American Express (NYSE: AXP) is coming out with some financial updates after the recent market turmoil has taken the stock to 5-year lows.  It said that that year it has increased its surplus capital above normal historical levels by halting its share buybacks, which enabled it to retain a larger portion of the capital and funds generated from ongoing trade operations.  Its current 2008 funding plan targets about $27 billion of term debt sales, which includes off-balance sheet securitizations of credit card loans for the year. Through September 30 it has raised approximately $23 billion or 85% of that total.

The current funding target of $27 billion for 2008 is about $5 billion
lower than what was reported final quarter to reflect slower expected
growth in the Company’s credit card loans outstanding and reductions in
net operating cash needs.   Amex plus says it has convinced all
maturing obligations and funded its growth by accessing a variety of
sources, including long- and short-term debt, asset securitizations and
bank deposits. It is plus having to pay higher spreads than during the
prior several years.  The company gave a table of upcoming maturities of long-term debt and
debt issued in connection with off-balance sheet securitizations:

QUARTER ENDING   LONG-TERM DEBT OFF-BALANCE SHEET   TOTAL MATURITIES
                                              MATURITIES               MATURITIES
December 31, 2008           $3.6 billion                          –                             $3.6 billion
March 31, 2009                   $2.3 billion                   $1.5 billion                   $3.8 billion
June 30, 2009                     $7.2 billion                   $0.6 billion                   $7.8 billion
September 30, 2009          $2.9 billion                   $2.7 billion                   $5.6 billion
December 31, 2009           $2.9 billion       

                   –                            $2.9 billion

Amex is additionally listing its various sources of cash including:

• cash and cash equivalents of $12 billion at September 30, 2008 for
  liquidity aspirations, which excludes cash and equivalents on hand to fund
  day-to-day operations,
• liquidity investment portfolio of U.S. Treasury and government agency securities of $5 billion,
• an undrawn committed facility to purchase securitized credit card receivables of $5 billion, and
• undrawn committed bank credit facilities of $9 billion.

It is additionally noting that its banking operations have the capability to
access to the Federal Reserve Bank reduction window.  The Federal
Reserve has indicated that credit card receivables are a anatomy of
qualifying collateral for secured borrowings made through the reduction window or its Term Auction Facility (TAF) program.

The Company has approximately $45 billion in U.S. credit card loans and
charge card receivables that could be sold by day through its
existing securitization trusts, its undrawn committed securitization
facility referred to above or pledged in return for secured borrowings
to supply further liquidity.

American Express said it believes that it would have the liquidity to
satisfy all maturing obligations and fund normal commerce operations
for at least a 12-month period whether access to the secured and unsecured
fixed income capital markets were interrupted.

Shares are down nearly 10% nowadays at levels just under $28.00.  The DJIA
component was briefly trading above $40.00 towards the end of
September.  Its 52-week trading range had been $30.50 to $63.63.

With the DJIA down some 600 points, the company’s adequate capital and lack of any massive scares inside the company is still falling on deaf ears.  Fear and paralysis are currently winning out by trying to analyze the facts coming out of companies.

Jon C. Ogg
October 6, 2008