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MarketScreener Homepage  >  Equities  >  Nyse  >  American Express Company    AXP

AMERICAN EXPRESS COMPANY

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American Express : Q4 2018 Pillar 3 Disclosure

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02/15/2019 | 01:52pm EST

American Express Company

Basel III Standardized Approach Pillar 3 Disclosures

For the Quarterly Period Ended December 31, 2018

AMERICAN EXPRESS COMPANY

BASEL III STANDARDIZED APPROACH PILLAR 3 DISCLOSURES

For the Quarterly Period Ended December 31, 2018

TABLE OF CONTENTS

Page

Disclosure Index ...................................................................................................................................................... 2

Introduction ............................................................................................................................................................ 3

Scope of Application ............................................................................................................................................... 4

Capital Structure and Capital Adequacy ............................................................................................................ 5

Capital Management .............................................................................................................................................. 8

Capital Conservation Buffer .................................................................................................................................. 10

Credit Risk General Disclosures ........................................................................................................................... 10

Counterparty Credit Risk for Derivative Contracts and Securities Purchased Under Agreements to

Resell ........................................................................................................................................................................ 15

Equity Exposures not Subject to the Market Risk Rule ...................................................................................... 17

Interest Rate Risk for Non-Trading Activities ..................................................................................................... 18

Supplementary Leverage Ratio ............................................................................................................................. 19

Glossary of Selected Terminology ......................................................................................................................... 22

1

AMERICAN EXPRESS COMPANY

BASEL III STANDARDIZED APPROACH PILLAR 3 DISCLOSURES

For the Quarterly Period Ended December 31, 2018

Disclosure Index

Disclosure

Scope of ApplicationCapital Structure and Capital Adequacy

Capital Management

Capital Conservation Buffer

Credit Risk General Disclosures

Counterparty Credit Risk for Derivative Contracts and Securities Purchased Under Agreements to ResellSecuritizationEquity Exposures not Subject to the Market Risk Rules

Interest Rate Risk for Non-Trading Activities

Supplementary Leverage RatioDescriptionPage Reference(s)

2018 AnnualPillar 3 DisclosureReport on Form 10-K

Basis of Consolidation 4 81

Capital Surplus of Insurance Underwriting Subsidiaries 5

Restrictions on Transfer of Funds or Regulatory Capital 5 125

Subsidiary Minimum Capital Requirements 5

Regulatory Risk-Based Capital Ratios 5

Components of Regulatory Capital 6

Risk-Weighted Assets 8

Capital Strategy

Stress Testing and Capital Planning

Capital Conservation Buffer Requirements and Measurement

Risk Management Credit Risk Exposures

Card Member Loans and Card Member Receivables

52 53,117

8 52,125

9 6,7 10

  • 10 59,60,61,62

11 12

78 88,94

Counterparty Credit Risk Limits 15 60

Derivative and Hedging Activities 15 110

Derivatives and Securities Purchased Under 16

Agreements to Resell

Counterparty Credit Risk Mitigation 16

Types of Eligible Collateral Held 16

Collateral Management and Valuation 16

Bank's Own Credit Deterioration 16

Credit Reserves 17 Not applicable. No securitized assets held that meet the securitization criteria outlined in the Final Rule.

Accounting and Valuation Methodologies 17

Realized and Unrealized Gains (Losses) 17

Risk-Weighting Approaches 17

Nature and Types of Exposures 18

Nature of Interest Rate Risk for Non-Trading Activities 18

Rate Shock Sensitivity Analysis 19

Summary Comparison of Accounting Assets and Total 19 Leverage Exposure

Supplementary Leverage Ratio 19

96,113

53,78

2

AMERICAN EXPRESS COMPANY

BASEL III STANDARDIZED APPROACH PILLAR 3 DISCLOSURES

For the Quarterly Period Ended December 31, 2018

Introduction

Business Overview

Throughout this report the terms "American Express," "we," "our" or "us," refer to American Express Company and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise.

We are a globally integrated payment company that provides customers with access to products, insights and experiences that enrich lives and build business success. Our principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. Business travel-related services are offered through the non-consolidated joint venture, American Express Global Business Travel.

American Express was founded in 1850 as a joint stock association and incorporated in 1965 as a New York corporation. American Express and its principal operating subsidiary, American Express Travel Related Services Company, Inc., are bank holding companies ("BHC") under the Bank Holding Company Act of 1956, as amended, subject to supervision and examination by the Board of Governors of the Federal Reserve System (the "Federal Reserve").

Our range of products and services includes charge card, credit card and other payment and financing products; merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants; network services; other fee services, including fraud prevention services and the design and operation of customized customer loyalty programs; expense management products and services; and travel-related services.

Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are sold through various channels, including mobile and online applications, direct mail, telephone, in-house sales teams, third-party vendors and direct response advertising.

Regulatory Capital Standards and Disclosures

Since the late 1980s, federal banking regulators' capital adequacy rules have been based on accords agreed to by the Basel Committee on Banking Supervision (the "Basel Committee"). These frameworks include general risk-based capital rules applicable to all banking organizations based on the 1988 Capital Accord, known as Basel I, and risk-based capital rules applicable to banking organizations having $250 billion or more in total consolidated assets or $10 billion or more in foreign exposures, known as Advanced approaches institutions, based on the advanced internal ratings-based approach for credit risk and the advanced measurement approach for operational risk in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee in June 2006, known as Basel II.

In July 2013, federal banking regulators adopted a final rule substantially revising the general risk-based capital rules previously applicable to banking organizations (Basel I), to make them more risk sensitive while implementing the final framework for strengthening international capital and liquidity regulation, known as Basel III (the "Final Rule"), released by the Basel Committee in December 2010. The Final Rule became effective for all banking organizations as of January 1, 2015 and has been fully phased-in as of January 1, 2019. The Final Rule also introduced the Standardized approach, a revised measurement of risk-weighted assets effective January 1, 2015, which replaces the Basel I calculation of risk-weighted assets.

As an Advanced approaches institution, American Express is required to comply with the Final Rule, which, among other things, revised capital definitions and minimum capital ratio requirements. We began reporting our Basel III Standardized approach capital adequacy standards and regulatory public disclosures ("Pillar 3") as of March 31, 2015. We also report our capital adequacy ratios on a parallel basis to federal banking regulators under Basel III requirements for an Advanced approaches institution. This will continue until we receive regulatory approval to exit, at which point we will begin publicly reporting our regulatory risk-based capital ratios under both the Basel III Standardized and Advanced approaches and Pillar 3 disclosures under the Basel III Advanced approaches. Refer to

3

AMERICAN EXPRESS COMPANY

BASEL III STANDARDIZED APPROACH PILLAR 3 DISCLOSURES

For the Quarterly Period Ended December 31, 2018

the "Pillar 3 Reports and Additional Information" section for information on how to find our SEC and regulatory public disclosures.

Enacted in May 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) preserves the fundamental elements of the post-Dodd-Frank regulatory framework, but, among other things, revises certain aspects of the U.S. financial regulatory regime for bank holding companies with less than $250 billion in total consolidated assets, such as American Express. There are also several regulations not directly affected by EGRRCPA but that federal banking regulators may modify to conform to the new higher asset thresholds. In October 2018, the Federal Reserve released two proposals, one jointly with the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) and one on its own, that would tailor the applicable capital and liquidity requirements and prudential standards for large U.S. banking organizations, such as American Express, based on their size and other risk-based indicators, consistent with EGRRCPA. The proposals are not yet final and may be modified prior to their final adoption by the Federal Reserve, the OCC and the FDIC. For additional information, refer to the Part I, Item 1. "Business -Supervision and Regulation" section of our Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Annual Report").

Pillar 3 Reports and Additional Information

This report contains the required Pillar 3 disclosures as of December 31, 2018, in accordance with the Basel III Standardized approach guidelines of the Final Rule. The disclosures in this report are based on our current understanding of the Final Rule and other factors, which may be subject to change as we receive additional clarification and implementation guidance from regulators relating to the Final Rule, and as the interpretation of the Final Rule evolves over time. This report is prepared in accordance with the Pillar 3 disclosure policy approved by the Risk Committee of our Board of Directors. The disclosure policy addresses controls and procedures associated with the preparation of this report. Certain key terms are defined in the "Glossary of Selected Terminology".

Pillar 3 disclosures should be read in conjunction with the 2018 Annual Report and the Consolidated Financial Statements for Holding Companies - FR Y-9C for the quarter ended December 31, 2018 (the "FR Y-9C"). Some measures of exposures and other amounts disclosed in this report may not be directly comparable to our other public disclosures and may not be comparable to similar measures used by other companies. We file annual, quarterly and current reports as well as other information with the SEC and the Federal Reserve. SEC filings are made available to the public from the SEC's website atwww.sec.govand regulatory filings are made available from the Federal Reserve's website athttp://www.ffiec.gov/nicpubweb/nicweb/NicHome.aspx.

Pillar 3 disclosures are made available on our Investor Relations website athttp://ir.americanexpress.com. To access these materials, click on the "Pillar 3 Disclosures" link under the caption "Financial Information" on the Investor Relations homepage. Our Investor Relations website is also accessible through the main website atwww.americanexpress.comby clicking on the "Investor Relations" link, which is located at the bottom of our homepage.

Scope of Application

The Final Rule requires Pillar 3 disclosures for top-tier banking organizations domiciled in the United States with $50 billion or more in total consolidated assets. As a result, this report has been prepared using the consolidated financial statements of American Express Company.

Basis of Consolidation

The basis of consolidation used for regulatory reporting purposes is the same as that used under the accounting principles generally accepted in the United States of America ("GAAP"). For additional information on the Company's principles of consolidation see the "Principles of Consolidation" section of the 2018 Annual Report.

4

Disclaimer

American Express Company published this content on 15 February 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 15 February 2019 18:51:05 UTC

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Financials ($)
Sales 2019 43 674 M
EBIT 2019 12 744 M
Net income 2019 6 821 M
Debt 2019 -
Yield 2019 1,50%
P/E ratio 2019 13,19
P/E ratio 2020 11,94
Capi. / Sales 2019 2,07x
Capi. / Sales 2020 1,93x
Capitalization 90 561 M
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 113 $
Spread / Average Target 5,5%
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NameTitle
Stephen J. Squeri Chairman & Chief Executive Officer
Jeffrey C. Campbell Chief Financial Officer & Executive Vice President
Marc D. Gordon Chief Information Officer & Executive VP
Charlene Barshefsky Independent Director
Peter F. Chernin Independent Director
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