At the same time, DBRS Morningstar confirmed the ratings of
KEY RATING CONSIDERATIONS
The ratings reflect the Company's strong franchise, leading brand recognition and defendable position in the global payments ecosystem. Additionally, supportive of the ratings are the Company's resilient earnings generation capacity, sound risk management, good funding profile, and sound capitalization. The ratings also consider the highly competitive landscape of the
The Stable trend reflects our expectation that the Company will continue to generate solid operating results even as spending volume growth moderates following the strong post-pandemic rebound and while credit performance gradually reverts towards more normalized levels. In absence of a significant spike in unemployment levels, Amex's lending portfolio is likely to exhibit more resiliency to inflationary pressures relative to its peers given the Company's preponderance of high FICO score customers who generally have a higher level of resources to effectively managing their debt obligations even with higher interest rates and inflation. Nevertheless, a prolonged contraction or sluggishness in economic activity caused by persistent inflationary pressures and a high interest rate environment present key downside risks to our expectations.
RATING DRIVERS
Over the longer-term, a notable market share expansion of the Company's core businesses while maintaining strong risk-adjusted profitability and balance sheet fundamentals would result in an upgrade of the ratings. A persistent deterioration in the Company's earnings power, reflecting weakened competitive positioning, or a substantial worsening in credit performance would result in a downgrade of the ratings.
RATING RATIONALE
Franchise Combined
Amex's franchise strength is underpinned by its strong brand recognition, leading market position in the global payments industry and diversified product offerings in its focused market segments. The Company's franchise also benefits from the competitive advantage provided by its closed-loop network that enables it to integrate all key facets of the payments ecosystem and to also capture the associated benefits in terms of pricing flexibility, scalability and adaptability to customers' evolving needs. The high satisfaction and loyalty of Amex's customers also strengthen its franchise as evidenced by the Company's consistently high rankings in multiple credit card customer satisfaction studies. Furthermore, supportive of Amex's franchise is its strong management team and a historically innovation-oriented business mindset.
Earnings Combined
The Company has a robust earnings generation capacity driven by sustainable revenue streams accompanied by a scalable and flexible expense base. The long-term revenue sustainability is bolstered by the favorable secular trends that support the electronification of consumer and commercial payments that bodes well with the Company's market positioning and predominantly fee-based revenue mix. These characteristics have enabled Amex to consistently deliver strong profitability metrics and also remain profitable even under stressed environments. In 2021, Amex reported net income of
Risk Combined
Amex has a strong credit risk profile, supported a disciplined approach to risk management, through-the-cycle underwriting and enhanced risk data analytics. The Company's focus on premier credit segments along with its closed loop network have also contributed to its historically superior credit and fraud risk performance relative to its industry peers. Through 1H22, credit performance has remained strong with delinquency and loss metrics well below pre-pandemic levels. Amex's
Funding and Liquidity Combined
Amex has a solid funding and liquidity profile supported by diversified funding sources that are appropriately aligned with its business model, including a sizable deposit base, unsecured and asset-backed debt. Deposits comprised 63% of total funding at
Capitalization Combined
The Company's strong capitalization is bolstered by its consistent organic capital generation ability. As of
Further details on the Scorecard Indicators and
ESG CONSIDERATIONS
There were no Environmental/ Social/ Governance factor(s) that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
Notes:
All figures are in
The principal methodology is the Global Methodology for
Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
The primary sources of information used for this rating include Morningstar, Inc. and Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.
This rating was not initiated at the request of the rated entity.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar did not have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are under regular surveillance.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com.
Tel. +1 212 806-3277
Ratings
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
04-Aug-22 Long-Term Issuer Rating A (high) Stb Confirmed US
04-Aug-22 Short-Term Issuer Rating R-1 (middle) Stb Confirmed US
04-Aug-22 Long-Term Senior Debt A (high) Stb Confirmed US
04-Aug-22 Short-Term Instruments R-1 (middle) Stb Confirmed US
04-Aug-22 Subordinated Notes A Stb Confirmed US
04-Aug-22 Noncumulative Preferred Shares BBB (high) Stb Confirmed US
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
04-Aug-22 Long-Term Issuer Rating AA (low) Stb Confirmed US
04-Aug-22 Long-Term Senior Debt AA (low) Stb Confirmed US
04-Aug-22 Short-Term Instruments Discontinued -- Discontinued US
04-Aug-22 Short-Term Issuer Rating Discontinued -- Discontinued US
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
04-Aug-22 Long-Term Issuer Rating AA (low) Stb Confirmed US
04-Aug-22 Short-Term Issuer Rating R-1 (middle) Stb Confirmed US
04-Aug-22 Long-Term Deposits AA (low) Stb Confirmed US
04-Aug-22 Long-Term Senior Debt AA (low) Stb Confirmed US
04-Aug-22 Short-Term Instruments R-1 (middle) Stb Confirmed US
Date Issued Debt Rated Rating Trend Action Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
04-Aug-22 Long-Term Issuer Rating AA (low) Stb Confirmed US
04-Aug-22 Short-Term Issuer Rating R-1 (middle) Stb Confirmed US
04-Aug-22 Short-Term Instruments R-1 (middle) Stb Confirmed US
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