Business Unit Results
Travel Related Services
Travel Related Services (TRS) - which includes our card, travel, merchant and network businesses, as well as our Travelers Cheque Group - reported net income for 2001 of $1.46 billion, down 24 percent from $1.93 billion in the prior year. Excluding TRS' portion of the restructuring charges and September 11-related charges, the unit's net income for the full year would have been $1.78 billion, down 8 percent from last year.
TRS' net revenues rose 4 percent in 2001, as growth in loans and fee revenues were partly offset by a 16 percent decline in travel commissions and fees. Billed business, or the total amount spent on American Express® Cards, was up slightly in 2001 as higher consumer card spending in the retail and "everyday" categories was largely offset by lower Corporate Card spending in the travel and entertainment sector, particularly after September 11. Net finance charge revenues rose 32 percent, due to growth in loan balances and wider net interest yields. This increase reflected a smaller percentage of loan balances on introductory rates and the benefit of declining interest rates during the year. Travel sales declined 24 percent due to the effects of the September 11 terrorist attacks and the weaker corporate travel environment.
TRS' provision for losses grew faster than its receivables largely as a result of an increase in U.S. lending write-off rates and delinquencies, reflecting higher unemployment and the overall economic environment.
American Express Financial Advisors
AEFA reported net income for 2001 of $52 million, down from $1.03 billion a year ago. Excluding its portion of the restructuring charges and the one-time September 11 charges, AEFA's net income would have been $130 million, down 87 percent from last year. Reflected in these results were the previously mentioned charges to write down high-yield securities and rebalance the risk profile of AEFA's investment portfolio.
AEFA's net revenues for 2001 decreased 33 percent to $2.8 billion, reflecting weakness in equity markets and narrower spreads in the investment portfolio. The weakened equity markets led to lower asset levels and lower sales of investment products. As a result, assets owned, managed and administered declined 8 percent to $253.3 billion. Management and distribution fees fell 13 percent. Mutual fund sales, including proprietary and non-proprietary funds, decreased 24 percent and sales of our annuity products decreased 4 percent. Net new money flowing into managed accounts continued to remain positive, however, despite the difficult economic environment.
American Express Bank
AEB reported a 2001 net loss of $13 million in 2001, compared with net income of $29 million a year ago. Excluding its portion of the restructuring charges, AEB's net income would have been $52 million, up 82 percent from the prior year.
The Bank's results for 2001 reflect a 10 percent growth in revenues, which were driven by higher net interest income, as well as higher foreign exchange and other revenue. These improvements were partially offset by lower commissions and fees. AEB's results benefited from lower funding costs and lower operating expenses that resulted from ongoing reengineering efforts. However, these benefits were offset in part by higher provisions for losses, primarily due to higher personal loan volumes.
The Bank's overall results were driven by strong performance in both the Personal Financial Services (PFS) and Private Banking groups, which together accounted for 46 percent of AEB's total 2001 net revenue, compared with 37 percent in 2000. Private Banking client holdings rose 19 percent and client volumes in PFS increased 9 percent. The Private Bank's client holdings stood at $12.4 billion at year-end.
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