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Credco’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, Credco’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Credco’s disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in Credco’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the applicable rules and forms, and that it is accumulated and communicated to Credco’s management, including Credco’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any changes in Credco’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during Credco’s fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Credco’s internal control over financial reporting.

 

26


PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

For a discussion of Credco’s risk factors, see Part I, Item 1A. “Risk Factors” of Credco’s Annual Report on Form 10-K for the year ended December 31, 2013 (the 2013 Form 10-K). There are no material changes from the risk factors set forth in the 2013 Form 10-K. However, the risks and uncertainties that Credco faces are not limited to those set forth in the 2013 Form 10-K. Additional risks and uncertainties not presently known to Credco or that it currently believes to be immaterial may also adversely affect Credco’s business.

ITEM 5. OTHER INFORMATION

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the Exchange Act), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted outside the United States by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

A travel company that may be considered an affiliate of Credco, American Express Nippon Travel Agency, Inc. (Nippon Travel Agency), has informed American Express that during the third quarter of 2014 it obtained 15 visas from the Iranian embassy in Japan in connection with certain travel arrangements on behalf of clients. Nippon Travel Agency had negligible gross revenues and net profits attributable to these transactions. Nippon Travel Agency has informed American Express that it intends to continue to engage in this activity so long as such activity is permitted under U.S. law.

ITEM 6. EXHIBITS

The exhibits required to be filed with this report are listed on page E-1 hereof, under “Exhibit Index,” which is incorporated herein by reference.

 

27


SIGNATURES

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, thereunto duly authorized.

 

   

AMERICAN EXPRESS CREDIT CORPORATION

(Registrant)

Date: November 6, 2014

   

By

 

/s/ David L. Yowan

     

David L. Yowan

     

Chief Executive Officer

Date: November 6, 2014

   

By

 

/s/ Kimberly R. Scardino

     

Kimberly R. Scardino

     

Senior Vice President and Chief Accounting Officer

 

28


EXHIBIT INDEX

Pursuant to Item 601 of Regulation S-K

 

Exhibit
No.
 

Description

  

How Filed

12.1   Computation in Support of Ratio of Earnings to Fixed Charges of American Express Credit Corporation.    Electronically filed herewith.
12.2   Computation in Support of Ratio of Earnings to Fixed Charges of American Express Company.    Electronically filed herewith.
31.1   Certification of David L. Yowan, Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.    Electronically filed herewith.
31.2   Certification of Anderson Y. Lee, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.    Electronically filed herewith.
32.1   Certification of David L. Yowan, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    Electronically filed herewith.
32.2   Certification of Anderson Y. Lee, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    Electronically filed herewith.
101.INS   XBRL Instance Document    Electronically filed herewith.
101.SCH   XBRL Taxonomy Extension Schema Document    Electronically filed herewith.
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document    Electronically filed herewith.
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document    Electronically filed herewith.
101.LAB   XBRL Taxonomy Extension Label Linkbase Document    Electronically filed herewith.
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document    Electronically filed herewith.

 

E-1