DBRS Confirms American Express Company, Assigns Ratings to Amex Banks

DBRS has today assigned its A (high) Issuer and Long-Term debt rating and its R-1 (middle) short-term rating to American Express Centurion Bank (Centurion) and to American Express Bank, FSB (AEFSB), collectively the Banks. Concurrently, DBRS has confirmed its A (high) Issuer and Long-Term Debt rating on American Express Company (Amex or the Company) and related subsidiaries. The trend on all ratings is Stable.

The ratings of the Banks are equalized with those of the ultimate parent reflecting the close relationship with and reliance on Amex. Although the Banks enjoy solid capitalization, strong liquidity and reasonable profits, the ratings are constrained by the Banks’ reliance on Amex for both deposit and cardmember receivable generation. The Banks are 100% owned by American Express Travel Services which itself is 100% owned by American Express Company. AEFSB and Centurion Bank are insured depository institutions that have the capability of borrowing from the Federal Reserve system, subject to the amount of qualifying collateral that they pledge. Futhermore, the Banks have access to the discount window and the TAF, subject to the discretion of the Federal Reserve Bank.

The rating confirmation reflects Amex’s solid capital position, its substantial earnings power and the overall franchise strength of the American Express brand name. Furthermore, the ratings factor in DBRS’s view that the U.S. and global macroeconomic environment will continue to deteriorate into 2009, which will add pressure to near-term earnings as credit costs are expected to remain elevated and consumer spending will likely remain muted. Nonetheless, DBRS expects Amex will continue to produce overall solid results during this part of the economic cycle. Further, the rating confirmation considers Amex’s well-managed liquidity profile, which has been recently enhanced by the actions taken by the U.S. government. Amex recently issued $5.9 billion of FDIC guaranteed debt, through AEFSB (see DBRS press release dated December 12, 2008).

Despite the anticipation of reduced earnings caused by the deteriorating operating environment, DBRS has maintained the Stable trend on all Amex ratings; however, ratings could be negatively pressured by any sustained weakening of the Company’s underlying earnings generation ability, its liquidity or any perceived weakness in its franchise, as this may reduce Amex’s ability to navigate through the current stressed operating environment.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Finance Companies Operating in the United States, which can be found on the DBRS website under Methodologies

This is a Corporate (Financial Institutions) rating.