Overview

  • American Express Co. (Amex) has reported strong financial performance for the past five years. Notably, the company did not post any quarterly losses during the credit crisis and its recent earnings were strong.
  • As a result, we are raising our long-term issuer credit ratings on Amex's core operating subsidiaries to 'A-' from 'BBB+' and affirming our 'A-2' short-term issuer credit ratings on the companies.
  • At the same time, we are affirming our 'BBB+/A-2' issuer credit ratings on Amex, the nonoperating holding company.
  • The stable outlook reflects our view that the group's strong performance will continue in the near and intermediate future.

Rating Action

On June 6, 2012, Standard & Poor's Ratings Service raised its long-term issuer 
credit ratings on American Express Co.'s (Amex's) core operating subsidiaries, 
which include American Express Travel Related Services and its rated 
subsidiaries, to 'A-' from 'BBB+' and affirmed its 'A-2' short-term issuer 
credit ratings on the subsidiaries. At the same time, Standard & Poor's 
affirmed its 'BBB+/A-2' issuer credit ratings on Amex, the nonoperating 
holding company. The outlook on the long-term ratings is stable.

Rationale

The rating actions reflect Amex's strong financial performance during the 
credit crisis through current periods. Notably, the company did not post any 
quarterly losses during the credit crisis and its recent earnings were strong. 
Except a 13% decline in 2009 as a result of broad-based declines in consumer 
and business spending, Amex's revenue growth has been steady, despite the very 
challenging operating conditions of the last several years, including recent 
revenue pressures from new regulations. 

Amex's strong fee income component makes its financial performance more 
resilient to asset quality issues. The company achieved revenue growth while 
improving asset quality performance to historically strong levels. Amex's 
prime customer focus results in asset quality metrics that generally are 
stronger than more traditional credit card lenders'. 

Since becoming a bank holding company, Amex has improved its funding profile 
by adding direct-to-consumer deposit funding to its mix. Retail deposits now 
account for about 38% of total funding. We consider direct-to-consumer 
deposits as weaker than traditional branch originated deposits, which 
typically are associated with stronger customer relationships, in our view. 
However, we also view direct-to-consumer deposits as a stronger form of 
funding than more traditional wholesale funding. We expect Amex to maintain at 
least this level of deposits in its funding profile going forward.

The affirmation of the ratings on Amex reflects our view that there is a 
greater degree of structural subordination, given that the banks comprise 
about 47% of consolidated assets. As a result, based on our criteria, we now 
rate the nonoperating holding company one notch below the group.

Outlook

The stable outlook reflects our view of Amex's positive customer spending 
trends, the improvement in its asset quality, and the strong profitability 
performance. We also consider the fragile state of the U.S. economic recovery 
and our expectation for a slow and extended recovery period, as well as the 
uncertainty around increased regulatory burdens. 

We expect that Amex will continue to invest to increase its franchise's growth 
and help mitigate revenue pressures resulting from the implementation of 
regulations, as well as to continue its tradition of focusing on higher 
quality customers. However, we also expect that the company's asset quality 
will weaken modestly since measures are at or near historically strong levels. 

We could revise our outlook to positive if Amex's earnings performance and 
capital retention increase our risk-adjusted capital ratio, which is currently 
at 7.6%, to approximately 10%. On the other hand, we could revise the outlook 
to negative if performance issues pressure capital or indicate long-term 
weakening of profitability. The possibility for future adverse regulatory, 
legislative, or legal actions remains a risk that could also negatively affect 
the ratings.

Related Criteria And Research

Ratings List

Ratings Affirmed

American Express Co.
 Counterparty Credit Rating             BBB+/Stable/A-2    
 Senior Unsecured                       BBB+               
 Preferred Stock                        BBB-               
 Commercial Paper                       A-2                

American Express Credit Corp.
 Commercial Paper                       A-2                

Upgraded
                                        To                 From
American Express Overseas Finance Co. N.V.
American Express Travel Related Services Co. Inc.
 Counterparty Credit Rating             A-/Stable/--       BBB+/Stable/--

American Express Bank FSB
American Express Centurion Bank
American Express Credit Corp.
American Express Overseas Credit Corp. Ltd.
American Express Travel Related Services Co. Inc.
 Senior Unsecured                       A-                 BBB+
 Subordinated                           BBB+               BBB

American Express Canada Credit Corp.
 Senior Unsecured                       A-                 BBB+

Upgraded; Ratings Affirmed
                                        To                 From
American Express Bank FSB
American Express Overseas Credit Corp. Ltd.
American Express Credit Corp.
American Express Centurion Bank
 Counterparty Credit Rating             A-/Stable/A-2      BBB+/Stable/A-2

American Express Centurion Bank
 Certificate Of Deposit
  Local Currency                        A-/A-2             BBB+/A-2

 
Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

Primary Credit Analyst:John K Bartko, New York (1) 212-438-7368;
john_bartko@standardandpoors.com
Secondary Contact:Kenneth Frey Jr, CFA, New York (1) 212-438-4415;
ken_frey@standardandpoors.com

No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@standardandpoors.com.