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Investing.com -- Fitch Ratings has confirmed the Long- and Short-Term Issuer Default Ratings (IDRs) of American Express Company (NYSE:AXP) and its subsidiaries at ’A’ and F1, respectively, on March 20, 2025. The Viability Rating (VR) of AXP and American Express National Bank (AENB) was also affirmed at ’a’. The Rating Outlook remains stable.
The ratings reflect AXP’s strong franchise, steady earnings, and solid liquidity and risk-adjusted capitalization. The company’s revenue is supported by a growing card membership and balances, positive operating leverage, and room for higher credit costs in a normalizing consumer credit environment.
The company generates revenues primarily from credit and charge card customers across various demographics and businesses that subscribe to its integrated payments network. AXP’s business model provides economic and risk management benefits and has shown resilience in downturns.
AXP maintains a moderate risk profile, balancing regulatory, cross-border, and market and credit pressures. As a U.S. bank holding company (BHC), it is subject to the Federal Reserve’s capital and liquidity requirements. The BHC became a Category III bank in the third quarter of 2024, which increased its capital, liquidity, and prudential regulations.
The company’s asset quality is considered best-in-class, maintaining the lowest net charge-off rates in its peer group. AXP has generated superior credit performance through multiple cycles with its affluent customers and sophisticated credit management.
AXP’s revenue streams, less rate-sensitive than those of its peers, are underpinned by its spend-centric model. The company generates non-interest income from fees on cards, services, and processing, with its largest source being discount revenue, a swipe fee earned from merchants accepting AXP cards.
AXP’s capital is sufficient at its rating level, given low credit losses and strong capital generation. The company has maintained its common equity Tier 1 (CET1) ratio at 10% or higher for 11 of the past 12 years.
The company’s loan-to-deposit ratio has improved to 100% since 2021, up from more than 120% pre-pandemic. Deposits have remained around 72% of funding since 2022, up from 53% in 2019. AXP’s funding and liquidity score reflects its improved loan-to-deposit ratio, partly offset by continued reliance on brokered deposits and non-deposit funding.
As a BHC, AXP is mandated in the U.S. to act as a source of strength for its bank subsidiaries. The company’s IDRs and VR are equalized with those of its bank subsidiary, reflecting the close correlation between BHC and subsidiary failure and default probabilities.
Fitch has assigned an SSR of ’a’ to Credco, a non-bank operating subsidiary of TRS, reflecting the ability and propensity of the parents, TRS and AXP, to provide support to prevent it from defaulting on senior obligations in the event of failure. AXP and AENB have been assigned a Government Support Rating (GSR) of ’ns’, suggesting no reasonable assumption of forthcoming support.
The VRs and Long-Term IDRs of TRS and AENB are sensitive to those of the parent, AXP. The Short-Term IDRs are directly linked to the Long-Term IDRs and would be expected to move in tandem. The Short-Term IDRs for the three entities are also sensitive to improvement in AXP’s funding and liquidity factor score.
AXP’s subordinated debt rating and preferred stock rating are sensitive to AXP’s VR and would be expected to move in tandem. AENB’s long-term uninsured deposit rating is one notch higher than its IDR, making it sensitive to any change in its IDR. The company’s deposit ratings are primarily sensitive to any change in AENB’s Long-Term and Short-Term IDRs.
Credco’s SSR is sensitive to significant changes in Fitch’s view of AXP’s ability and propensity to provide extraordinary shareholder support when needed, or to a change in TRS’s IDR.
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