American Express Co. (NYSE: AXP) is probably feeling a little lucky today.  On a day that the market is lower its shares are only down 2% after the company disclosed in an SEC filing that its write-offs crossed the 10% mark to 10.1% on the managed basis and 10.4% on the owned basis as of April 30. These are essentially the same trends we have seen at Wells Fargo & Co. (NYSE: WFC) and at Citigroup, Inc. (NYSE: C).

This number is up from 8.8% (managed) and 8.6% ( owned) in March, although April’s numbers included some help from cardmember loans that had been sold to third parties.  Despite this, the current delinquencies are actually coming down.

For both the owned basis and the managed basis, this rate of “30 days past due loans as a % of total” was 4.9% at April 30.  That is down from 5.1% in March and down from 5.3% in February.

The total loans on a managed basis have been coming down as you would expect (and hope) in the current climate: $57.8 billion in February, $56.5 billion in March, and $55.4 billion in April; and that is down on an average basis as well.  We have seen the same drops on an owned basis in total loans as well: $29.5 billion in February, $28.2 billion in March, and $27.1 billion in April.

On the American Express Credit Account Master Trust we have seen a drop down to $35.5 billion for the ending total principal balance and the Defaulted amount net of recoveries on an annualized basis hit 9.9% (from 9.7% in March and 9.3% in February).

American Express shares are down 2.7% at $24.05 and are only about $0.15 off the intra-day lows.  With the DJIA off 1% and with most of the big key financial lenders and banks lower, being down this amount is probably a win.

We are still looking for “declining rates of change” and that is so far what we are seeing.  The only issue to consider now after the huge run the have seen from the bounce off of March lows is that there is beginning to be the notion that the recession is peaking and going to end sooner than we would have expected just two months ago.  Wall Street and Main Street can continue to tolerate these numbers getting worse, but not forever and not at higher rates of decline.

All that considered, this bad news just might be a win at the end of the day when you take everything else into account.

When borrowers wonder why credit card companies are shrinking credit lines or raising rates unilaterally, double digit rates of charge-offs is as solid of a reason as any.

Jon C. Ogg
May 15, 2009

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