AmEx Embraces Its Partner Banks

  American Express Co. ended 2005 by signing card-issuing partnerships with Visa and MasterCard issuers while at the same time transforming itself into a pure-play card issuer.
  Chairman and CEO Kenneth I. Chenault announced in January the issuer had signed card-issuing deals with Citibank, Bank of America, GE Consumer Finance, Juniper Financial, Barclays, USAA Federal Savings Bank and HSBC. The banks agreed to issue cobranded AmEx cards over the company's global network.
  Some arm-twisting was needed, however.
  In November 2004, AmEx filed a federal lawsuit against several large issuing members of Visa USA and MasterCard International, charging they violated U.S. antitrust laws by collectively refusing to form card-issuing partnerships with AmEx.
  AmEx was on firm ground with its argument. Earlier, U.S. district and appeals courts had struck down Visa and MasterCard "exclusionary rules" that prohibited member banks from issuing AmEx cards. And in October 2004, the U.S. Supreme Court refused to review the lower-court decisions, making the district court ruling law.
  MBNA Corp., seeing writing on the wall, announced in January 2004 that it would issue a cobranded AmEx card. AmEx dropped from the lawsuit MBNA and other banks that similarly agreed to issue AmEx cards.
  When another issuer becomes an AmEx partner, the other company issues the cobranded cards, retains the receivables and manages customer service, but the cards go over AmEx's network.
  Meanwhile, AmEx continued to rack up some impressive numbers despite suffering the effects of the nation's new bankruptcy law, which took effect in October.
  For all of 2005, AmEx reported net income of $3.73 billion, up 8.1% from $3.45 billion in 2004. Revenues for the year totaled $24.26 billion, up 10.5% from $21.96 billion in 2004.
  Individually, AmEx's U.S. Card Services unit reported 2005 revenues of $11.94 billion, up 14.9% from $10.39 billion in 2004. Average basic cardholder spending in 2005 was $10,996, up 8.7% from $10,118 in 2004.
  Revenues within AmEx's International Card & Global Commercial Services unit last year totaled $9.03 billion, up 7.2% from $8.42 billion in 2004. Average basic cardholder spending outside the United States last year was $9,641, up 12% from $8,610 in 2004.
  AmEx's card billed business, or annual charge volume, last year in the U.S. was $354 billion, up 16.1% from $304.8 billion in 2004. Outside the U.S., card billed business last year totaled $130 billion, an increase of 17.1% from $111 billion in 2004.
  Last year in the U.S., AmEx had 43 million cards in force, a 7.7% jump from 39.9 million in 2004. Outside the country, there were 28 million AmEx cards issued as of the end of 2005, up 9.8% from 25.5 million in December 2004. AmEx had 71 million total cards issued worldwide as of the end of last year, an 8.6% increase from 65.4 million at the end of 2004.
  Worldwide receivables were $34.2 billion at the end of 2005, up 10% from $31.1 billion in 2004. Total loans on a managed basis in 2005 were $54.3 billion, up 15% from $47.2 billion in 2004.
  To persuade consumers to move AmEx cards to the top of their wallets, the issuer, already a heavy marketer, spent even more in 2005 on marketing, promotions, rewards and card services. Last year, AmEx spent a record $1.58 billion toward those efforts, an 11.3% increase from $1.42 billion in 2004.
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