DBRS Assigns Provisional Rating of A (high) to American Express Senior Notes

DBRS has today assigned a provisional rating of A (high) to American Express Company’s (Amex or the Company) pending issue of Non-Callable Senior Unsecured Notes (the Notes). Amex intends to use the proceeds from the issuance of the Notes for general corporate purposes, which may include, subject to approval from the Company’s regulators, the partial funding of the Company’s anticipated repurchase of its $3.4 billion of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which were sold to the U.S. Treasury on January 9, 2009 under the Treasury’s Capital Purchase Program. The rating trend is Negative.

The rating reflects the Company’s strong business franchise, sound earnings power, and well-managed liquidity profile. Amex’s franchise continues to demonstrate strong momentum despite the difficult economic environment. This franchise generates significant earnings that allow the Company to absorb the higher credit costs associated with the recessionary environment, which DBRS views as a noteworthy underpinning of ratings stability. DBRS views managing credit losses in the recessionary cycle as the Company’s most significant challenge.

The Negative trend reflects DBRS’s perspective that credit costs will remain elevated through 2009, as global recessionary environment persists. DBRS remains concerned that continuing weakness in the U.S. economic environment could result in a further reduction in billed business, reducing revenues at a time that revenues are needed to offset higher cyclical credit costs. DBRS would view negatively 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 challenging operating environment. That said, DBRS’s ratings allow for an expectation of a certain level of earnings volatility. Conversely, the rating trend could revert to stable should Amex demonstrate its ability to generate solid revenues, sufficient enough to both absorb the credit losses inherent in this business cycle, while protecting its franchise.

DBRS will finalize this rating when final documentation is made available. Additionally, DBRS expects to publish an updated rating report on American Express in the near term.

Notes:
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.