American Express Co. devoted much of its efforts last year to foundation building that it believes should pay off in 2005. Not that 2003 was slow or that 2004 is looking weak, according to Kenneth I. Chenault, AmEx chief executive.
  But just wait until next year.
  AmEx announced in January that it would team with MBNA Corp. to market MBNA-issued American Express cards in the U.S., Canada, Spain and the United Kingdom ("Behind the AmEx/MBNA Deal," March). The U.S. part of the deal isn't likely to get off the ground until late this year. AmEx raised hopes for 2005 further when it announced in March that it would soon enter the Chinese market in a card-issuing alliance with the Industrial and Commercial Bank of China ("China Opens Up to Foreign Issuers," page 58).
  While shareholders prepare for AmEx's head-on competition with MasterCard International and Visa USA, the company made most of them happy in 2003.
  American Express's card and travel-agency subsidiary, Travel Related Services, saw net earnings of $2.43 billion, a rise of nearly 14% from 2002's $2.14 billion. Net TRS revenues rose 8% to $19.2 billion.
  The results were due in part to greater organic growth, the addition of new customers and increasing assets per customer, Chenault said in comments to analysts. That was reflected in the 9% rise in spending per card, reaching $8,367, up from $7,645 in 2002.
  Major new merchants signed by AmEx included quick-service restaurant chain Wendy's International Inc., BJ's Wholesale Club Inc., and the premium payment business of insurance giant American International Group Inc.
  Charge volume rose 13% worldwide to $352.2 billion from 2002's $311.4 billion. In the U.S., charge volume totaled $262.1 billion, up 12% from $234.1 billion in 2002. The number of U.S. cards rose 4% to 36.4 million.
  The average discount rate dropped to 2.59% of a transaction, down five basis points from 2.64%. However, the rise in charge volume drove discount revenue up 11% to $8.8 billion.
  Card fees brought in $1.8 billion, up 6%. The average fee per card was $35, up slightly from 2002's $34. Net finance charge revenues came to $2.0 billion, up 11% from $1.8 billion. The U.S. lending portfolio grew 12% to $38.5 billion in receivables.
  The value of travelers checks sold dropped 13% from $22.1 billion to $19.2 billion. Though travelers checks once represented a core AmEx product, Chenault said that AmEx's newly launched gift card and TravelFunds Card are changing this unit.
  American Express added further heft to its travel business last year with the acquisition of Rosenbluth International, a corporate travel-management firm with annual volume exceeding $3 billion.
  On the expense side of the ledger, spending on marketing, promotions, rewards and cardholder services hit $3.8 billion, up 26% from $3.0 billion in 2002.
  Credit quality improved as the provision for charge card losses dropped 11% from $960 million to $853 million. The net write off-rate for managed loans was 5.1% of receivables, down from 5.9% in 2002. Chargeoffs dropped from $903 million to $817 million, a 10% decline.
  American Express's Global Network Services unit will have oversight of the partnership and the issuing deal in China. GNS has 80 partnerships with banks in 90 countries that issue AmEx cards locally.
  Looking forward, the main event for AmEx in 2004 should be the deal with MBNA. If nothing else, it promises to be interesting.

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