American Express Company (the Company), a bank holding company, is a leading global payments and travel company. The Company's principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. The Company's businesses are organized into two customer-focused groups, the Global Consumer Group and the Global Business-to-Business Group. The Global Consumer Group's range of products and services include charge and credit card products for consumers and small businesses worldwide primarily through its U.S. bank subsidiaries and affiliates; consumer travel services; and stored value products such as Travelers Cheques and prepaid products. The Global Business-to-Business Group offers business travel, corporate cards and other expense management products and services; network services for the Company's network partners; and merchant acquisition and merchant processing, point-of-sale, servicing and settlement and marketing products and services for merchants. The Company's various products and services are sold globally to diverse customer groups, including consumers, small businesses, middle-market companies, and large corporations. These products and services are sold through various channels including direct mail, on-line applications, targeted sales forces, and direct response advertising.

The Company's products and services generate the following types of revenue for the Company:

† Discount revenue, which is the Company's largest revenue source, represents fees charged to merchants when cardmembers use their cards to purchase goods and services on the Company's network;

† Net card fees, which represent revenue earned for annual charge card memberships;

† Travel commissions and fees, which are earned by charging a transaction or management fee for airline or other travel-related transactions;

† Other commissions and fees, which are earned on foreign exchange conversion fees and card-related fees and assessments;

† Securitization income, net, which is the net earnings related to cardmember loans financed through securitization activities;

† Other revenue, which represents insurance premiums earned from cardmember travel and other insurance programs, revenues arising from contracts with Global Network Services' (GNS) partners including royalties and signing fees, publishing revenues, and other miscellaneous revenue and fees; and

† Interest and fees on loans, which represents interest income earned on outstanding balances, card fees and balance transfer fees related to the cardmember lending portfolio.

In addition to funding and operating costs associated with these types of revenue, other major expense categories are related to marketing and reward programs that add new cardmembers and promote cardmember loyalty and spending, and provisions for anticipated cardmember credit and fraud losses.

Historically, the Company has sought to achieve a number of financial targets, on average and over time:

† Total revenues net of interest expense growth of at least 8 percent;

† Earnings per share growth of 12 to 15 percent;

† Return on average equity (ROE) of 33 to 36 percent.

In addition, assuming achievement of such financial targets, the Company has sought to return at least 65 percent of the capital it generates to shareholders as a dividend or through the repurchase of common stock.

The Company met or exceeded these targets for most of the past decade. However, during 2008 and the first quarter of 2009, its performance fell short of the targets as economic and market conditions deteriorated in many parts of the world. As long as these difficult conditions persist, it is unlikely that the Company will achieve its on average and over time financial objectives. The share repurchase program was suspended in

2008 and, as a result, the portion of capital generated that is returned to shareholders is likely to be significantly below recent levels.

When economic conditions improve, the Company believes it will be positioned, over the long term, to generate revenue and earnings growth in line with its historical target levels. However, the receipt of $3.39 billion from the Capital Purchase Program (CPP), as discussed below, along with evolving market, regulatory and rating agency expectations will likely cause the Company to maintain a higher level of capital in future years. The Company's participation in the CPP requires it to suspend its share repurchase program, except related to its benefit plans and in other limited circumstances, and not increase its dividends until the redemption of the CPP investment. Even after the anticipated redemption of the CPP investment, a capital base greater than the Company has maintained over the last several years will lead, all other things being equal, to lower future ROE. While the Company is not establishing a new target at this time, it currently believes that it will ultimately be positioned to deliver an ROE in excess of 20 percent over time. As the capital markets environment evolves and economic conditions improve, management will have greater visibility into its capital requirements. At that time, the Company will provide updated long-term ROE and capital distribution targets.

Certain reclassifications of prior year amounts have been made to conform to the current presentation. These reclassifications did not have an impact on the Company's results of operations or cash flows.

During the fourth quarter of 2008, the Company became a bank holding company under the Bank Holding Company Act of 1956, and the Federal Reserve Board (Federal Reserve) became the Company's primary federal regulator.

Certain of the statements in this Form 10-Q report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See the "Forward-Looking Statements" section below.

Current Economic Environment/Outlook

Concerns over the availability and cost of credit generally, a historic decline in real estate values in the United States, rising unemployment, and the collapse of major financial institutions have contributed to a worsening global recession, increased volatility and reduced liquidity in the capital markets, and diminished expectations for the economy. In addition, increasing stress in the worldwide financial markets has continued to erode consumer and business confidence levels. Based on these trends, the Company expects consumer and business sentiment will likely deteriorate further and will translate into weaker economies around the globe and increased unemployment through 2009.

In the first quarter of 2009, the Company continued to experience slowing cardmember spending throughout all its businesses, as well as lower loan volumes. The Company also experienced higher delinquencies and write-offs rates. Higher write-off rates were due to both increased levels of dollar write-offs and lower lending balances.

Beyond the economy, all card issuers face increased regulation as policy makers around the world step up efforts to ensure fairness and transparency in the credit card industry.

To prepare for this more difficult environment, the Company has undertaken significant reengineering initiatives as described below, and intends to implement additional actions, including further staff reductions which are expected to result in the recognition of a restructuring charge in the second quarter. The Company has also begun implementing a number of selective pricing increases in connection with certain of its products to help mitigate the Company's increased costs to extend credit. Through a combination of cost reductions and revenue-building actions, the Company expects to increase its financial flexibility. The Company will continue to selectively and prudently invest in longer-term business-building actions and programs with the objective of capitalizing on its strong brand and competitive position in the payments industry.

As noted above, the Company remains cautious about the business environment through 2009 and believes economic conditions will deteriorate further. As a result, cardmember spending is expected to remain soft and write-offs are expected to continue to rise further in 2009. Based on projected delinquency trends and anticipated declines in U.S. loan balances, the Company estimates that the U.S. lending write-off rate on a managed basis in the second quarter of 2009 will increase between 200 and 250 basis points compared to the first quarter. The Company further expects such write-off rate in the third quarter to rise less than 50 basis points. This write-off rate in the fourth quarter of 2009 is expected to be similar to the rate in the third quarter assuming the U.S. unemployment rate is 9.7 percent by December(1). These expected write-off rates assume that actual dollars written off will rise in the second quarter but will remain relatively flat in the third and fourth quarters. If credit performance continues to worsen with the estimated write-off rates increasing as described above, the Company will, as appropriate and in consideration of this and other factors, increase its U.S. lending reserve level during 2009.

In response to the adverse economic environment that existed during much of 2008, the Company took various actions in the latter part of 2008 that resulted in recording pretax reengineering charges of $449 million ($291 million after-tax) to reduce its cost structure. The reengineering plan included lowering staff levels and compensation expense and reducing operating costs and related investment spending.

The Company began the execution and implementation of these initiatives in the fourth quarter of 2008, primarily associated with severance and other costs related to the elimination of approximately 7,000 positions or approximately 10 percent of its total worldwide workforce. Actions taken under the reengineering plan are anticipated to generate benefits, from previously anticipated spending levels in 2009, of $700 million from staffing and compensation decisions, $125 million from lower operating costs, and $1.0 billion in reduced investment spending, for a total of approximately $1.8 billion. The Company believes it is on track to realize the $1.8 billion of projected benefits over the course of 2009.

As previously announced on April 28, 2009, the Company sold a portion of its H shares in Industrial and Commercial Bank of China (ICBC) in a private sale resulting in a gain of approximately $210 million ($132 million after-tax) that will be recognized in the second quarter. As noted above, the Company also expects to initiate additional reengineering efforts in the second quarter of 2009, including staff reductions, to help further reduce its operating costs. These actions are expected to result in the recognition of a restructuring charge for the quarter ending June 30, 2009. The estimated amount of this charge has not yet been determined.

Notwithstanding the challenging environment, the Company seeks to generate earnings in excess of its dividend payment. The Company's objectives in this environment are maintaining liquidity and profitability and investing selectively for growth.

Discontinued Operations

American Express Bank Ltd. and American Express International Deposit Company

On September 18, 2007, the Company entered into an agreement to sell its international banking subsidiary, American Express Bank Ltd. (AEB), to Standard Chartered PLC (Standard Chartered). On February 29, 2008, the sale was completed.

On September 18, 2007, the Company also entered into an agreement with Standard Chartered to sell American Express International Deposit Company (AEIDC) 18 months after the close of the AEB sale through a put/call agreement. In the third quarter of 2008, AEIDC qualified to be reported as a discontinued operation as it is the Company's intention to exercise its AEIDC put option in the third quarter of 2009.

For the appropriate periods, the operating results, assets and liabilities, and cash flows of AEB (except for certain components of the AEB businesses that were not sold) and AEIDC have been removed from the Corporate & Other segment and reported separately within the discontinued operations captions on the Company's Consolidated Financial Statements and notes related thereto.

Refer to Note 2 to the Consolidated Financial Statements for further discussion of the Company's discontinued operations.

                            American Express Company

                        Selected Statistical Information



(Billions, except percentages and where indicated)



                                                    Three Months Ended
                                                        March 31,
                                                     2009         2008
Card billed business (a):
United States                                     $     97.4    $  114.6
Outside the United States                               41.8        51.8
Total                                             $    139.2    $  166.4
Total cards-in-force (millions) (b):
United States                                           53.4        52.9
Outside the United States                               38.2        35.1
Total                                                   91.6        88.0
Basic cards-in-force (millions) (b):
United States                                           41.6        41.4
Outside the United States                               33.3        30.2
Total                                                   74.9        71.6

Average discount rate (c)                               2.56 %      2.57 %
Average basic cardmember spending (dollars) (d)   $    2,443    $  2,984
Average fee per card (dollars) (d)                $       34    $     34
Average fee per card adjusted (dollars) (d)       $       38    $     39

(b) Total cards-in-force represents the number of cards that are issued and outstanding. Proprietary basic consumer cards-in-force includes basic cards issued to the primary account owner and does not include additional supplemental cards issued on that account. Proprietary basic small business and corporate cards-in-force include basic and supplemental cards issued to employee cardmembers. Non-proprietary basic cards-in-force includes all cards that are issued and outstanding under network partnership agreements.

(c) This calculation is designed to approximate merchant pricing. It represents the percentage of billed business (both proprietary and GNS) retained by the Company from merchants it acquires, prior to payments to third parties unrelated to merchant acceptance.

(d) Average basic cardmember spending and average fee per card are computed from proprietary card activities only. Average fee per card is computed based on net card fees, including the amortization of deferred direct acquisition costs, plus card fees included in interest and fees on loans (including related amortization of deferred direct acquisition costs), divided by average worldwide proprietary cards-in-force. The card fees related to cardmember loans included in interest and fees on loans were $40 million and $36 million for the quarters ended March 31, 2009 and 2008, respectively. The adjusted average fee per card is computed in the same manner, but excludes amortization of deferred direct acquisition costs (a portion of which is charge card related and included in net card fees and a portion of which is lending related and included in interest and fees on loans). The amount of amortization excluded was $70 million and $77 million for the quarters ended March 31, 2009 and 2008, respectively. The Company presents adjusted average fee per card because management believes that this metric presents a useful indicator of card fee pricing across a range of its proprietary card products.

                  Selected Statistical Information (continued)



 (Billions, except percentages and where indicated)



                                                      Three Months Ended
                                                          March 31,
                                                       2009         2008
Worldwide cardmember receivables:
Total receivables                                   $     30.3    $   39.0
Loss reserves (millions):
Beginning balance                                   $      810    $  1,149
Provision                                                  336         345
Net write-offs                                            (332 )      (257 )
Other                                                       (4 )       (16 )
Ending balance                                      $      810    $  1,221
% of receivables                                           2.7 %       3.1 %
Net write-off rate - USCS                                  4.9 %       3.6 %
30 days past due as a % of total - USCS                    3.7 %       3.7 %
Net loss ratio as a % of charge volume - ICS              0.35 %      0.21 %
90 days past due as a % of total - ICS                     3.3 %       2.2 %
Net loss ratio as a % of charge volume - GCS              0.17 %      0.12 %
90 days past due as a % of total - GCS                     2.4 %       1.7 %

Worldwide cardmember lending - owned basis (a):
Total loans                                         $     36.7    $   49.4
30 days past due loans as a % of total                     4.9 %       3.3 %
Loss reserves (millions):
Beginning balance                                   $    2,570    $  1,831
Provision                                                1,401         776
Net write-offs - principal                                (782 )      (566 )
Net write-offs - interest and fees                        (155 )      (127 )
Other                                                      (21 )         5
Ending balance                                      $    3,013    $  1,919
% of loans                                                 8.2 %       3.9 %
% of past due                                              168 %       118 %
Average loans                                       $     39.0    $   50.7
Net write-off rate                                         8.0 %       4.5 %
Net interest yield on cardmember loans (b)                10.7 %       8.9 %

Worldwide cardmember lending - managed basis (c):
Total loans                                         $     65.0    $   75.1
30 days past due loans as a % of total                     5.0 %       3.2 %
Net write-offs-principal (millions)                 $    1,392    $    820
Average loans                                       $     67.9    $   75.7
Net write-off rate                                         8.2 %       4.3 %
Net interest yield on cardmember loans (b)                10.9 %       9.6 %

(b) See below for calculations of net interest yield on cardmember loans. The Company believes net interest yield on cardmember loans (on both an owned and managed basis) is useful to investors because it provides a measure of profitability of the Company's cardmember lending portfolio.

(c) Includes on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans. The difference between the "owned basis" (GAAP) information and "managed basis" information is attributable to the effects of securitization activities. Refer to the information set forth under U.S. Card Services Selected Financial Information for further discussion of the managed basis presentation.

                  Selected Statistical Information (continued)



Calculation of net interest yield on cardmember loans



                                                Three Months Ended March 31,
(Millions)                                        2009                2008
Owned Basis:
Net interest income                          $           919     $           971
Average loans (billions)                     $          39.0     $          50.7
Adjusted net interest income (a)             $         1,033     $         1,124
Adjusted average loans (billions) (b)        $          39.1     $          50.9
Net interest yield on cardmember loans (c)              10.7 %               8.9 %

Managed Basis (d):
Net interest income (e)                      $         1,722     $         1,654
Average loans (billions)                     $          67.9     $          75.7
Adjusted net interest income (f)             $         1,835     $         1,808
Adjusted average loans (billions) (g)        $          68.0     $          75.8
Net interest yield on cardmember loans (c)              10.9 %               9.6 %

(b) Represents owned average loans excluding the impact of deferred card fees net of deferred direct acquisition costs for owned cardmember loans.

(c) Net interest yield on cardmember loans represents the net spread earned on cardmember loans. Net interest yield on cardmember loans (both on an owned and managed basis) is computed by dividing adjusted net interest income by adjusted average loans, computed on an annualized basis. The calculation of net interest yield on cardmember loans (both on an owned and managed basis) includes interest and fees that are deemed uncollectible. For the owned basis presentation, reserves and net write-offs related to uncollectible interest and fees are recorded through provisions for losses - cardmember lending, and for the managed basis presentation, reserves and net write-offs related to uncollectible interest and fees are included as a reduction to securitization income, net; therefore, such reserves and net write-offs are not included in the net interest yield calculation.

(d) Includes on-balance sheet cardmember loans and off-balance sheet securitized cardmember loans. Refer to the information set forth under U.S. Card Services Selected Financial Information for further discussion of the managed basis presentation.

(e) Includes the GAAP to managed basis securitization adjustments to interest income and interest expense as set forth under U.S. Card Services Selected Financial Information managed basis presentation.

(f) Represents net interest income allocable to the Company's managed cardmember lending portfolio, which excludes the impact of card fees on managed loans and balance transfer fees attributable to the Company's managed cardmember lending portfolio.

(g) Represents average managed loans excluding the impact of deferred card fees net of deferred direct acquisition costs for managed cardmember loans.

The following discussions regarding Consolidated Results of Operations and Consolidated Liquidity and Capital Resources are presented on a basis consistent with GAAP unless otherwise noted.

Consolidated Results of Operations for the Three Months Ended March 31, 2009 and 2008

The Company's consolidated income from continuing operations for the three months ended March 31, 2009, decreased $601 million or 58 percent to $443 million as compared to the same period a year ago, and diluted earnings per share (EPS) from continuing operations declined $0.57 or 64 percent to $0.32.

The Company's consolidated net income for the three months ended March 31, 2009 decreased $554 million or 56 percent from the year ago period to $437 million, and diluted EPS decreased $0.54 or 64 percent to $0.31. Net income included a loss from discontinued operations of $6 million as compared to a $53 million loss from discontinued operations a year ago. On a trailing 12-month basis, ROE was 16.3 percent, down from 35.9 percent a year ago.

The Company's revenues, expenses, and provisions for losses are affected by changes in the relative values of non-U.S. currencies to the U.S. dollar. The currency rate changes reduced the growth rates of revenues net of interest expense, total expenses, and provisions for losses, 4 percent, 5 percent, and 3 percent, respectively, for the three months ended March 31, 2009.

Total Revenues Net of Interest Expense

Consolidated total revenues net of interest expense were $5.9 billion, down $1.3 billion or 18 percent from $7.2 billion in the same period a year ago. Total revenues net of interest expense decreased due to lower discount revenues, lower total interest income, reduced securitization income, net, lower other commissions and fees, reduced travel commissions and fees and lower other revenues, partially offset by lower total interest expense.

Discount revenue declined $652 million or 18 percent to $3.1 billion as a result of a 16 percent decrease in billed business. The greater discount revenue versus billed business decline reflects the relatively faster growth in billed business related to GNS, where the Company shares discount revenue with card issuing partners. The average discount rate was 2.56 percent and 2.57 percent for the three months ended March 31, 2009 and 2008, respectively. As indicated in prior quarters, selective re-pricing initiatives, changes in the mix of business and volume-related pricing discounts will likely result in some erosion of the average discount rate over time.

. . .