Morningstar DBRS Confirms American Express Company's LT Issuer Rating at A (high); Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of American Express Company (Amex or the Company) including its Long-Term Issuer Rating at A (high) and Short-Term Issuer Rating at R-1 (middle). Morningstar DBRS also confirmed the credit ratings of American Express National Bank (the Bank). The trends for all credit ratings are Stable. The Intrinsic Assessment (IA) for the Bank was maintained at AA (low), while the Support Assessment remains SA1, reflecting the internal support provided by the Company. The Company's Support Assessment is SA3, meaning timely systemic support is not expected, and its Long-Term Issuer Rating is positioned one notch below the Bank's IA. Additionally, Morningstar DBRS withdrew its credit ratings on American Express Travel Related Services Company, Inc. (TRS) and American Express Credit Corporation (CredCo). The decision to withdraw the credit ratings was made for business reasons. Prior to discontinuation, Morningstar DBRS confirmed the credit ratings of TRS and CredCo.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings reflect Amex's strong franchise, supported by its global brand recognition and defendable market position in its focused business segments. Providing further support of the credit ratings are Amex's resilient earnings generation, strong risk profile, good funding and liquidity profile, and sound capitalization. The credit ratings also consider the Company's concentrated business model, the highly competitive U.S. credit card issuing and payment network market, the emergence of alternate lending products and payment schemes, and the regulatory risk associated with its payment business globally.

The Stable trends reflect Morningstar DBRS' expectation that the Company will continue to generate resilient earning results while maintaining sound balance sheet fundamentals. The key downside risks to our expectations are a notable weakening in the labor markets, and/or a slower macroeconomic growth, which could pressure the Company's operating results including a deteriorating credit performance and a decline in billed business volumes.

The Company's Intrinsic Assessment of AA (low) has been assigned at the midpoint of the Intrinsic Assessment Range. Morningstar DBRS views Amex's credit fundamentals and performance as commensurate with those of similarly rated peers.

CREDIT RATING DRIVERS
Over the longer term, a sustained market share expansion of the Company's core businesses while maintaining similar risk-adjusted profitability and balance sheet fundamentals would result in an upgrade of the credit ratings. Conversely, a persistent deterioration in the Company's earnings power, reflecting weakened competitive positioning, or a substantial worsening in credit fundamentals would result in a downgrade of the credit ratings.

CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Strong
The Company's franchise is underpinned by its strong global brand recognition and leading market position in the credit card issuing and payments industry. Amex's franchise is also supported by the competitive advantage inherent in its closed-loop network that enables the Company to integrate all core facets of the payments ecosystem, and to also capture the associated benefits in terms of pricing flexibility, scalability, and adaptability to customers' evolving needs. Also supportive of Amex's franchise are its management team and a historically innovation-oriented business mindset. The high satisfaction and loyalty of the Company's customers also strengthen its franchise as evidenced by Amex's consistently high rankings in various credit card customer satisfaction studies.

Earnings Combined Building Block Assessment: Very Strong/Strong
Amex's earnings power strength is driven by its robust revenue generation, loss absorption capacity, as well as its flexible and scalable expense base that enables it to achieve operating efficiencies, and strong profitability. Even though the Company's predominantly fee-based revenue streams are closely related with spending and economic trends, Amex's business model has historically exhibited resiliency and consistent profitability during stressed economic environments. In 2024, Amex reported net income of $10.1 billion, including a one-time aftertax gain of $479 million, up from $8.4 billion in 2023. Excluding this one-time gain, the solid 9% growth in net revenue year over year (YOY) surpassed the growth in total expenses (marketing, customer engagement, and operating expenses) of 7% YOY, even though provisions for credit losses increased slightly. In Q1 2025, the Company reported net income of $2.6 billion, up 6% YOY, driven by net revenue growth of 7% YOY and a 9% YOY decrease in provisions for credit, partially offset by 4% YOY growth in operating and marketing expenses and a 14% YOY increase in variable customer engagement expenses. Amex expects to deliver revenue growth of 8% to 10% in 2025.

Risk Combined Building Block Assessment: Strong
The Company's strong credit risk profile is underscored by a disciplined approach to risk management, through-the-cycle underwriting, and enhanced risk data analytics. Amex's focus on premier credit segments along with its closed-loop network has enabled it to maintain leading asset quality metrics in the card-issuing industry while its fraud loss metrics are substantially better than the other major payment networks. Credit performance metrics remained relatively flat over the past year and remain below pre-pandemic levels even as the peer group of top card issuers have already exceeded them. For Card Member loans and receivables, the net write-off rate was 2.1% in Q1 2025, flat from Q1 2024 and compared with 2.0% for full-year 2024 and 2.2% in Q4 2019. Similarly, the 30-plus day delinquency rate was 1.3% on March 31, 2025, flat YOY for two consecutive quarters and compared with 1.5% at year-end 2019. For the U.S. Consumer Services Card Member loans, the 30-plus day delinquency rate was 1.4% on March 31, 2025, flat from the linked quarter and from the prior-year period, and nearly half that of the peer average.

Funding and Liquidity Combined Building Block Assessment: Good/Moderate
The Company has a solid funding profile comprised of a well-diversified funding base, that is also appropriately aligned with its business model. Amex maintains consistent access to the unsecured and asset-backed debt markets, though deposits provide a stable source of funding for the Company, and for over a decade, it has become a major part of its funding mix, accounting for 72% of total funding in Q1 2025. As of March 31, 2025, total customer deposits of $146.4 billion were up 9% YOY, with direct savings and CD deposits (nonbrokered) accounting for 82% of retail deposits. On March 31, 2025, Amex also had ample liquidity with $52.5 billion in cash and $1.1 billion in marketable securities, mostly including foreign government bonds and Treasury securities. The Company also had contingent liquidity sources including a borrowing capacity of $75.5 billion based on pledged charge and credit card receivables by the Bank to the Fed's discount window and an additional unutilized $9.7 billion capacity from a committed bank credit facility and the undrawn balances on its secured credit facilities. Amex's readily available liquidity alone is adequate to cover nearly the entirety of its outstanding unsecured debt, card asset-backed debt, brokered deposits, and direct certificates of deposits.

Capitalization Combined Building Block Assessment: Strong
The Company's strong capitalization is bolstered by its consistent organic capital generation ability. As of March 31, 2025, Amex's common equity tier 1 (CET1) capital ratio of 10.7% was comfortably above its minimum regulatory requirement of 7.0% that includes the Fed's stress capital buffer of 2.5% (which was unchanged based on the Fed's 2025 preliminary Stress Capital Buffer requirement) and also remained within its target range of 10% to 11%. Amex has historically demonstrated solid loss absorption capacity in adverse economic cycles as well as in the Fed's supervisory stress tests in which capitalization has consistently remained well above the regulatory minimum requirements with the Company still profitable under the severely adverse scenario.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/457942

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

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

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (May 23, 2025) https://dbrs.morningstar.com/research/454637. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for this credit rating include Morningstar, Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing this credit rating was of satisfactory quality.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the credit rating process for this credit rating action.

Morningstar DBRS did not have access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is an unsolicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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