New York, August 03, 2021 -- Moody's Investors Service (Moody's) has affirmed all of the ratings and
assessments of American Express Company (Amex) and the rated subsidiaries,
American Express Travel Related Services Co., Inc.
(TRS) and American Express Credit Corporation (Credit Corp). Amex
is rated A3 for long-term senior unsecured debt. TRS and
Credit Corp have A2 issuer ratings.
Moody's has also affirmed the a2 standalone baseline credit assessment
(BCA) of Amex's bank subsidiary, American Express National Bank
(AENB) as well as the bank's Aa3 long-term deposit ratings and
A3 issuer rating. The A1(cr)/Prime-1(cr) Counterparty Risk
Assessments and the A2/Prime-1 Counterparty Risk Ratings of AENB
were also affirmed.
The outlooks on Amex and its subsidiaries were changed to stable from
negative, reflecting Moody's assessment that Amex's profitability
will continue to improve with net income to assets, assuming pre-pandemic
loan loss provision levels, again exceeding 3.0% by
2022.
Affirmations:
..Issuer: American Express Company
.... LT Issuer Rating, Affirmed A3,
Stable from Negative
....Senior Unsec. Shelf (Local Currency),
Affirmed (P)A3
....Subordinate Shelf (Local Currency),
Affirmed (P)A3
....Pref. shelf Non-cumulative
(Local Currency), Affirmed (P)Baa2
....Pref. Stock Non-cumulative
(Local Currency), Affirmed Baa2 (hyb)
....Subordinate Regular Bond/Debenture (Local
Currency), Affirmed A3
....Senior Unsecured Conv./Exch.
Bond/Debenture (Local Currency), Affirmed A3, Stable from
Negative
....Senior Unsecured Regular Bond/Debenture
(Local Currency), Affirmed A3, Stable from Negative
..Issuer: American Express Credit Corporation
.... Backed Commercial Paper (Local Currency),
Affirmed P-1
.... LT Issuer Rating, Affirmed A2,
Stable from Negative
....Senior Unsecured MTN (Local Currency),
Affirmed (P)A2
....Senior Unsecured MTN (Foreign Currency),
Affirmed (P)A2
....Subordinate MTN (Local Currency),
Affirmed (P)A3
....Other Short Term (Local Currency),
Affirmed (P)P-1
....Other Short Term (Foreign Currency),
Affirmed (P)P-1
....Senior Unsecured Regular Bond/Debenture
(Local Currency), Affirmed A2, Stable from Negative
....Senior Unsecured Regular Bond/Debenture
(Foreign Currency), Affirmed A2, Stable from Negative
..Issuer: American Express National Bank
.... Adjusted Baseline Credit Assessment,
Affirmed a2
.... Baseline Credit Assessment, Affirmed
a2
.... ST Bank Note Program (Local Currency),
Affirmed P-2
.... LT Counterparty Risk Assessment,
Affirmed A1(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... LT Counterparty Risk Rating (Foreign
Currency), Affirmed A2
.... LT Counterparty Risk Rating (Local Currency),
Affirmed A2
.... ST Counterparty Risk Rating (Foreign
Currency), Affirmed P-1
.... ST Counterparty Risk Rating (Local Currency),
Affirmed P-1
.... LT Issuer Rating, Affirmed A3,
Stable from Negative
.... ST Bank Deposits (Local Currency),
Affirmed P-1
....Other Short Term (Local Currency),
Affirmed (P)P-2
....Senior Unsecured Bank Note Program (Local
Currency), Affirmed (P)A3
....ST Bank Note Program (Local Currency),
Affirmed (P)P-2
....LT Bank Deposits (Local Currency),
Affirmed Aa3, Stable from Negative
..Issuer: American Express Travel Related Svcs Co.,
Inc
.... LT Issuer Rating, Affirmed A2,
Stable from Negative
Outlook Actions:
..Issuer: American Express Company
....Outlook, Changed To Stable From
Negative
..Issuer: American Express Credit Corporation
....Outlook, Changed To Stable From
Negative
..Issuer: American Express National Bank
....Outlook, Changed To Stable From
Negative
..Issuer: American Express Travel Related Svcs Co.,
Inc
....Outlook, Changed To Stable From
Negative
RATINGS RATIONALE
The affirmation of AENB's a2 BCA reflects Moody's assessment
that the company's key credit strengths will persist over the next 12-18
month. These include Amex's strong profitability supported by its
leading credit card franchise, global payments network and high
proportion of non-spread income in its revenue base benefitting
earnings diversification, its "best in class" asset quality compared
to rated credit card peers and solid capitalization, which protects
the bank against unexpected losses. The BCA also reflects the refinancing
risk from the company's below average funding profile compared to similarly-rated
banks globally, as a result of its high reliance on confidence and
performance-sensitive capital markets and brokered deposit funding.
The company is highly sensitive to consumer and corporate spending patterns,
in particular spending by affluent consumers and small businesses,
as well as larger businesses for travel and entertainment expenses.
These activities were negatively impacted by the restrictions imposed
during the coronavirus pandemic.
With the material decline in merchant discount revenues and uncertain
economic environment driving a large increase in loan loss provisions,
Amex's profitability decline materially in 2020 with net income
to assets (ROA) of just 0.6% for the first six months of
2020 versus 3.4% in 2019. However, as economies
around the world have reopened, Amex's profitability has improved
materially with ROA of 4.9% in Q2 2021, driven by
a material increase in merchant discount revenues as network spending
volumes have increased. A material decline in loan loss provisions
also contributed to this profitability improvement. Eliminating
the current one-time benefits of declining loan loss reserve levels
as economic prospects improve, by assuming historical average loan
loss provision levels, Q2 ROA was solid at around 2.6%.
Amex's network volumes were down just 2% in Q2 2021 from
Q2 2019 levels, a substantial improvement from the more than 30%
year-over year decline in Q2 of last year. In addition,
asset quality has been exceptionally strong this year with delinquencies
and charge-offs near historically low levels. As a result,
over the last several quarters, loan loss provisions have been extraordinarily
low as the company continues to reduce its loan loss reserves.
Like other lenders, the company materially increased loan loss reserves
in the first half of 2020 due to the very weak and uncertain economic
environment and the expectation that asset quality was going to materially
deteriorate as well as due to the implementation of the Current Expected
Credit Losses (CECL) accounting standard.
The stable rating outlook reflects Moody's assessment that by 2022
Amex's will restore its historical exceptionally strong and stable profitability,
with ROA consistently exceed 3.0%. Nevertheless,
in Moody's view, the company faces a number of challenges over the
next 12-18 months, including a very competitive US credit
card market. The provision of financial services through digital
ecosystems controlled by large global technology firms poses an additional
threat for incumbent financial services companies, such as Amex.
However, in Moody's view, the company and its management
continue to demonstrate its resilience and ability to adapt to the evolving
competitive landscape.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The BCA could be upgraded if the company strengthens its customer-direct,
deposit franchise, supporting its exceptionally strong profitability
and reduces its reliance on wholesale funding and brokered deposits reducing
refinancing risk, while maintaining its solid capitalization.
A higher BCA would likely result in rating upgrades.
The BCA could be downgraded if there was a significant erosion in the
firm's liquidity position, making it vulnerable to market shocks,
a material decline in profitability such that return on average assets
was expected to remain below 3.0%, or a material deterioration
in credit performance or capital levels, reducing the bank's
ability to absorb unexpected losses. A lower BCA would likely result
in rating downgrades.
The principal methodology used in these ratings was Banks Methodology
published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
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and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
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for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Warren Kornfeld
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Andrea Usai
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
