2019 Annual Report
DEAR SHAREHOLDERS:
2019 was another good year for our shareholders, our customers and our colleagues. We continued the steady, consistent
performance that we have delivered over the past two years. In doing so, we generated broad-based growth across our
businesses by remaining focused on our vision to deliver the best customer experience every single day.
Our 2019 results demonstrate that our strategy of investing in share, scale, and relevance is working:
(cid:120) Revenue reached a record $43.6 billion, and the fourth quarter of 2019 marked our 10th straight quarter of FX-
adjusted revenue growth at or above 8 percent.
(cid:120) Our growth was driven by a well-balanced mix of fee income, Card Member spending, and lending growth, with
our subscription-like card fee revenue becoming our fastest growing revenue line.
(cid:120) Worldwide spending surpassed $1.2 trillion, up 5 percent from the prior year.
(cid:120) We achieved our goal of virtual parity merchant acceptance in the U.S. as of year end, an ambitious goal we set in
2016. And we remained committed to continuing expanding merchant acceptance globally.
We achieved these milestones by providing differentiated products, benefits and services, including refreshed premium
and cobrand cards for our consumer and commercial customers, and new capabilities that are helping drive engagement
in our digital channels. Over the past two years, we refreshed or launched over 50 proprietary products across both our
consumer and commercial businesses around the world, resulting in greater customer engagement and strong new card
acquisitions, which are driving our revenue growth. These investments have also enabled us to maintain strong retention
rates and bring in younger customers, including millennials, who now comprise more than half of the new U.S. Consumer
Platinum Card® Members we acquire. In total, we added 11.5 million new proprietary cards, with approximately 70 percent
of new Card Members choosing fee-based products.
In 2019, revenues net of interest expense increased 9 percent after adjusting for the impact of foreign exchange. 1 Diluted
earnings per share for the year was $7.99, or $8.20 per share when adjusting for a litigation-related charge in the first
quarter, representing an increase of 12 percent from the prior year.2
22019 Progress
My confidence in our ability to generate steady and consistent results over the long term is based on several factors,
including the fundamental strengths we derive from our differentiated business model; the significant growth
opportunities we see across our business; and our demonstrated success in executing against our four strategic
imperatives:
(cid:120)
Expanding our leadership in the premium consumer space,
(cid:120) Building on our strong position in commercial payments,
(cid:120) Strengthening our global integrated network to provide unique value, and
(cid:120) Making American Express an essential part of our customers’ digital lives.
We continued to make progress on each of these goals in 2019, providing a solid foundation for American Express to build
upon in 2020. Let me share the highlights from each area:
Premium Consumer Space
Our focus on premium products and services continues to pay off, as we’ve seen a notable lift in spend, acquisition and
Card Member engagement across these portfolios globally. We expanded our leadership in the premium consumer space
by continuing the disciplined, strategic approach of refreshing our premium products and upgrading our cobrand
portfolios globally.
These included a series of upgrades to our Platinum Card in a number of international markets; the refresh of our iconic
Green and Centurion® cards in the U.S.; the launch of a new line of Marriott Bonvoy American Express® cards; and the
announcement of a series of upgraded Delta cobrand cards as part of the long-term, enterprise-level agreement we
signed earlier in the year. We also continue to expand the reach of our Centurion® Lounges with the opening of three new
locations in Los Angeles’s LAX Airport, Phoenix and Charlotte, N.C., and plans to open three additional lounges in New
York’s JFK Airport, Denver and London’s Heathrow Airport.
i
In all these cases, we added features, services and capabilities that our Card Members value. This is illustrated by our
continued strong acquisitions of new Card Members. We also continue to make headway in broadening our customer
base. Our new Card Members are skewing younger and are more digitally engaged. As an example, over 50 percent of the
new Card Members in our U.S. Consumer Platinum portfolio are millennials. Our refreshed products are also enabling us
to re-engage with our existing customer base, helping to increase organic spend, push net promoter scores to all-time
highs, and maintain steady attrition rates.
BBuuiillddiinngg oonn oouurr CCoommmmeerrcciiaall PPaayymmeennttss SSttrreennggtthh
In the commercial payments space, our goals are to be the leading payments and working capital provider for small and
mid-sized enterprises globally, and to build on our leadership in travel and expense management to become a leader in
non-card B2B payments solutions for large and global companies.
Today, we are the leading provider of corporate and small business card programs globally. To build on that position, we
are focused on differentiating and growing our card offerings for businesses of all sizes. One of the ways we are doing that
is by extending our successful card refresh strategy to our business card portfolio. In 2019, we upgraded our small
business Platinum cards in a number of countries around the world, and we announced the refresh of our Corporate
Program for larger companies. Similar to our consumer initiatives, our refreshed products have been enhanced with new
features, benefits and capabilities that are designed specifically to meet the needs of our business customers. We also
added to our portfolio by launching several new products, including new cobranded SME cards with Singapore Airlines
and British Airways, the innovative new American Express Business Edge® Card in Canada, and a new extension of our
Corporate Card program that addresses the unique needs of start-up companies.
On the working capital and non-card B2B front, we are focused on scaling our business financing offerings for SME
customers and our supplier management solutions for companies large and small. In this space, we are partnering with
cutting-edge technology industry leaders and start-ups to meet the needs of our business customers who increasingly tell
us they want to simplify their approach to managing cash flow, supplier payments and invoice management. In 2019, this
included expanding our Accounts Payable automation solutions with the acquisition of acompaytm, a digital payment
automation platform, and partnerships with SAP Ariba, Coupa and Bill.com.
EExxppaannddiinngg OOuurr NNeettwwoorrkk
Our relationship with millions of merchants around the world is a key component of our integrated payments platform,
and consistently expanding the number of places where American Express Cards are accepted continues to be one of our
top priorities. In 2019, we made great strides in expanding our merchant network in the U.S. and internationally. First, in
the U.S., I am pleased to report that as of year-end 2019, we achieved virtual parity merchant acceptance, with
approximately 99 percent of credit card-accepting merchants in the U.S. now able to accept American Express. 3
Achieving this ambitious goal is key to our overall business strategy, as expanding merchant coverage drives Card
Member and partner satisfaction while also increasing spend on our network.
The work on this front will not stop. The merchant landscape is dynamic, with hundreds of thousands of U.S. businesses
opening and closing ever year. We will continue to focus on maintaining virtual parity coverage in the U.S. going forward.
We also made good progress increasing merchant coverage in international markets where our Card Members live, work
and travel to the most, adding more than 2 million merchant locations in 2019. This remains a focus for us in 2020. Going
forward, as we continue to grow our network, we will work with our merchant partners in the U.S. and around the world to
ensure that our Card Members are warmly welcomed and encouraged to spend in the millions of places where their
American Express® Cards are accepted.
In another milestone, the People’s Bank of China officially accepted American Express’ network application, which was an
important next step in our plan to build a network business in China.
DDrriivviinngg DDiiggiittaall EEnnggaaggeemmeenntt
By leveraging the unique assets of our integrated payments platform, we continue to bring American Express
membership to life in our digital channels in ways that are driving increased engagement with our customers. We have
been hard at work integrating the acquisitions we’ve made over the last few years, including our latest additions of Resy®
and LoungeBuddy®, to provide our Card Members with premium access and experiences across a wide range of travel,
dining and lifestyle services that differentiate us from our competitors.
ii
We’re also working with our partners and our internal development teams to deepen our relationships with current
customers, attract news ones and harness the power of new online and mobile capabilities. A couple examples include our
“split-the-bill” feature, which we developed with our partner PayPal, on our new U.S. Green Card, and home- grown
offerings such as our Early Pay financing solution to help our business customers capture discounts and manage their
cash flow. On the dining front, we are integrating a reservation booking feature in the American Express® Mobile App for
searching, booking and managing restaurant reservations at more than 10,000 restaurants globally. The tool is currently
available to select Platinum Card Members and will be rolling out to Platinum and Centurion Card Members in the first half
of 2020.
These launches demonstrate our commitment to provide digital-first Membership benefits to our Card Members and
back our merchants big and small so that American Express becomes an indispensable part of their lives. We’re seeing
good results, as customer engagement with our digital channels is strong and growing. In 2019, 81 percent of our active
Card Members digitally engaged with us through the American Express mobile app or website, and we have seen a 26
percent increase year-over-year in customers who use our mobile app daily.3
EEnabling Our Colleagues to Thrive
Our colleagues are instrumental in enabling American Express to deliver on our vision to provide the world’s best
customer experience every day. To attract and retain the best talent, we continuously invest in programs, benefits and
resources to ensure our colleagues can grow in their careers and thrive professionally and personally. Our focus has
helped us build a reputation for being an employer of choice, earning a spot in the top 20 companies on Fortune’s ranking
of the World’s Most Admired Companies for the last 10 years, ranking ninth on the 2020 Fortune 100 Best Companies to
Work For® list, as well as top rankings in a number of other “best place to work” surveys in the U.S. and around the world.
Our focus in this area cuts across talent development, policy and benefits, and culture, as we strive to foster an inclusive
environment where people can be themselves and feel empowered to contribute their unique perspectives. As part of our
commitment to creating a diverse and inclusive workplace, it is imperative that our pay and reward structure is equitable,
transparent and free from bias. I am pleased to report that as of 2019, American Express is at 100% parity globally, with
women and men being paid equally, according to our most recent compensation review conducted by a third-party
consultant. This is up from 99% in 2018 and reflects our continued investments to ensure all colleagues are treated fairly.
We also expanded our Annual Incentive Award program to cover all colleagues, including those in more junior roles who
were not previously eligible for other bonus and incentive programs, a recognition of our commitment to having all our
colleagues’ backs.
Backing Our Communities
We remain steadfast in our support of the communities in which our colleagues and customers live and work. That means
we must operate our business responsibly, ensuring our practices are sustainable and consider the impact on all of our
constituents. I am pleased by the advancements we have made, including becoming a Carbon Neutral® company and
shifting our energy consumption to 100 percent renewable sources.
In 2019, we marked the 10th anniversary of Small Business Saturday®, a campaign we founded to help small businesses in
the aftermath of the Great Recession and that has evolved into a full-scale movement. Each year community organizers,
civic leaders and other stakeholders show up to support the small businesses that help bring vitality to their Main Streets.
Last year, U.S. shoppers who shopped at independent retailers and restaurants on Small Business Saturday reported
spending a record high total of an estimated $19.6 billion, according to the 2019 Small Business Saturday Consumer
Insights Survey from American Express and the National Federation of Independent Business. 4
To maximize our community impact, we believe it is vital to invest in the future leaders of tomorrow. We continued to
advance this mission through the American Express Leadership Academy, which provides training to emerging nonprofit
leaders and social entrepreneurs around the world. Since 2008, we have invested more than $90 million to help develop
more than 125,000 social purpose leaders who are tackling some of society’s most complex issues, including through our
signature American Express Leadership Academy. Last year, we hosted our first American Express Leadership Academy
for leaders from LGBTQ+ organizations, as well as the inaugural Academy in Southern Africa for women NGO leaders that
was held in Johannesburg. I am also inspired by the commitment that our colleagues make to better their communities.
Last year, through our gift matching programs, colleagues pledged more than $5 million in donations to charities and
organizations of importance to them, which we matched dollar-for-dollar. In total in 2019, American Express contributed
nearly $42 million in charitable giving to support leadership development, historic preservation and community services.
I’m proud that in recognition of our continuous work in this area, we earned the 12th spot out of 300 companies included
in Newsweek’s 2020 list of America’s Most Responsible Companies and were recently named to the CDP Climate A List
for the first time, recognizing our efforts to back our communities through environmentally sustainable practices and
climate action.
iii
BBuuiillddiinngg OOnn OOuurr SSttrreennggtthhss
Looking ahead to 2020 and beyond, our business is strong, and our focus is clear. We have an incredibly talented team at
all levels of the company and strong relationships with a wide array of outstanding business partners, from our cobrand
and digital partners to our millions of merchant partners around the globe, all working together to deliver the best
products and services for our customers.
We are excited about the opportunities that lie ahead in 2020 and beyond and are confident in our ability to continue to
deliver sustainable growth for our shareholders.
STEPHEN J. SQUERI
CHAIRMAN & CEO
AMERICAN EXPRESS COMPANY
FEBRUARY 13, 2020
(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
1 FX-adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency
translations into U.S. dollars (e.g., assumes the foreign exchange rates used to determine results for the year ended December 31,
2019 apply to the period(s) against which such results are being compared). Management believes the presentation of information on
an FX-adjusted basis is helpful to investors by making it easier to compare the company’s performance in one period to that of another
period without the variability caused by fluctuations in currency exchange rates. FX-adjusted revenues constitute non-GAAP
measures.
2 Adjusted diluted earnings per common share, a non-GAAP measure, excludes the impacts of a litigation-related charge in Q1’19 and
certain discrete tax benefits in Q4’18. See Appendix I for a reconciliation to EPS on a GAAP basis. Management believes adjusted EPS
is useful in evaluating the ongoing operating performance of the company.
3 Source: AXP internal data and The Nilson Report, Issue 1169, “General Purpose Cards – U.S. 2019, Table: 2019 Merchant Acceptance
Locations in the U.S.”
4 Digital Engagement represents Card Member accounts with spend greater than $0 and at least one American Express website or
mobile app visit vs. all Card Member accounts with spend greater than $0, for full year 2019.
5 The 2019 Small Business Saturday Consumer Insights Survey was conducted by Teneo on behalf of American Express, and the
National Federation of Independent Business (NFIB). The study is a nationally representative sample of 2,287 U.S. adults 18 years of
age or older. The sample was collected using an email invitation and an online survey. The study gathered self-reported data and does
not reflect actual receipts or sales. It was conducted anonymously on December 1, 2019. The survey has an overall margin of error of
+/- 2.0%, at the 95% level of confidence. Projections are based on the current U.S. Census estimates of the U.S. adult population, age
18 years and over.
iv
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(cid:4192)(cid:4192) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
(cid:1407)(cid:1407) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the transition period from to
Commission File No. 1-7657
American Express Company
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
13-4922250
(I.R.S. Employer Identification No.)
200 Vesey Street
New York, New York
(Address of principal executive offices)
10285
(Zip Code)
Title of each class
Common Shares (par value $0.20 per Share)
Registrant’s telephone number, including area code: (212) 640-2000
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
AXP
Securities registered pursuant to section 12(g) of the Act: None
Name of each exchange on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:59) No (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134) No (cid:59)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes (cid:59) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes (cid:59) No (cid:134)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:59)
Accelerated filer (cid:134)
Non-accelerated filer (cid:134)
Smaller reporting company (cid:1407) Emerging growth company (cid:1407)
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407) No (cid:59)
As of June 30, 2019, the aggregate market value of the registrant’s voting shares held by non-affiliates of the registrant was approximately
$102.7 billion based on the closing sale price as reported on the New York Stock Exchange.
As of January 30, 2020, there were 808,040,664 common shares of the registrant outstanding.
Part III: Portions of Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting
of Shareholders to be held on May 5, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
TTABLE OF CONTENTS
PART I
Form 10-K
Item Number
1.
Business
Competition
Supervision and Regulation
Information about our Executive Officers
Additional Information
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
PPurchases of Equity Securities
Selected Financial Data
Managemeent’s Discussion and Analysis of Financial Condition and Results of Operations
(MD&A)
Executive Overview
Consolidated Results of Operations
Business Segment Results of Operations
Consolidated Capital Resources and Liquidity
Off--Balaance Sheet Arrangements and Contractual Obligations
Risk Management
Critical Accounting Estimates
Other Matters
Quantitative and QQualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public AAccounting Firm
Index to Consolidated Financial Statements
Consolidated Financial Staatements
Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on Accounting and FFinancial Disclosure
Controls and Procedures
Other Information
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8..
9.
9A.
9B.
Page
1
4
5
14
16
16
32
32
32
32
33
355
36
36
388
455
53
59
60
666
69
744
74
74
755
788
79
84
133
133
133
110.
111.
112.
113.
114.
115.
116.
DDirectors, Executive Officers and Corporate GGovernance
EExecutive Compensation
PPART III
SSecurity OOwnership of Certain Beneficial Owners and Management and Related
SStockholder Matters
CCertain Relationships and Related Transactions, and Director Independence
PPrincipal Accountingg Fees and Services
PPART IV
EExhibits, FFinancial Statement Schedules
FForm 10--KK Summary
SSignatures
GGuide 3 –– SStatistical Disclosure by Bank Holding Companies
1134
1134
1134
1134
1134
1135
1138
1139
AA--11
This Annual Report on Form 10-K, including the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that are subject to risks and uncertainties. You can identify forward-looking statements by words
such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,”
“estimate,” “predict,” “potential,” “continue” or other similar expressions. We discuss certain factors that affect our
business and operations and that may cause our actual results to differ materially from these forward-looking statements
under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We
undertake no obligation to update publicly or revise any forward-looking statements.
This report includes trademarks, such as American Express®, which are protected under applicable intellectual property
laws and are the property of American Express Company or its subsidiaries. This report also contains trademarks, service
marks, copyrights and trade names of other companies, which are the property of their respective owners. Solely for
convenience, our trademarks and trade names referred to in this report may appear without the ® or ™ symbols, but such
references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our
rights or the right of the applicable licensor to these trademarks and trade names.
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. The use of the term “partner” or
“partnering” in this report does not mean or imply a formal legal partnership, and is not meant in any way to alter the
terms of American Express’ relationship with any third parties. Refer to the “MD&A — Glossary of Selected Terminology”
for the definitions of other key terms used in this report.
THIS PAGE INTENTIONALLY LEFT BLANK
PPART I
ITEM 1. BUSINESS
Overview
American Express is a globally integrated payments company that provides customers with access to products, insights
and experiences that enrich lives and build business success. We are a leader in providing credit and charge cards to
consumers, small businesses, mid-sized companies and large corporations around the world. American Express® cards
issued by American Express as well as by third-party banks and other institutions on the American Express network
permit Card Members to charge purchases of goods and services at the millions of merchants around the world that
accept cards bearing our logo.
Our various products and services are sold globally to diverse customer groups through various channels, including
mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business
partners, direct mail, telephone, in-house sales teams and direct response advertising. Business travel-related services
are offered through our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).
We were founded in 1850 as a joint stock association and were incorporated in 1965 as a New York corporation. American
Express Company and its principal operating subsidiary, American Express Travel Related Services Company, Inc. (TRS),
are bank holding companies under the Bank Holding Company Act of 1956, as amended (the BHC Act), subject to
supervision and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve). As of
December 31, 2019, we employed approximately 64,500 people, whom we refer to as colleagues.
We principally engage in businesses comprising three reportable operating segments: Global Consumer Services Group
(GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate functions
and certain other businesses are included in Corporate & Other. Our businesses are global in scope and function together
to form our end-to-end integrated payments platform, which we believe is a differentiator that underpins our business
model. For further information about our reportable operating segments, please see “Business Segment Results” under
“MD&A.”
Our Integrated Payments Platform
Through our general-purpose card-issuing, merchant-acquiring and card network businesses, we are able to connect
participants and provide differentiated value across the commerce path. We maintain direct relationships with both our
Card Members (as a card issuer) and merchants (as an acquirer), and we handle all key aspects of those relationships.
These relationships create a “closed loop” in that we have direct access to information at both ends of the card
transaction, which distinguishes our integrated payments platform from the bankcard networks.
1
Our integrated payments platform allows us to analyze information on Card Member spending and build algorithms and
other analytical tools that we use to underwrite risk, reduce fraud and provide targeted marketing and other information
services for merchants and special offers and services to Card Members, all while respecting Card Member preferences
and protecting Card Member and merchant data in compliance with applicable policies and legal requirements. Through
contractual relationships, we also obtain information from third-party card issuers, merchant acquirers and processors
with whom we do business.
Card Issuing Businesses
Our global proprietary card-issuing businesses are conducted through our GCSG and GCS reportable operating
segments. We offer a broad set of card products, rewards and services to a diverse consumer and commercial customer
base, in the United States and internationally. We acquire and retain high-spending, engaged and creditworthy Card
Members by:
• Designing innovative products and features that appeal to our target customer base and meet their spending
and borrowing needs
• Using incentives to drive spending on our various card products and engender loyal Card Members, including
our Membership Rewards® program, cash-back reward features and participation in loyalty programs
sponsored by our cobrand and other partners
•
Providing digital and mobile services and an array of benefits and experiences across card products, such as
airport lounge access and other travel and lifestyle benefits, which we believe are difficult for others to
replicate and help increase Card Member engagement
• Creating world-class service experiences by delivering exceptional customer care
• Developing a wide range of partner relationships, including with other corporations and institutions that
sponsor certain of our cards under cobrand arrangements and provide benefits and services to our Card
Members
For the year ended December 31, 2019, worldwide proprietary billed business (spending on American Express cards
issued by us) was $1,071 billion and at December 31, 2019, we had 70 million proprietary cards-in-force worldwide.
Merchant Acquiring Business
Our GMNS reportable operating segment builds and manages relationships with millions of merchants around the world
that choose to accept American Express cards. This includes signing new merchants to accept our cards, agreeing on the
discount rate (a fee charged to the merchant for accepting our cards) and handling servicing for merchants. We also build
and maintain relationships with merchant acquirers, aggregators and processors to manage aspects of our merchant
services business. For example, through our OptBlue® merchant-acquiring program, third-party processors contract
directly with small merchants for card acceptance and determine merchant pricing.
We continue to grow merchant acceptance of American Express cards around the world. As of year-end 2019, based on
our internal tracking and our understanding of the latest industry data, we believe we achieved our goal of reaching virtual
parity coverage with Mastercard and Visa credit card-accepting merchants in the United States. We are also focused on
increasing merchant coverage strategically in targeted countries, cities and merchant categories outside the United
States, with continued growth in merchant locations internationally in 2019. As we continue to grow our network, we will
seek to work with merchant partners in the United States and around the world to ensure that our Card Members are
warmly welcomed and encouraged to spend in the millions of places where their American Express cards are accepted.
Card Network Business
GMNS operates a payments network through which it establishes and maintains relationships with third-party banks and
other institutions in approximately 94 countries and territories, licensing the American Express brand and extending the
reach of our global network. Under independent operator arrangements, partners are licensed to issue local currency
American Express-branded cards in their countries and serve as the merchant acquirer for local merchants. Under
network card license arrangements, partners are licensed to issue American Express-branded cards on our network.
For the year ended December 31, 2019, worldwide network services billed business (spending on American Express cards
issued by third parties) was $170 billion and at December 31, 2019, we had 44 million cards-in-force issued by third
parties worldwide.
GMNS also provides fraud-prevention tools, marketing solutions, data analytics and other programs and services to
merchants and other partners that leverage the capabilities of our integrated payments platform.
2
DDiverse Customer Base and Global Footprint
The following charts provide a summary of our diverse set of customers and broad geographic footprint:
Partners and Relationships
Our integrated payments platform allows us to work with a range of business partners, and our partners in return help
drive the scale and relevance of the platform.
There are many examples of how we connect partners with our integrated payments platform, including: issuing cards
under cobrand arrangements with other corporations and institutions (e.g., Delta Air Lines, Marriott International, British
Airways and Hilton Worldwide Holdings); offering innovative ways for our Card Members to earn and use points with our
merchants (e.g., Pay with Points at Amazon.com); expanding merchant acceptance with third-party acquirers and
processors (e.g., OptBlue partners); developing new capabilities and features with our digital partners (e.g., PayPal and
Venmo); integrating into the supplier payment processes of our corporate card clients (e.g., SAP Ariba); and extending
the platform into travel services with American Express leisure and business travel (e.g., Fine Hotels and Resorts).
Delta Air Lines is our largest strategic partner. Our relationships with, and revenues and expenses related to, Delta are
significant and represent a significant source of value for our Card Members. We issue cards under cobrand
arrangements with Delta and the Delta cobrand portfolio represented approximately 8 percent of our worldwide billed
business and approximately 22 percent of worldwide Card Member loans as of December 31, 2019. The Delta cobrand
portfolio generates fee revenue and interest income from Card Members and discount revenue from Delta and other
merchants for spending on Delta cobrand cards. During 2019, we signed an 11-year renewal extending the Delta cobrand
relationship through the end of 2029 and expect to continue to make significant investments in this partnership going
forward. Among other things, Delta is also a key participant in our Membership Rewards program, provides travel-related
benefits and services, including airport lounge access for certain American Express Card Members, accepts American
Express cards as a merchant and is a corporate payments customer.
Working with all of our partners, we will continue to seek to provide value, choice and unique experiences across our
customer base.
Our Spend-Centric Model and Revenue Mix
Our “spend-centric” business model focuses on generating revenues primarily by driving spending on our cards and
secondarily through finance charges and fees. Spending on our cards, which is higher on average on a per-card basis
versus our competitors, offers superior value to merchants in the form of loyal customers and larger transactions.
Because of the revenues generated from having high-spending Card Members and the annual card fees we charge on
many of our products, we are able to invest in attractive rewards and other benefits for Card Members, as well as targeted
marketing and other programs and investments for merchants. This creates incentives for Card Members to spend more
on their cards and positively differentiates American Express cards.
We believe our spend-centric model gives us the ability to provide differentiated value to Card Members, merchants and
business partners.
3
TThe American Express Brand and Service Excellence
Our brand and its attributes—trust, security and service—are key assets. We invest heavily in managing, marketing,
promoting and protecting our brand, including through the delivery of our products and services in a manner consistent
with our brand promise. The American Express brand is consistently ranked as one of the most valuable brands in the
world. We place significant importance on trademarks, service marks and patents, and seek to secure our intellectual
property rights around the world.
We aim to provide the world’s best customer experience every day and our reputation for world-class service has been
recognized by numerous awards over the years. Our customer care professionals and partners treat servicing
interactions as an opportunity to bring the brand to life for our customers, add meaningful value and deepen
relationships.
Our Business Strategies
We seek to grow our business by focusing on four strategic imperatives:
First, we aim to expand our leadership in the premium consumer space by continuing to deliver membership benefits that
span our customers’ everyday spending, borrowing, travel and lifestyle needs, expanding our roster of business partners
around the globe and developing a range of experiences that attract high-spending customers.
Second, we will look to build on our strong position in commercial payments by evolving our card value propositions,
further differentiating our corporate card and accounts payable expense management solutions, and designing innovative
products and features, including financing and supplier payment solutions for our business customers.
Third, we are focused on strengthening our global network to provide unique value by continuing to help merchants
navigate the convergence of online and offline commerce with fraud protection services, marketing insights and digital
connections to higher-spending Card Members, and continuing to work with our network partners to offer expanded
products and services.
Finally, we want to continue to make American Express an essential part of our customers’ digital lives by developing
more digital features, solutions and services, expanding our digital partnerships and making targeted acquisitions.
COMPETITION
We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (e.g.,
cash and checks), bank transfer models (e.g., wire transfers and Automated Clearing House, or ACH), as well as evolving
and growing alternative payment and financing providers. As the payments industry continues to evolve, we face
increasing competition from non-traditional players that leverage new technologies, business models and customer
relationships to create payment or financing solutions.
As a card issuer, we compete with financial institutions that issue general-purpose charge and credit cards and debit
cards. We also encounter competition from businesses that issue their own private label cards, operate their own mobile
wallets or extend credit to their customers. We face intense competition for cobrand relationships, as both card issuer
and network competitors have targeted key business partners with attractive value propositions.
Our global card network competes in the global payments industry with other card networks, including, among others,
China UnionPay, Visa, Mastercard, JCB, Discover and Diners Club International (which is owned by Discover). We are the
fourth largest general-purpose card network globally based on purchase volume, behind China UnionPay, Visa and
Mastercard. In addition to such networks, a range of companies globally, including merchant acquirers, processors and
web- and mobile-based payment platforms (e.g., Alipay, PayPal and Venmo), as well as regional payment networks (such
as the National Payments Corporation of India), carry out some activities similar to those performed by our GMNS
business.
4
The principal competitive factors that affect the card-issuing, merchant and network businesses include:
•
The features, value and quality of the products and services, including customer care, rewards programs,
partnerships, benefits and digital and mobile services, and the costs associated with providing such features
and services
• Reputation and brand recognition
•
•
•
The number, spending characteristics and credit performance of customers
The quantity, diversity and quality of the establishments where the cards can be used
The attractiveness of the value proposition to card issuers, merchant acquirers, cardholders, corporate
clients and merchants (including the relative cost of using or accepting the products and services, and
capabilities such as fraud prevention and data analytics)
The number and quality of other payment cards and other forms of payment available to customers
The success of marketing and promotional campaigns
The speed of innovation and investment in systems, technologies, and product and service offerings
The nature and quality of expense management tools, electronic payment methods and data capture and
reporting capabilities, particularly for business customers
The security of cardholder and merchant information
•
•
•
•
•
Another aspect of competition is the dynamic and rapid growth of alternative payment mechanisms, systems and
products, which include payment aggregators (e.g., PayPal, Square and Amazon), marketplace lenders, wireless payment
technologies (including using mobile telephone networks to carry out transactions), financial technology companies,
electronic wallet and push payment providers (including handset manufacturers, telecommunication providers, retailers,
banks and technology companies), digital currencies developed by both governments and the private sector, blockchain
and similar distributed ledger technologies, real-time settlement and processing, prepaid systems and gift cards, and
systems linked to payment cards or that provide payment solutions. Various competitors are working to integrate more
financial services into their product offerings and competitors are attempting to replicate our closed-loop functionality,
such as the merchant-processing platform ChaseNet. New payments competitors continue to emerge in response to
evolving technologies, consumer habits and merchant needs.
In addition to the discussion in this section, see “Our operating results may materially suffer because of substantial and
increasingly intense competition worldwide in the payments industry” in “Risk Factors” for further discussion of the
potential impact of competition on our business, and “Our business is subject to comprehensive government regulation
and supervision, which could materially adversely affect our results of operations and financial condition” and “Legal
proceedings regarding provisions in our merchant contracts could have a material adverse effect on our business and result
in additional litigation and/or arbitrations, substantial monetary damages and damage to our reputation and brand” in
“Risk Factors” for a discussion of the potential impact on our ability to compete effectively due to government regulations
or if ongoing legal proceedings limit our ability to prevent merchants from engaging in various actions to discriminate
against our card products.
SSUPERVISION AND REGULATION
Overview
We are subject to extensive government regulation and supervision in jurisdictions around the world, and the costs of
compliance are substantial. In recent years, the financial services industry has been subject to rigorous scrutiny, high
regulatory expectations, an increasing range of regulations and a stringent and unpredictable enforcement environment.
Governmental authorities have focused, and we believe will continue to focus, considerable attention on reviewing
compliance by financial services firms with laws and regulations, and as a result, we continually work to evolve and
improve our risk management framework, governance structures, practices and procedures. Reviews to assess
compliance with laws and regulations by governmental authorities, as well as our own internal reviews, have resulted in,
and are likely to continue to result in, changes to our products, practices and procedures, restitution to our customers
and increased costs related to regulatory oversight, supervision and examination. We have also been subject to regulatory
5
actions and may continue to be the subject of such actions, including governmental inquiries, investigations, enforcement
proceedings and the imposition of fines or civil money penalties, in the event of noncompliance or alleged noncompliance
with laws or regulations. In addition, legislators and regulators in various countries in which we operate have focused on
the operation of card networks, including through antitrust actions, legislation and regulations to change certain practices
or pricing of card issuers, merchant acquirers and payment networks, and, in some cases, to establish broad and ongoing
regulatory oversight regimes for payment systems.
See “Risk Factors—Legal, Regulatory and Compliance Risks” for a discussion of the potential impact legislative and
regulatory changes may have on our results of operations and financial condition.
BBanking Regulation
Federal and state banking laws, regulations and policies extensively regulate the Company (which, for purposes of this
section, refers to American Express Company as a bank holding company), TRS and our U.S. bank subsidiary, American
Express National Bank (AENB). Both the Company and TRS are subject to comprehensive consolidated supervision,
regulation and examination by the Federal Reserve and AENB is likewise supervised, regulated and examined by the
Office of the Comptroller of the Currency (OCC). The Company and its subsidiaries are also subject to the rulemaking,
enforcement and examination authority of the Consumer Financial Protection Bureau (CFPB). Banking regulators have
broad examination and enforcement power, including the power to impose substantial fines, limit dividends and other
capital distributions, restrict operations and acquisitions and require divestitures. Many aspects of our business also are
subject to rigorous regulation by other U.S. federal and state regulatory agencies and by non-U.S. government agencies
and regulatory bodies.
The Federal Reserve has established a new rating system for large financial institutions, such as the Company, which is
intended to align with the Federal Reserve’s existing supervisory program for large financial institutions and which
includes component ratings for capital planning, liquidity risk management, and governance and controls. In August 2017
and January 2018, the Federal Reserve proposed related guidance for the governance and controls component.
Activities
The BHC Act generally limits bank holding companies to activities that are considered to be banking activities and certain
closely related activities. As noted above, each of the Company and TRS is a bank holding company and each has elected
to become a financial holding company, which is authorized to engage in a broader range of financial and related
activities. In order to remain eligible for financial holding company status, we must meet certain eligibility requirements.
Those requirements include that each of the Company and AENB must be “well capitalized” and “well managed,” and
AENB must have received at least a “satisfactory” rating on its most recent assessment under the Community
Reinvestment Act of 1977 (the CRA). The Company and TRS engage in various activities permissible only for financial
holding companies, including, in particular, providing travel agency services, acting as a finder and engaging in certain
insurance underwriting and agency services. If the Company fails to meet eligibility requirements for financial holding
company status, it is likely to be barred from engaging in new types of financial activities or making certain types of
acquisitions or investments in reliance on its status as a financial holding company, and ultimately could be required to
either discontinue the broader range of activities permitted to financial holding companies or divest AENB. In addition, the
Company and its subsidiaries are prohibited by law from engaging in practices that the relevant regulatory authority
deems unsafe or unsound (which such authorities generally interpret broadly).
6
Acquisitions and Investments
Applicable federal and state laws place limitations on the ability of persons to invest in or acquire control of us without
providing notice to or obtaining the approval of one or more of our regulators. In addition, we are subject to banking laws
and regulations that limit our investments and acquisitions and, in some cases, subject them to the prior review and
approval of our regulators, including the Federal Reserve and the OCC. Federal banking regulators have broad discretion
in evaluating proposed acquisitions and investments that are subject to their prior review or approval.
FFinancial Regulatory Reform
In October 2019, the U.S. federal bank regulatory agencies finalized rules that tailor the application of the enhanced
prudential standards to bank holding companies and depository institutions (the Tailoring Rules) pursuant to the
amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd Frank) introduced by
the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Tailoring Rules assign each U.S. bank holding
company with $100 billion or more in total consolidated assets, as well as its bank subsidiaries, to one of four categories
based on its status as a U.S. global systemically important banking organization and five other risk-based indicators: (i)
size, (ii) cross-jurisdictional activity, (iii) non-bank assets, (iv) off-balance sheet exposure, and (v) weighted short-term
wholesale funding.
Under the Tailoring Rules, the Company (and, pursuant to the Tailoring Rules, its depository institution subsidiary, AENB)
is subject to Category IV standards. As a Category IV firm, the Company is, among other things, (i) no longer subject to
the advanced approaches capital requirements, (ii) no longer subject to the supplementary leverage ratio (SLR), (iii) no
longer subject to the countercyclical capital buffer, (iv) no longer subject to company-run stress testing requirements, (v)
subject to supervisory stress testing on an every-other-year basis rather than an annual basis, and (vi) no longer subject
to the requirement to prepare and submit a holding company-level resolution plan. In addition, as a Category IV firm with
less than $50 billion in weighted short-term wholesale funding, the Company is no longer subject to the liquidity coverage
ratio (LCR).
Because a firm’s categorization under the Tailoring Rules is determined by, and can change over time dependent upon,
how the firm measures against the risk-based indicator thresholds, we are required to monitor and periodically report
these risk-based indicators and there can be no assurance that the Company will continue to be a Category IV firm in the
future.
Stress Testing and Capital Planning
Under the Federal Reserve’s regulations, the Company is subject to supervisory stress testing requirements that are
designed to evaluate whether a bank holding company has sufficient capital on a total consolidated basis to absorb losses
and support operations under adverse economic conditions. As a Category IV firm, the Company will be subject to the
Federal Reserve’s supervisory stress tests every other year, beginning in 2020, rather than on an annual cycle.
We remain subject to the requirement to develop and submit to the Federal Reserve an annual capital plan. The Federal
Reserve has stated it plans to propose changes, which would include providing firms subject to Category IV standards
additional flexibility to develop their capital plans. As part of the Comprehensive Capital Analysis and Review (CCAR), the
Federal Reserve evaluates whether the Company has sufficient capital to continue operations by assessing our pro-forma
capital position and ratios under a scenario of economic and financial market stress. Sufficient capital for these purposes
is likely to require us to maintain capital ratios appreciably above applicable minimum requirements and buffers.
The Federal Reserve is expected to publish the decisions for all the bank holding companies participating in CCAR,
including the reasons for any objection to capital plans, by June 30. In addition, the Federal Reserve will publish
separately the results of its supervisory stress test under the supervisory severely adverse scenario. The information to
be released will include, among other things, the Federal Reserve’s projection of company-specific information, including
post-stress capital ratio information over the planning horizon.
We may be required to revise and resubmit our capital plan as required by the Federal Reserve following certain events,
such as a significant acquisition. In addition to other limitations, our ability to make any capital distributions (including
dividends and share repurchases) is contingent on the Federal Reserve’s non-objection to our capital plan.
7
DDividends and Other Capital Distributions
The Company and TRS, as well as AENB and the Company’s insurance and other regulated subsidiaries, are limited in
their ability to pay dividends by statutes, regulations and supervisory policy.
Dividend payments by the Company to shareholders are subject to the oversight of the Federal Reserve. See “Stress
Testing and Capital Planning.” Even if the Federal Reserve has not objected to a distribution, the Company may still not
make a distribution without Federal Reserve approval if, among other things, the Company would not meet a minimum
regulatory capital ratio after giving effect to the capital distribution, changes in facts would require resubmission of our
capital plan or the Company’s earnings are materially underperforming its projections in the capital plan.
In general, federal laws and regulations prohibit, without first obtaining the OCC’s approval, AENB from making dividend
distributions to TRS, if such distributions are not paid out of available recent earnings or would cause AENB to fail to meet
capital adequacy standards. In addition to specific limitations on the dividends AENB can pay to TRS, federal banking
regulators have authority to prohibit or limit the payment of a dividend if, in the banking regulator’s opinion, payment of a
dividend would constitute an unsafe or unsound practice in light of the financial condition of the institution.
Capital, Leverage and Liquidity Regulation
Capital Rules
The Company and AENB are required to comply with the applicable capital adequacy rules established by federal banking
regulators. These rules are intended to ensure that bank holding companies and depository institutions (collectively,
banking organizations) have adequate capital given their level of assets and off-balance sheet obligations. The federal
banking regulators’ current capital rules (the Capital Rules) implement the Basel Committee on Banking Supervision’s
(the Basel Committee) framework for strengthening international capital regulation, known as Basel III. For additional
information regarding our capital ratios, see “Consolidated Capital Resources and Liquidity” under “MD&A.”
Under the Capital Rules, banking organizations are required to maintain minimum ratios for Common Equity Tier 1 (CET1),
Tier 1 capital (that is, CET1 plus additional Tier 1 capital) and Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-
weighted assets. Since 2014, we have reported our capital adequacy ratios on a parallel basis to federal banking
regulators using both risk-weighted assets calculated under the Basel III standardized approach, as adjusted for certain
items, and the requirements for an advanced approaches institution. As a Category IV firm, we are no longer subject to
the Basel III advanced approaches capital requirements.
In December 2017, the Basel Committee published standards that, among other things, revise the standardized approach
for credit risk (including by recalibrating risk weights and introducing additional capital requirements for certain
“unconditionally cancellable commitments” such as unused credit card lines of credit) and provide a new standardized
calculation for operational risk capital requirements. If adopted in the United States as issued by the Basel Committee
and applicable to us, the new standards could result in higher capital requirements for us.
The Company and AENB must each maintain CET1, Tier 1 capital and Total capital ratios of at least 4.5 percent, 6.0
percent and 8.0 percent, respectively. The Capital Rules also implement a 2.5 percent capital conservation buffer
composed entirely of CET1, on top of these minimum risk-weighted asset ratios. As a result, the minimum ratios are
effectively 7.0 percent, 8.5 percent and 10.5 percent for the CET1, Tier 1 capital and Total capital ratios, respectively.
Federal banking regulators may further increase required minimum capital ratios by a countercyclical capital buffer
composed entirely of CET1 up to 2.5 percent if they determine that such a buffer is necessary to protect the banking
system from disorderly downturns associated with excessively expansionary periods. Under the Tailoring Rules, Category
IV firms, such as the Company, would not be subject to such a countercyclical capital buffer.
Banking institutions whose ratio of CET1, Tier 1 Capital or Total capital to risk-weighted assets is above the minimum but
below the capital conservation buffer will face constraints on discretionary distributions such as dividends, repurchases
and redemptions of capital securities, and executive compensation based on the amount of the shortfall and the
institution’s “eligible retained income” (that is, four quarter trailing net income, net of distributions and tax effects not
reflected in net income).
The Federal Reserve proposed a rule in April 2018 that would, among other things, replace the static 2.5 percent capital
conservation buffer with a stress capital buffer requirement for bank holding companies subject to the CCAR process.
The stress capital buffer would reflect stressed losses in the supervisory severely adverse scenario of the Federal
Reserve’s CCAR stress tests and would also include four quarters of planned common stock dividends. The proposal also
included a stress leverage buffer requirement, similar to the stress capital buffer, which would apply to the Tier 1 leverage
ratio. The proposal would require bank holding companies to reduce their planned capital distributions if those
distributions would not be consistent with the applicable capital buffer constraints based on the bank holding companies’
own baseline scenario projections. The Federal Reserve has indicated that it intends to propose revisions to the stress
buffer requirements that would be applicable to Category IV firms, such as the Company, to align with the two-year
supervisory stress-testing cycle for Category IV bank holding companies.
8
Leverage Requirements
We are also required to comply with minimum leverage ratio requirements. The leverage ratio is the ratio of a banking
organization’s Tier 1 capital to its average total consolidated assets (as defined for regulatory purposes). All banking
organizations are required to maintain a leverage ratio of at least 4.0 percent.
The Capital Rules also establish an SLR requirement for advanced approaches banking organizations. The SLR is the ratio
of Tier 1 capital to an expanded concept of leverage exposure that includes both on-balance sheet and certain off-balance
sheet exposures. The Capital Rules require a minimum SLR of 3.0 percent. As noted above, Category IV firms, such as the
Company, are not subject to the SLR requirement under the Tailoring Rules.
Liquidity Regulation
The Federal Reserve’s enhanced prudential standards rule includes heightened liquidity and overall risk management
requirements. The rule requires the maintenance of a liquidity buffer, consisting of highly liquid assets, that is sufficient to
meet projected net outflows for 30 days over a range of liquidity stress scenarios, and a minimum LCR that measures a
firm’s high-quality liquid assets to its projected net outflows. Under the Tailoring Rules, Category IV firms with less than
$50 billion in weighted short-term wholesale funding, such as the Company, are no longer subject to any LCR
requirement.
A second standard provided for in the Basel III liquidity framework, referred to as the net stable funding ratio (NSFR),
requires a minimum amount of longer-term funding based on the assets and activities of banking entities. Although the
NSFR has not been finalized, the Federal Reserve staff’s memorandum has indicated it will be applied in a manner
consistent with the application of the LCR under the Tailoring Rules, provided a Category IV firm’s weighted short-term
wholesale funding remains below $50 billion.
PPrompt Corrective Action
The Federal Deposit Insurance Act (FDIA) requires, among other things, that federal banking regulators take prompt
corrective action in respect of depository institutions insured by the FDIC (such as AENB) that do not meet minimum
capital requirements. The FDIA establishes five capital categories for FDIC-insured banks: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. The FDIA imposes
progressively more restrictive constraints on operations, management and capital distributions, depending on the capital
category in which an institution is classified. In order to be considered “well capitalized,” AENB must maintain CET1, Tier 1
capital, Total capital and Tier 1 leverage ratios of 6.5 percent, 8.0 percent, 10.0 percent and 5.0 percent, respectively.
Under the FDIA, AENB could be prohibited from accepting brokered deposits (i.e., deposits raised through third-party
brokerage networks) or offering interest rates on any deposits significantly higher than the prevailing rate in its normal
market area or nationally (depending upon where the deposits are solicited), unless (1) it is well capitalized or (2) it is
adequately capitalized and receives a waiver from the FDIC. A significant amount of our outstanding U.S. retail deposits
are considered brokered deposits for bank regulatory purposes. If a federal regulator determines that we are in an unsafe
or unsound condition or that we are engaging in unsafe or unsound banking practices, the regulator may reclassify our
capital category or otherwise place restrictions on our ability to accept or solicit brokered deposits.
In December 2019, the FDIC issued a proposed rule intended to update and modernize the FDIC’s brokered deposit
regulations. The proposed rule, among other things, would revise the definition of “deposit broker” and the accompanying
exceptions.
Resolution Planning
Pursuant to Dodd Frank, certain bank holding companies are required to submit resolution plans to the Federal Reserve
and FDIC providing for the company’s strategy for rapid and orderly resolution in the event of its material financial
distress or failure. However, in connection with the release of the Tailoring Rules, the Federal Reserve and FDIC finalized
rules in October 2019 which, among other things, adjust the review cycles and applicability of the agencies’ resolution
planning requirements. Under these new rules, Category IV firms such as the Company are no longer required to submit a
holding company resolution plan.
AENB continues to be required to prepare and provide a separate resolution plan to the FDIC that would enable the FDIC,
as receiver, to effectively resolve AENB under the FDIA in the event of failure. The FDIC has issued an Advance Notice of
Proposed Rulemaking on potential revisions to this separate resolution plan requirement for insured depository
institutions, and the next round of insured depository institution resolution plan submissions will not be required until the
rulemaking process is complete.
9
OOrderly Liquidation Authority
The Company could become subject to the Orderly Liquidation Authority (OLA), a resolution regime under which the
Treasury Secretary may appoint the FDIC as receiver to liquidate a systemically important financial institution, if the
Company is in danger of default and is determined to present a systemic risk to U.S. financial stability. As under the FDIC
resolution model, under the OLA, the FDIC has broad power as receiver. Substantial differences exist, however, between
the OLA and the FDIC resolution model for depository institutions, including the right of the FDIC under the OLA to
disregard the strict priority of creditor claims in limited circumstances, the use of an administrative claims procedure to
determine creditor claims (as opposed to the judicial procedure used in bankruptcy proceedings), and the right of the
FDIC to transfer claims to a “bridge” entity.
The FDIC has developed a strategy under OLA, referred to as the “single point of entry” or “SPOE” strategy, under which
the FDIC would resolve a failed financial holding company by transferring its assets (including shares of its operating
subsidiaries) and, potentially, very limited liabilities to a “bridge” holding company; utilize the resources of the failed
financial holding company to recapitalize the operating subsidiaries; and satisfy the claims of unsecured creditors of the
failed financial holding company and other claimants in the receivership by delivering securities of one or more new
financial companies that would emerge from the bridge holding company. Under this strategy, management of the failed
financial holding company would be replaced and its shareholders and creditors would bear the losses resulting from the
failure.
FDIC Powers upon Insolvency of AENB
If the FDIC is appointed the conservator or receiver of AENB, the FDIC has the power: (1) to transfer any of AENB’s assets
and liabilities to a new obligor without the approval of AENB’s creditors; (2) to enforce the terms of AENB’s contracts
pursuant to their terms; or (3) to repudiate or disaffirm any contract or lease to which AENB is a party, the performance
of which is determined by the FDIC to be burdensome and the disaffirmation or repudiation of which is determined by the
FDIC to promote the orderly administration of AENB. In addition, the claims of holders of U.S. deposit liabilities and
certain claims for administrative expenses of the FDIC against AENB would be afforded priority over other general
unsecured claims against AENB, including claims of debt holders and depositors in non-U.S. offices, in the liquidation or
other resolution of AENB. As a result, whether or not the FDIC ever sought to repudiate any debt obligations of AENB, the
debt holders and depositors in non-U.S. offices would be treated differently from, and could receive substantially less, if
anything, than the depositors in the U.S. offices of AENB.
Other Banking Regulations
Source of Strength
The Company is required to act as a source of financial and managerial strength to its U.S. bank subsidiary, AENB, and
may be required to commit capital and financial resources to support AENB. Such support may be required at times
when, absent this requirement, the Company otherwise might determine not to provide it. Capital loans by the Company
to AENB are subordinate in right of payment to deposits and to certain other indebtedness of AENB. In the event of the
Company’s bankruptcy, any commitment by the Company to a federal banking regulator to maintain the capital of AENB
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
Transactions Between AENB and its Affiliates
Certain transactions (including loans and credit extensions from AENB) between AENB and its affiliates (including the
Company, TRS and their other subsidiaries) are subject to quantitative and qualitative limitations, collateral requirements
and other restrictions imposed by statute and regulation. Transactions subject to these restrictions are generally required
to be made on an arm’s-length basis.
FDIC Deposit Insurance and Insurance Assessments
AENB accepts deposits that are insured by the FDIC up to the applicable limits. Under the FDIA, the FDIC may terminate
the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices; is
in an unsafe or unsound condition to continue operations; or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of
deposit insurance at AENB. The FDIC’s deposit insurance fund is funded by assessments on insured depository
institutions, including AENB, which are subject to adjustment by the FDIC.
10
Community Reinvestment Act
AENB is subject to the CRA, which imposes affirmative, ongoing obligations on depository institutions to meet the credit
needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound
operation of the institution. In December 2019, the OCC and FDIC issued a notice of proposed rulemaking intended to (i)
clarify which activities qualify for CRA credit; (ii) update where activities count for CRA credit; and (iii) change the
methods for CRA measurement, data collection, recordkeeping and reporting.
CConsumer Financial Products Regulation
In the United States, our marketing, sale and servicing of consumer financial products and our compliance with certain
federal consumer financial laws are supervised and examined by the CFPB, which has broad rulemaking and enforcement
authority over providers of credit, savings and payment services and products, and authority to prevent “unfair, deceptive
or abusive” acts or practices. In addition, a number of U.S. states have significant consumer credit protection, disclosure
and other laws (in certain cases more stringent than U.S. federal laws). U.S. federal law also regulates abusive debt
collection practices, which, along with bankruptcy and debtor relief laws, can affect our ability to collect amounts owed to
us or subject us to regulatory scrutiny.
On May 7, 2019, the CFPB issued proposed rules that would set forth additional requirements for third-party debt
collection agencies, which we use in the ordinary course of business. This proposal is not expected to result in final rules,
if any, becoming effective before 2021.
We are also regulated in the United States under the “money transmitter” or “sale of check” laws in effect in most states.
In addition, we are required by the laws of many states to comply with unclaimed and abandoned property laws, under
which we must pay to states the face amount of any Travelers Cheque or prepaid card that is uncashed or unredeemed
after a period of time depending on the type of product.
In countries outside the United States, regulators continue to focus on a number of key areas impacting our card-issuing
businesses, particularly consumer protection (such as in the European Union (EU), the United Kingdom and Canada) and
responsible lending (such as in Australia, Mexico, New Zealand and Singapore), with increasing importance on and
attention to customers and outcomes rather than just ensuring compliance with local rules and regulations. Regulators’
expectations of firms in relation to their compliance, risk and control frameworks continue to increase and regulators are
placing significant emphasis on a firm’s systems and controls relating to the identification and resolution of issues.
Payments Regulation
Legislators and regulators in various countries in which we operate have focused on the operation of card networks,
including through antitrust actions, legislation and regulations to change certain practices or pricing of card issuers,
merchant acquirers and payment networks, and, in some cases, to establish broad and ongoing regulatory oversight
regimes for payment systems.
The EU, Australia and other jurisdictions have focused on interchange fees (that is, the fee paid by the bankcard merchant
acquirer to the card issuer in payment networks like Visa and Mastercard), as well as the rules, contract terms and
practices governing merchant card acceptance. For example, in April 2019, the European Commission accepted
commitments by Visa and Mastercard to significantly reduce inter-regional multilateral interchange fees.
Regulation and other governmental actions relating to pricing or practices could affect all networks directly or indirectly,
as well as adversely impact consumers and merchants. Among other things, regulation of bankcard fees has negatively
impacted and may continue to negatively impact the discount revenue we earn, including as a result of downward
pressure on our discount rate from decreases in competitor pricing in connection with caps on interchange fees. In some
cases, regulations also extend to certain aspects of our business, such as network and cobrand arrangements or the
terms of card acceptance for merchants, and we have largely exited our network businesses in the EU and Australia as a
result of regulation in those jurisdictions, for example.
In various countries, such as certain Member States in the EU and Australia, merchants are permitted by law to surcharge
card purchases. In addition, the laws of a number of states in the United States that prohibit surcharging have been
challenged in litigation brought by merchant groups and some such laws have been overturned. Surcharging is an adverse
customer experience and could have a material adverse effect on us if it becomes widespread, particularly where it only or
disproportionately impacts our business. In addition, other steering practices that are permitted by regulation in some
countries could also have a material adverse effect on us if they become widespread. See “Surcharging or steering by
merchants could materially adversely affect our business and results of operations” under “Risk Factors.”
11
In Canada, regulators have prompted the major international card networks to make voluntary commitments on pricing,
specifically interchange fee levels; as American Express does not operate with interchange fees in Canada, our
commitments extend to maintaining current pricing practices and complying with certain other practices.
In some countries governments have established regulatory regimes that require international card networks to be locally
licensed and/or to localize aspects of their operations. For example, the Reserve Bank of India, which has broad power
under the Payment and Settlement Systems Act, 2007 to regulate the membership and operations of card networks, has
issued a mandate requiring payment systems operators in India to store certain payments data locally. The development
and enforcement of payment system regulatory regimes generally continue to grow and may adversely affect our ability
to compete effectively and maintain and extend our global network.
Governments in some countries also provide resources or protection to select domestic payment card networks. The
People’s Bank of China officially accepted our application for a business operating license to process domestic currency
transactions through a joint venture in mainland China. There can be no assurance that we will receive such a license, or,
if we do, that we will be able to successfully compete in China with domestic payment card networks and alternative
payment providers.
PPrivacy, Data Protection, Information and Cyber Security
Regulatory and legislative activity in the areas of privacy, data protection and information and cyber security continues to
increase worldwide. We have established and continue to maintain policies and a governance framework to comply with
applicable privacy, data protection and information and cyber security laws, meet evolving customer expectations and
support and enable business innovation and growth.
Our regulators are increasingly focused on ensuring that our privacy, data protection and information and cyber security-
related policies and practices are adequate to inform customers of our data collection, use, sharing and/or security
practices, to provide them with choices, if required, about how we use and share their information, and to appropriately
safeguard their personal information and account access. Regulators are also focused on the policies and practices of our
third-party vendors that may have access to our customer data or other information.
In the United States, certain of our businesses are subject to the privacy, disclosure and safeguarding provisions of the
Gramm-Leach-Bliley Act (GLBA) and its implementing regulations and guidance. Among other things, GLBA imposes
certain limitations on our ability to share consumers’ nonpublic personal information with nonaffiliated third parties and
requires us to develop, implement and maintain a written comprehensive information security program containing
safeguards that are appropriate to the size and complexity of our business, the nature and scope of our activities and the
sensitivity of customer information that we process. Effective January 2020, the California Consumer Privacy Act
requires us to offer expanded privacy rights to California residents who are not covered by GLBA. Various regulators, U.S.
states and territories are considering similar requirements or have adopted laws, rules and regulations pertaining to
privacy and/or information and cyber security that may be more stringent and/or expansive than federal requirements.
We are also subject to certain privacy, data protection and information and cyber security laws in other countries in which
we operate (including countries in the EU, Australia, Canada, Japan, Hong Kong, India, Mexico, Singapore and the United
Kingdom), some of which are more stringent and/or expansive than those in the United States. Some countries have also
instituted laws requiring in-country data processing and/or in-country storage of data. Compliance with such laws could
result in higher technology, administrative and other costs for us, could limit our ability to optimize the use of our closed-
loop data, and could require use of local technology services. Some of these laws also require us to provide foreign
governments broader access to our proprietary data and intellectual property. Data breach notification laws or regulatory
activities to encourage breach notification are also becoming more prevalent in jurisdictions outside the United States in
which we operate.
In Europe, the EU General Data Protection Regulation (GDPR) went into effect in May 2018 with significant fines for non-
compliance (up to 4 percent of total annual worldwide revenue). It created additional legal and compliance obligations on
companies that process personal data of individuals in the EU, irrespective of the geographical location of the company.
We have made changes to our privacy practices to comply with these requirements, and continue to rely on our binding
corporate rules as the primary method for lawfully transferring data from our European affiliates to our affiliates in the
United States and elsewhere globally. The GDPR includes, among other things, a requirement for prompt notice of data
breaches, in certain circumstances, to affected individuals and supervisory authorities.
In addition, the European Directive 2002/58/EC (the ePrivacy Directive) will continue to set out requirements for the
processing of personal data and the protection of privacy in the electronic communications sector until the approval of
the forthcoming ePrivacy Regulation. The ePrivacy Directive places restrictions on, among other things, the sending of
unsolicited marketing communications, as well as on the collection and use of data about internet users.
12
The European Central Bank and the European Banking Authority have enacted secondary legislation focused on security
breaches, outsourcing, strong customer authentication and information security-related policies. Likewise, a network and
information security directive has been implemented into national laws by Member States in the EU. The Revised
Payment Services Directive (PSD2) also contains regulatory requirements on strong customer authentication, open
access to customer data and payment capabilities, and measures to prevent security incidents.
AAnti-Money Laundering, Sanctions and Anti-Corruption Compliance
We are subject to significant supervision and regulation, and an increasingly stringent enforcement environment, with
respect to compliance with anti-money laundering (AML), sanctions and anti-corruption laws and regulations in the
United States and in other jurisdictions in which we operate. Failure to maintain and implement adequate programs and
policies and procedures for AML, sanctions and anti-corruption compliance could have serious financial, legal and
reputational consequences.
Anti-Money Laundering
American Express is subject to a significant number of AML laws and regulations as a result of being a financial company
headquartered in the United States, as well as having a global presence. In the United States, the majority of AML
requirements are derived from the Currency and Foreign Transactions Reporting Act and the accompanying regulations
issued by the U.S. Department of the Treasury (collectively referred to as the Bank Secrecy Act), as amended by the USA
PATRIOT Act of 2001 (the Patriot Act). In Europe, AML requirements are largely the result of countries transposing the
4th EU Anti-Money Laundering Directive (and preceding EU Anti-Money Laundering Directives) into local laws and
regulations. EU Member States are required to implement the 5th and 6th EU Anti-Money Laundering Directives by
January 10, 2020 and December 3, 2020, respectively. Numerous other countries, such as Argentina, Australia, Canada,
India, Mexico, New Zealand and Russia, have also enacted or proposed new or enhanced AML legislation and regulations
applicable to American Express.
Among other things, these laws and regulations require us to establish AML programs that meet certain standards,
including, in some instances, expanded reporting, particularly in the area of suspicious transactions, and enhanced
information gathering and recordkeeping requirements. Any errors, failures or delays in complying with federal, state or
foreign AML and counter-terrorist financing laws could result in significant criminal and civil lawsuits, penalties and
forfeiture of significant assets or other enforcement actions.
Office of Foreign Assets Control Regulation
The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals
and others. The United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially
Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the U.S.
Department of the Treasury’s Office of Foreign Assets Control (OFAC) and are typically known as the OFAC rules. The
OFAC rules prohibit U.S. persons from engaging in financial transactions with or relating to the prohibited individual,
entity or country, require the blocking of assets in which the individual, entity or country has an interest, and prohibit
transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons) to such
individual, entity or country. Blocked assets (e.g., property or bank deposits) cannot be paid out, withdrawn, set off or
transferred in any manner without a license from OFAC. We maintain a global sanctions program designed to ensure
compliance with OFAC requirements. Failure to comply with such requirements could subject us to serious legal and
reputational consequences, including criminal penalties.
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to
the Securities Exchange Act of 1934, as amended (the Exchange Act), an issuer is required to disclose in its annual or
quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or
dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is
generally required even where the activities, transactions or dealings were conducted outside the United States by non-
U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.
American Express Global Business Travel (GBT) and certain entities that may be considered affiliates of GBT have
informed us that during the year ended December 31, 2019, approximately 30 visas were obtained from Iranian
embassies and consulates around the world in connection with certain travel arrangements on behalf of clients and
reservations were booked at one hotel that may be owned, directly or indirectly, or may otherwise be affiliated with, the
Government of Iran. GBT had negligible gross revenues and net profits attributable to these transactions and intends to
continue to engage in these activities on a limited basis so long as such activities are permitted under U.S. law.
13
Anti-Corruption
We are subject to complex international and U.S. anti-corruption laws and regulations, including the U.S. Foreign Corrupt
Practices Act (the FCPA), the UK Bribery Act and other laws that prohibit the making or offering of improper payments.
The FCPA makes it illegal to corruptly offer or provide anything of value to foreign government officials, political parties or
political party officials for the purpose of obtaining or retaining business or an improper advantage. The FCPA also
requires us to strictly comply with certain accounting and internal controls standards. In recent years, enforcement of the
FCPA has become more intense. The UK Bribery Act also prohibits commercial bribery and the receipt of a bribe, and
makes it a corporate offense to fail to prevent bribery by an associated person, in addition to prohibiting improper
payments to foreign government officials. Failure of the Company, our subsidiaries, colleagues, contractors or agents to
comply with the FCPA, the UK Bribery Act and other laws can expose us and/or individual colleagues to investigation,
prosecution and potentially severe criminal and civil penalties.
CCompensation Practices
Our compensation practices are subject to oversight by the Federal Reserve. The federal banking regulators’ guidance on
sound incentive compensation practices sets forth three key principles for incentive compensation arrangements that are
designed to help ensure that incentive compensation plans do not encourage imprudent risk-taking and are consistent
with the safety and soundness of banking organizations. The three principles provide that a banking organization’s
incentive compensation arrangements should (1) provide incentives that appropriately balance risk and financial results
in a manner that does not encourage employees to expose their organizations to imprudent risks, (2) be compatible with
effective internal controls and risk management, and (3) be supported by strong corporate governance, including active
and effective oversight by the organization’s board of directors. Any deficiencies in our compensation practices that are
identified by the Federal Reserve or other banking regulators in connection with its review of our compensation practices
may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or perform other
actions. Enforcement actions may be taken against us if our incentive compensation arrangements or related risk-
management control or governance processes are determined to pose a risk to our safety and soundness and we have
not taken prompt and effective measures to correct the deficiencies.
In May 2016, the federal banking regulators, the Securities and Exchange Commission (SEC), the Federal Housing
Finance Agency and the National Credit Union Administration re-proposed a rule, originally proposed in 2011, on
incentive-based compensation practices. The re-proposed rule would apply deferral, downward adjustment and
forfeiture, and clawback requirements to incentive-based compensation arrangements granted to senior executive
officers and significant risk-takers of covered institutions, with specific requirements varying based on the asset size of
the covered institution and the category of employee. If these or other regulations are adopted in a form similar to what
has been proposed, they will impose limitations on the manner in which we may structure compensation for our
colleagues, which could adversely affect our ability to hire, retain and motivate key colleagues.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Set forth below, in alphabetical order, is a list of our executive officers as of February 13, 2020, including each executive
officer’s principal occupation and employment during the past five years and reflecting recent organizational changes.
None of our executive officers has any family relationship with any other executive officer, and none of our executive
officers became an officer pursuant to any arrangement or understanding with any other person. Each executive officer
has been elected to serve until the next annual election of officers or until his or her successor is elected and qualified.
Each officer’s age is indicated by the number in parentheses next to his or her name.
14
DOUGLAS E. BUCKMINSTER —
Group President, Global Consumer Services Group
Mr. Buckminster (59) has been Group President, Global Consumer Services Group since February 2018. Prior thereto, he
had been President, Global Consumer Services Group since October 2015 and President, Global Network and
International Card Services since February 2012.
JEFFREY C. CAMPBELL —
Chief Financial Officer
Mr. Campbell (59) has been Chief Financial Officer since August 2013.
MARC D. GORDON —
Chief Information Officer
Mr. Gordon (59) has been Chief Information Officer since September 2012.
MONIQUE HERENA —
Chief Colleague Experience Officer
Ms. Herena (48) has been Chief Colleague Experience Officer since April 2019. Ms. Herena joined American Express from
BNY Mellon, where she served as the Chief Human Resources Officer and Senior Executive Vice President, Human
Resources, Marketing and Communications since 2014.
RAYMOND JOABAR —
Chief Risk Officer and President, Global Risk, Banking & Compliance
Mr. Joabar (54) has been Chief Risk Officer and President, Global Risk, Banking & Compliance since September 2019.
Prior thereto, he had been President of International Consumer Services and Global Travel and Lifestyle Services since
February 2018. He also served as Executive Vice President, Global Servicing Network from February 2016 to February
2018 and Executive Vice President, World Service from November 2015 to February 2016. Prior thereto, he had been
Executive Vice President, Global Credit Administration from February 2014 to November 2015.
ANNA MARRS —
President, Global Commercial Services
Ms. Marrs (46) has been President, Global Commercial Services since September 2018. Ms. Marrs joined American
Express from Standard Chartered Bank, where she served as Regional CEO, ASEAN and South Asia since November 2016
and CEO, Commercial and Private Banking since October 2015. She joined Standard Chartered Bank as Group Head,
Strategy and Corporate Development in January 2012.
DENISE PICKETT —
President, Global Services Group
Ms. Pickett (54) has been President, Global Services Group since September 2019. Prior thereto, she had been Chief Risk
Officer and President, Global Risk, Banking & Compliance since February 2018 and President, U.S. Consumer Services
since October 2015. She also served as President, American Express OPEN from February 2014 to October 2015.
ELIZABETH RUTLEDGE —
Chief Marketing Officer
Ms. Rutledge (58) has been Chief Marketing Officer since February 2018. Prior thereto, she had been Executive Vice
President, Global Advertising & Media since February 2016 and Executive Vice President, Card Products & Benefits since
May 2013.
LAUREEN E. SEEGER —
Chief Legal Officer
Ms. Seeger (58) has been Chief Legal Officer since July 2014.
JENNIFER SKYLER —
Chief Corporate Affairs Officer
Ms. Skyler (43) has been Chief Corporate Affairs Officer since October 2019. Ms. Skyler joined American Express from
the We Company, where she had been Chief Communications Officer from January 2018 to September 2019. Prior
thereto, she had been Global Head of Public Affairs from January 2016 to January 2018. Prior thereto, she had been
Director, Consumer Communications at Facebook from December 2012 to December 2015.
STEPHEN J. SQUERI —
Chairman and Chief Executive Officer
Mr. Squeri (60) has been Chairman and Chief Executive Officer since February 2018. Prior thereto, he had been Vice
Chairman since July 2015. Prior thereto, he had been Group President, Global Corporate Services since November 2011.
ANRÉ WILLIAMS —
Group President, Global Merchant and Network Services
Mr. Williams (54) has been Group President, Global Merchant and Network Services since February 2018. Prior thereto,
he had been President of Global Merchant Services and Loyalty since October 2015 and President, Global Merchant
Services since November 2011.
15
AADDITIONAL INFORMATION
We maintain an Investor Relations website at http://ir.americanexpress.com. We make available free of charge, on or
through this website, our annual, quarterly and current reports and any amendments to those reports as soon as
reasonably practicable following the time they are electronically filed with or furnished to the SEC.
In addition, we routinely post financial and other information, some of which could be material to investors, on our
Investor Relations website. Information regarding our corporate responsibility and sustainability initiatives are available
on our Corporate Responsibility website at http://about.americanexpress.com/corporate-responsibility.
The content of any of our websites referred to in this report is not incorporated by reference into this report or any other
report filed with or furnished to the SEC. We have included such website addresses only as inactive textual references and
do not intend them to be active links.
You can find certain statistical disclosures required of bank holding companies starting on page A-1, which are
incorporated herein by reference.
Our business as a whole has not experienced significant seasonal fluctuations, although card billed business tends to be
moderately higher in the fourth quarter than in other quarters. As a result, the amount of Card Member loans and
receivables outstanding tend to be moderately higher during that quarter. The average discount rate also tends to be
slightly lower during the fourth quarter due to a higher level of retail-related billed business volumes.
ITEM 1A. RISK FACTORS
This section highlights specific risks that could affect us and our businesses, broadly categorized as “Strategic, Business
and Competitive Risks,” “Legal, Regulatory and Compliance Risks” and “Credit, Liquidity and Market Risks.” You should
carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K,
including the “Risk Management” section under “MD&A,” which describes our approach to identifying, monitoring and
managing the risks we assume in conducting our businesses and provides certain quantitative and qualitative disclosures
about market risks. Based on the information currently known to us, we believe the following information identifies the
most significant risk factors affecting us. However, the risks and uncertainties we face are not limited to those described
below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also
adversely affect our business.
If any of the following risks develop into actual events or if the circumstances described in the risks occur or continue to
occur, these events or circumstances could have a material adverse effect on our business, financial condition or results
of operations. These events or circumstances could also have a negative effect on the trading price of our securities.
Strategic, Business and Competitive Risks
Difficult conditions in the business and economic environment, as well as political conditions in the United States
and elsewhere, may materially adversely affect our business and results of operations.
Our results of operations are materially affected by economic, market, political and social conditions in the United States
and abroad. We offer a broad array of products and services to consumers, small businesses and commercial clients and
thus are very dependent upon the level of consumer and business activity and the demand for payment and financing
products. Slow economic growth, volatile or deteriorating economic conditions or shifts in broader consumer and
business trends significantly impact customer behaviors, including spending on our cards, the ability and willingness of
Card Members to borrow and pay amounts owed to us, and demand for fee-based products and services. Political
conditions, prolonged or recurring government shutdowns, regional hostilities and the prospect or occurrence of more
widespread conflicts, social upheaval, fiscal and monetary policies, trade wars and tariffs could also negatively affect
consumer and business spending, including travel patterns and business investment, and demand for credit.
Factors such as consumer spending and confidence, unemployment rates, business investment, geopolitical instability,
election results, government spending, trade relationships with other countries, interest rates, taxes, energy costs, the
volatility and strength of the capital markets, inflation and deflation all affect the economic environment and, ultimately,
our profitability. Such factors may also cause our earnings, billings, loan balances, credit metrics and margins to fluctuate
and diverge from expectations of analysts and investors, who may have differing assumptions regarding their impact on
our business, adversely affecting, and/or increasing the volatility of, the trading price of our common shares.
16
Travel and entertainment expenditures, which comprised approximately 25 percent of our U.S. billed business during
2019, for example, are sensitive to business and personal discretionary spending levels and tend to decline during general
economic downturns. Likewise, spending by small businesses and corporate clients, which comprised approximately 41
percent of our worldwide billed business during 2019, depends in part on the economic environment and a favorable
climate for continued business investment and new business formation. Increases in delinquencies and write-off rates as
a result of increases in bankruptcies, unemployment rates, changes in customer behaviors or otherwise could also have a
material adverse effect on our results of operations. The consequences of negative circumstances impacting us or the
environment generally can be sudden and severe.
OOur business is subject to the effects of geopolitical events, weather, natural disasters and other conditions.
Geopolitical events, terrorist attacks, natural disasters, severe weather conditions, floods, health pandemics (including
the recent coronavirus outbreak), information or cyber security incidents (including intrusion into or degradation of
systems or technology by cyberattackers) and other catastrophic events can have a material adverse effect on our
business. Because of our proximity to the World Trade Center, our headquarters were damaged as a result of the terrorist
attacks of September 11, 2001. Recent hurricanes and other natural disasters have impacted spending and credit
performance in the areas affected. Similar events or other disasters or catastrophic events in the future, and events
impacting other sectors of the economy, including the telecommunications and energy sectors, could have a negative
effect on our businesses and infrastructure, including our technology and systems. Climate change may exacerbate
certain of these threats, including the frequency and severity of weather-related events. Card Members in California, New
York, Florida, Texas, Georgia and New Jersey account for a significant portion of U.S. Consumer billed business and Card
Members loans, and our results of operations could be impacted by events or conditions that disproportionately or
specifically affect one or more of those states.
Because we derive a portion of our revenues from travel-related spending, our business is sensitive to safety concerns
related to travel and tourism, limitations on travel and mobility, and health-related risks, including travel restrictions and
bans as a result of the recent coronavirus outbreak. In addition, disruptions in air travel and other forms of travel can
result in the payment of claims under travel interruption insurance policies we offer and, if such disruptions to travel are
prolonged, they can materially adversely affect overall travel-related spending.
If the conditions described above (or similar ones) result in widespread or lengthy disruptions to travel, they could have a
material adverse effect on our results of operations. Card Member spending may also be negatively impacted in areas
affected by natural disasters or other catastrophic events. The impact of such events on the overall economy may also
adversely affect our financial condition or results of operations.
The exit of the United Kingdom from the European Union could materially adversely impact our business, results of
operations and financial condition.
Our business in the United Kingdom and elsewhere may be negatively impacted by the exit of the United Kingdom from
the EU (commonly referred to as Brexit) on January 31, 2020, including from a deterioration of the economic environment
in the United Kingdom and other countries in which we operate that adversely affects spending on our cards and the
ability and willingness of Card Members to pay amounts owed to us. We may also experience increased volatility in the
value of the pound sterling, the euro and other European currencies, which could further strengthen the U.S. dollar,
adversely impacting the results of operations from our international activities. In addition, Brexit could lead to legal
uncertainty and potentially divergent national laws and regulations in the United Kingdom and the EU, and we may incur
additional costs or need to make operational changes that reduce revenue as we adapt to potentially divergent regulatory
frameworks. Any of these effects of Brexit, among others, could adversely affect our business and financial results. As of
December 31, 2019, the United Kingdom constituted approximately 4 percent of our worldwide billed business and the
EMEA region as a whole constituted approximately 11 percent. We have made changes to the structure of our business
operations in Europe in anticipation of Brexit, although the financial, trade and legal implications of Brexit remain
uncertain and may be more severe than expected given the lack of comparable precedent.
Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in
the payments industry.
The payments industry is highly competitive, and we compete with card networks, issuers and acquirers, paper-based
transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and ACH), as well as evolving and growing
alternative, non-traditional payment and financing providers. If we are not able to differentiate ourselves from our
competitors, develop compelling value propositions for our customers and/or effectively grow in areas such as mobile
and online payments and emerging technologies, we may not be able to compete effectively.
17
We believe Visa and Mastercard are larger than we are in most countries. As a result, card issuers and acquirers on the
Visa and Mastercard networks may be able to benefit from the dominant position, scale, resources, marketing and pricing
of those networks. Our business may also be increasingly negatively affected if we are unable to increase or maintain
merchant acceptance and our cards are not accepted at merchants that accept cards on the Visa and Mastercard
networks.
Some of our competitors have developed, or may develop, substantially greater financial and other resources than we
have and may offer richer value propositions or a wider range of programs and services than we offer or may use more
effective advertising, marketing or cross-selling strategies to acquire and retain more customers, capture a greater share
of spending and borrowings, establish and develop more attractive cobrand card and other partner programs and
maintain greater merchant acceptance than we have. We may not be able to compete effectively against these threats or
respond or adapt to changes in consumer spending habits as effectively as our competitors. Expenses such as Card
Member rewards and Card Member services expenses could continue to increase as we improve our value propositions
for Card Members, including in response to increased competition.
Spending on our cards could continue to be impacted by increasing consumer usage of charge, credit and debit cards
issued on other networks, as well as adoption of alternative payment systems. The fragmentation of customer spending
to take advantage of different merchant or card incentives or for convenience with technological solutions may continue
to increase. To the extent other payment mechanisms, systems and products continue to successfully expand, our
discount revenues and our ability to access transaction data through our integrated payments platform could be
negatively impacted. For example, companies that control access to consumer and merchant payment method choices at
the point of sale or through digital wallets, commerce-related experiences, mobile applications or other technologies
could choose not to accept, suppress use of, or degrade the experience of using our products or could restrict our access
to our customers and transaction data. Such companies could also require payments from us to participate in such digital
wallets, experiences or applications, impacting our profitability on transactions.
The competitive value of our closed-loop data may also be diminished as traditional and non-traditional competitors use
other, new data sources and technologies to derive similar insights. Certain regulations, such as PSD2 in Europe and open
banking initiatives in various jurisdictions around the world, could also diminish the value of our closed-loop data or the
demand for our products and services by disintermediating existing financial services providers.
To the extent we expand into new business areas and new geographic regions, we may face competitors with more
experience and more established relationships with relevant customers, regulators and industry participants, which could
adversely affect our ability to compete. Laws and business practices that favor local competitors, require card
transactions to be routed over domestic networks or prohibit or limit foreign ownership of certain businesses could limit
our growth in international regions. We may face additional compliance and regulatory risks to the extent that we expand
into new business areas, and we may need to dedicate more expense, time and resources to comply with regulatory
requirements than our competitors, particularly those that are not regulated financial institutions.
Many of our competitors are subject to different, and in some cases, less stringent, legislative and regulatory regimes,
and some may have lower cost structures and more agile business models and systems. More restrictive laws and
regulations that do not apply to all of our competitors can put us at a disadvantage, including prohibiting us from
engaging in certain transactions, regulating our business practices or adversely affecting our cost structure.
WWe face intense competition for partner relationships, which could result in a loss or renegotiation of these
arrangements that could have a material adverse impact on our business and results of operations.
In the ordinary course of our business we enter into different types of contractual arrangements with business partners in
a variety of industries. For example, we have partnered with Delta, Marriott, British Airways and Hilton, as well as many
others globally, to offer cobranded cards for consumers and small businesses, and through our Membership Rewards
program we have partnered with businesses in many industries, including Delta and others in the airline industry, to offer
benefits to Card Member participants. See “Business Partners and Relationships” under “Business” for additional
information on our business partnerships, including with Delta.
Competition for relationships with key business partners is very intense and there can be no assurance we will be able to
grow or maintain these partner relationships or that they will remain as profitable. Establishing and retaining attractive
cobrand card partnerships is particularly competitive among card issuers and networks as these partnerships typically
appeal to high-spending loyal customers. All of our cobrand portfolios in the aggregate accounted for approximately 18
percent of our worldwide billed business for the year ended December 31, 2019. Card Member loans related to our
cobrand portfolios accounted for approximately 38 percent of our worldwide Card Member loans as of December 31,
2019.
18
Cobrand arrangements are entered into for a fixed period, generally ranging from five to ten years, and will terminate in
accordance with their terms, including at the end of the fixed period unless extended or renewed at the option of the
parties, or upon early termination as a result of an event of default or otherwise. We work with our cobrand partners on an
ongoing basis to demonstrate the value we deliver and evolve our relationships for the benefit of both parties. We face the
risk that we could lose partner relationships, even after we have invested significant resources in the relationships. We
may also choose to not renew certain cobrand relationships. The volume of billed business could decline and Card
Member attrition could increase, in each case, significantly as a result of the termination of one or more cobrand
partnership relationships. In addition, some of our cobrand arrangements provide that, upon expiration or termination,
the cobrand partner may purchase or designate a third party to purchase the loans generated with respect to its program,
which could result in the loss of the card accounts and a significant decline in our Card Member loans outstanding.
We regularly seek to extend or renew cobrand arrangements in advance of the end of the contract term and face the risk
that existing relationships will be renegotiated with less favorable terms for us or that we may be unable to renegotiate on
terms that are acceptable to us, as competition for such relationships continues to increase. We make payments to our
cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding
rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and
retained. The amount we pay to our cobrand partners has increased, particularly in the United States, and may continue
to increase as arrangements are renegotiated due to increasingly intense competition for cobrand partners among card
issuers and networks. See "Off-Balance Sheet Arrangements and Contractual Obligations" under "MD&A" for additional
information regarding commitments for payments to certain cobrand partners.
The loss of exclusivity arrangements with business partners, the loss of the partner relationship altogether (whether by
non-renewal at the end of the contract period, such as the end of our relationship with Costco in the United States in
2016, or as the result of a merger, legal or regulatory action or otherwise, such as the withdrawal of American Airlines in
2014 from our Airport Club Access program for Centurion® and Platinum Card® Members) or the renegotiation of existing
partnerships with terms that are significantly worse for us could have a material adverse impact on our business and
results of operations. See "Our business is subject to comprehensive government regulation and supervision, which could
materially adversely affect our results of operations and financial condition" for information on the uncertainty regarding
our cobrand and agent relationships in the EU. In addition, any publicity associated with the loss of any of our key
business partners could harm our reputation, making it more difficult to attract and retain Card Members and merchants,
and could weaken our negotiating position with our remaining and prospective business partners.
AArrangements with our business partners represent a significant portion of our business. We are exposed to risks
associated with our business partners, including reputational issues, business slowdowns, bankruptcies,
liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners.
Our success is, in many ways, dependent on the success of our business partners. From customer acquisition to
cobranding arrangements, from participation in our rewards programs to facilitating B2B supplier payments for our
corporate clients, we rely on our business partners across many aspects of our company and our arrangements with
business partners represent a significant portion of our business. See “Business Partners and Relationships” under
“Business” for additional information on our business partnerships. To the extent any of our partners fail to effectively
promote and support our products, experience a slowdown in their business, operational disruptions, reputational issues
or loss of consumer confidence, or are otherwise unable to meet our expectations or those of their other stakeholders,
our business may be materially negatively impacted. In addition, we may be obligated to make or accelerate payments to
certain business partners such as cobrand partners upon the occurrence of certain triggering events such as a shortfall in
certain performance and revenue levels. If we are not able to effectively manage these triggering events, we could
unexpectedly have to make payments to these partners, which could have a negative effect on our financial condition and
results of operations. See “Contractual Obligations” under “MD&A” for additional information on financial commitments
related to agreements with certain cobrand partners.
Similarly, we are exposed to risk from bankruptcies, liquidations, insolvencies, financial distress, restructurings,
consolidations and other similar events that may occur in any industry representing a significant portion of our billed
business, which could negatively impact particular card products and services (and billed business generally) and our
financial condition and results of operations. We could also be materially impacted if we were obligated or elected to
reimburse Card Members for products and services purchased from merchants that have ceased operations or stopped
accepting our cards. For example, we are exposed to credit risk in the airline industry to the extent we protect Card
Members against non-delivery of goods and services, such as where we have remitted payment to an airline for a Card
Member purchase of tickets that have not yet been used or “flown.” If we are unable to collect the amount from the
airline, we may bear the loss for the amount credited to the Card Member. Spending at airline merchants accounted for
approximately 8 percent of our worldwide billed business for the year ended December 31, 2019.
For additional information relating to the general risks related to the airline industry, see “Risk Management—Institutional
Credit Risk—Exposure to the Airline and Travel Industry” under “MD&A.”
19
WWe face continued intense competitive pressure that may materially impact the prices we charge merchants that
accept our cards for payment for goods and services.
Unlike our competitors in the payments industry that rely on revolving credit balances to drive profits, our business model
is more focused on Card Member spending. Discount revenue, which represents fees generally charged to merchants
when Card Members use their cards to purchase goods and services on our network, is primarily driven by billed business
volumes and is our largest single revenue source. Our average merchant discount rate has been impacted by regulatory
changes affecting competitor pricing in certain international countries. We also face pressure from competitors that have
other sources of income or lower costs that can make their pricing more attractive to business partners and merchants.
Merchants are also able to negotiate incentives and pricing concessions from us as a condition to accepting our cards or
being cobrand partners. As merchants consolidate and become even larger, we may have to increase the amount of
incentives and/or concessions we provide to such merchants, which could materially and adversely affect our results of
operations. Competitive and regulatory pressures on pricing could make it difficult to offset the costs of these incentives.
We have also experienced erosion of our average merchant discount rate as we increase merchant acceptance. We may
not be successful in significantly expanding merchant acceptance or offsetting rate erosion with volumes at new
merchants.
In addition, the regulatory environment and differentiated payment models and technologies from non-traditional players
in the alternative payments space could pose challenges to our traditional payment model and adversely impact our
average merchant discount rate. Some merchants continue to invest in their own payment solutions, such as proprietary-
branded mobile wallets, using both traditional and new technology platforms. If merchants are able to drive broad
consumer adoption and usage, it could adversely impact our average merchant discount rate and billed business
volumes.
A continuing priority of ours is to drive greater and differentiated value to our merchants which, if not successful, could
negatively impact our discount revenue and financial results. We may not succeed in maintaining merchant discount rates
or offsetting the impact of declining merchant discount rates, which could materially and adversely affect our revenues
and profitability, and therefore our ability to invest in innovation and in value-added services for merchants and Card
Members.
Surcharging or steering by merchants could materially adversely affect our business and results of operations.
In certain countries, such as Australia and certain Member States in the EU, merchants are expressly permitted by law to
surcharge certain card purchases. In jurisdictions allowing surcharging, we have seen merchant surcharging on American
Express cards in certain merchant categories, and in some cases, either the surcharge is greater than that applied to Visa
and Mastercard cards or Visa and Mastercard cards are not surcharged at all (practices that are known as differential
surcharging), even though there are many cards issued on competing networks that have an equal or greater cost of
acceptance for the merchant. In addition, the laws of a number of states in the United States that prohibit surcharging
have been overturned in litigation brought by merchant groups.
We also encounter merchants that accept our cards, but tell their customers that they prefer to accept another type of
payment or otherwise seek to suppress use of our cards. Our Card Members value the ability to use their cards where and
when they want to, and we, therefore, take steps to meet our Card Members’ expectations and to protect the American
Express brand by prohibiting this form of discrimination, subject to local legal requirements.
If surcharging, steering or other forms of discrimination become widespread, American Express cards and credit and
charge cards generally could become less desirable to consumers, which could result in a decrease in cards-in-force and
transaction volumes. The impact could vary depending on such factors as: the industry or manner in which a surcharge is
levied; how Card Members are surcharged or steered to other card products or payment forms at the point of sale; the
ease and speed of implementation for merchants, including as a result of new or emerging technologies; the size and
recurrence of the underlying charges; and whether and to what extent these actions are applied to other forms of
payment, including whether it varies depending on the type of card (e.g., credit or debit), product, network, acquirer or
issuer. Discrimination against American Express cards could have a material adverse effect on our business, financial
condition and results of operations, particularly to the extent it disproportionately impacts our Card Members or our
business.
20
WWe may not be successful in our efforts to promote card usage through marketing and promotion, merchant
acceptance and Card Member rewards and services, or to effectively control the costs of such investments, both of
which may materially impact our profitability.
Revenue growth is dependent on increasing consumer and business spending on our cards, growing loan balances and
increasing fee revenue. We have been investing in a number of growth initiatives, including to attract new Card Members,
reduce Card Member attrition and capture a greater share of customers’ total spending and borrowings. There can be no
assurance that our investments to acquire Card Members, provide differentiated features and services and increase
usage of our cards will continue to be effective. In addition, if we develop new products or offers that attract customers
looking for short-term incentives rather than incentivize long-term loyalty, Card Member attrition and costs could
increase. Increasing spending on our cards also depends on our continued expansion of merchant acceptance of our
cards. If we are unable to continue growing merchant acceptance or merchants decide to no longer accept American
Express cards, our business could suffer. Further, expanding our service offerings, adding customer acquisition channels
and forming new partnerships or renewing current partnerships could have higher costs than our current arrangements,
and could adversely impact our average discount rate or dilute our brand.
Another way we invest in customer value is through our Membership Rewards program, as well as other Card Member
benefits. Any significant change in, or failure by management to reasonably estimate, actual redemptions of Membership
Rewards points and associated redemption costs could adversely affect our profitability. We rely on third parties for
certain redemption options and may not be able to continue to offer such redemption options in the future, which could
diminish the value of the program for our Card Members. Our two largest redemption partners are Amazon and Delta. In
addition, many credit card issuers have instituted rewards and cobrand programs and may introduce programs and
services that are similar to or more attractive than ours. Our inability to continue to differentiate our products and
services generally could materially adversely affect us.
We may not be able to cost-effectively manage and expand Card Member benefits, including containing the growth of
marketing, promotion, rewards and Card Member services expenses in the future. If such expenses increase beyond our
expectations, we will need to find ways to offset the financial impact by increasing payments volume, increasing other
areas of revenues such as fee-based revenues, or both. We may not succeed in doing so, particularly in the current
competitive and regulatory environment.
Our brand and reputation are key assets of our Company, and our business may be materially affected by how we are
perceived in the marketplace.
Our brand and its attributes are key assets, and we believe our continued success depends on our ability to preserve,
grow and leverage the value of our brand. Our ability to attract and retain consumer and small business Card Members
and corporate clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business
practices, data use and protection, management, workplace culture, merchant acceptance, financial condition, our
response to unexpected events and other subjective qualities. Negative perceptions or publicity regarding these matters
— even if related to seemingly isolated incidents and whether or not factually correct—could erode trust and confidence
and damage our reputation among existing and potential Card Members, corporate clients, merchants and partners,
which could make it difficult for us to attract new customers and maintain existing ones. Negative public opinion could
result from actual or alleged conduct in any number of activities or circumstances, including card practices, regulatory
compliance, the use and protection of customer information and conduct by our colleagues, and from actions taken by
regulators or others in response thereto. Discussion about such matters in social media channels can also cause rapid,
widespread reputational harm to our brand.
Our brand and reputation may also be harmed by actions taken by third parties that are outside our control. For example,
any shortcoming of or controversy related to a third-party vendor, business partner, merchant acquirer or network
partner may be attributed by Card Members and merchants to us, thus damaging our reputation and brand value. The
lack of acceptance, suppression of card usage or surcharging by merchants can also negatively impact perceptions of our
brand and our products, lower overall transaction volume and increase the attractiveness of other payment products or
systems. Adverse developments with respect to our industry may also, by association, negatively impact our reputation,
or result in greater regulatory or legislative scrutiny or litigation against us. Furthermore, as a corporation with
headquarters and operations located in the United States, a negative perception of the United States arising from its
political or other positions could harm the perception of our company and our brand. Although we monitor developments
for areas of potential risk to our reputation and brand, negative perceptions or publicity could materially and adversely
affect our business volumes, revenues and profitability.
21
AA major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage
to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our
charge and credit cards.
We and third parties process, transmit, store and provide access to account information in connection with our charge
and credit cards and other products, and in the normal course of our business, we collect, analyze and retain significant
volumes of certain types of personally identifiable and other information pertaining to our customers and colleagues.
Our networks and systems are subject to constant attempts to identify and exploit potential vulnerabilities in our
operating environment with intent to disrupt our business operations and capture, destroy, manipulate or expose various
types of information relating to corporate trade secrets, customer information, including Card Member, travel and loyalty
program data, colleague information and other sensitive business information, including acquisition activity, non-public
financial results and intellectual property. There are a number of motivations for cyber threat actors, including criminal
activities such as fraud, identity theft and ransom, corporate or nation-state espionage, political agendas, public
embarrassment with the intent to cause financial or reputational harm, intent to disrupt information technology systems,
and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites.
Global financial institutions like us, as well as our customers, colleagues, regulators, vendors and other third parties, have
experienced a significant increase in information and cyber security risk in recent years and will likely continue to be the
target of increasingly sophisticated cyberattacks, including computer viruses, malicious or destructive code,
ransomware, social engineering attacks (including phishing, impersonation and identity takeover attempts), corporate
espionage, hacking, website defacement, denial-of-service attacks and other attacks and similar disruptions from the
misconfiguration or unauthorized use of or access to computer systems. For example, we and other U.S. financial
services providers have been the target of distributed denial-of-service attacks from sophisticated third parties. These
threats can arise from external parties as well as insiders who knowingly or unknowingly engage in or enable malicious
cyber activities.
We develop and maintain systems and processes aimed at detecting and preventing information and cyber security
incidents and fraudulent activity, which require significant investment, maintenance and ongoing monitoring and
updating as technologies and regulatory requirements change and as efforts to overcome security measures become
more sophisticated. Despite our efforts, the possibility of information and cyber security incidents, malicious social
engineering, corporate espionage, fraudulent or other malicious activities and human error or malfeasance cannot be
eliminated entirely and will evolve as new and emerging technology is deployed, including the increasing use of personal
mobile and computing devices that are outside of our network and control environments. Risks associated with each of
these include theft of funds and other monetary loss, the disruption of our operations and the unauthorized disclosure,
release, gathering, monitoring, misuse, modification, loss or destruction of confidential, proprietary, trade secret or other
information (including account data information), the effects of which could be compounded if not detected quickly.
Indeed, an information or cyber security incident may not be detected until well after it occurs and the severity and
potential impact may not be fully known for a substantial period of time after it has been discovered.
Information or cyber security incidents, fraudulent activity and other actual or perceived failures to maintain
confidentiality, integrity, privacy and/or security has led to increased regulatory scrutiny and may lead to regulatory
investigations and intervention (such as mandatory card reissuance), increased litigation (including class action
litigation), remediation, fines and response costs, negative assessments of us and our subsidiaries by banking regulators
and rating agencies, reputational and financial damage to our brand, and reduced usage of our products and services, all
of which could have a material adverse impact on our business. The disclosure of sensitive company information could
also undermine our competitive advantage and divert management attention and resources.
Successful cyberattacks, data breaches, disruptions or other incidents related to the actual or perceived failures to
maintain confidentiality, integrity, privacy and/or security at other large financial institutions, large retailers, travel and
hospitality companies, government agencies or other market participants, whether or not we are impacted, could lead to
a general loss of customer confidence that could negatively affect us, including harming the market perception of the
effectiveness of our security measures or harming the reputation of the financial system in general, which could result in
reduced use of our products and services. Such events could also result in legislation and additional regulatory
requirements. Although we maintain cyber insurance, there can be no assurance that liabilities or losses we may incur will
be covered under such policies or that the amount of insurance will be adequate.
22
TThe uninterrupted operation of our information systems is critical to our success and a significant disruption could
have a material adverse effect on our business and results of operations.
Our information technology systems, including our transaction authorization, clearing and settlement systems, and data
centers, may experience service disruptions or degradation because of technology malfunction, sudden increases in
customer transaction volume, natural disasters, accidents, power outages, internet outages, telecommunications
failures, fraud, denial-of-service and other cyberattacks, terrorism, computer viruses, vulnerabilities in hardware or
software, physical or electronic break-ins, or similar events. Service disruptions or degradations could prevent access to
our online services and account information, compromise or limit access to company or customer data, impede
transaction processing and financial reporting, and lead to regulatory investigations and fines, increased regulatory
oversight and litigation. Any such service disruption or degradation could adversely affect the perception of the reliability
of our products and services and materially adversely affect our overall business, reputation and results of operations.
We rely on third-party providers for acquiring and servicing customers, technology, platforms and other services
integral to the operations of our businesses. These third parties may act in ways that could materially harm our
business.
We rely on third-party service providers, cobrand partners, merchants, customer acquisition channels, processors,
aggregators, network partners and other third parties for services that are integral to our operations and are subject to
the risk that activities of such third parties may adversely affect our business. As outsourcing, specialization of functions,
third-party digital services and technology innovation within the payments industry increase (including with respect to
mobile technologies, tokenization, big data, artificial intelligence and cloud storage solutions), more third parties are
involved in processing card transactions and handling our data. For example, we rely on third parties for the timely
transmission of accurate information across our global network, card acquisition and provision of services to our
customers. If a service provider or other third party ceases to provide the data quality or communications capacity we
expect or services upon which we rely, as a result of natural disaster, operational disruptions or errors, terrorism,
information or cyber security incidents, or any other reason, the failure could interrupt or compromise the quality of our
services to customers or impact our ability to grow our business.
The confidentiality, integrity, privacy, availability and/or security of data communicated over third-party networks or
platforms or held by, or accessible to, third parties, including merchants that accept our cards, payment processors,
payment intermediaries and our third-party vendors and business partners, could become compromised, which could
lead to unauthorized use of our data or fraudulent transactions on our cards, as well as costs associated with responding
to such an incident, including regulatory investigations and fines, increased regulatory oversight and litigation. For
example, in March 2018, we were alerted by Expedia that certain customers who used Expedia’s Orbitz platform may have
been victims of a cyberattack. The attack involved an Orbitz platform that served as the underlying booking engine for
online travel websites, including Amextravel.com and travel booked through Amex Travel Representatives.
We are also exposed to the risk that a disruption or other event at a third party affecting one of our service providers or
partners could impede their ability to provide to us services or data on which we rely to operate our business. Service
providers or other third parties could also cease providing data to us or use our data in a way that diminishes the
competitive value of our closed loop.
The management and oversight of multiple vendors increases our operational complexity and governance challenges and
decreases our control. A failure to exercise adequate oversight over service providers, including compliance with service
level agreements or regulatory or legal requirements, could result in regulatory actions, fines, litigation, sanctions or
economic and reputational harm to us. In addition, we may not be able to effectively monitor or mitigate operational risks
relating to our vendors’ service providers. We are also exposed to the risk that a service disruption at a common service
provider to our vendors could impede their ability to provide services to us. Notwithstanding any attempts to diversify our
reliance on third parties, we may not be able to effectively mitigate operational risks relating to our vendors’ use of
common service providers.
If we are not able to invest successfully in, and compete at the leading edge of, technological developments across
all our businesses, our revenue and profitability could be materially adversely affected.
Our industry is subject to rapid and significant technological changes. In order to compete in our industry, we need to
continue to invest in technology across all areas of our business, including in transaction processing, data management
and analytics, machine learning and artificial intelligence, customer interactions and communications, open banking and
alternative payment mechanisms, authentication technologies and digital identification, tokenization, real-time
settlement, and risk management and compliance systems. Incorporating new technologies into our products and
services, including developing the appropriate governance and controls consistent with regulatory expectations, may
require substantial expenditures and take considerable time, and ultimately may not be successful. We expect that new
technologies in the payments industry will continue to emerge, and these new technologies may be superior to, or render
obsolete, our existing technology.
23
The process of developing new products and services, enhancing existing products and services and adapting to
technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to
anticipate customers’ changing needs and emerging technological trends accurately could significantly impede our ability
to compete effectively. Consumer and merchant adoption is a key competitive factor and our competitors may develop
products, platforms or technologies that become more widely adopted than ours. In addition, we may underestimate the
time and expense we must invest in new products and services before they generate significant revenues, if at all.
Our ability to develop, acquire or access competitive technologies or business processes on acceptable terms may also
be limited by intellectual property rights that third parties, including competitors and potential competitors, may assert.
In addition, our ability to adopt new technologies may be inhibited by the emergence of industry-wide standards, a
changing legislative and regulatory environment, an inability to develop appropriate governance and controls, a lack of
internal product and engineering expertise, resistance to change from Card Members or merchants, or the complexity of
our systems.
WWe may not be successful in realizing the benefits associated with our acquisitions, strategic alliances, joint ventures
and investment activity, and our business and reputation could be materially adversely affected.
We have acquired a number of businesses and have made a number of strategic investments, and continue to evaluate
potential transactions. These transactions could be material to our financial condition and results of operations. There is
no assurance that we will be able to successfully identify and secure future acquisition candidates on terms and
conditions that are acceptable to us, or successfully complete proposed acquisitions and investments, which could impair
our growth. The process of integrating an acquired company, business or technology could create unforeseen operating
difficulties and expenditures, result in unanticipated liabilities, including legal claims, violations of laws, commercial
disputes and information security vulnerabilities or breaches, and harm our business generally. It may take us longer than
expected to fully realize the anticipated benefits of these transactions, and those benefits may ultimately be smaller than
anticipated or may not be realized at all, which could materially adversely affect our business and operating results,
including as a result of write-downs of goodwill and other intangible assets.
We may also face risks with other types of strategic transactions, such as the sale to InComm of the operations relating to
our prepaid reloadable and gift card business. The reloadable operations have experienced disruptions in the past,
impacting the ability of our prepaid customers to load and use their cards. If such operations are interrupted, suspended
or terminated in the future, it could further negatively impact our customers’ experience, result in additional costs,
litigation and regulatory action, and harm our business and reputation.
Joint ventures, including our GBT JV and our new joint venture in China, and minority investments inherently involve a
lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational and/or
compliance risks associated with the joint venture or minority investment. In addition, we may be dependent on joint
venture partners, controlling shareholders or management who may have business interests, strategies or goals that are
inconsistent with ours. For example, trade secrets and other proprietary information we may provide to a joint venture
may become available to third parties beyond our control. The ability to enforce intellectual property and contractual
rights to prevent disclosure of our trade secrets and other proprietary information may be limited in certain jurisdictions.
Business decisions or other actions or omissions of the joint venture partner, controlling shareholders or management
may adversely affect the value of our investment, result in litigation or regulatory action against us and otherwise damage
our reputation and brand.
Our success is dependent on maintaining a culture of integrity and respect as well as upon our executive officers and
other key personnel, and misconduct by or loss of key personnel could materially adversely affect our business.
We rely upon our key personnel not only for business success, but also to lead with integrity and promote a culture of
respect. To the extent our leaders behave in a manner that does not comport with our company’s values, the
consequences to our brand and reputation could be severe and could negatively affect our financial condition and results
of operations.
The market for qualified individuals is highly competitive, and we may not be able to attract and retain qualified personnel
or candidates to replace or succeed members of our senior management team or other key personnel who voluntarily or
involuntarily leave the company. Changes in immigration and work permit laws and regulations or the administration or
enforcement of such laws or regulations can also impair our ability to attract and retain qualified personnel, or to employ
such personnel in the location(s) of our choice. As further described in “Supervision and Regulation—Compensation
Practices,” our compensation practices are subject to review and oversight by the Federal Reserve and the compensation
practices of AENB is subject to review and oversight by the OCC. This regulatory review and oversight could further affect
our ability to attract and retain our executive officers and other key personnel. The loss of key personnel could materially
adversely affect our business.
24
LLegal, Regulatory and Compliance Risks
Our business is subject to comprehensive government regulation and supervision, which could materially adversely
affect our results of operations and financial condition.
We are subject to comprehensive government regulation and supervision in jurisdictions around the world, which
significantly affects our business and requires continual enhancement of our compliance efforts. Regulatory oversight
and supervision of our businesses are generally designed to protect consumers and enhance financial stability and are
not designed to protect our security holders.
Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing
business activities, limit our ability to pursue certain business opportunities and adopt new technologies, and affect our
relationships with Card Members, partners, merchants, vendors and other third parties. New laws or regulations could
similarly affect our business, increase our costs of doing business and require us to change certain of our business
practices and invest significant management attention and resources, all of which could adversely affect our results of
operations and financial condition. Legislators and regulators around the world are aware of each other’s approaches to
the regulation of the payments industry. Consequently, a development in one country, state or region may influence
regulatory approaches in another. To the extent that different regulatory systems impose overlapping or inconsistent
requirements on the conduct of our business, we face complexity and additional costs in our compliance efforts.
If we fail to satisfy regulatory requirements or maintain our financial holding company status, our financial condition and
results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions
(such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions.
Additionally, our banking regulators have wide discretion in the examination and the enforcement of applicable banking
statutes and regulations and may restrict our ability to engage in certain business activities or acquisitions or require us
to maintain more capital.
In recent years, legislators and regulators have focused on the operation of card networks, including interchange fees
paid to card issuers in payment networks such as Visa and Mastercard and the fees merchants are charged to accept
cards. Even where we are not directly regulated, regulation of bankcard fees significantly negatively impacts the discount
revenue derived from our business, including as a result of downward pressure on our discount rate from decreases in
competitor pricing in connection with caps on interchange fees. In some cases, regulations also extend to certain aspects
of our business, such as network and cobrand arrangements or the terms of card acceptance for merchants, including
terms relating to non-discrimination and honor-all-cards. For example, we have largely exited our network businesses in
the EU and Australia as a result of regulation in those jurisdictions. In addition, there is uncertainty as to when or how
interchange fee caps and other provisions of the EU payments legislation might apply when we work with cobrand
partners and agents in the EU. In a ruling issued on February 7, 2018, the EU Court of Justice confirmed the validity of the
application of the fee caps and other provisions in circumstances where three-party networks issue cards with a cobrand
partner or through an agent, although the ruling provided only limited guidance as to when or how the provisions might
apply in such circumstances and remains subject to differing interpretations by regulators and participants in cobrand
arrangements. As a result, there can be no assurance we will be able to maintain our existing cobrand and agent
relationships in the EU. Furthermore, the European Commission is in the process of conducting an impact assessment of
the interchange fee caps, which could potentially result in lower and/or additional interchange fee caps and restrictions.
We are subject to certain provisions of the Bank Secrecy Act, as amended by the Patriot Act, with regard to maintaining
effective AML programs. Similar AML requirements apply under the laws of most jurisdictions where we operate.
Increased regulatory focus in this area is likely to result in increased costs related to oversight, supervision and fines, and
may result in changes to our business practices, including restrictions with respect to the types of products and services
we may offer to consumers, the countries in which our cards may be used, and the types of customers and merchants
who can obtain or accept our cards. Emerging technologies, such as digital currencies, could limit our ability to track the
movement of funds. Money laundering, terrorist financing and other illicit activities involving our business could result in
enforcement action, and our reputation may suffer due to our customers’ association with certain countries, persons or
entities or the existence of any such transactions.
Various regulatory agencies and legislatures are also considering regulations and legislation covering identity theft,
account management guidelines, credit bureau reporting, disclosure rules, security and marketing that would impact us
directly, in part due to increased scrutiny of our underwriting and account management standards. These new
requirements may restrict our ability to issue charge and credit cards or partner with other financial institutions, which
could adversely affect our revenue growth.
See “Supervision and Regulation” for more information about certain laws and regulations to which we are subject and
their impact on us.
25
LLitigation and regulatory actions could subject us to significant fines, penalties, judgments and/or requirements
resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our
business.
Businesses in the financial services and payments industries have historically been subject to significant legal actions,
including class action lawsuits. Many of these actions have included claims for substantial compensatory or punitive
damages. While we have historically relied on our arbitration clause in agreements with customers to limit our exposure to
class action litigation, there can be no assurance that we will continue to be successful in enforcing our arbitration clause
in the future and claims of the type we previously arbitrated could be subject to the complexities, risks and costs
associated with class action cases. The continued focus of merchants on issues relating to the acceptance of various
forms of payment may lead to additional litigation and other legal actions. Given the inherent uncertainties involved in
litigation, and the very large or indeterminate damages sought in some matters asserted against us, there is significant
uncertainty as to the ultimate liability we may incur from litigation matters.
We have been subject to regulatory actions and may continue to be subject to such actions, including governmental
inquiries, investigations and enforcement proceedings, in the event of noncompliance or alleged noncompliance with laws
or regulations. For example, we have been cooperating with certain governmental authorities that have requested
information from, or served subpoenas on, us seeking information relating to a small, specialized part of our business,
known as foreign exchange international payments (FXIP), which offers cross-border payments services primarily to
small and middle market business customers in five countries, including the United States. In particular, we received
investigative subpoenas from both the civil and criminal divisions of the U.S. Department of Justice as well as inquiries
from the Federal Reserve, the OCC, the CFPB, the FDIC and others.
FXIP accounts for less than one half of one percent of our total revenue net of interest expense and is unrelated to our
card businesses. Relatedly, our review of FXIP’s pricing practices conducted with an outside law firm has concluded and
as a result, we voluntarily provided approximately $1.5 million of remediation to certain customers covering a five-year
period and took disciplinary action where appropriate. We do not believe this matter will have a material adverse impact
on our operations or results.
We expect that regulators will continue taking formal enforcement actions against financial institutions in addition to
addressing supervisory concerns through non-public supervisory actions or findings, which could involve restrictions on
our activities, among other limitations that could adversely affect our business. In addition, a violation of law or regulation
by another financial institution could give rise to an investigation by regulators and other governmental agencies of the
same or similar practices by us. Further, a single event may give rise to numerous and overlapping investigations and
proceedings. Regulatory action could subject us to significant fines, penalties or other requirements resulting in Card
Member reimbursements, increased expenses, limitations or conditions on our business activities, and damage to our
reputation and our brand, which could adversely affect our results of operations and financial condition.
Legal proceedings regarding provisions in our merchant contracts could have a material adverse effect on our
business and result in additional litigation and/or arbitrations, substantial monetary damages and damage to our
reputation and brand.
We are, and have been in the past, a defendant in a number of actions, including legal proceedings and proposed class
actions filed by merchants, challenging certain provisions of our card acceptance agreements. A description of the
outstanding legal proceedings is contained in “Legal Proceedings.”
An adverse outcome in these proceedings could have a material adverse effect on our business and results of operations,
require us to change our merchant agreements in a way that could expose our cards to increased merchant steering and
other forms of discrimination that could impair the Card Member experience, result in additional litigation and/or
arbitrations, impose substantial monetary damages and damage our reputation and brand. Even if we were not required
to change our merchant agreements, changes in Visa’s and Mastercard’s policies or practices as a result of legal
proceedings, lawsuit settlements or regulatory actions pending against them could result in changes to our business
practices and materially and adversely impact our profitability.
We are subject to capital adequacy and liquidity rules, and if we fail to meet these rules, our business would be
materially adversely affected.
Failure to meet current or future capital or liquidity requirements could compromise our competitive position and could
result in restrictions imposed by the Federal Reserve, including limiting our ability to pay dividends, repurchase our
capital stock, invest in our business, expand our business or engage in acquisitions.
26
Some elements of the capital and liquidity regimes are not yet final and certain developments could significantly impact
the requirements applicable to financial institutions. For example, the Basel Committee finalized revisions to the
standardized approach for credit risk and operational risk capital requirements. If these revisions are adopted in the
United States, we could be required to hold significantly more capital. As a result, the ultimate impact on our long-term
capital and liquidity planning and our results of operations is not certain, although an increase in our capital and liquid
asset levels could lower our return on equity. As part of our required stress testing, we must continue to comply with
applicable capital standards as calculated under the standardized approach in the severely adverse economic scenario
published by the Federal Reserve. To satisfy these requirements, it may be necessary for us to hold additional capital in
excess of that required by the Capital Rules.
Compliance with capital adequacy and liquidity rules requires a material investment of resources. An inability to meet
regulatory expectations regarding our compliance with applicable capital adequacy and liquidity rules may also negatively
impact the assessment of us and our U.S. bank subsidiary by federal banking regulators.
For more information on capital adequacy requirements, see “Stress Testing and Capital Planning” and “Capital,
Leverage and Liquidity Regulation” under “Supervision and Regulation.”
WWe are subject to restrictions that limit our ability to pay dividends and repurchase our capital stock. Our
subsidiaries are also subject to restrictions that limit their ability to pay dividends to us, which may adversely affect
our liquidity.
We are limited in our ability to pay dividends and repurchase capital stock by our regulators, who have broad authority to
prohibit any action that would be considered an unsafe or unsound banking practice. For example, we are subject to a
requirement to submit capital plans that include, among other things, projected dividend payments and repurchases of
capital stock to the Federal Reserve for review. As part of the capital planning and stress testing process, our proposed
capital actions are assessed against our ability to satisfy applicable capital requirements in the event of a stressed market
environment. If the Federal Reserve objects to our capital plan or if we fail to satisfy applicable capital requirements, our
ability to undertake capital actions may be restricted.
In addition, the Capital Rules include buffers that can be satisfied only with CET1 capital. If our risk-based capital ratios
were to fall below the applicable buffer levels, we would be subject to certain restrictions on dividends, stock repurchases
and other capital distributions, as well as discretionary bonus payments to executive officers.
Our ability to declare or pay dividends on, or to purchase, redeem or otherwise acquire, shares of our common stock will
be prohibited, subject to certain exceptions, in the event that we do not declare and pay in full dividends for the last
preceding dividend period of our Series B and Series C preferred stock.
American Express Company relies on dividends from its subsidiaries for liquidity, and federal and state laws, regulations
and supervisory policy limit the amount of dividends that our subsidiaries may pay to the parent company. For example,
our U.S. bank subsidiary, AENB, is subject to various statutory and regulatory limitations on its declaration and payment
of dividends. These limitations may hinder our ability to access funds we may need to make payments on our obligations,
make dividend payments on outstanding American Express Company capital stock or otherwise achieve strategic
objectives.
Any reduction of, or elimination of, our common stock dividend or share repurchase program would likely adversely affect
the market price of our common stock and market perceptions of American Express. For more information on bank
holding company and depository institution dividend restrictions, see “Dividends and Other Capital Distributions” under
“Supervision and Regulation,” as well as “Consolidated Capital Resources and Liquidity—Share Repurchases and
Dividends” under “MD&A” and Note 22 to our “Consolidated Financial Statements.”
Regulation in the areas of privacy, data protection, account access and information and cyber security could
increase our costs and affect or limit our business opportunities and how we collect and/or use personal
information.
Legislators and regulators in the United States and other countries in which we operate are increasingly adopting or
revising privacy, data protection and information and cyber security laws, including data localization, authentication and
account access laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting
requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context
of ensuring that adequate data protection, data transfer and account access mechanisms are in place.
Compliance with current or future privacy, data protection, account access and information and cyber security laws could
significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or colleague information
27
and could restrict our ability to fully maximize our closed-loop capability or provide certain products and services, which
could materially and adversely affect our profitability.
Our failure to comply with privacy, data protection, account access and information and cyber security laws could result
in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions,
ongoing regulatory monitoring, customer attrition, decreases in the use or acceptance of our cards and damage to our
reputation and our brand. In recent years, there has been increasing regulatory enforcement and litigation activity in the
areas of privacy, data protection and information and cyber security in the United States, the EU and various other
countries in which we operate.
For more information on regulatory and legislative activity in this area, see “Privacy, Data Protection, Information and
Cyber Security” under “Supervision and Regulation.”
WWe may not be able to effectively manage the operational, conduct and compliance risks to which we are exposed.
We consider operational risk to be the risk of not achieving business objectives due to inadequate or failed processes or
information systems, poor data quality, human error or the external environment (e.g., natural disasters). Operational risk
includes, among others, the risk that error or misconduct could result in a material financial misstatement, a failure to
monitor a third party’s compliance with regulatory or legal requirements, or a failure to adequately monitor and control
access to, or use of, data in our systems we grant to third-parties. As processes or organizations are changed, or new
products and services are introduced, we may not fully appreciate or identify new operational risks that may arise from
such changes. Through human error, fraud or malfeasance, conduct risk can result in harm to customers, broader
markets and the company and its employees.
Compliance risk arises from the failure to adhere to applicable laws, rules, regulations and internal policies and
procedures. Operational, conduct and compliance risks can expose us to reputational and legal risks as well as fines, civil
money penalties or payment of damages and can lead to diminished business opportunities and diminished ability to
expand key operations.
If we are not able to protect our intellectual property, or successfully defend against any infringement or
misappropriation assertions brought against us, our revenue and profitability could be negatively affected.
We rely on a variety of measures to protect our intellectual property and control access to, and distribution of, our trade
secrets and other proprietary information. These measures may not prevent infringement of our intellectual property
rights or misappropriation of our proprietary information and a resulting loss of competitive advantage. The ability to
enforce intellectual property rights to prevent disclosure of our trade secrets and other proprietary information may be
limited in certain jurisdictions. In addition, competitors or other third parties may allege that our systems, processes or
technologies infringe on their intellectual property rights. Given the complex, rapidly changing and competitive
technological and business environments in which we operate, and the potential risks and uncertainties of intellectual
property-related litigation, a future assertion of an infringement or misappropriation claim against us could cause us to
lose significant revenues, incur significant defense, license, royalty or technology development expenses, and/or pay
significant monetary damages.
Tax legislative initiatives or assessments by governmental authorities could adversely affect our results of
operations and financial condition.
We are subject to income and other taxes in the United States and in various foreign jurisdictions. The laws and
regulations related to tax matters are extremely complex and subject to varying interpretations. Although management
believes our positions are reasonable, we are subject to audit by the Internal Revenue Service in the United States and by
tax authorities in all the jurisdictions in which we conduct business operations. We are being challenged in a number of
countries regarding our application of value-added taxes (VAT) to certain transactions. While we believe we comply with
all applicable VAT and other tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may determine
that we owe additional taxes or apply existing laws and regulations more broadly, which could result in a significant
increase in liabilities for taxes and interest in excess of accrued liabilities.
New tax legislative initiatives may be proposed from time to time, which may impact our effective tax rate and could
adversely affect our tax positions or tax liabilities. New guidance or modifications to the Tax Cuts and Jobs Act of 2017
(the Tax Act) could have an adverse effect on our results of operations. In addition, unilateral or multi-jurisdictional
actions by various tax authorities, including an increase in tax audit activity, could have an adverse impact on our tax
liabilities.
28
CCredit, Liquidity and Market Risks
Our risk management policies and procedures may not be effective.
Our risk management framework seeks to identify and mitigate risk and appropriately balance risk and return. We have
established policies and procedures intended to identify, monitor and manage the types of risk to which we are subject,
including credit risk, market risk, asset liability risk, liquidity risk, operational risk, compliance risk, model risk, strategic
and business risk and reputational risk. See “Risk Management” under “MD&A” for a discussion of the policies and
procedures we use to identify, monitor and manage the risks we assume in conducting our businesses. Although we have
devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in
the future, these policies and procedures, as well as our risk management techniques, such as our hedging strategies,
may not be fully effective. There may also be risks that exist, or develop in the future, that we have not appropriately
anticipated, identified or mitigated. As regulations and markets in which we operate continue to evolve, our risk
management framework may not always keep sufficient pace with those changes. If our risk management framework
does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely
affected.
Management of our risks in some cases depends upon the use of analytical and/or forecasting models. Although we have
a governance framework for model development and independent model validation, the modeling methodology or key
assumptions could be erroneous or the models could be misused. In addition, issues with the quality or effectiveness of
our data aggregation and validation procedures, as well as the quality and integrity of data inputs, could result in
ineffective or inaccurate model outputs and reports. For example, models based on historical data sets might not be
accurate predictors of future outcomes and their ability to appropriately predict future outcomes may degrade over time.
Upon the adoption of the new accounting guidance for the recognition of credit losses on certain financial instruments,
effective January 1, 2020, we began using a new credit reserve methodology, which requires measurement of expected
credit losses for the estimated life of the financial instrument, not only based on historical experience and current
conditions, but also by including forecasts incorporating forward-looking information. If our business decisions or
estimates for credit losses are based on incorrect or misused models and assumptions or we fail to manage data inputs
effectively and to aggregate or analyze data in an accurate and timely manner, our results of operations and financial
condition may be materially adversely affected.
We may not be able to effectively manage individual or institutional credit risk, or credit trends that can affect
spending on card products and the ability of customers and partners to pay us, which could have a material adverse
effect on our results of operations and financial condition.
We are exposed to both individual credit risk, principally from consumer and small business Card Member loans and
receivables, and institutional credit risk, principally from corporate Card Member loans and receivables, merchants,
network partners, loyalty coalition partners and treasury and investment counterparties. Third parties may default on
their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors,
such as the rate of inflation, unemployment levels and interest rates, may result in greater delinquencies that lead to
greater credit losses. Country, regional and political risks can also contribute to credit risk. A customer’s ability and
willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but by a
customer’s other payment obligations, and increasing leverage can result in a higher risk that customers will default or
become delinquent in their obligations to us.
We rely principally on the customer’s creditworthiness for repayment of the loan or receivable and therefore have no
other recourse for collection. Our ability to assess creditworthiness may be impaired if the criteria or models we use to
manage our credit risk prove inaccurate in predicting future losses, which could cause our losses to rise and have a
negative impact on our results of operations. Further, our pricing strategies may not offset the negative impact on
profitability caused by increases in delinquencies and losses; thus any material increases in delinquencies and losses
beyond our current estimates could have a material adverse impact on us.
Rising delinquencies and rising rates of bankruptcy are often precursors of future write-offs and may require us to
increase our reserve for loan losses. Higher write-off rates and the resulting increase in our reserves for loan and
receivable losses adversely affect our profitability and the performance of our securitizations, and may increase our cost
of funds.
Although we make estimates to provide for credit losses in our outstanding portfolio of loans and receivables, these
estimates may not be accurate. In addition, the information we use in managing our credit risk may be inaccurate or
incomplete. As noted above, we began using a new credit reserve methodology, effective January 1, 2020, which differs
significantly from our previous approach and alters the estimation process, inputs and assumptions used in estimating
expected credit losses for loans and receivables. The new methodology may have a significant effect on our reported
results and could cause fluctuations in our reported results, even if there are no underlying changes in the economics of
the business. For more information on recently issued accounting standards, see Note 1 to our “Consolidated Financial
Statements.”
29
Although we regularly review our credit exposure to specific clients and counterparties and to specific industries,
countries and regions that we believe may present credit concerns, default risk may arise from events or circumstances
that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk may be adversely
affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, minimum
payment regulations and re-age guidance). Increased credit risk, whether resulting from underestimating the credit
losses inherent in our portfolio of loans and receivables, deteriorating economic conditions (particularly in the United
States where approximately 75 percent of our revenues were generated in 2019), increases in the level of loan balances,
changes in our mix of business or otherwise, could require us to increase our provisions for losses and could have a
material adverse effect on our results of operations and financial condition.
IInterest rate increases could materially adversely affect our earnings.
If the rate of interest we pay on our borrowings increases more than the rate of interest we earn on our loans, our net
interest yield, and consequently our net interest income, could fall. Our interest expense was approximately $3.5 billion
for the year ended December 31, 2019. A hypothetical 100 basis point increase in market interest rates would have
resulted in a decrease to our annual net interest income of approximately $141 million as of December 31, 2019. We
expect the rates we pay on our deposits will increase if benchmark interest rates increase. In addition, interest rate
changes may affect customer behavior, such as impacting the loan balances Card Members carry on their credit cards or
their ability to make payments as higher interest rates lead to higher payment requirements, further impacting our results
of operations.
For a further discussion of our interest rate risk, see “Risk Management — Market Risk Management Process” under
“MD&A.”
Uncertainty relating to LIBOR and other reference rates and their potential discontinuance may negatively impact
our access to funding and the value of our financial instruments and commercial agreements.
Due to uncertainty surrounding the suitability and sustainability of the London interbank offered rate (LIBOR), central
banks and global regulators have called for financial market participants to prepare for the discontinuance of LIBOR by
the end of 2021 and the establishment of alternative reference rates. At this time, it is not possible to predict the effect
that any discontinuance, modification or other reforms to LIBOR or any other reference rate, the establishment of
alternative reference rates, or the impact of any such events on contractual mechanisms may have on the markets, us, or
our financial instruments or commercial agreements that reference LIBOR.
Certain of our financial instruments and commercial agreements contain provisions to replace LIBOR as the benchmark
following the occurrence of specified transition events. Such provisions may not be sufficient to trigger a change in the
benchmark at all times when LIBOR is no longer representative of market interest rates, or that these events will align
with similar events in the market generally or in other parts of the financial markets, such as the derivatives market.
Alternative reference rates are calculated using components different from those used in the calculation of LIBOR and
may fluctuate differently than, and not be representative of, LIBOR. In order to compensate for these differences, certain
of our financial instruments and commercial agreements allow for a benchmark replacement adjustment. However, there
is no assurance that any benchmark replacement adjustment will be sufficient to produce the economic equivalent of
LIBOR, either at the benchmark replacement date or over the life of such instruments and agreements.
Uncertainty as to the nature and timing of the potential discontinuance or modification of LIBOR, the replacement of
LIBOR with one or more alternative reference rates or other reforms may negatively impact market liquidity, our access to
funding required to operate our business and the trading market for our financial instruments. Furthermore, the timing of
implementation and use of alternative reference rates and corresponding adjustments or other reforms could be subject
to disputes, could cause the interest payable on our outstanding financial instruments and commercial agreements to be
materially different than expected and may impact the value of our financial instruments and commercial agreements.
For a further discussion on LIBOR Transition, see “Risk Management — LIBOR Transition” under “MD&A.”
Adverse financial market conditions may significantly affect our ability to meet liquidity needs, access to capital and
cost of capital.
We need liquidity to pay merchants, operating and other expenses, interest on debt and dividends on capital stock and to
repay maturing liabilities. The principal sources of our liquidity are payments from Card Members, proceeds from the
issuance of unsecured medium- and long-term notes and asset securitizations and direct and third-party sourced
deposits, cash flows from our investment portfolio, cash and cash equivalents, securitized borrowings through our
secured borrowing facilities, a committed bank credit facility and the Federal Reserve discount window.
30
Our ability to obtain financing in the debt capital markets for unsecured term debt and asset securitizations is dependent
on market conditions. Disruptions, uncertainty or volatility across the financial markets, as well as adverse developments
affecting our competitors and the financial industry generally, could negatively impact market liquidity and limit our
access to funding required to operate our business. Such market conditions may also limit our ability to replace, in a
timely manner, maturing liabilities, satisfy regulatory capital requirements and access the funding necessary to grow our
business. In some circumstances, we may incur an unattractive cost to raise capital, which could decrease profitability
and significantly reduce financial flexibility.
For a further discussion of our liquidity and funding needs, see “Consolidated Capital Resources and Liquidity — Funding
Programs and Activities” under “MD&A.”
AAny reduction in our and our subsidiaries’ credit ratings could increase the cost of our funding from, and restrict our
access to, the capital markets and have a material adverse effect on our results of operations and financial
condition.
Rating agencies regularly evaluate us and our subsidiaries, and their ratings of our and our subsidiaries’ long-term and
short-term debt and deposits are based on a number of factors, including financial strength, as well as factors not within
our control, including conditions affecting the financial services industry generally, and the wider state of the economy.
Our and our subsidiaries’ ratings could be downgraded at any time and without any notice by any of the rating agencies,
which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other
terms upon which we and our subsidiaries are able to obtain funding.
Adverse currency fluctuations and foreign exchange controls could decrease earnings we receive from our
international operations and impact our capital.
During 2019, approximately 25 percent of our total revenues net of interest expense were generated from activities
outside the United States. We are exposed to foreign exchange risk from our international operations, and accordingly the
revenue we generate outside the United States is subject to unpredictable fluctuations if the values of other currencies
change relative to the U.S. dollar (including as a result of Brexit), which could have a material adverse effect on our results
of operations.
Foreign exchange regulations or capital controls might restrict or prohibit the conversion of other currencies into
U.S. dollars or our ability to transfer them. Political and economic conditions in other countries could also impact the
availability of foreign exchange for the payment by the local card issuer of obligations arising out of local Card Members’
spending outside such country and for the payment by Card Members who are billed in a currency other than their local
currency. Substantial and sudden devaluation of local Card Members’ currency can also affect their ability to make
payments to the local issuer of the card in connection with spending outside the local country. The occurrence of any of
these circumstances could further impact our results of operations.
An inability to accept or maintain deposits due to market demand or regulatory constraints could materially
adversely affect our liquidity position and our ability to fund our business.
Our U.S. bank subsidiary, AENB, accepts deposits directly from consumers through American Express Personal Savings,
as well as from individuals through third-party brokerage networks, and uses the proceeds as a source of funding. As of
December 31, 2019, we had approximately $72.4 billion in total U.S. retail deposits, of which a significant amount had
been raised through third-party brokerage networks. We face strong and increasing competition with regard to deposits,
and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances. If
we are required to offer higher interest rates to attract or maintain deposits, our funding costs will be adversely impacted.
Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on AENB’s capital
levels. The FDIA’s brokered deposit provisions and related FDIC rules in certain circumstances prohibit banks from
accepting or renewing brokered deposits and apply other restrictions, such as a cap on interest rates that can be paid.
Additionally, our regulators can adjust applicable capital requirements at any time and have authority to place limitations
on our deposit businesses. An inability to attract or maintain deposits in the future could materially adversely affect our
ability to fund our business.
The value of our investments may be adversely impacted by economic, political or market conditions.
Market risk includes the loss in value of portfolios and financial instruments due to adverse changes in market variables,
which could negatively impact our financial condition. We held approximately $8.4 billion of investment securities as of
December 31, 2019. In the event that actual default rates of these investment securities were to significantly change from
historical patterns due to economic conditions or otherwise, it could have a material adverse impact on the value of our
investment portfolio, potentially resulting in impairment charges. Defaults or economic disruptions, even in countries or
territories in which we do not have material investment exposure, conduct business or have operations, could adversely
affect us.
31
IITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal executive offices are in a 2.2 million square foot building located in lower Manhattan on land leased from the
Battery Park City Authority for a term expiring in 2069. We have an approximately 49 percent ownership interest in the
building and an affiliate of Brookfield Financial Properties owns the remaining approximately 51 percent interest in the
building. We also lease space in the building from Brookfield’s affiliate.
Other owned or leased principal locations include American Express offices in Sunrise, Florida, Phoenix, Arizona, Salt
Lake City, Utah, Mexico City, Mexico, Sydney, Australia, Singapore, Gurgaon, India, Manila, Philippines, and Brighton,
England; the American Express data centers in Phoenix, Arizona and Greensboro, North Carolina; the headquarters for
American Express Services Europe Limited in London, England; the headquarters for American Express Europe, S.A. in
Madrid, Spain; and the Amex Bank of Canada and Amex Canada Inc. headquarters in Toronto, Ontario, Canada.
Generally, we lease the premises we occupy in other locations. We believe the facilities we own or occupy suit our needs
and are well maintained.
ITEM 3.
LEGAL PROCEEDINGS
Refer to Note 12 to our “Consolidated Financial Statements,” which is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
32
PPART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
(a)
Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP. As of
December 31, 2019, we had 19,974 common shareholders of record. You can find dividend information
concerning our common stock in Note 26 to our “Consolidated Financial Statements.” For information on
dividend restrictions, see “Dividends and Other Capital Distributions” under “Supervision and Regulation” and
Note 22 to our “Consolidated Financial Statements.” You can find information on securities authorized for
issuance under our equity compensation plans under the caption “Executive Compensation — Equity
Compensation Plans” to be contained in our definitive 2020 proxy statement for our Annual Meeting of
Shareholders, which is scheduled to be held on May 5, 2020. The information to be found under such caption is
incorporated herein by reference. Our definitive 2020 proxy statement for our Annual Meeting of Shareholders is
expected to be filed with the SEC in March 2020 (and, in any event, not later than 120 days after the close of our
most recently completed fiscal year).
Stock Performance Graph
The information contained in this Stock Performance Graph section shall not be deemed to be “soliciting material”
or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the
Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the
Securities Act or the Exchange Act.
The following graph compares the cumulative total shareholder return on our common shares with the total
return on the S&P 500 Index and the S&P Financial Index for the last five years. It shows the growth of a $100
investment on December 31, 2014, including the reinvestment of all dividends.
Year-end Data
American Express
S&P 500 Index
S&P Financial Index
2014
2015
2016
2017
2018
$
$
$
100.00 $
75.78 $
82.28 $
112.07 $
109.12 $
100.00 $
101.37 $
113.49 $
138.26 $
132.19 $
100.00 $
98.44 $
120.83 $
147.58 $
128.33 $
2019
144.60
173.80
169.52
33
(b) Not applicable.
(c) Issuer Purchases of Securities
The table below sets forth the information with respect to purchases of our common stock made by or on behalf of us
during the quarter ended December 31, 2019.
October 1-31, 2019
Repurchase program(a)
Employee transactions(b)
November 1-30, 2019
Repurchase program(a)
Employee transactions(b)
December 1-31, 2019
Repurchase program(a)
Employee transactions(b)
Total
Repurchase program(a)
Employee transactions(b)
Total Number
of Shares
Purchased
Average Price
Paid Per
Share
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans
or Programs(c)
Maximum
Number of
Shares that May
Yet Be
Purchased
Under the
Plans
or Programs
5,039,911 $
27 $
2,226,779 $
3,205 $
3,338,428 $
— $
10,605,118 $
3,232 $
115.67
116.80
120.74
118.07
122.26
—
118.81
118.06
5,039,911
N/A
114,960,089
N/A
2,226,779
N/A
112,733,310
N/A
3,338,428
N/A
109,394,882
N/A
10,605,118
N/A
109,394,882
N/A
(a) On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time to time,
(b)
subject to market conditions and in accordance with our capital plans. This authorization replaced the prior repurchase
authorization and does not have an expiration date. See “MD&A – Consolidated Capital Resources and Liquidity” for additional
information regarding share repurchases.
Includes: (i) shares surrendered by holders of employee stock options who exercised options (granted under our incentive
compensation plans) in satisfaction of the exercise price and/or tax withholding obligation of such holders and (ii) restricted shares
withheld (under the terms of grants under our incentive compensation plans) to offset tax withholding obligations that occur upon
vesting and release of restricted shares. Our incentive compensation plans provide that the value of the shares delivered or attested
to, or withheld, be based on the price of our common stock on the date the relevant transaction occurs.
(c) Share purchases under publicly announced programs are made pursuant to open market purchases or privately negotiated
transactions (including employee benefit plans) as market conditions warrant and at prices we deem appropriate.
34
IITEM 6. SELECTED FINANCIAL DATA
2019
2018
2017
2016
2015(a)
Operating Results (($ in Millions)
Total revenues net of interest expense
Provisions for losses(b)
Expenses(b)
Pretax income
Income tax provision
Net income
Return on average equity(c)
Return on average assets(c)
Balance Sheet (($ in Millions)
Cash and cash equivalents
Card Member loans and receivables HFS(b)
Card Member receivables, net
Loans, net
Investment securities
Total assets
Customer deposits
Short-term borrowings
Long-term debt
Shareholders’ equity
Average shareholders' equity to average
total assets ratio
Common Share Statistics(d)
Earnings per share:
$
$
43,556
3,573
31,554
8,429
1,670
6,759
29.6 %
3.5 %
$
40,338
3,352
28,864
8,122
1,201
6,921
33.5 %
3.8 %
$
$
23,932
—
56,794
89,624
8,406
198,321
73,287
6,442
57,835
23,071
$
$
27,445
—
55,320
83,396
4,647
188,602
69,960
3,100
58,423
22,290
$
$
$
$
36,878
2,760
26,693
7,425
4,677
2,748
13.2 %
1.6 %
32,927
—
53,526
74,300
3,159
181,196
64,452
3,278
55,804
18,261
$
$
$
$
35,438
2,027
25,369
8,042
2,667
5,375
25.8 %
3.4 %
25,208
—
46,841
65,461
3,157
158,917
53,042
5,581
46,990
20,523
$
$
$
$
32,818
1,988
22,892
7,938
2,775
5,163
24.0 %
3.3 %
22,762
14,992
43,671
58,799
3,759
161,184
54,997
4,812
48,061
20,673
11.7 %
11.3 %
12.5 %
13.2 %
13.5 %
Net income attributable to common
shareholders:(e)
Basic
Diluted
$
Cash dividends declared per common
share
Dividend payout ratio(f)
Book value per common share
Average common shares outstanding (millions):
Basic
Diluted
Shares outstanding at period end (millions)
Other Statistics
Number of colleagues at period end (thousands):
United States
Outside the United States
Total
Number of shareholders of record
$
8.00
7.99
1.64
20.5 %
26.51
$
$
828
830
810
23
41
64
19,974
$
$
7.93
7.91
1.48
18.7 %
24.45
$
856
859
847
21
38
59
21,078
3.00
2.99
1.34
44.7 %
19.42
883
886
859
20
35
55
22,262
$
$
$
$
5.63
5.61
1.22
21.7 %
$
20.95
$
5.07
5.05
1.13
22.3 %
19.71
933
935
904
21
35
56
23,572
999
1,003
969
21
34
55
24,704
(a) 2015 amounts were not restated in conjunction with the adoption of the new revenue recognition standard.
(b) Beginning December 1, 2015 through to the sale completion dates in the first half of 2016, Card Member loans and receivables
related to our cobrand partnerships with JetBlue Airways Corporation and Costco Wholesale Corporation in the United States were
held for sale on the Consolidated Balance Sheets and credit costs were reported in Expenses through a valuation allowance
adjustment and not reflected in Provisions for losses.
(c) Return on average equity and return on average assets are calculated by dividing one-year period of net income by one-year average
of total shareholders’ equity or total assets, respectively.
(d) Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP.
(e) Represents net income, less earnings allocated to participating share awards and dividends on preferred shares.
(f) Calculated on year’s dividends declared per common share as a percentage of the year’s net income available per common share.
35
IITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (MD&A)
EXECUTIVE OVERVIEW
BUSINESS INTRODUCTION
We are a globally integrated payments company with three reportable operating segments: Global Consumer Services
Group (GCSG), Global Commercial Services (GCS) and Global Merchant and Network Services (GMNS). Corporate
functions and certain other businesses and operations are included in Corporate & Other.
Our range of products and services includes:
• Credit card, charge 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 customer loyalty
programs
Expense management products and services
Travel and lifestyle 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, affiliate marketing, customer referral programs, third-party vendors and business
partners, direct mail, telephone, in-house sales teams, and direct response advertising. Business travel-related services
are offered through our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).
The following types of revenue are generated from our various products and services:
• Discount revenue, our largest revenue source, primarily represents the amount we earn on transactions occurring at
merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner
or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. The
amount of fees charged for accepting our cards as payment for goods or services, or merchant discount, varies with,
among other factors, the industry in which the merchant does business, the merchant’s overall American Express-
related transaction volume, the method of payment, the settlement terms with the merchant, the method of
submission of transactions and, in certain instances, the geographic scope for the related card acceptance
agreement between the merchant and us (e.g., domestic or global) and the transaction amount. In some instances,
an additional flat transaction fee is assessed as part of the merchant discount, and additional fees may be charged
such as a variable fee for “non-swiped” card transactions or for transactions using cards issued outside the United
States at merchants located in the United States;
Interest on loans, principally represents interest income earned on outstanding balances;
•
• Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card
and the number of cards for each account;
• Other fees and commissions, primarily represent Card Member delinquency fees, foreign currency conversion fees
charged to Card Members, loyalty coalition-related fees, travel commissions and fees, service fees earned from
merchants, and Membership Rewards program fees; and
• Other revenue, primarily represents revenues arising from contracts with partners of our GNS business (including
commissions and signing fees less issuer rate payments), cross-border Card Member spending, earnings from equity
method investments (including the GBT JV), ancillary merchant-related fees, insurance premiums earned from Card
Members, and prepaid card and Travelers Cheque-related revenue.
36
FFINANCIAL HIGHLIGHTS
For 2019, we reported net income of $6.8 billion and diluted earnings per share of $7.99. This compared to $6.9 billion of
net income and $7.91 diluted earnings per share for 2018.
2019 results included:
•
a $0.21 per share impact of a litigation-related charge in the first quarter.
2018 results included:
•
a $0.58 per share impact of certain discrete tax benefits in the fourth quarter.
NON-GAAP MEASURES
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the
United States of America (GAAP). However, certain information included within this report constitutes non-GAAP
financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled
measures by other companies.
BUSINESS ENVIRONMENT
Our results for 2019 continued the steady, consistent performance that we have delivered over the past two years. These
results reflect our strategy of investing in share, scale and relevance and demonstrate our success in executing against
our four strategic imperatives. We continued to invest in new card acquisitions, new services and Card Member benefits,
refreshing and launching new products, and expanding our merchant network. During the year, we returned $5.9 billion of
capital to our shareholders through our share buyback program and an increase in our dividend, while maintaining strong
capital ratios.
Our worldwide billed business increased 5 percent over the prior year and worldwide proprietary billings, which comprised
86% of our total billings, grew 7 percent, led by consumers. After adjusting for foreign currency exchange (FX) rates,
worldwide proprietary billed business increased 8 percent over the prior year, with international proprietary billings
growing 13 percent.1 This spending occurred against the backdrop of an economy that grew at a more modest pace
relative to 2018. U.S. Consumer proprietary billed business grew at 7 percent reflecting continued strong acquisition
performance and solid underlying spend growth from existing customers. International proprietary consumer growth
remained in double digits on an FX-adjusted basis. We also saw 6 percent growth from our commercial customers, driven
by steady acquisition and retention of U.S. small and mid-sized enterprise (SME) customers and strong growth in
international SME customers. GNS billed business declined 6 percent (2 percent on an FX-adjusted basis) as we exited
the network business in Europe and Australia due to certain regulatory changes; excluding the billings from those
geographies, GNS billed business grew 5 percent year-over-year on an FX-adjusted basis.1
Revenues net of interest expense increased 8 percent (9 percent on an FX-adjusted basis), driven by a well-balanced mix
of growth in card fees, Card Member spending and net interest income.1 The fourth quarter of 2019 was the tenth
consecutive quarter with FX-adjusted revenue growth of 8 percent or better. 1 Card fees continue to be our fastest
growing revenue line, with an increase of 17 percent year-over-year reflecting our approach of enhancing the value of our
premium products to drive higher customer engagement. Discount revenue increased 6 percent year-over-year primarily
driven by the previously mentioned billings growth. Net interest income grew at 12 percent year-over-year, driven by
growth in loans and net yield, reflecting continued positive impacts from mix and pricing initiatives.
Card Member loans grew 7 percent year-over-year, as we continued to expand our lending relationships with existing
customers and acquired new Card Members. Provisions for losses increased 7 percent, driven by a modest increase in net
write-offs, which reflects the impact of our lending strategy, as well as the relatively stable economy and low
unemployment rate.
Spending on customer engagement (the aggregate of rewards, Card Member services, and marketing and business
development expenses) increased 10 percent year-over-year with growth across all categories. Increases in rewards and
Card Member services reflected the growth in proprietary billings and continued investment and usage across many of
our premium travel-related benefits. Card Member services costs continue to be our fastest growing expense category, as
it includes the costs of many components of our differentiated value propositions that support strong Card Member
acquisition and engagement. Marketing and business development expense grew due to continued investments in our
partnerships, including the impact of the renewal of our relationship with Delta Air Lines earlier in 2019, and higher
1 The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into
U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current period apply to the corresponding prior year period against
which such results are being compared). FX-adjusted revenues and expenses constitute non-GAAP measures. We believe the presentation of information on a
foreign currency adjusted basis is helpful to investors by making it easier to compare our performance in one period to that of another period without the
variability caused by fluctuations in currency exchange rates.
37
corporate client incentives. Operating expenses increased 8 percent year-over-year, reflecting investments we are
making across our business and the litigation-related charge in the first quarter of 2019.
We continue to see attractive growth opportunities across our businesses and plan to invest to take advantage of them in
order to generate and sustain a strong level of revenue growth, which we believe is the foundation for steady and
consistent double-digit EPS growth. While we continue to see some headwinds in the environment, including from
economic and geopolitical uncertainty, regulation in countries around the world and intense competition, we remain
focused on delivering differentiated value to our merchants, Card Members and business partners and delivering
appropriate returns to our shareholders.
See “Supervision and Regulation” in “Business” for information on legislative and regulatory changes that could have a
material adverse effect on our results of operations and financial condition and “Risk Factors” for information on the
potential impacts of economic, geopolitical and competitive conditions and certain litigation and regulatory matters on
our business.
CCONSOLIDATED RESULTS OF OPERATIONS
The discussions in the “Financial Highlights”, “Consolidated Results of Operations” and “Business Segment Results”
provide commentary on the variances for the year ended December 31, 2019 compared to the year ended December 31,
2018, as presented in the accompanying tables. For a discussion of the financial condition and results of operations for
2018 compared to 2017, please refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on
February 13, 2019.
2017
2018
2019
$ 43,556
3,573
$ 36,878
2,760
Change
2018 vs. 2017
Change
2019 vs. 2018
TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE
Years Ended December 31,
(Millions, except percentages and per
share amounts)
Total revenues net of interest expense
Provisions for losses
Expenses
Pretax income
Income tax provision
Net income
Earnings per common share — diluted(a) $
Return on average equity(b)
Effective tax rate (ETR)
Adjustments to ETR(c)
Adjusted ETR(c)
# Denotes a variance greater than 100 percent
(a) Represents net income, less (i) earnings allocated to participating share awards of $47 million, $54 million and $21 million for the
$ 40,338
3,352
28,864
8,122
1,201
6,921
7.91
33.5 %
14.8 %
6.1 %
20.9 %
8 % $ 3,460
592
7
2,171
9
697
4
39
(3,476)
4,173
(2)
1 % $ 4.92
$ 3,218
221
2,690
307
469
(162)
$ 0.08
2.99
13.2 %
63.0 %
(34.7)%
28.3 %
7.99
29.6 %
19.8 %
9 %
21
8
9
(74)
#
# %
26,693
31,554
$
8,429
6,759
1,670
$
2,748
7,425
4,677
years ended December 31, 2019, 2018 and 2017, respectively, and (ii) dividends on preferred shares of $81 million, $80 million and
$81 million for the years ended December 31, 2019, 2018 and 2017, respectively.
(b) Return on average equity (ROE) is computed by dividing (i) one-year period net income ($6.8 billion, $6.9 billion and $2.7 billion for
2019, 2018 and 2017, respectively) by (ii) one-year average total shareholders’ equity ($22.8 billion, $20.7 billion and $20.9 billion
for 2019, 2018 and 2017, respectively).
(c) The adjusted ETRs for 2018 and 2017 are non-GAAP measures. The 2018 adjusted ETR excludes a benefit of $496 million relating to
changes in the tax method of accounting for certain expenses, the resolution of certain prior years’ tax audits, and a final adjustment
to our 2017 provisional tax charge related to the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act). The 2017 adjusted
ETR excludes the $2.6 billion charge related to the Tax Act. Management believes the adjusted ETRs are useful in evaluating our tax
rates in comparison with the other presented periods. Refer to Note 20 of the “Consolidated Financial Statements” for additional
information.
38
TTABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY
Years Ended December 31,
(Millions, except percentages)
Discount revenue
Net card fees
Other fees and commissions
Other
Total non-interest revenues
Total interest income
Total interest expense
Net interest income
Total revenues net of interest expense
2018
24,721 $ 22,890 $ 1,446
601
3,441
144
3,153
70
1,360
2,261
32,675
1,478
10,606
521
2,943
957
7,663
$ 43,556 $ 40,338 $ 36,878 $ 3,218
2019
$ 26,167 $
4,042
3,297
1,430
34,936
12,084
3,464
8,620
3,090
2,990
1,457
30,427
8,563
2,112
6,451
2017
Change
2019 vs. 2018
Change
2018 vs. 2017
6 % $ 1,831
17
351
5
163
5
(97)
7
2,248
14
2,043
18
831
12
1,212
8 % $ 3,460
8 %
11
5
(7)
7
24
39
19
9 %
TOTAL REVENUES NET OF INTEREST EXPENSE
Discount revenue increased, primarily due to growth in billed business. U.S. billed business increased 6 percent and non-
U.S. billed business increased 2 percent. See Tables 5 and 6 for more details on billed business performance. The average
discount rate remained flat at 2.37 percent for both 2019 and 2018.
Net card fees increased, primarily driven by growth in the Platinum, Delta and Gold portfolios, as well as growth in certain
key international countries.
Other fees and commissions increased, primarily driven by growth in foreign exchange conversion revenue and
delinquency fees.
Other revenues increased, primarily due to higher revenues related to the GBT JV and a modification of one of our GNS
arrangements, partially offset by lower revenue earned on cross-border Card Member spending.
Interest income increased, primarily reflecting higher average Card Member loans and higher yields.
Interest expense increased, driven by higher cost of funds, average long-term debt and average deposits.
TABLE 3: PROVISIONS FOR LOSSES SUMMARY
Years Ended December 31,
(Millions, except percentages)
Charge card
Card Member loans
Other
Total provisions for losses
2019
963 $
2,462
148
3,573 $
$
$
2018
937 $
2,266
149
3,352 $
Change
2019 vs. 2018
Change
2018 vs. 2017
2017
795 $
1,868
97
26
196
(1)
2,760 $ 221
3 % $ 142
398
9
(1)
52
7 % $ 592
18 %
21
54
21 %
PROVISIONS FOR LOSSES
Charge card provision for losses increased, primarily due to growth in receivables and higher net write-offs in the
consumer and small business portfolios, partially offset by lower net write-offs in the corporate portfolio.
Card Member loans provision for losses increased, driven by higher net write-offs, partially offset by a lower reserve build
due to slower loan growth.
See Note 1 to our "Consolidated Financial Statements" for information about the implementation and expected impact of
new accounting guidance for the recognition of credit losses on financial instruments, effective January 1, 2020, and the
new credit reserving methodology known as the Current Expected Credit Loss (CECL) methodology. Following the
adoption, the future effects of CECL on our provisions for losses will ultimately be dependent on a number of internal and
external factors. Assuming no change in the growth in Card Member loans, current macroeconomic conditions, and
portfolio quality, we estimate our provisions for losses will likely be higher under CECL and may result in more quarter-to-
quarter fluctuations relative to the current accounting methodology.
39
TTABLE 4: EXPENSES SUMMARY
Years Ended December 31,
(Millions, except percentages)
Marketing and business development
Card Member rewards
Card Member services
Total marketing, business development,
rewards and Card Member services
Salaries and employee benefits
Other, net
Total expenses
EXPENSES
Change
2019 vs. 2018
Change
2018 vs. 2017
$
2019
7,114 $
2017
2018
5,722 $ 644
6,470 $
743
8,687
9,696
445
1,392
1,777
1,832
15,801
17,943
661
5,258
5,250
197
5,634
5,671
$ 31,554 $ 28,864 $ 26,693 $ 2,690
10,439
2,222
19,775
5,911
5,868
10 % $ 748
1,009
8
385
25
2,142
10
(8)
13
37
3
9 % $ 2,171
13 %
12
28
14
—
1
8 %
Marketing and business development expense increased, primarily due to continued investments in partnerships
(including as a result of the recent renewal of our cobrand relationship with Delta Air Lines), increased network partner
payments and increased corporate client incentives driven by higher volumes, partially offset by higher marketing costs in
the prior year with the launch of our new global brand campaign.
Card Member rewards expense increased, primarily driven by increases in Membership Rewards and cash back rewards
expenses of $505 million and cobrand rewards expense of $238 million, both of which were primarily driven by higher
spending volumes.
The Membership Rewards Ultimate Redemption Rate for current program participants at both December 31, 2019 and
2018 was 96 percent (rounded up).
Card Member services expense increased, primarily driven by higher usage of travel-related benefits.
Salaries and employee benefits expense increased, reflecting higher payroll costs, higher restructuring charges and
higher incentive and deferred compensation.
Other expenses increased, primarily driven by lower unrealized gains on certain equity investments, higher technology
costs and litigation-related expenses, partially offset by non-income tax-related benefits and a prior-year loss on a
transaction involving the operations of our prepaid reloadable and gift card business.
INCOME TAXES
The effective tax rate for 2019 was 19.8 percent. The effective tax rate for 2018 was 14.8 percent, and reflects a benefit of
$496 million relating to changes in the tax method of accounting for certain expenses, the resolution of certain prior
years’ tax audits and an adjustment to the 2017 provisional tax charge related to the Tax Act.
The tax rates in both periods reflect the level of pretax income in relation to recurring permanent tax benefits and the
geographic mix of business.
40
TTABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION
2019
2018
2017
2019 vs. 2018 2018 vs. 2017
Change
Change
Years Ended December 31,
Billed business: (billions)
U.S.
Outside the U.S.
Total
Proprietary
GNS
Total
Cards-in-force: (millions)
U.S.
Outside the U.S.
Total
Proprietary
GNS
Total
Basic cards-in-force: (millions)
U.S.
Outside the U.S.
Total
$
$
$
$
827.7
413.1
1,240.8
1,070.5
170.3
1,240.8
$
$
$
$
777.6
406.4
1,184.0
1,002.6
181.4
1,184.0
$
708.3
376.9
$ 1,085.2
900.6
$
184.6
$ 1,085.2
50.0
62.8
112.8
64.6
48.2
112.8
39.4
52.2
91.6
54.7
59.7
114.4
70.3
44.1
114.4
43.0
50.0
93.0
21,515
16,351
19,972
53.7
60.3
114.0
69.1
44.9
114.0
42.3
50.3
92.6
20,840
15,756
19,340
6 %
2
5
7
(6)
5
2
(1)
—
2
(2)
—
2
(1)
—
3
4
3
10 %
8
9
11
(2)
9
7
(4)
1
7
(7)
1
7
(4)
1
3
10
4
14 %
4 %
Average proprietary basic Card Member spending:
(dollars)
U.S.
Outside the U.S.
Worldwide Average
Average discount rate
Average fee per card (dollars)(a)
$
$
$
$
$
$
$
2.37 %
58
$
2.37 %
51
$ 20,317
14,277
$
18,519
$
2.40 %
49
$
(a) Average fee per card is computed based on proprietary net card fees divided by average proprietary total cards-in-force.
41
TTABLE 6: BILLED BUSINESS GROWTH
Worldwide
Proprietary
Proprietary consumer
Proprietary commercial
Total Proprietary
GNS
Worldwide Total
Airline-related volume (8% of Worldwide Total for both
2019 and 2018)
U.S.
Proprietary
Proprietary consumer
Proprietary commercial
Total Proprietary
U.S. Total
T&E-related volume (25% of U.S. Total for both 2019 and
2018)
Non-T&E-related volume (75% of U.S. Total for both 2019
and 2018)
Airline-related volume (7% of U.S. Total for both 2019 and
2018)
Outside the U.S.
Proprietary
Proprietary consumer
Proprietary commercial
Total Proprietary
Outside the U.S. Total
Japan, Asia Pacific & Australia
Latin America & Canada
Europe, the Middle East & Africa
2019
2018
Percentage
Increase
(Decrease)
Assuming No
Changes in
FX Rates(a)
Percentage
Increase
(Decrease)
Percentage
Increase
(Decrease)
Assuming No
Changes in
FX Rates(a)
Percentage
Increase
(Decrease)
8 %
6
7
(6)
5
1
7
5
6
6
6
6
4
10
7
9
2
1
4
1 %
9 %
6
8
(2)
6
3
14
11
13
6
5
10
5 %
12 %
11
11
(2)
9
8
10
10
10
10
8
10
8
17
16
17
8
8
4
10 %
12 %
11
11
(1)
9
7
17
16
17
8
7
11
8 %
(a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of
currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply
to the corresponding prior-year period against which such results are being compared).
42
TTABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)
Worldwide Card Member loans
Card Member loans: (billions)
U.S.
Outside the U.S.
Total
Loss reserves:
Beginning balance
76.0
11.4
87.4
72.0
9.9
81.9
2019
2018
$
$
$
$
$
$
$
$
$
Change
2019 vs.
2018
Change
2018 vs.
2017
6 %
15
7
12 %
11
12
25
9
21
23
#
12
11
24
9
—
9
3
10
3
5
(35)
8 %
39
21
30
34
(78)
25
25
26
14
4
3
4
12
18
17
#
10 %
2017
64.5
8.9
73.4
1,223
1,868
(1,181)
(227)
23
1,706
1,622
84
2.3 %
177 %
66.7
1.8 %
2.1 %
1.3 %
2,134
2,462
(1,860)
(375)
22
2,383
2,252
131
2.7 %
177 %
82.8
2.2 %
2.7 %
1.5 %
$
$
$
$
1,706
2,266
(1,539)
(304)
5
2,134
2,028
106
2.6 %
182 %
75.8
2.0 %
2.4 %
1.4 %
$
$
$
$
39.0
18.4
557.4
$
$
39.0
16.9
55.9
$
$
37.6
16.4
54.0
$
$
573
963
(900)
(17)
619
1.1 %
1.8 %
2.0 %
1.4 %
0.08 %
0.8 %
$
$
521
937
(859)
(26)
573
1.0 %
1.7 %
1.8 %
1.4 %
0.11 %
0.7 %
467
795
(736)
(5)
521
1.0 %
1.6 %
1.7 %
1.4 %
0.10 %
0.9 %
Provisions - principal, interest and fees
Net write-offs — principal less recoveries
Net write-offs — interest and fees less recoveries
Other (a)
Ending balance
Ending reserves — principal
Ending reserves — interest and fees
% of loans
% of past due
Average loans (billions)
Net write-off rate — principal only (b)
Net write-off rate — principal, interest and fees (b)
30+ days past due as a % of total (b)
Worldwide Card Member receivables
Card Member receivables: (billions)
U.S.
Outside the U.S.
Total
Loss reserves:
Beginning balance
Provisions - principal and fees
Net write-offs - principal and fees less recoveries
Other (a)
Ending balance
% of receivables
Net write-off rate — principal only (b)
Net write-off rate — principal and fees (b)
30+ days past due as a % of total (b)
Net loss ratio as a % of charge volume — GCP (c)
90+ days past billing as a % of total — GCP (c)
$
$
$
$
$
$
$
$
# Denotes a variance greater than 100 percent
(a) Other includes foreign currency translation adjustments.
(b) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention.
In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for losses, a net write-off rate
including principal, interest and/or fees is also presented. The net write-off rates and 30+ days past due as a percentage of total for Card
Member receivables relate to GCSG and Global Small Business Services (GSBS) Card Member receivables.
(c) Global Corporate Payments (GCP) reflects global, large and middle market corporate accounts. For GCP Card Member receivables,
delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past
billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection
procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as
90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes. GCP delinquency data for periods
other than 90+ days past billing is not available due to system constraints. The net loss ratio for GCP represents the ratio of GCP charge card
write-offs, consisting of principal (resulting from authorized transactions) and fee components, less recoveries, on Card Member receivables
expressed as a percentage of gross amounts billed to corporate Card Members.
43
TTABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS
Years Ended December 31,
(Millions, except percentages and where indicated)
Net interest income
Exclude:
Interest expense not attributable to our Card Member loan portfolio (a)
Interest income not attributable to our Card Member loan portfolio (b)
Adjusted net interest income (c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans (c)
Net interest yield on average Card Member loans (c)
$
$
$
2019
8,620
2018
7,663
$
2017
6,451
$
1,732
(1,226)
9,126
82.8
10.4 %
11.0 %
$
$
1,456
(1,010)
8,109
75.8
10.1 %
10.7 %
$
$
1,149
(637)
6,963
66.7
9.7 %
10.4 %
(a) Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables.
(b) Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment
portfolios.
(c) Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to “Glossary of
Selected Terminology” for the definitions of these terms. We believe adjusted net interest income is useful to investors because it
represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net
interest yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net
interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans,
computed on an annualized basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a
GAAP measure, includes elements of total interest income and total interest expense that are not attributable to the Card Member
loan portfolio, and thus is not representative of net interest yield on average Card Member loans.
44
BBUSINESS SEGMENT RESULTS OF OPERATIONS
We consider a combination of factors when evaluating the composition of our reportable operating segments, including
the results reviewed by the chief operating decision maker, economic characteristics, products and services offered,
classes of customers, product distribution channels, geographic considerations (primarily United States versus outside
the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and Part I,
Item 1. “Business” for additional discussion of products and services that comprise each segment.
Effective for the first quarter of 2019, we moved intercompany assets and liabilities, previously recorded in the operating
segments, to Corporate & Other. Prior period amounts have been revised to conform to the current period presentation.
Results of the reportable operating segments generally treat each segment as a stand-alone business. The management
reporting process that derives these results allocates revenue and expense using various methodologies as described
below.
TOTAL REVENUES NET OF INTEREST EXPENSE
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within
the GCSG and GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue
generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network
and acquirer component of the overall discount revenue.
Net card fees and Other fees and commissions are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported.
Interest expense represents an allocated funding cost based on a combination of segment funding requirements and
internal funding rates.
PROVISIONS FOR LOSSES
The provisions for losses are directly attributable to the segment in which they are reported.
EXPENSES
Marketing and business development expense is included in each segment based on the actual expenses incurred. Global
brand advertising is primarily reflected in Corporate & Other and may be allocated to the segments based on the actual
expenses incurred. Rewards and Card Member services expenses are included in each segment based on the actual
expenses incurred.
Salaries and employee benefits and other operating expenses reflect expenses such as professional services, occupancy
and equipment and communications incurred directly within each segment. In addition, expenses related to support
services, such as technology costs, are allocated to each segment primarily based on support service activities directly
attributable to the segment. Certain other overhead expenses are allocated from Corporate & Other to the segments
based on the relative levels of revenue and Card Member loans and receivables.
INCOME TAXES
An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates
applicable to the various businesses that comprise the segment.
45
GGLOBAL CONSUMER SERVICES GROUP
TABLE 9: GCSG SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions, except percentages)
Revenues
2019
2018
Change
2019 vs. 2018
Change
2018 vs. 2017
2017
Non-interest revenues
Interest income
Interest expense
Net interest income
Total revenues net of interest expense
Provisions for losses
Total revenues net of interest expense after
provisions for losses
Expenses
Marketing, business development, rewards and
Card Member services
Salaries and employee benefits and other
operating expenses
Total expenses
Pretax segment income
Income tax provision
Segment income
Effective tax rate
$ 15,972
9,413
1,806
7,607
23,579
2,636
20,943
$ 14,675
8,323
1,542
6,781
21,456
2,430
19,026
$ 13,378
6,789
1,047
5,742
19,120
1,996
17,124
$ 1,297
1,090
264
826
2,123
206
1,917
10 %
9 % $ 1,297
13
17
12
10
8
10
1,534 23
495 47
1,039
18
2,336
12
434 22
11
1,902
12,023
10,774
9,233
1,249
12
1,541
17
4,896
16,919
4,024
762
$ 3,2262
4,538
15,312
3,714
637
$ 3,077
4,246
13,479
3,645
1,053
$ 2,592
358
1,607
310
125
$ 185
18.9 %
17.2 %
28.9 %
7
14
2
(416) (40)
292
1,833
69
8
10
8
20
6 % $ 485
19 %
GCSG primarily issues a wide range of proprietary consumer cards globally. GCSG also provides services to consumers,
including travel and lifestyle services and non-card financing products, and manages certain international joint ventures
and our partnership agreements in China.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased, primarily driven by discount revenue and net card fees. Discount revenue increased 8
percent reflecting a corresponding increase in proprietary consumer billed business. See Tables 5, 6 and 10 for more
details on billed business performance. The increase in proprietary consumer billed business reflected higher average
spend per card and higher cards-in-force. Net card fees increased 19 percent, driven primarily by growth in the Delta,
Platinum and Gold portfolios, as well as growth in certain key international countries.
Net interest income increased, primarily driven by growth in average Card Member loans and higher yields, partially offset
by higher cost of funds.
PROVISIONS FOR LOSSES
Provisions for losses increased, primarily driven by higher net write-offs, partially offset by a lower reserve build in Card
Member loans due to slower loan growth.
Refer to Table 10 for the Card Member loan and receivable write-off rates for 2019 and 2018.
EXPENSES
Marketing, business development, rewards and Card Member services expenses increased across all expense categories.
The increase in Card Member rewards expense was primarily driven by higher proprietary and cobrand spending volumes.
The increase in Card Member services expense was primarily driven by higher usage of travel-related benefits. The
increase in marketing and business development expenses was primarily due to higher cobrand partner payments.
Salaries and employee benefits and other operating expenses increased, primarily driven by higher technology and other
servicing-related costs, and increased payroll costs, partially offset by non-income tax-related benefits.
46
2017
336.9
119.8
456.7
34.9
15.8
50.7
25.0
10.9
35.9
13,950
11,225
13,115
94.9
53.7
8.6
62.3
49.0
7.4
56.4
$
$
$
$
$
$
$
$
$
$
Change
2019 vs.
2018
Change
2018 vs.
2017
7 %
10
8
1
4
2
—
4
1
5
4
4
4
4
14
5
8
10 %
17
12
8
6
7
8
6
8
2
10
4
8
12
12
12
12
12
8 %
20
13 %
2018
371.1
140.3
511.4
37.7
16.8
54.5
27.0
11.6
38.6
14,161
12,348
13,613
102.4
59.9
9.6
69.5
55.1
8.9
64.0
398.8
154.0
552.8
37.9
17.5
55.4
26.9
122.1
39.0
14,801
12,884
14,212
106.3
62.4
10.9
73.3
59.4
10.0
69.4
$
$
$
$
$
$
$
$
$
TTABLE 10: GCSG SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Millions, except percentages and where
indicated)
Proprietary billed business: (billions)
U.S.
Outside the U.S.
2019
$
$
$
$
$
$
$
$
$
$
$
Total
Proprietary cards-in-force:
U.S.
Outside the U.S.
Total
Proprietary basic cards-in-force:
U.S.
Outside the U.S.
Total
Average proprietary basic Card Member
U.S.
Outside the U.S.
Average
Total segment assets (billions)(a)
Card Member loans:
Total loans (billions)
U.S.
Outside the U.S.
Total
Average loans (billions)
U.S.
Outside the U.S.
Total
U.S.
Net write-off rate — principal only (b)
Net write-off rate — principal, interest and
fees (b)
30+ days past due as a % of total
Outside the U.S.
Net write-off rate — principal only (b)
Net write-off rate — principal, interest and
fees (b)
30+ days past due as a % of total
Total
Net write-off rate — principal only (b)
Net write-off rate — principal, interest and
fees (b)
30+ days past due as a % of total
2.3 %
2.8 %
1.6 %
2.4 %
2.9 %
1.8 %
2.3 %
2.8 %
1.6 %
2.1 %
2.5 %
1.4 %
2.1 %
2.6 %
1.6 %
2.1 %
2.5 %
1.5 %
1.8 %
2.1 %
1.3 %
2.1 %
2.5 %
1.4 %
1.8 %
2.2 %
1.3 %
47
(Millions, except percentages and where
indicated)
Card Member receivables: (billions)
U.S.
Outside the U.S.
Total receivables
22019
114.2
88.6
222.8
2018
$
$
13.7
7.8
21.5
$
$
2017
13.1
7.8
20.9
$$
$$
Change
2019 vs.
2018
Change
2018 vs.
2017
4 %
10
6 %
5 %
—
3 %
U.S.
Net write-off rate — principal only (b)
Net write-off rate — principal and fees (b)
30+ days past due as a % of total
Outside the U.S.
Net write-off rate — principal only (b)
Net write-off rate — principal and fees (b)
30+ days past due as a % of total
Total
Net write-off rate — principal only (b)
Net write-off rate — principal and fees (b)
30+ days past due as a % of total
11.4 %%
11.6 %%
11.2 %%
22.2 %%
22.4 %%
11.3 %%
11.7 %%
11.9 %%
11.2 %%
1.3 %
1.5 %
1.1 %
2.1 %
2.3 %
1.3 %
1.6 %
1.8 %
1.2 %
1.3 %
1.4 %
1.1 %
2.0 %
2.1 %
1.3 %
1.5 %
1.7 %
1.2 %
(a) During 2019, we moved intercompany assets and liabilities, previously recorded in the operating segments, to Corporate & Other.
Prior period amounts have been revised to conform to the current period presentation.
(b) Refer to Table 7 footnote (b).
48
TTABLE 11: GCSG NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS
As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)
U.S.
2019
2018
2017
Net interest income
Exclude:
Interest expense not attributable to our Card Member loan portfolio(a)
Interest income not attributable to our Card Member loan portfolio(b)
Adjusted net interest income(c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans(c)
Net interest yield on average Card Member loans(c)
Outside the U.S.
Net interest income
Exclude:
Interest expense not attributable to our Card Member loan portfolio(a)
Interest income not attributable to our Card Member loan portfolio(b)
Adjusted net interest income(c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans(c)
Net interest yield on average Card Member loans(c)
Total
Net interest income
Exclude:
Interest expense not attributable to our Card Member loan portfolio(a)
Interest income not attributable to our Card Member loan portfolio(b)
Adjusted net interest income(c)
Average Card Member loans (billions)
Net interest income divided by average Card Member loans(c)
Net interest yield on average Card Member loans(c)
$
6,557
$
5,895
$
4,961
$
$
257
(219)
6,595
59.4
11.0 %
11.1 %
$
$
202
(178)
5,919
55.1
10.7 %
10.7 %
$
$
164
(101)
5,024
48.9
10.1 %
10.3 %
$
1,050
$
886
$
$
$
85
(15)
1,120
10.0
10.5 %
11.2 %
$
$
70
(8)
948
8.9
10.0 %
10.6 %
$
$
781
54
(8)
827
7.4
10.6 %
11.1 %
$
7,607
$
6,781
$
5,742
$
$
342
(234)
7,715
69.4
11.0 %
11.1 %
$
$
272
(186)
6,867
64.0
10.6 %
10.7 %
$
$
218
(110)
5,850
56.4
10.2 %
10.4 %
(a) Refer to Table 8 footnote (a).
(b) Refer to Table 8 footnote (b).
(c) Refer to Table 8 footnote (c).
49
GGLOBAL COMMERCIAL SERVICES
TABLE 12: GCS SELECTED INCOME STATEMENT DATA
Years Ended December 31,
(Millions, except percentages)
Revenues
2019
2018
Change
2019 vs. 2018
Change
2018 vs. 2017
2017
Non-interest revenues
Interest income
Interest expense
Net interest income
Total revenues net of interest expense
Provisions for losses
Total revenues net of interest expense after
provisions for losses
Expenses
Marketing, business development, rewards
and Card Member services
Salaries and employee benefits and other
operating expenses
Total expenses
Pretax segment income
Income tax provision
Segment income
Effective tax rate
$ 12,623
1,9000
995
905
13,528
917
$ 11,882
1,621
827
794
12,676
899
$ 10,942
1,361
595
766
11,708
743
12,611
11,777
10,965
$ 741
279
168
111
852
18
834
14
6 % $ 940
260
17
232
20
28
968
156
812
7
2
7
6,241
3,304
9,545
3,066
590
$ 2,476
19.2 %
5,853
3,029
8,882
2,895
555
$ 2,340
5,311
2,811
8,122
2,843
388
275
663
171
35
$ 136
7
7
9
542
218
760
52
6
(359)
6
6 % $ 411
914
$ 1,929
19.2 %
32.1 %
9 %
19
39
4
8
21
7
10
8
9
2
(39)
21 %
GCS primarily issues a wide range of proprietary corporate and small business cards and provides payment and expense
management services globally. In addition, GCS provides commercial financing products.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased, primarily driven by higher discount revenue, which increased 6 percent, reflecting
growth in billed business from small and medium sized businesses, and higher net card fees, primarily due to growth in
the U.S. small business Platinum portfolio. See Tables 5, 6 and 13 for more details on billed business performance.
Net interest income increased, primarily driven by growth in average Card Member loans, partially offset by higher cost of
funds.
PROVISIONS FOR LOSSES
Provisions for losses increased, driven by higher net write-offs in the small business portfolio due to continued portfolio
growth, partially offset by lower net write-offs in the corporate portfolio.
EXPENSES
Marketing, business development, rewards and Card Member services expenses increased, primarily driven by increases
in Card Member rewards expense and marketing and business development expense, which primarily reflected higher
spending volumes and increased corporate client incentives.
Salaries and employee benefits and other operating expenses increased, primarily driven by higher technology and other
servicing-related costs, and higher payroll costs.
50
Change
2019 vs.
2018
Change
2018 vs.
2017
2017
TTABLE 13: GCS SELECTED STATISTICAL INFORMATION
As of or for the Years Ended December 31,
(Millions, except percentages and where indicated)
Proprietary billed business (billions)
Proprietary cards-in-force
Average Card Member spending (dollars)
Total segment assets (billions)(a)
Card Member loans (billions)
Card Member receivables (billions)
GSBS Card Member loans:(b)
Total loans (billions)
Average loans (billions)
Net write-off rate - principal only(c)
Net write-off rate - principal, interest and fees(c)
30+ days past due as a % of total
2019
$ 513.3
14.9
$ 34,905
52.8
$
14.1
$
34.6
$
14.1
13.3
1.9 %
2.2 %
1.3 %
$
$
$
$
$
$
2018
$ 486.2
14.5
$ 34,058
51.3
$
12.4
34.4
$ 438.1
14.0
$ 31,729
48.5
$
11.1
$
33.1
$
$
$
12.4
11.7
1.7 %
2.0 %
1.3 %
11.0
10.3
1.6 %
1.9 %
1.2 %
Calculation of Net Interest Yield on Average Card
Member Loans:
Net interest income
Exclude:
Interest expense not attributable to our Card
Member loan portfolio(d)
Interest income not attributable to our Card
Member loan portfolio(e)
Adjusted net interest income(f)
Average Card Member loans (billions)
Net interest income divided by average Card
Member loans(f)
Net interest yield on average Card Member loans(f)
GCP Card Member receivables:
Total receivables (billions)
90+ days past billing as a % of total(g)
Net loss ratio (as a % of charge volume)(g)
GSBS Card Member receivables:
Total receivables (billions)
Net write-off rate - principal only(c)
Net write-off rate - principal and fees(c)
30+ days past due as a % of total
$
905
$
794
$
766
$
$
$
$
727
609
$
$
$
$
(221)
1,411
13.4
6.8 %
10.5 %
17.2
0.8 %
0.08 %
17.4
1.99 %
2.1 %
1.7 %
$
$
(161)
1,242
11.8
6.7 %
10.5 %
$
17.7
0.7 %
0.11 %
$
16.7
1.7 %
2.0 %
1.6 %
461
(114)
1,113
10.3
7.4 %
10.8 %
17.0
0.9 %
0.10 %
16.1
1.6 %
1.8 %
1.6 %
6 %
3
2
3
14
1
14
14 %
11 %
4
7
6
12
4
13
14 %
(3) %
4 %
4 %
4 %
(a) During 2019, we moved intercompany assets and liabilities, previously recorded in the operating segments, to Corporate & Other.
Prior period amounts have been revised to conform to the current period presentation.
(b) Effective July 1, 2017, GSBS loans and associated metrics reflect worldwide small business services loans. Prior to July 1, 2017, due
to certain system limitations, small business services loans outside the U.S. and associated credit metrics are reflected within
GCSG, and were not significant to either GCSG or GCS.
(c) Refer to Table 7 footnote (b).
(d) Refer to Table 8 footnote (a).
(e) Refer to Table 8 footnote (b).
(f) Refer to Table 8 footnote (c).
(g) Refer to Table 7 footnote (c).
51
GGLOBAL MERCHANT AND NETWORK SERVICES
TABLE 14: GMNS SELECTED INCOME STATEMENT AND OTHER DATA
Years Ended December 31,
(Millions, except percentages and where
t d)
i di
Revenues
Non-interest revenues
Interest income
Interest expense
Net interest income
Total revenues net of interest expense
Provisions for losses
Total revenues net of interest expense after
provisions for losses
Expenses
Marketing, business development, rewards
and Card Member services
Salaries and employee benefits and other
operating expenses
Total expenses
Pretax segment income
Income tax provision
Segment income
Effective tax rate
Total segment assets (billions)(a)
2019
2018
2017
Change
2019 vs. 2018
Change
2018 vs. 2017
$ 6,025
42
$ 6,252
28
(3665)
393
6,645
20
$ 6,069
30
(294)
324
6,393
22
6,625
6,371
1,427
1,250
2,050
3,477
3,148
736
$ 2,412
23.4 %
$
17.5
$
$
2,277
3,527
2,844
704
2,140
24.8 %
$
$ 183
(2)
(71)
69
252
(2)
254
177
(227)
(50)
304
32
$ 272
(188)
230
6,255
16
6,239
1,227
2,367
3,594
2,645
857
1,788
32.4 %
3 % $ 44
(12)
(7)
(106)
24
94
21
138
4
6
(9)
132
4
14
(10)
(1)
11
5
13
23
(90)
(67)
199
(153)
$ 352
1 %
(29)
56
41
2
38
2
2
(4)
(2)
8
(18)
20
15.5
$
19.7
$ 2.0
13 % $
(4)
(21) %
(a) During 2019, we moved intercompany assets and liabilities, previously recorded in the operating segments, to Corporate & Other.
Prior period amounts have been revised to conform to the current period presentation.
GMNS operates a global payments network that processes and settles card transactions, acquires merchants and
provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated
network. GMNS manages our partnership relationships with third-party card issuers, merchant acquirers and a prepaid
reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global
network. GMNS also manages loyalty coalition businesses in certain countries.
TOTAL REVENUES NET OF INTEREST EXPENSE
Non-interest revenues increased, primarily driven by worldwide billed business growth.
Net interest income increased, reflecting a higher interest expense credit relating to internal transfer pricing, which
results in a net benefit for GMNS due to its merchant payables.
EXPENSES
Marketing, business development, rewards and Card Member services expenses increased, primarily driven by marketing
and business development expense reflecting increased network issuer expense due to higher U.S. volumes and
payments related to the partnership agreement with our prepaid reloadable and gift card program manager, partially
offset by lower levels of spending on growth initiatives.
Salaries and employee benefits and other operating expenses decreased, reflecting, in part, lower technology and other
service-related costs, and the prior-year loss on a transaction involving the operations of our prepaid reloadable and gift
card business.
CORPORATE & OTHER
Corporate functions and certain other businesses are included in Corporate & Other.
Corporate & Other net loss was $1.4 billion and $0.6 billion in 2019 and 2018, respectively. The increase in the net loss in
2019 compared to 2018 was primarily driven by lower discrete tax benefits, lower unrealized gains on certain equity
investments and higher restructuring charges.
52
CCONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY
Our balance sheet management objectives are to maintain:
• A solid and flexible equity capital profile;
• A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and
•
Liquidity programs that enable us to continuously meet expected future financing obligations and business
requirements for at least a twelve-month period in the event we are unable to continue to raise new funds under our
traditional funding programs during a substantial weakening in economic conditions.
CAPITAL STRATEGY
Our objective is to retain sufficient levels of capital generated through earnings and other sources to maintain a solid
equity capital base and to provide flexibility to support future business growth. We believe capital allocated to growing
businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value.
The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy
Assessment Process, which takes into account our business activities, as well as marketplace conditions and
requirements or expectations of credit rating agencies, regulators and shareholders, among others. Our consolidated
capital position is also influenced by subsidiary capital requirements. As a bank holding company, we are also subject to
regulatory requirements administered by the U.S. federal banking agencies. The Federal Reserve has established specific
capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items.
We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating
risk-weighted assets. The Basel III minimum requirements and the capital conservation buffers have been fully phased in
as of January 1, 2019.
As a Category IV firm, we are no longer subject to the Basel III advanced approaches capital requirements. Refer to
"Financial Regulatory Reform" under Part I, Item I. "Business — Supervision and Regulation" for additional details.
The following table presents our regulatory risk-based capital ratios and leverage ratios and those of our significant bank
subsidiary, American Express National Bank (AENB) as of December 31, 2019.
TABLE 15: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS
Risk--Based Capital
Common Equity Tier 1
American Express Company
American Express National Bank
Tier 1
Total
American Express Company
American Express National Bank
American Express Company
American Express National Bank
Tier 1 Leverage
American Express Company
American Express National Bank
Supplementary Leverage Ratio
American Express Company
American Express National Bank
53
Basel III
Minimum
7.0 %
8.5
10.5
4.0
3.0 %
Ratios as of
December 31,
2019
10.7 %
13.4
11.6
13.4
13.2
15.4
10.2
11.1
8.8
9.3 %
TTABLE 16: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS
American Express Company
(($ in Billions)
Risk--Based Capital
Common Equity Tier 1
Tier 1 Capital
Tier 2 Capital
Total Capital
Risk--Weighted Assets
Average Total Assets to calculate the Tier 1 Leverage Ratio
Total Leeverage Exposure to calculate supplementary leverage ratio
December 31,
2019
$
$
18.1
19.6
2.6
22.2
168.5
192.3
224.0
We seek to maintain capital levels and ratios in excess of the minimum regulatory requirements, specifically within a 10 to
11 percent target range for American Express' Common Equity Tier 1 risk-based capital ratio, and finance such capital in a
cost efficient manner. Failure to maintain minimum capital levels at American Express or AENB could affect our status as
a financial holding company and cause the regulatory agencies with oversight of American Express or AENB to take
actions that could limit our business operations.
Our primary source of equity capital has been the generation of net income. Capital generated through net income and
other sources, such as the exercise of stock options by employees, is used to maintain a strong balance sheet, support
asset growth and engage in acquisitions, with excess available for distribution to shareholders through dividends and
share repurchases.
We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional
capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory
requirements. These infused amounts can affect the capital profile and liquidity levels at the American Express parent
company level.
The following are definitions for our regulatory risk-based capital ratios and leverage ratio, which are calculated as per
standard regulatory guidance:
Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to
capital adequacy guidelines. On- and off-balance sheet items are weighted for risk, with off-balance sheet items
converted to balance sheet equivalents, using risk conversion factors, before being allocated a risk-adjusted weight. Off-
balance sheet exposures comprise a minimal part of the total risk-weighted assets.
Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as Common Equity Tier 1 capital (CET1), divided by risk-
weighted assets. CET1 is the sum of common shareholders’ equity, adjusted for ineligible goodwill and intangible assets,
certain deferred tax assets, as well as certain other comprehensive income items as follows: net unrealized gains/losses
on securities, foreign currency translation adjustments and net unrealized pension and other postretirement
benefit/losses, all net of tax.
Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets. Tier 1 capital is the sum of
CET1, our perpetual preferred stock and third-party non-controlling interests in consolidated subsidiaries, adjusted for
capital held by insurance subsidiaries. The minimum requirement for the Tier 1 risk-based capital ratio is 1.5 percent
higher than the minimum for the CET1 risk-based capital ratio. We have $1.6 billion of preferred shares outstanding to
help address a portion of the Tier 1 capital requirements in excess of common equity requirements.
Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets.
Tier 2 capital is the sum of the allowance for loan and receivable losses (limited to 1.25 percent of risk-weighted assets),
minority interest that is not included in Tier 1 capital and $480 million of eligible subordinated notes, adjusted for capital
held by insurance subsidiaries. The $480 million of eligible subordinated notes reflect a 20 percent, or $120 million,
reduction of Tier 2 capital credit for the $600 million subordinated debt issued in December 2014.
Tier 1 Leverage Ratio — Calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent
quarter.
Supplementary Leverage Ratio — Calculated by dividing Tier 1 capital by total leverage exposure under Basel III. Total
leverage exposure reflects average total consolidated assets with adjustments for Tier 1 capital deductions, average off-
balance sheet derivative exposures, average securities purchased under agreements to resell, and average credit
equivalents of conditionally and unconditionally cancellable undrawn commitments.
54
In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for
the adverse regulatory capital effects upon adopting the CECL model pursuant to new accounting guidance for the
recognition of credit losses on financial instruments, effective January 1, 2020. We plan to elect to phase-in the regulatory
capital impact of adopting CECL, at 25 percent per year through January 1, 2023. The Federal Reserve also released a
statement indicating that it plans to maintain the current framework for calculating credit loss allowances on loans in
supervisory stress tests through the 2021 stress test cycle. Refer to Note 1 to the “Consolidated Financial Statements” for
further information about CECL.
SSHARE REPURCHASES AND DIVIDENDS
We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce
common shares outstanding and more than offset the issuance of new shares as part of employee compensation plans.
During the year ended December 31, 2019, we returned $5.9 billion to our shareholders in the form of common stock
dividends of $1.4 billion and share repurchases of $4.6 billion. We repurchased 40 million common shares at an average
price of $115.50 in 2019. These dividend and share repurchase amounts collectively represent approximately 87 percent
of total capital generated during the year.
In addition, during the year ended December 31, 2019, we paid $81 million in dividends on non-cumulative perpetual
preferred shares outstanding. For additional information on our preferred shares, refer to Note 16 to the “Consolidated
Financial Statements.”
FUNDING STRATEGY
Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to meet our maturing
obligations, cost-effectively finance current and future asset growth in our global businesses, as well as to maintain a
strong liquidity profile. The diversity of funding sources by type of instrument, by maturity and by investor base, among
other factors, provides additional insulation from the impact of disruptions in any one type of instrument, maturity or
investor. The mix of our funding in any period will seek to achieve cost efficiency consistent with both maintaining
diversified sources and achieving our liquidity objectives. While we seek to diversify our funding sources by maintaining
scale and relevance in unsecured debt, asset securitizations and deposits, we currently expect that direct deposits, such
as the Personal Savings program, will become a larger proportion of our funding over time. Our funding strategy and
activities are integrated into our asset-liability management activities. We have in place a funding policy covering
American Express Company and all of our subsidiaries.
Our global proprietary card-issuing businesses generate significant assets in both domestic and international Card
Member lending and receivable activities. Our financing needs are in large part a consequence of our proprietary card-
issuing businesses, and the maintenance of a liquidity position to meet regulatory requirements and support all of our
business activities, such as merchant payments. We generally pay merchants for card transactions prior to
reimbursement by Card Members and therefore fund the merchant payments during the period Card Member loans and
receivables are outstanding. We also have additional financing needs associated with general corporate purposes. Our
funding plan to meet these financing needs is in turn driven by, among other factors, our liquidity position, size and mix of
business asset growth, choice of funding sources, and our maturing obligations.
FUNDING PROGRAMS AND ACTIVITIES
We meet our funding needs through a variety of sources, including direct and third-party distributed deposits and debt
instruments, such as senior unsecured debt, asset securitizations, borrowings through secured borrowing facilities and a
committed bank credit facility.
We had the following consolidated debt and customer deposits outstanding as of December 31:
TABLE 17: SUMMARY OF CONSOLIDATED DEBT AND CUSTOMER DEPOSITS
(Billions)
Short-term borrowings
Long-term debt
Total debt
Customer deposits
Total debt and customer deposits
$
$
2019
6.4 $
57.8
64.2
73.3
137.5 $
2018
3.1
58.4
61.5
70.0
131.5
55
We may redeem from time to time certain debt securities within 31 days prior to the original contractual maturity dates in
accordance with the optional redemption provisions of those debt securities.
Our funding plan for the full year 2020 includes, among other sources, approximately zero to $3 billion of unsecured term
debt issuance and approximately $7 billion to $10 billion of secured term debt issuance. Our annual funding plans can
vary due to various risks and uncertainties, such as future business growth, the impact of global economic, political and
other events on market capacity, demand for securities offered by us, regulatory changes, ability to securitize and sell
receivables, and the performance of receivables previously sold in securitization transactions. Many of these risks and
uncertainties are beyond our control.
Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured
debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and
Fitch Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall
funding strategy. Our asset securitization activities are rated separately.
TTABLE 18: UNSECURED DEBT RATINGS
Credit Agency
Fitch
Moody’s
Moody's
Moody’s
Moody's
S&P
S&P
S&P
American Express Entity
All rated entities
American Express Travel Related Services Company, Inc.
American Express Credit Corporation
American Express National Bank
American Express Company
American Express Travel Related Services Company, Inc.
American Express Credit Corporation and American Express
National Bank
American Express Company
Short--Term
RRatings
F1
N/A
Prime-1
Prime-1
N/A
N/A
A-2
Long--Term
RRatings
A
A2
A2
A3
A3
A-
A-
A-2
BBB+
Outlook
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding
costs, as well as higher fees related to borrowings under our unused lines of credit. Declines in credit ratings could also
reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding
mix, including the proportion of U.S. retail deposits insured by the Federal Deposit Insurance Corporation (FDIC) to total
funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs.
SHORT-TERM FUNDING PROGRAMS
Short-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or
less, as well as interest-bearing overdrafts with banks. Our short-term funding programs are used primarily to fund
working capital needs, such as managing seasonal variations in receivables balances. The amount of short-term
borrowings issued in the future will depend on our funding strategy, our needs and market conditions. As of December 31,
2019, we had $3.0 billion in commercial paper outstanding and we had an average of $0.3 billion in commercial paper
outstanding during 2019. Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these
borrowings.
DEPOSIT PROGRAMS
We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to $250,000 per account
holder through the FDIC. Our ability to obtain deposit funding and offer competitive interest rates is dependent on the
capital level of AENB. We, through AENB, have a Personal Savings program, which is our primary deposit product
channel. The direct retail program makes FDIC-insured certificates of deposit (CDs) and high-yield savings account
products available directly to consumers. We also source deposits through third-party distribution channels as needed to
meet our overall funding objectives. As of December 31, 2019 we had $73.3 billion in customer deposits. Refer to Note 7 to
the “Consolidated Financial Statements” for a further description of these deposits.
LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMS
As of December 31, 2019, we had $57.8 billion in long-term debt outstanding. During 2019, we and our subsidiaries issued
$11.7 billion of unsecured debt and asset-backed securities with maturities ranging from 2 to 7 years. Refer to Note 8 to
the “Consolidated Financial Statements” for a further description of these borrowings.
56
We periodically securitize Card Member loans and receivables arising from our card business, as the securitization
market provides us with cost-effective funding. Securitization of Card Member loans and receivables is accomplished
through the transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to
third-party investors. The proceeds from issuance are distributed to us, through our wholly-owned subsidiaries, as
consideration for the transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further
description of our asset securitizations.
On February 1, 2020, we removed U.S. consumer and small business Card Member receivables from the American
Express Issuance Trust II (the Charge Trust) and substantially replaced them with U.S. corporate Card Member
receivables.
Our 2019 long-term debt and asset securitization issuances were as follows:
TTABLE 19: DEBT ISSUANCES
(Billions)
American Express Company:
Fixed Rate Senior Notes (weighted-average coupon of 2.92%)
Floating Rate Senior Notes (3-month LIBOR plus 62 basis points)
American Express Credit Account Master Trust:
Fixed Rate Class A Certificates (weighted-average coupon of 2.55%)
Fixed Rate Class B Certificates (weighted-average coupon of 2.75%)
Floating Rate Class A Certificates (1-month LIBOR plus 24 basis points)
Total
LIQUIDITY MANAGEMENT
2019
5.6
0.9
4.2
0.2
0.8
11.7
$
$
Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to
maintain liquidity sources in amounts sufficient to meet our expected future financial obligations and business
requirements for liquidity for a period of at least twelve months in the event we are unable to raise new funds under our
regular funding programs during a substantial weakening in economic conditions.
Our liquidity management strategy includes a number of elements, including, but not limited to:
• Maintaining diversified funding sources (refer to the “Funding Strategy” section for more details);
• Maintaining unencumbered liquid assets and off-balance sheet liquidity sources;
•
•
•
Projecting cash inflows and outflows under a variety of economic and market scenarios;
Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements; and
Incorporating liquidity risk management as appropriate into our capital adequacy framework.
We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash
and other liquid assets, committed bank credit facilities and secured borrowing facilities. Through our U.S. bank
subsidiary, AENB, we also hold collateral eligible for use at the Federal Reserve’s discount window.
The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios
required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios
required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow
assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy
include market-wide, firm-specific and combined liquidity stresses. We consider other factors in determining the amount
and type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations,
growth in our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources
and credit rating agency guidelines and requirements.
The investment income we receive on liquidity resources is less than the interest expense on the sources of funding for
these balances. The level of future net interest costs to maintain these resources can be substantial, as it depends on the
amount of liquidity resources we maintain and the difference between our cost of funding these amounts and their
investment yields.
57
SSecuritized Borrowing Capacity
As of December 31, 2019, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July
15, 2022, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the Charge Trust. We
also maintained our committed, revolving, secured borrowing facility, with a maturity date of September 15, 2022, which
gives us the right to sell up to $2.0 billion face amount of eligible AAA certificates from the American Express Credit
Account Master Trust (the Lending Trust). Both facilities are used in the ordinary course of business to fund working
capital needs, as well as to further enhance our contingent funding resources. As of December 31, 2019, no amounts were
drawn on the Charge Trust facility or the Lending Trust facility.
Federal Reserve Discount Window
As an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco, subject to the
amount of qualifying collateral that it may pledge. The Federal Reserve has indicated that both credit and charge card
receivables are a form of qualifying collateral for secured borrowings made through the discount window. Whether
specific assets will be considered qualifying collateral and the amount that may be borrowed against the collateral, remain
at the discretion of the Federal Reserve.
We had approximately $76.6 billion as of December 31, 2019 in U.S. credit card loans and charge card receivables that
could be sold over time through our securitization trusts or pledged in return for secured borrowings to provide further
liquidity, subject in each case to applicable market conditions and eligibility criteria.
Committed Bank Credit Facility
In addition to the secured borrowing facilities described above, we maintained a committed syndicated bank credit facility
as of December 31, 2019 of $3.5 billion, with a maturity date of October 15, 2022. The availability of this credit line is
subject to our compliance with certain financial covenants, principally the maintenance by American Express Credit
Corporation (Credco) of a certain ratio of combined earnings and fixed charges to fixed charges. As of December 31, 2019
and 2018, we were in compliance with each of our covenants. As of December 31, 2019, no amounts were drawn on the
committed credit facility. We may, from time to time, use this facility in the ordinary course of business to fund working
capital needs. Any undrawn portion of this facility could serve as backstop for the amount of commercial paper
outstanding.
Our committed bank credit facility does not contain a material adverse change clause, which might otherwise preclude
borrowing under the credit facility, nor is it dependent on our credit rating.
CASH FLOWS
The following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating,
investing and financing cash flows.
TABLE 20: CASH FLOWS
(Billions)
Total cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of foreign currency exchange rates on cash, cash equivalents and restricted
cash
Net (decrease) increase in cash, cash equivalents and restricted cash
2019
2018
$
$
13.6 $
(16.7)
(0.5)
0.2
(3.4) $
8.9 $
(19.6)
5.1
0.1
(5.5) $
2017
13.5
(18.2)
12.2
0.3
7.8
Cash Flows from Operating Activities
Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net
income, such as provisions for losses, depreciation and amortization, deferred taxes and stock-based compensation and
(ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of
business due to the amount and timing of payments.
The increase in net cash provided by operating activities was primarily driven by the amount and timing of payments of
accounts payable and other liabilities.
Cash Flows from Investing Activities
Our cash flows from investing activities primarily include changes in Card Member receivables and loans, as well as
changes in our available-for-sale investment securities portfolio.
58
The decrease in net cash used in investing activities was primarily driven by lower growth in Card Member receivables and
loans, partially offset by a larger net increase in the investment securities portfolio.
CCash Flows from Financing Activities
Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term
borrowings, as well as dividend payments and share repurchases.
The increase in net cash used in financing activities was primarily driven by a higher level of share repurchases and lower
growth in customer deposits.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL
OBLIGATIONS
We have identified both on- and off-balance sheet transactions, arrangements, obligations and other relationships that
may have a material current or future effect on our financial condition, changes in financial condition, results of
operations, or liquidity and capital resources.
CONTRACTUAL OBLIGATIONS
The table below identifies transactions that represent our contractually committed future obligations. Purchase
obligations include our agreements to purchase goods and services that are enforceable and legally binding and that
specify significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction.
TABLE 21: COMMITTED FUTURE OBLIGATIONS BY YEAR
$
(Millions)
Long-term debt
Certificates of deposit
Interest payments on long-term debt(b)
Lease obligations
Deemed repatriation tax(c)
Purchase obligations(d)
Other long-term liabilities(e) (f)
Total
Payments due by year(a)
2021-2022
2023-2024
2025 and
thereafter
25,898 $
4,687
1,844
214
—
188
101
32,932
12,050 $
625
743
166
263
33
3
13,883
4,883 $
—
1,246
842
749
—
20
7,740
2020
15,615 $
4,632
1,426
134
—
269
217
22,293
Total
58,446
9,944
5,259
1,356
1,012
490
341
76,848
(a) The table above excludes approximately $0.7 billion of tax reserves related to the uncertainty in income taxes as inherent
complexities and the number of tax years currently open for examination in multiple jurisdictions do not permit reasonable
estimates of payments, if any, to be made over a range of years. Refer to Note 20 to the “Consolidated Financial Statements” for
additional information.
(b) Estimated interest payments were calculated using the effective interest rates as of December 31, 2019, and includes the effect of
existing interest rate swaps. Actual cash flows may differ from estimated payments.
(c) Represents the remaining obligation under the Tax Act to pay a one-time transition tax on unrepatriated earnings and profits of
certain foreign subsidiaries. In 2019, the Internal Revenue Service applied our prior year U.S. federal income tax return over-
payment against a portion of the remaining obligation.
(d) The purchase obligation amounts represent either the early termination fees or non-cancelable minimum contractual obligations, as
applicable, by period under contracts that were in effect as of December 31, 2019.
(e) As of December 31, 2019, there were no minimum required contributions, and no contributions are currently planned, for the U.S.
American Express Retirement Plan. For the U.S. American Express Retirement Restoration Plan and non-U.S. defined benefit
pension and postretirement benefit plans, contributions in 2020 are anticipated to be approximately $45 million, and this amount
has been included within other long-term liabilities. Remaining obligations under defined benefit pension and postretirement benefit
plans aggregating $595 million have not been included in the table above as the timing of such obligations is not determinable.
Additionally, other long-term liabilities do not include $8.9 billion of Membership Rewards liabilities, which are not considered long-
term liabilities as Card Members in good standing can redeem points immediately, without restrictions, and because the timing of
point redemption is not determinable.
(f) As of December 31, 2019, we had committed to provide funding related to certain tax credit investments resulting in a $211 million
unfunded commitment included in other long-term liabilities. In addition to this amount, there was a further $78 million of
contractual off-balance sheet obligations that have not been included in the table above as the timing of such obligations is not
determinable. Refer to Note 6 to the “Consolidated Financial Statements” for additional information.
59
In addition to the contractual obligations noted in Table 21, we have financial commitments related to agreements with
certain cobrand partners under which we are required to make a certain level of minimum payments over the life of the
agreement, generally ranging from five to ten years. Such commitments are designed to be satisfied by the payments we
make to such cobrand partners primarily based on Card Members' spending and earning rewards on their cobrand cards
and as we acquire new Card Members. In the event these payments do not fully satisfy the commitment, we will pay
the cobrand partner up to the amount of the commitment in exchange for an equivalent value of reward points. As of
December 31, 2019, we had $5 billion in such commitments outstanding and also had certain cobrand arrangements that
include commitments based on variables, the values of which are not yet determinable and thus the amount is not
quantifiable.
We also have off-balance sheet arrangements that include guarantees, indemnifications and certain other off-balance
sheet arrangements.
GGUARANTEES
As of December 31, 2019, we had guarantees and indemnifications totaling approximately $1 billion related primarily to
real estate and business dispositions in the ordinary course of business. Refer to Note 15 to the “Consolidated Financial
Statements” for further discussion regarding our guarantees.
CERTAIN OTHER OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2019, we had approximately $306 billion of unused credit available to Card Members as part of
established lending product agreements. Total unused credit available to Card Members does not represent potential
future cash requirements, as a significant portion of this unused credit will likely not be drawn. Our charge card products
generally have no pre-set spending limit, and therefore are not reflected in unused credit available to Card Members.
We provide Card Member protection plans that cover losses associated with purchased products. The maximum potential
liability related to these plans is the portion of annual billed business for which timely and valid disputes may be raised
under applicable law and relevant customer agreements. However, based on historical experience, we believe that this
total amount is not representative of our actual potential loss exposure. The actual amount of the potential exposure
cannot be quantified as the billed business volumes which may include or result in claims under these plans are not
sufficiently estimable. Losses related to these protection plans were immaterial for the years ended December 31, 2019,
2018 and 2017.
Refer to Notes 6 and 12 to the “Consolidated Financial Statements” for discussion regarding our other off-balance sheet
arrangements.
RISK MANAGEMENT
GOVERNANCE
We use our comprehensive Enterprise-wide Risk Management (ERM) program to identify, aggregate, monitor, and
manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and
execution of the ERM program is headed by our Chief Risk Officer.
Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit
and Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of
independent directors and provides regular reports to the full Board regarding matters reviewed at their committee. The
committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance & Ethics Officer, the Chief
Audit Executive and other senior management with regard to our risk management processes, controls, talent and
capabilities. The Board monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks.
The Risk Committee of our Board of Directors provides oversight of our enterprise-wide risk management framework,
processes and methodologies. The Risk Committee approves our ERM policy. The ERM policy governs risk governance,
risk oversight and risk appetite for risks, including individual credit risk, institutional credit risk, market risk, liquidity risk,
operational risk, reputational risk, compliance risk, model risk, asset/liability risk, strategic and business risk, and foreign
country risk. Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk
tolerance, including stressed forward-looking scenarios. In addition, it establishes principles for risk taking in the
aggregate and for each risk type, and is supported by a comprehensive system for monitoring limits, escalation triggers
and assessing control programs.
60
The Risk Committee reviews and concurs in the appointment, replacement, performance and compensation of our Chief
Risk Officer and receives regular updates from the Chief Risk Officer on key risks, transactions and exposures.
The Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including
significant risk exposures, risk trends in our portfolios and major risk concentrations.
The Risk Committee also provides oversight of our compliance with Basel capital and liquidity standards, our Internal
Capital Adequacy Assessment Process, including its Comprehensive Capital Analysis and Review (CCAR) submissions,
and resolution planning.
The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include
our Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of
our Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the
Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process,
internal and external auditing, including the qualifications and independence of the independent registered public
accounting firm and the performance of our internal audit services function, and the integrity of our systems of
internal controls.
The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance
Committee reviews and concurs in the appointment, replacement, performance and compensation of our Chief Audit
Executive and approves Internal Audit’s annual audit plan, charter, policies and budget. The Audit and Compliance
Committee also receives regular updates on the audit plan’s status and results including significant reports issued by
Internal Audit and the status of our corrective actions.
The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our
overall compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with
business incentives and how business performance is achieved without taking imprudent or excessive risk. Our Chief Risk
Officer is actively involved in setting goals. Our Chief Risk Officer also reviews the current and forward-looking risk profiles
of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the
Compensation and Benefits Committee and attests whether performance goals and results have been achieved without
taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation
framework to decide on our bonus pools and the compensation of senior executives.
There are several internal management committees, including the Enterprise-wide Risk Management Committee (ERMC),
chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and
is responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite
framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk
policies company-wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance
matters, and provides guidance on the steps to monitor, control and report major risks.
As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense
comprises functions and management committees directly initiating risk taking. Business unit presidents, our Chief
Credit Officer, Chief Market Risk Officer and Functional Risk Officer are part of the first line of defense. The second line
comprises independent functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief
Compliance & Ethics Officer, the Chief Operational Risk Officer and certain control groups, both at the enterprise level
and within regulated entities, are part of the second line of defense. The global risk oversight team oversees the policies,
strategies, frameworks, models, processes and capabilities deployed by the first line teams and provides challenges and
independent assessments on how the first line of defense is managing risks. In addition, the Asset Liability Committee,
chaired by our Chief Financial Officer, is responsible for managing market, liquidity and asset/liability risk, capital and
resolution planning.
Our Internal Audit Group constitutes the third line of defense, and provides independent assessments and effective
challenge of the first and second lines of defense.
CCREDIT RISK MANAGEMENT PROCESS
Credit risk is defined as loss due to obligor or counterparty default or changes in the credit quality of a counterparty or
security. Our credit risks are divided into two broad categories: individual and institutional. Each has distinct risk
management capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures
of significant importance are supported by dedicated risk management teams, each led by a Chief Credit Officer.
61
IINDIVIDUAL CREDIT RISK
Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These
portfolios consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit
from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product
features and risk management capabilities, which span underwriting, customer management and collections. The risk in
these portfolios is generally correlated to broad economic trends, such as unemployment rates and gross domestic
product (GDP) growth.
The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief
Credit Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and
enforcement of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and
procedures and escalates to the ERMC as appropriate. The Individual Credit Risk Management Policy is further supported
by subordinate policies and operating manuals covering decision logic and processes of credit extension, including
prospecting, new account approvals, point-of-sale authorizations, credit line management and collections. The
subordinate risk policies and operating manuals are designed to ensure consistent application of risk management
principles and standardized reporting of asset quality and loss recognition.
Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-
date information on prospects and customers, such as spending and payment history and data feeds from credit bureaus.
We have developed data-driven economic decision logic for customer interactions to better serve our customers.
INSTITUTIONAL CREDIT RISK
Institutional credit risk arises principally within our GCS, GMS and GNS businesses, as well as investment and liquidity
management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but
higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large
losses in any given year or over several years is not necessarily representative of the level of risk of institutional portfolios,
given the infrequency of loss events in such portfolios.
Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers.
These officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for
implementation and enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the
credit officers of each business unit with substantial institutional credit risk exposures. The committee, along with the
business unit Chief Credit Officers, makes investment decisions in core risk capabilities, ensures proper implementation
of the underwriting standards and contractual rights for risk mitigation, monitors risk exposures, and determines risk
mitigation actions. The IRMC formally reviews large institutional risk exposures to ensure compliance with ERMC
guidelines and procedures and escalates them to the ERMC as appropriate. At the same time, the IRMC provides
guidance to the business unit risk management teams to optimize risk-adjusted returns on capital. A centralized risk
rating unit provides risk assessment of our institutional obligors.
Exposure to the Airline and Travel Industry
We have multiple important cobrand, rewards, merchant acceptance and corporate payments arrangements with airlines.
The ERM program evaluates the risks posed by our airline partners and the overall airline strategy companywide through
comprehensive business analysis of global airlines, and the travel industry more broadly, including cruise lines, travel
agencies and tour operators. Our largest airline partner is Delta, and this relationship includes an exclusive cobrand credit
card partnership and other arrangements including Membership Rewards redemption, merchant acceptance, travel and
corporate payments. See "We face intense competition for partner relationships, which could result in a loss or
renegotiation of these arrangements that could have a material adverse impact on our business and results of operations"
and "Arrangements with our business partners represent a significant portion of our business. We are exposed to risks
associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations,
restructurings and consolidations, and the possible obligation to make payments to our partners" under “Risk Factors” for
additional information.
Debt Exposure
As part of our ongoing risk management process, we monitor our financial exposure to both sovereign and non-sovereign
customers and counterparties, and measure and manage concentrations of risk by geographic regions, as well as by
economic sectors and industries. A primary focus area for monitoring is credit deterioration due to weaknesses in
economic and fiscal profiles. We evaluate countries based on the market assessment of the riskiness of their sovereign
debt and our assessment of the economic and financial outlook and closely monitor those deemed high risk. As of
December 31, 2019, we considered our gross credit exposures to government entities, financial institutions and
corporations in those countries deemed high risk to be individually and collectively not material.
62
OOPERATIONAL RISK MANAGEMENT PROCESS
We define operational risk as the risk of not achieving business objectives due to inadequate or failed processes, people,
or information systems, or the external environment, including failures to comply with laws and regulations as well as
impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an
organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory
penalties.
To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk
framework that is defined in the Operational Risk Management Policy approved by the Risk Committee. The Operational
Risk Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups
on effective risk assessments and controls and oversees the preventive, responsive and mitigation efforts by Operational
Excellence teams in the business units and staff groups.
We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks.
This framework, supervised by the ORMC, consists of (a) operational risk event capture, (b) a project office to coordinate
issue management and control enhancements, (c) key risk indicators, and (d) process and entity-level risk assessments.
The framework requires the assessment of operational risk events to determine root causes, impact to customers and/or
us, and resolution plan accountability to correct any defect, remediate customers, and enhance controls and testing to
mitigate future issues. The impact is assessed from an operational, financial, brand, regulatory compliance and legal
perspective.
INFORMATION AND CYBER SECURITY
We have implemented an Information Security Program and Operating Model that is designed to protect the
confidentiality, integrity and availability of information and information systems from unauthorized access, use,
disclosure, disruption, modification or destruction.
Our Information Security Program and Operating Model are based on the National Institute of Standards and Technology
Cybersecurity Common Standards Framework, which consist of controls designed to identify, protect, detect, respond
and recover from information and cyber security incidents. The framework defines risks and associated controls which
are embedded in our processes and technology. Those controls are measured and monitored by a combination of subject
matter experts and a security operations center with our integrated cyber detection, response and recovery capabilities.
Chaired by the Chief Information Security Officer, our Information Security Risk Management Committee, a sub-
committee of the ORMC, provides governance for our information security risk management program. The Information
Security and Technology Oversight team provides independent challenge and assessment of the information, cyber
security and technology risk management programs.
See “A major information or cyber security incident or an increase in fraudulent activity could lead to reputational damage
to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our charge
and credit cards” under “Risk Factors” for additional information.
PRIVACY AND DATA GOVERNANCE
Our Privacy Framework and Operating Model follow a similar structure. Chaired by the Chief Privacy Officer, our Privacy
Risk Management Committee, a sub-committee of the ORMC, provides oversight and governance for our privacy
program. The committee is responsible for the governance over the collection, notice, use, sharing, transfer,
confidentiality and retention of personal data.
Our Enterprise Data Governance Framework and Policy defines governance requirements for data used in critical
processes.
COMPLIANCE RISK MANAGEMENT PROCESS
We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or
other forms of sanction as a result of non-compliance with applicable laws, regulations, rules or standards of conduct.
We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global
Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk
Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing,
controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance
63
Risk Management Committee (CRMC), chaired by the Chief Compliance and Ethics Officer, is responsible for identifying,
evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship directly to both the
ERMC and the Audit and Compliance Committee.
We have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the
appropriate government authorities. As part of that program, the Global Risk Oversight team provides independent risk
assessment of the rules used by the Anti-Money Laundering team. In addition, the Internal Audit Group reviews the
processes for practices consistent with regulatory guidance.
RREPUTATIONAL RISK MANAGEMENT PROCESS
We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner
relationships, business activities and policies, management and workplace culture, or our response to unexpected events,
could cause sustained, critical media coverage, a decline in revenue or investment, talent attrition, litigation, or
government or regulatory scrutiny.
We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of
providing the world’s best customer experience and fundamental to our long-term success.
Our business leaders are responsible for considering the reputational risk implications of business activities and
strategies and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring
reputational risk considerations are included in the scope of appropriate subordinate risk policies and committees and
properly reflected in all decisions escalated to the ERMC.
MARKET RISK MANAGEMENT PROCESS
Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk
exposures include interest rate risk and foreign exchange risk. Interest rate risk is driven by the relationship between
interest rates on assets (such as loans, receivables and investment securities) and interest rates on liabilities (such as
debt and deposits). Foreign exchange risk arises from transactions, funding, investments and earnings in currencies other
than the U.S. dollar.
Our Asset-Liability Management (ALM) and Market Risk policies establish the framework that guides and governs market
risk management, including quantitative limits and escalation triggers. These policies are approved by the Asset Liability
Committee or Market Risk Management Committee.
Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an
independent risk assessment and oversight over the policies and exposure management for market risk and ALM
activities, as well as overseeing compliance with the Volcker Rule and other regulatory requirements. Market risk
management is also guided and governed by policies covering the use of derivative financial instruments, funding,
liquidity and investments.
Interest Rate Risk
We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on
earnings and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over
time as a result of, among other things, the proportion of our total funding provided by variable-and fixed-rate debt and
deposits compared to our Card Member loans and receivables. Interest rate swaps are used from time to time to
effectively convert debt issuances to (or from) variable-rate, from (or to) fixed-rate. We do not engage in derivative
financial instruments for trading purposes other than with respect to our Foreign Exchange International Payments
business activities. Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative
financial instruments.
As of December 31, 2019, a hypothetical, immediate 100 basis point increase in market interest rates would have a
detrimental effect on our annual net interest income of approximately $141 million. This measure first projects net
interest income over the following twelve-month time horizon considering forecasted business growth and anticipated
future market interest rates. The detrimental impact from a rate increase is then measured by instantaneously increasing
the anticipated future interest rates by 100 basis points. It is further assumed that our interest-rate sensitive assets and
the majority of our liabilities that reprice within the twelve-month horizon generally reprice by 100 basis points. Our
estimated repricing risk assumes that certain deposit liabilities reprice at a lower magnitude than benchmark rate
movements consistent with historical deposit repricing experience in the industry and within our own portfolio. Actual
changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to
changes in market interest rates.
64
In addition to parallel rate changes, our net interest income is subject to changes in the relationship between market
benchmark rates. For example, movements in Prime rate change the yield on a large portion of our variable-rate U.S.
lending receivables and loans, while LIBOR rates determine the effective interest rate on a significant portion of our
outstanding funding. Differences in the rate of change of these two benchmark indices, commonly referred to as basis
risk, would thus impact our net interest income. The detrimental effect on our net interest income of a hypothetical 10
basis point decrease in the spread between Prime and LIBOR over the next twelve months is estimated to be $20 million.
We currently have approximately $48 billion of Prime-based, variable-rate U.S. lending receivables and loans and $20
billion of LIBOR-indexed debt, including asset securitizations.
LLIBOR Transition
Due to uncertainty surrounding the suitability and sustainability of LIBOR, central banks and global regulators have called
for financial market participants to prepare for the discontinuance of LIBOR by the end of 2021 and the establishment of
alternative reference rates.
We have financial instruments and commercial agreements that will be impacted by the discontinuance of LIBOR,
including floating rate debt and equity instruments, derivatives, borrowings and other contracts. We have established an
enterprise-wide, cross-functional initiative to identify, assess and monitor risks associated with LIBOR, engage with the
industry participants and regulators and to transition to new alternative reference rates. As part of this initiative, we are
reviewing and updating our operational processes, IT systems and models for a timely transition.
See “Uncertainty relating to LIBOR and other reference rates and their potential discontinuance may negatively impact our
access to funding and the value of our financial instruments and commercial agreements” under “Risk Factors” for
additional information.
Foreign Exchange Risk
Foreign exchange exposures arise in four principal ways: 1) Card Member spending in currencies that are not the billing
currency, 2) cross-currency transactions and balances from our funding activities, 3) cross-currency investing activities,
such as in the equity of foreign subsidiaries, and 4) revenues generated and expenses incurred in foreign currencies,
which impact earnings.
These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with
foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to
offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2019, foreign
currency derivative instruments with total notional amounts of approximately $36 billion were outstanding.
With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward
contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar would result in an immaterial impact to
projected earnings as of December 31, 2019. With respect to translation exposure of foreign subsidiary equity balances,
including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S.
dollar would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2019. With
respect to earnings denominated in foreign currencies, the adverse impact on pretax income of a hypothetical 10 percent
strengthening of the U.S. dollar related to anticipated overseas operating results for the next twelve months would be
approximately $146 million as of December 31, 2019.
To a much lesser extent, we are also subject to market risk arising from activities conducted by our Foreign Exchange
International Payments business. We aim to minimize market risk from these activities through hedging, where
appropriate, and the establishment of limits to define and protect the company from excessive exposure.
The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of
rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same
degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our
businesses.
FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS
Liquidity risk is defined as our inability to meet our ongoing financial and business obligations as they become due at a
reasonable cost.
Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.
65
Liquidity risk is managed by the Funding and Liquidity Committee. In addition, the Market Risk Oversight Officer provides
independent oversight of liquidity risk management. We manage liquidity risk by maintaining access to a diverse set of
cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business
requirements and expected future financing obligations for at least a twelve-month period in the event we are unable to
raise new funds under our regular funding programs during a substantial weakening in economic conditions. We consider
the trade-offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having
inadequate liquidity, which may result in financial distress during a liquidity event.
Liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure that
sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of
our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy
those requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity
resources required and monitors positions and determines any actions to be taken.
MMODEL RISK MANAGEMENT PROCESS
We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision
making, or damage to our reputation, from decisions based on incorrect or misused model outputs and reports.
We manage model risk through a comprehensive model governance framework, including policies and procedures for
model development, independent model validation and change management capabilities that seek to minimize erroneous
model methodology, outputs and misuse. We also assess model performance on an ongoing basis.
STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESS
Strategic and business risk is the risk related to our inability to achieve our business objectives due to poor strategic
decisions, including decisions related to mergers, acquisitions, and divestitures, poor implementation of strategic
decisions or declining demand for our products and services.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with
company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as
well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by
committees and business leaders. Mergers, acquisitions and divestitures can only be approved following Deal Committee
due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the
Chief Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new products and
material changes in business processes are reviewed and approved by the New Products Committee and appropriate
credit or risk committees.
FOREIGN COUNTRY RISK MANAGEMENT PROCESS
Foreign country risk is defined as the risk that economic, social, and/or political conditions and events in a foreign country
will adversely impact us, primarily as a result of greater credit losses, increased operational risk or the inability to
repatriate capital. We manage foreign country risk as part of the normal course of business. Policies and procedures
establish foreign country risk escalation thresholds to control and limit exposure, driven by processes that enable the
monitoring of foreign country conditions in which we have exposure.
CRITICAL ACCOUNTING ESTIMATES
Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain
of our accounting policies requiring significant management assumptions and judgments are as follows:
RESERVES FOR CARD MEMBER LOSSES
Reserves for Card Member losses represent our best estimate of the probable losses inherent in our outstanding portfolio
of Card Member loans and receivables, as of the balance sheet date.
In estimating these losses, we use statistical and analytical models that analyze portfolio performance and reflect our
judgment regarding the quantitative components of the reserve. The models take into account several factors, including
delinquency-based loss migration rates, loss emergence periods and average losses and recoveries over an appropriate
historical period. We also consider whether to adjust the quantitative reserve for certain external and internal qualitative
factors that may increase or decrease the reserves for losses on Card Member loans and receivables. Refer to Note 3 to
the "Consolidated Financial Statements" for additional information.
66
The process of estimating these reserves requires a high degree of judgment. To the extent historical credit experience,
updated for any external and internal qualitative factors such as environmental trends, is not indicative of future
performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or
lower future provisions for Card Member losses in any quarter.
As of December 31, 2019, a 10 percent increase in our estimate of losses inherent in the outstanding portfolio of Card
Member loans and receivables, evaluated collectively for impairment, would increase reserves for losses with a
corresponding change to provisions for losses by approximately $300 million. This sensitivity analysis is provided as a
hypothetical scenario to assess the sensitivity of the provisions for losses. It does not represent our expectations for
losses in the future, nor does it include how other portfolio factors such as delinquency-based loss migration rates or
recoveries, or the amount of outstanding balances, may impact the level of reserves for losses and the corresponding
impact on the provisions for losses.
Refer to Note 1 to the "Consolidated Financial Statements" for information about the implementation and impact of new
accounting guidance for the recognition of credit losses on financial instruments, effective January 1, 2020, and the new
credit reserving methodology known as the CECL methodology.
LLIABILITY FOR MEMBERSHIP REWARDS
The Membership Rewards program is our largest card-based rewards program. Card Members can earn points for
purchases charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members
to earn bonus points for purchases at merchants in particular industry categories. Membership Rewards points are
redeemable for a broad variety of rewards, including travel, shopping, gift cards, and covering eligible charges. Points
typically do not expire, and there is no limit on the number of points a Card Member may earn. Membership Rewards
expense is driven by charge volume on enrolled cards, customer participation in the program and contractual
arrangements with redemption partners.
We record a Membership Rewards liability that represents the estimated cost of points earned that are expected to be
redeemed by Card Members in the future. The Membership Rewards liability is impacted over time by enrollment levels,
attrition, the volume of points earned and redeemed, and the associated redemption costs. We estimate the Membership
Rewards liability by determining the Ultimate Redemption Rate (URR) and the weighted average cost (WAC) per point,
which are applied to the points of current enrollees. Refer to Note 9 to the “Consolidated Financial Statements” for
additional information.
The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be
redeemed in future periods. We use statistical and actuarial models to estimate the URR of points earned to date by
current Card Members based on redemption trends, card product type, enrollment tenure, card spend levels and credit
attributes. The WAC per point assumption is used to estimate future redemption costs and is primarily based on
redemption choices made by Card Members, reward offerings by partners, and Membership Rewards program changes.
The WAC per point is derived from the previous 12 months of redemptions and is adjusted as appropriate for certain
changes in redemption costs that are not representative of future cost expectations.
We periodically evaluate our liability estimation process and assumptions based on developments in redemption patterns,
cost per point redeemed, partner contract changes and other factors.
The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and
associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership
Rewards expense.
Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the
liability through the current period Membership Rewards expense by an amount estimated to cover the cost of all points
previously earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31,
2019, an increase in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards
liability and corresponding rewards expense by approximately $123 million. Similarly, an increase in the WAC per point of
1 basis point would increase the Membership Rewards liability and corresponding rewards expense by approximately $114
million.
GOODWILL RECOVERABILITY
Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and
liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when
events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce
the fair value of the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment
testing contains both a qualitative and quantitative assessment.
67
We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are
not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the
reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that
the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using a more
detailed quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit,
bypassing the qualitative assessment.
Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the
measurement of fair value for our reporting units, which inherently entails the use of significant management judgment.
For valuation, we use a combination of the income approach (discounted cash flows) and market approach (market
multiples) in estimating the fair value of our reporting units.
When preparing discounted cash flow models under the income approach, we estimate future cash flows using the
reporting unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is
appropriate in light of current and expected future economic conditions. To discount these cash flows we use our
expected cost of equity, determined using a capital asset pricing model. When using the market method under the market
approach, we apply comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’
actual results. The judgment in estimating forecasted cash flows, discount rates and market comparables is significant,
and imprecision could materially affect the fair value of our reporting units.
We could be exposed to an increased risk of further goodwill impairment if future operating results or macroeconomic
conditions differ significantly from management’s current assumptions.
IINCOME TAXES
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign
jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts
is sometimes open to interpretation. In establishing a provision for income tax expense, we must make judgments about
the application of inherently complex tax laws.
In particular, the Tax Act is complex and requires interpretation of certain provisions to estimate the impact on our
income tax expense. The estimates are based on our current interpretations of the Tax Act, and may change due to
additional guidance or context from the Internal Revenue Service, the U.S. Treasury Department or others.
Unrecognized Tax Benefits
We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected
to be taken in a tax return and the benefit recognized in the financial statements.
In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the
extent to which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be
sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit
recognized is the largest benefit that we believe is more likely than not to be realized on ultimate settlement. As new
information becomes available, we evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate.
Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such
differences generally impacting the provision for income tax.
Deferred Tax Asset Realization
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases
of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are
expected to reverse.
Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain
estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the
benefit of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of
future taxable income, reversing temporary differences and available tax planning strategies. These assessments are
performed quarterly, taking into account any new information.
Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to
uncertainties.
68
OOTHER MATTERS
RECENTLY ISSUED ACCOUNTING STANDARDS
Refer to the Recently Issued Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”
GLOSSARY OF SELECTED TERMINOLOGY
Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card
Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest
expense and interest income not attributable to our Card Member loans.
Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose
entity created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as
asset-backed securities that are secured by the transferred loans and receivables. The trust uses the proceeds from the
sale of such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and
receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities
issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets.
Average discount rate — This calculation is generally designed to reflect the average pricing at all merchants accepting
American Express cards and represents the percentage of proprietary and GNS billed business retained by us from
merchants we acquire, or from merchants acquired by third parties on our behalf, net of amounts retained by such third
parties. The average discount rate, together with billed business, drive our discount revenue.
Billed business — Represents transaction volumes (including cash advances) on cards and other payment products
issued by American Express (proprietary billed business) and cards issued under network partnership agreements with
banks and other institutions, including joint ventures (GNS billed business). In-store spending activity within GNS retail
cobrand portfolios, from which we earn no revenue, is not included in billed business. Billed business is reported as inside
the United States or outside the United States based on the location of the issuer. Billed business, together with the
average discount rate, drive our discount revenue.
Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine
whether the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual
estimates. Refer to the Capital Strategy section under “Consolidated Capital Resources and Liquidity” for further related
definitions under Basel III.
Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary
cards-in-force) and cards issued and outstanding under network partnership agreements with banks and other
institutions, including joint ventures (GNS cards-in-force), except for GNS retail cobrand cards that had no out-of-store
spending activity during the prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer
accounts. Cards-in-force is useful in understanding the size of our Card Member base.
Card Member — The individual holder of an issued American Express-branded card.
Card Member loans — Represents the outstanding amount due from Card Members for charges made on their American
Express credit cards, as well as any interest charges and card-related fees. Card Member loans also include revolving
balances on certain American Express charge card products.
Card Member receivables — Represents the outstanding amount due from Card Members for charges made on their
American Express charge cards, as well as any card-related fees, other than revolving balances on certain American
Express charge cards with Pay Over Time features. Such revolving balances are included within Card Member loans.
Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method
of payment and not as a means of financing purchases. Charge Card Members generally must pay the full amount billed
each month. No finance charges are assessed on charge cards. Each charge card transaction is authorized based on its
likely economics reflecting a Card Member’s most recent credit information and spend patterns. Some charge cards have
additional Pay Over Time feature(s) that allow revolving of certain charges.
Cobrand cards — Cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand
agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card
Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number
of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand
partner’s own loyalty program.
69
Credit cards — Represents cards that have a range of revolving payment terms, grace periods, and rate and fee
structures.
Discount revenue — Primarily represents revenue earned from fees charged to merchants who have entered into a card
acceptance agreement. The discount fee is generally deducted from our payment for Card Member purchases.
Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate
purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily
relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to
interest expense on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds
purchased, bank overdrafts and other short-term borrowings), as well as the realized impact of derivatives hedging
interest rate risk on our long-term debt.
Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest
income on deposits with banks and other.
Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified
as non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the
applicable account agreement until the outstanding balance is paid or written off.
Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest
income is recognized using the effective interest method, which adjusts the yield for security premiums and discounts,
fees and other payments, so a constant rate of return is recognized on the outstanding balance of the related investment
security throughout its term. Amounts are recognized until securities are in default or when it is likely that future interest
payments will not be made as scheduled.
Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term
funding requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand
and call accounts.
Loyalty Coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a
variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally
fund the consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the
loyalty platform and by providing marketing support.
Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered
card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation
and deferred acquisition costs.
Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net
interest income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to
uncollectible interest are recorded through provision for losses, and are thus not included in the net interest yield
calculation.
Net loss ratio — Represents the ratio of GCP charge card write-offs, consisting of principal (resulting from authorized
transactions) and fee components, less recoveries, on Card Member receivables expressed as a percentage of gross
amounts billed to corporate Card Members.
Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member
loans or receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a
percentage of the average loan or receivable balance during the period.
Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest
and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.
Operating expenses — Represents salaries and employee benefits, professional services, occupancy and equipment, and
other expenses.
Return on average equity — Calculated by dividing one-year period net income by one-year average total shareholders’
equity.
70
CCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, which are subject to risks and uncertainties. The forward-looking statements, which address our current
expectations regarding business and financial performance, among other matters, contain words such as “believe,”
“expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,”
“potential,” “continue” and similar expressions. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or
revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-
looking statements, include, but are not limited to, the following:
• our ability to grow earnings per share in the future, which will depend in part on revenue growth, credit performance
and the effective tax rate remaining consistent with current expectations, the company’s ability to control operating
expense growth and generate operating leverage, and the company’s ability to continue executing its share
repurchase program, any of which could be impacted by, among other things, the factors identified in the subsequent
paragraphs as well as the following: issues impacting brand perceptions and our reputation; the impact of any future
contingencies, including, but not limited to, restructurings, impairments, changes in reserves, legal costs, the
imposition of fines or civil money penalties and increases in Card Member reimbursements; the amount and efficacy
of investments in share, scale and relevance; changes in interest rates beyond current expectations; a greater impact
from new or renegotiated cobrand and other partner agreements than expected, which could be affected by spending
volumes and customer acquisition; and the impact of regulation and litigation, which could affect the profitability of
our business activities, limit our ability to pursue business opportunities, require changes to business practices or
alter our relationships with Card Members, partners, merchants, vendors and other third parties;
• our ability to grow revenues net of interest expense and the composition and relative growth of fee, spend and lend
revenues remaining consistent with expectations, which could be impacted by, among other things, weakening
economic conditions in the United States or internationally; a decline in consumer confidence impacting the
willingness and ability of Card Members to sustain and grow spending, pay higher card fees and revolve balances;
concerns related to the recent coronavirus outbreak and travel restrictions and bans; a slowdown in corporate
spending; growth in Card Member loans and the yield on Card Member loans not remaining consistent with current
expectations; the average discount rate changing by a greater amount than expected; the strengthening of the U.S.
dollar beyond expectations; Card Members continuing to be attracted to our premium card products; and our
inability to address competitive pressures and implement our strategies and business initiatives, including within the
premium consumer segment, commercial payments, the global network and digital environment;
changes in the substantial and increasing worldwide competition in the payments industry, including competitive
pressure that may materially impact the prices we charge merchants that accept American Express cards,
competition for new and existing cobrand relationships, competition from new and non-traditional competitors and
the success of marketing, promotion and rewards programs;
•
• net interest income not growing consistent with current expectations, which will be influenced by, among other
things, changes in benchmark interest rates and our cost of funds, changes in consumer behavior that affect loan
balances (such as paydown rates) and our ability to continue to grow loans, our Card Member acquisition strategy,
pricing changes, product mix and credit actions, including line size and other adjustments to credit availability;
• write-off rates being higher or lower than current expectations, which will depend in part on changes in the level of
loan and receivable balances and delinquencies, macroeconomic factors such as unemployment rates and the
volume of bankruptcies, the mix of balances and the credit performance of newer vintages and non-card lending
products;
•
• our ability to continue to grow loans, which may be affected by increasing competition, brand perceptions and our
reputation, our ability to manage risk, the behavior of Card Members and their actual spending and borrowing
patterns, and our ability to issue new and enhanced card products, offer attractive non-card lending products,
capture a greater share of existing Card Members’ spending and borrowings, reduce Card Member attrition and
attract new customers;
the growth of provisions for losses being higher or lower than current expectations, which will depend in part on
changes in the level of loan and receivable balances and delinquency and write-off rates; the impact of new
accounting guidance and the CECL methodology; collections capabilities and recoveries of previously written-off
loans and receivables; and macroeconomic factors like unemployment rates and the volume of bankruptcies;
the actual amount to be spent on customer engagement, which will be based in part on management’s assessment of
competitive opportunities; overall business performance and changes in macroeconomic conditions; the growth in
the cost of Card Member services, which could be impacted by, among other things, the factors identified in the
subsequent paragraph; Card Member behavior as it relates to their spending patterns (including the level of spend in
bonus categories) and the redemption of rewards and offers; the costs related to reward point redemptions,
advertising and Card Member acquisition; our ability to continue to shift Card Member acquisition to digital channels;
and new and renegotiated contractual obligations with business partners;
•
71
•
the cost of Card Member services not growing consistently with current expectations, which could be impacted by
the degree of interest of Card Members in the value propositions we offer; increasing competition, which could result
in pressure to further enhance card products and services to make them attractive to Card Members, potentially in a
manner that is not cost effective; and the pace and cost of the expansion of our global lounge collection;
• our ability to control operating expense growth and grow operating expenses more slowly than revenues, which could
be impacted by increases in costs, such as cyber, fraud or compliance expenses or consulting, legal and other
professional fees, including as a result of increased litigation or internal and regulatory reviews; higher than expected
employee levels; an inability to innovate efficient channels of customer interactions, such as chat supported by
artificial intelligence, or customer acquisition; the impact of changes in foreign currency exchange rates on costs; the
payment of civil money penalties, disgorgement, restitution, non-income tax assessments and litigation-related
settlements; impairments of goodwill or other assets; management’s decision to increase or decrease spending in
such areas as technology, business and product development, sales force, premium servicing and digital capabilities;
and the level of M&A activity and related expenses;
• our ability to satisfy our commitments to certain of our cobrand partners as part of the ongoing operations of the
business, which will be impacted in part by competition, brand perceptions and our reputation, and our ability to
develop and market value propositions that appeal to current cobrand Card Members and new customers and offer
attractive services and rewards programs, which will depend in part on ongoing investments, new product innovation
and development, Card Member acquisition efforts and enrollment processes, including through digital channels, and
infrastructure to support new products, services and benefits;
changes affecting our plans regarding the return of capital to shareholders through dividends and share repurchases,
which will depend on factors such as our capital levels and regulatory capital ratios and the actual impact of CECL on
those ratios; changes in the stress testing and capital planning process and approval of our capital plans; the amount
of capital required to support asset growth; the amount we spend on acquisitions of companies; and our results of
operations and financial condition; and the economic environment and market conditions in any given period;
•
• our tax rate not remaining consistent with current expectations, which could be impacted by, among other things, our
geographic mix of income, further changes in tax laws and regulation, unfavorable tax audits and other unanticipated
tax items;
a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties,
including as a result of cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of
data, disrupt our operations, reduce the use and acceptance of American Express cards and lead to regulatory
scrutiny, litigation, remediation and response costs, and reputational harm;
•
• our deposit rates increasing faster or slower than current expectations and changes affecting our ability to grow
Personal Savings deposits due to market demand, changes in benchmark interest rates, competition or regulatory
restrictions on our ability to obtain deposit funding or offer competitive interest rates, which could affect our net
interest yield and ability to fund our businesses;
•
•
• our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various
factors such as future business growth, the impact of global economic, political and other events on market capacity,
demand for securities we offer, regulatory changes, ability to securitize and sell receivables and the performance of
receivables previously sold in securitization transactions;
changes in global economic and business conditions, consumer and business spending generally, the availability and
cost of capital, unemployment rates, geopolitical conditions, travel restrictions and bans, including as a result of the
recent coronavirus outbreak, Brexit, prolonged or recurring government shutdowns, trade policies, foreign currency
rates and interest rates, all of which may significantly affect demand for and spending on American Express cards,
delinquency rates, loan and receivable balances and other aspects of our business and results of operations;
changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs,
expectations regarding capital and liquidity ratios, access to capital and cost of capital, including changes in interest
rates; changes in market conditions affecting the valuation of our assets; or any reduction in our credit ratings or
those of our subsidiaries, which could materially increase the cost and other terms of our funding or restrict our
access to the capital markets;
legal and regulatory developments, which could require us to make fundamental changes to many of our business
practices, including our ability to continue certain cobrand and agent relationships in the EU; exert further pressure
on the average discount rate and GNS volumes; result in increased costs related to regulatory oversight, litigation-
related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or civil money
penalties; materially affect our capital or liquidity requirements, results of operations or ability to pay dividends or
repurchase stock; or result in harm to the American Express brand;
changes in the financial condition and creditworthiness of our business partners, such as bankruptcies,
restructurings or consolidations, including merchants that represent a significant portion of our business, such as the
airline industry, or our partners in GNS or financial institutions that we rely on for routine funding and liquidity, which
could materially affect our financial condition or results of operations; and
•
•
72
•
factors beyond our control such as fire, power loss, disruptions in telecommunications, severe weather conditions,
natural and man-made disasters, health pandemics or terrorism, any of which could significantly affect demand for
and spending on American Express cards, delinquency rates, loan and receivable balances and other aspects of our
business and results of operations or disrupt our global network systems and ability to process transactions.
A further description of these uncertainties and other risks can be found in “Risk Factors” above and our other reports filed
with the SEC.
73
IITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Refer to “Risk Management” under “MD&A” for quantitative and qualitative disclosures about market risk.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America (GAAP), and includes those policies and
procedures that:
•
•
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and
dispositions of assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In
making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control —Integrated Framework (2013).
Based on management’s assessment and those criteria, we conclude that, as of December 31, 2019, our internal control
over financial reporting is effective.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has issued an audit report appearing on
the following page on the effectiveness of our internal control over financial reporting as of December 31, 2019.
74
RREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF AMERICAN EXPRESS COMPANY
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of American Express Company and its subsidiaries (the
“Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive
income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express opinions on the Company’s consolidated financial statements and on the Company’s internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
75
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
CCritical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i) relate
to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Membership Rewards Liability - Ultimate Redemption Rate
As described in Note 9 to the consolidated financial statements, the Membership Rewards liability represents
management’s estimate of the cost of Membership Rewards points earned that are expected to be redeemed in the
future. The Membership Rewards liability was $8.9 billion as of December 31, 2019. The weighted average cost per point
and the ultimate redemption rate (URR) are key assumptions used to estimate the liability. The URR assumption is used
by management to estimate the number of points earned that will ultimately be redeemed in future periods. Management
uses statistical and actuarial models to estimate the URR based on redemption trends, card product type, enrollment
tenure, card spend levels and credit attributes.
The principal considerations for our determination that performing procedures relating to the URR for the Membership
Rewards liability is a critical audit matter are (i) the estimate of the URR involved significant judgment by management,
which in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating
results relating to the models, significant inputs and assumptions used by management; and (ii) the audit effort involved
the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the estimate of the Membership Rewards liability, including the URR assumption. These procedures also
included, among others, (i) testing the completeness and accuracy of certain inputs to the statistical and actuarial models
used to estimate the URR assumption, including redemption trends, card product type, enrollment tenure, and card
spend levels, (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an
independent estimate of the URR assumption and comparing the independent estimate to management’s assumption to
evaluate its reasonableness, and (iii) comparing the independent estimate of the Membership Rewards liability to
management’s estimate.
Reserves for Losses on Card Member Loans - Qualitative Reserve Component
As described in Note 3 to the consolidated financial statements, reserves for losses on Card Member loans represent
management’s estimate of the probable inherent losses in the Company’s outstanding portfolio of loans, as of the
balance sheet date. Reserves for losses are primarily based upon statistical and analytical models that analyze portfolio
performance and reflect management’s judgments regarding the quantitative components of the reserve. These models
take into account several factors, including delinquency-based loss migration rates, loss emergence periods and average
losses and recoveries over an appropriate historical period. Management considers whether to adjust the quantitative
reserves for certain external and internal qualitative factors, which may increase or decrease the reserves for losses on
Card Member loans (the “qualitative reserve component”). These external factors include employment, spend, sentiment,
housing and credit, and changes in the legal and regulatory environment, while the internal factors include increased risk
in certain portfolios, impact of risk management initiatives, changes in underwriting requirements and overall process
stability. The qualitative reserve component represents a portion of the total reserves for losses on Card Member loans of
$2.4 billion as of December 31, 2019.
The principal considerations for our determination that performing procedures relating to the qualitative reserve
component of the reserves for losses on Card Member loans is a critical audit matter are (i) there was significant
judgment required by management in estimating the qualitative reserve component, including determination of
underlying factors, which led to a high degree of auditor judgment and subjectivity in performing procedures relating to
the methodology and the underlying factors; and (ii) the audit effort involved the use of professionals with specialized skill
and knowledge.
76
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the reserves for losses on Card Member loans, including the qualitative reserve component. These procedures
also included, among others, testing management’s process for determining the qualitative reserve component of the
reserves for losses on Card Member loans through (i) the involvement of professionals with specialized skill and
knowledge to evaluate the appropriateness of management’s methodology for estimating the qualitative reserve
component, including evaluating whether certain factors are reasonable given the current macroeconomic conditions and
portfolio characteristics and (ii) testing the completeness and accuracy of specific data inputs and evaluating the
reasonableness of specific assumptions related to certain external factors applied by management in estimating the
qualitative reserve component.
New York, New York
February 13, 2020
We have served as the Company’s auditor since 2005.
77
IINDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Consolidated Statements of Income – For the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income – For the Years Ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets – December 31, 2019 and 2018
Consolidated Statements of Cash Flows – For the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Shareholders’ Equity – For the Years Ended December 31, 2019, 2018 and 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies
Note 2 – Loans and Accounts Receivable
Note 3 – Reserves for Losses
Note 4 – Investment Securities
Note 5 – Asset Securitizations
Note 6 – Other Assets
Note 7 – Customer Deposits
Note 8 – Debt
Note 9 – Other Liabilities
Note 10 – Stock Plans
Note 11 – Retirement Plans
Note 12 – Contingencies and Commitments
Note 13 – Derivatives and Hedging Activities
Note 14 – Fair Values
Note 15 – Guarantees
Note 16 – Common and Preferred Shares
Note 17 – Changes in Accumulated Other Comprehensive Income
Note 18 – Other Fees and Commissions and Other Expenses
Note 19 – Restructuring
Note 20 – Income Taxes
Note 21 – Earnings Per Common Share
Note 22 – Regulatory Matters and Capital Adequacy
Note 23 – Significant Credit Concentrations
Note 24 – Reportable Operating Segments and Geographic Operations
Note 25 – Parent Company
Note 26 – Quarterly Financial Data (Unaudited)
78
79
80
81
82
83
84
89
95
97
99
99
101
102
104
105
107
108
110
113
117
117
119
120
120
121
124
125
127
128
131
132
CCONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 (Millions, except per share amounts)
Revenues
Non-interest revenues
Discount revenue
Net card fees
Other fees and commissions
Other
Total non-interest revenues
Interest income
Interest on loans
Interest and dividends on investment securities
Deposits with banks and other
Total interest income
Interest expense
Deposits
Long-term debt and other
Total interest expense
Net interest income
Total revenues net of interest expense
Provisions for losses
Charge card
Card Member loans
Other
Total provisions for losses
Total revenues net of interest expense after provisions for losses
Expenses
Marketing and business development
Card Member rewards
Card Member services
Salaries and employee benefits
Other, net
Total expenses
Pretax income
Income tax provision
Net income
Earnings per Common Share —— ((Note 21)(a)
Basic
Diluted
Average common shares outstanding for earnings per common share:
Basic
Diluted
$
$
$
2019
2018
2017
$
26,167 $
4,042
3,297
1,430
34,936
24,721 $
3,441
3,153
1,360
32,675
22,890
3,090
2,990
1,457
30,427
8,148
89
326
8,563
779
1,333
2,112
6,451
36,878
795
1,868
97
2,760
34,118
5,722
8,687
1,392
5,258
5,634
26,693
7,425
4,677
2,748
3.00
2.99
883
886
11,308
188
588
12,084
1,559
1,905
3,464
8,620
43,556
963
2,462
148
3,573
39,983
7,114
10,4439
2,222
5,911
5,868
31,554
8,429
1,670
6,759 $
8.00 $
7.99 $
828
830
9,941
118
547
10,606
1,287
1,656
2,943
7,663
40,338
937
2,266
149
3,352
36,986
6,470
9,696
1,777
5,250
5,671
28,864
8,122
1,201
6,921 $
7.93 $
7.91 $
856
859
(a) Represents net income less (i) earnings allocated to participating share awards of $47 million, $54 million and $21 million for the
years ended December 31, 2019, 2018 and 2017, respectively, and (ii) dividends on preferred shares of $81 million, $80 million and
$81 million for the years ended December 31, 2019, 2018 and 2017, respectively.
See Notes to Consolidated Financial Statements.
79
CCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31 (Millions)
Net income
Other comprehensive (loss) income:
Net unrealized securities gains (losses), net of tax
Foreign currency translation adjustments, net of tax
Net unrealized pension and other postretirement benefits, net of tax
Other comprehensive (loss) income
Comprehensive income
2019
6,759 $
41
(56)
(125)
(140)
6,619 $
$
$
2018
6,921 $
(8)
(172)
11
(169)
6,752 $
2017
2,748
(7)
301
62
356
3,104
See Notes to Consolidated Financial Statements.
80
CCONSOLIDATED BALANCE SHEETS
December 31 (Millions, except share data)
Assets
Cash and cash equivalents
Cash and due from banks
Interest-bearing deposits in other banks (includes securities purchased under resale
agreements: 2019, $87; 2018, $64)
Short-term investment securities
Total cash and cash equivalents
Card Member receivables (includes gross receivables available to settle obligations of a
consolidated variable interest entity: 2019, $8,284; 2018, $8,539), less reserves: 2019, $619;
2018, $573
Card Member loans (includes gross loans available to settle obligations of a consolidated variable
interest entity: 2019, $32,230; 2018, $33,194), less reserves: 2019, $2,383; 2018, $2,134
Other loans, less reserves: 2019, $152; 2018, $124
Investment securities
Premises and equipment, less accumulated depreciation and amortization: 2019, $6,562; 2018,
$6,015
Other assets (includes restricted cash of consolidated variable interest entities: 2019, $85; 2018,
$70)
Total assets
Liabilities and Shareholders’ Equity
Liabilities
Customer deposits
Accounts payable
Short-term borrowings
Long-term debt (includes debt issued by consolidated variable interest entities: 2019, $19,668;
2018, $19,509)
Other liabilities
Total liabilities
Contingencies and Commitments (Note 12)
Shareholders’ Equity
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600
shares as of December 31, 2019 and 2018 (Note 16)
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 810
million shares as of December 31, 2019 and 847 million shares as of December 31, 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Net unrealized debt securities gains (losses), net of tax of: 2019, $11; 2018, $(1)
Foreign currency translation adjustments, net of tax of: 2019, $(319); 2018, $(300)
Net unrealized pension and other postretirement benefits, net of tax of: 2019, $(208); 2018,
$(170)
Total accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
2019
2018
$
3,402 $
20,392
138
23,932
56,794
84,998
4,626
8,4006
4,834
14,731
198,321 $
73,287 $
12,738
6,442
57,835
24,948
175,250 $
—
163
11,774
13,871
33
(2,189)
(581)
(2,737)
23,071
198,321 $
$
$
$
$
3,253
24,026
166
27,445
55,320
79,720
3,676
4,647
4,416
13,378
188,602
69,960
12,255
3,100
58,423
22,574
166,312
—
170
12,218
12,499
(8)
(2,133)
(456)
(2,597)
22,290
188,602
See Notes to Consolidated Financial Statements.
81
CCONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 (Millions)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for losses
Depreciation and amortization
Deferred taxes and other
Stock-based compensation
$
Changes in operating assets and liabilities, net of effects of acquisitions and
dispositions:
Other assets
Accounts payable & other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Sale of available-for-sale investment securities
Maturities and redemptions of investment securities
Purchase of investments
Net increase in Card Member loans and receivables, and other loans
Purchase of premises and equipment, net of sales: 2019, $43; 2018, $1; 2017, $1
Acquisitions/dispositions, net of cash acquired
Other investing activities
Net cash used in investing activities
Cash Flows from Financing Activities
Net increase in customer deposits
Net increase (decrease) in short-term borrowings
Proceeds from long-term debt
Payments of long-term debt
Issuance of American Express common shares
Repurchase of American Express common shares and other
Dividends paid
Net cash (used in) provided by financing activities
Effect of foreign currency exchange rates on cash, cash equivalents and restricted
cash
Net (decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental cash flow information
Cash, cash equivalents and restricted cash reconciliation
Cash and cash equivalents per Consolidated Balance Sheets
Restricted cash included in Other assets per Consolidated Balance Sheets
Total cash, cash equivalents and restricted cash
$
$
$
2019
2018
2017
6,759 $
6,921 $
2,748
3,573
1,188
426
283
(368)
1,771
13,632
22
7,329
(11,166)
(11,047)
(1,645)
(352)
152
(16,707)
3,330
3,316
12,706
(13,850)
86
(4,685)
(1,422)
(519)
3,352
1,293
455
283
991
(4,365)
8,930
4
3,499
(5,434)
(15,854)
(1,310)
(520)
—
(19,615)
5,542
(148)
21,524
(18,895)
87
(1,685)
(1,324)
5,101
232
(3,362)
27,808
24,446 $
129
(5,455)
33,263
27,808 $
2,760
1,321
782
282
398
5,249
13,540
2
2,494
(2,612)
(16,853)
(1,062)
(211)
—
(18,242)
11,385
(2,300)
32,764
(24,082)
129
(4,400)
(1,251)
12,245
226
7,769
25,494
33,263
Dec--19
23,932 $
514
24,446 $
Dec-18
27,445 $
363
27,808 $
Dec-17
32,927
336
33,263
See Notes to Consolidated Financial Statements.
82
CCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Millions, except per share amounts)
Balances as of December 31, 2016
Net income
Other comprehensive income
Repurchase of common shares
Other changes, primarily employee plans
Cash dividends declared preferred Series B,
$52.00 per share
Cash dividends declared preferred Series C,
$49.00 per share
Cash dividends declared common, $1.34 per
share
Balances as of December 31, 2017
Net income
Other comprehensive loss
Repurchase of common shares
Other changes, primarily employee plans
Cash dividends declared preferred Series B,
$52.00 per share
Cash dividends declared preferred Series C,
$49.00 per share
Cash dividends declared common, $1.48 per
share
Balances as of December 31, 2018
Net income
Other comprehensive loss
Repurchase of common shares
Other changes, primarily employee plans
Cash dividends declared preferred Series B,
$52.00 per share
Cash dividends declared preferred Series C,
$49.00 per share
Cash dividends declared common, $1.64 per
share
Balances as of December 31, 2019
Total
Preferred
Shares
Common
Shares
Additional
Paid-in
Capital
$ 20,523 $
2,748
356
(4,314)
212
(39)
— $
—
—
—
—
—
181 $ 12,733 $
—
—
(10)
1
—
—
—
(742)
219
—
(42)
(1,183)
18,261
6,921
(169)
(1,570)
200
(39)
(41)
(1,273)
22,290
6,759
(140)
(4,585)
186
(39)
(42)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
172
—
—
(3)
1
—
—
—
170
—
—
(8)
1
—
—
—
—
12,210
—
—
(216)
224
—
—
—
12,218
—
—
(671)
227
—
—
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
(2,784) $ 10,393
2,748
—
(3,562)
(8)
—
356
—
—
—
(39)
(42)
(1,183)
8,307
6,921
—
(1,351)
(25)
(39)
(41)
(1,273)
12,499
6,759
—
(3,906)
(42)
(39)
(42)
—
—
(2,428)
—
(169)
—
—
—
—
—
(2,597)
—
(140)
—
—
—
—
(1,358)
$ 23,071 $
—
— $
—
163 $ 11,774 $
—
—
(1,358)
(2,737) $ 13,871
See Notes to Consolidated Financial Statements.
83
NNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
We are a globally integrated payments company that provides our customers with access to products, insights and
experiences that enrich lives and build business success. Our principal products and services are credit and charge card
products, along with travel and lifestyle 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. 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, affiliate marketing, customer referral programs, third-party vendors
and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.
Effective for the first quarter of 2019, we moved intercompany assets and liabilities, previously recorded in the operating
segments, to Corporate & Other. Prior period amounts have been revised to conform to the current period presentation.
Refer to Note 24 for additional discussion of the products and services that comprise each segment. Corporate functions
and certain other businesses and operations are included in Corporate & Other.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the
United States of America (GAAP). Significant intercompany transactions are eliminated.
We consolidate entities in which we hold a “controlling financial interest.” For voting interest entities, we are considered to
hold a controlling financial interest when we are able to exercise control over the investees’ operating and financial
decisions. For variable interest entities (VIEs), the determination of which is based on the amount and characteristics of
the entity’s equity, we are considered to hold a controlling financial interest when we are determined to be the primary
beneficiary. A primary beneficiary is the party that has both: (1) the power to direct the activities that most significantly
impact that VIE’s economic performance, and (2) the obligation to absorb the losses of, or the right to receive the benefits
from, the VIE that could potentially be significant to that VIE.
Entities in which our voting interest in common equity does not provide it with control, but allows us to exert significant
influence over operating and financial decisions, are accounted for under the equity method. We also have investments in
equity securities where our voting interest is below the level of significant influence, including investments that we make
in non-public companies in the ordinary course of business. Such investments are initially recorded at cost and adjusted
to fair value through earnings for observable price changes in orderly transactions for identical or similar transactions of
the same company or if they are determined to be impaired. See Note 4 for the accounting policy for our marketable
equity securities.
FOREIGN CURRENCY
Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange
rates prevailing at the end of the reporting period; non-monetary assets and liabilities are translated at the historic
exchange rate at the date of the transaction; revenues and expenses are translated at the average month-end exchange
rates during the year. Resulting translation adjustments, along with any related qualifying hedge and tax effects, are
included in accumulated other comprehensive income (loss) (AOCI), a component of shareholders’ equity. Translation
adjustments, including qualifying hedge and tax effects, are reclassified to earnings upon the sale or substantial
liquidation of investments in foreign operations. Gains and losses related to transactions in a currency other than the
functional currency are reported in Other, net expenses in the Consolidated Statements of Income.
AMOUNTS BASED ON ESTIMATES AND ASSUMPTIONS
Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part,
on management’s assumptions concerning future events. Among the more significant assumptions are those that relate
84
to reserves for Card Member losses on loans and receivables, Membership Rewards liability, goodwill and income taxes.
These accounting estimates reflect the best judgment of management, but actual results could differ.
IINCOME STATEMENT
Discount Revenue
Discount revenue primarily represents the amount we earn on transactions occurring at merchants that have entered into
a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant
acquirer, for facilitating transactions between the merchants and Card Members. The amount of fees charged for
accepting our cards as payment for goods or services, or merchant discount, varies with, among other factors, the
industry in which the merchant conducts business, the merchant’s overall American Express-related transaction volume,
the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in
certain instances, the geographic scope of the card acceptance agreement between the merchant and us (e.g., local or
global) and the transaction amount. The merchant discount is generally deducted from the payment to the merchant and
recorded as discount revenue at the time the Card Member transaction occurs.
The card acceptance agreements, which include the agreed-upon terms for charging the merchant discount fee, vary in
duration. Our contracts with small- and medium-sized merchants generally have no fixed contractual duration, while
those with large merchants are generally for fixed periods, which typically range from three to seven years in duration.
Our fixed-period agreements may include auto-renewal features, which may allow the existing terms to continue beyond
the stated expiration date until a new agreement is reached. We satisfy our obligations under these agreements over the
contract term, often on a daily basis, including through the processing of Card Member transactions and the availability of
our payment network.
In cases where the merchant acquirer is a third party (which is the case, for example, under our OptBlue program, or with
certain of our GNS partners), we receive a network rate fee in our settlement with the merchant acquirer, which is
individually negotiated between us and that merchant acquirer and is recorded as discount revenue at the time the Card
Member transaction occurs. In our role as the operator of the American Express network, we also settle with merchants
on behalf of our GNS card issuing partners, who in turn receive an issuer rate that is individually negotiated between that
issuer and us and is recorded as expense in Marketing and business development (see below) or as contra-revenue in
Other revenue.
Revenue expected to be recognized in future periods related to contracts that have an original expected duration of one
year or less and contracts with variable consideration (e.g. discount revenue) is not required to be disclosed. Non-interest
revenue expected to be recognized in future periods through remaining contracts with customers is not material.
Net Card Fees
Net card fees represent revenue earned from annual card membership fees, which vary based on the type of card and the
number of cards for each account. These fees, net of acquisition costs and a reserve for projected refunds for Card
Member cancellations, are deferred and recognized on a straight-line basis over the twelve-month card membership
period as Net card fees in the Consolidated Statements of Income. The unamortized net card fee balance is reported in
Other liabilities on the Consolidated Balance Sheets (refer to Note 9).
Other Fees and Commissions
Other fees and commissions includes certain fees charged to Card Members, including delinquency fees and foreign
currency conversion fees, which are primarily recognized in the period in which they are charged to the Card Member.
Other fees and commissions also includes Membership Rewards program fees, which are deferred and recognized over
the period covered by the fee, typically one year, the unamortized portion of which is included in Other liabilities on the
Consolidated Balance Sheets. In addition, Other fees and commissions includes loyalty coalition-related fees, travel
commissions and fees and service fees earned from merchants, that are recognized when the service is performed, which
is generally in the period the fee is charged. Refer to Note 18 for additional information.
Contra-revenue
Payments made pursuant to contractual arrangements with our merchants, GNS partners, and other customers are
classified as contra-revenue, except where we receive goods, services or other benefits for which the fair value is
determinable and measurable, in which case they are recorded as expense.
85
IInterest Income
Interest on Card Member loans is assessed using the average daily balance method. Unless the loan is classified as non-
accrual, interest is recognized based upon the principal amount outstanding, in accordance with the terms of the
applicable account agreement, until the outstanding balance is paid, or written off.
Interest and dividends on investment securities primarily relate to our performing fixed-income securities. Interest
income is recognized as earned using the effective interest method, which adjusts the yield for security premiums and
discounts, fees and other payments, so that a constant rate of return is recognized on the investment security’s
outstanding balance. Amounts are recognized until securities are in default or when it becomes likely that future interest
payments will not be made as scheduled.
Interest on deposits with banks and other is recognized as earned, and primarily relates to the placement of cash, in
excess of near-term funding requirements, in interest-bearing time deposits, overnight sweep accounts, and other
interest-bearing demand and call accounts.
Interest Expense
Interest expense includes interest incurred primarily to fund Card Member loans and receivables, general corporate
purposes and liquidity needs, and is recognized as incurred. Interest expense is divided principally into two categories:
(i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt,
which primarily relates to interest expense on our long-term debt and short-term borrowings, as well as the realized
impact of derivatives used to hedge interest rate risk on our long-term debt.
Marketing and Business Development
Marketing and business development expense includes costs incurred in the development and initial placement of
advertising, which are expensed in the year in which the advertising first takes place. Also included in Marketing and
business development expense are payments to our cobrand partners, Card Member statement credits for qualifying
charges on eligible card accounts, corporate incentive payments earned on achievement of pre-set targets, and certain
payments to GNS card issuing partners. These costs are generally expensed as incurred.
Card Member Rewards
We issue charge and credit cards that allow Card Members to participate in various rewards programs (e.g., Membership
Rewards, cobrand and cash back). Rewards expense is recognized in the period Card Members earn rewards, generally by
spending on their enrolled card products. We record a Card Member rewards liability that represents the estimated cost
of points earned that are expected to be redeemed. Pursuant to cobrand agreements, we make payments to our cobrand
partners based primarily on the amount of Card Member spending and corresponding rewards earned on such spending
and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for
providing rewards to the Card Member under the cobrand partner’s own loyalty program. Card Member rewards liabilities
are impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated
redemption costs. Changes in the Card Member rewards liabilities during the period are taken as an increase or decrease
to the Card Member rewards expense in the Consolidated Statement of Income.
BALANCE SHEET
Cash and Cash Equivalents
Cash and cash equivalents include cash and amounts due from banks, interest-bearing bank balances, including
securities purchased under resale agreements, and other highly liquid investments with original maturities of 90 days or
less.
Goodwill
Goodwill represents the excess of the acquisition cost of an acquired business over the fair value of assets acquired and
liabilities assumed. We allocate goodwill to our reporting units for the purpose of impairment testing. A reporting unit is
defined as an operating segment, or a business that is one level below an operating segment, for which discrete financial
information is regularly reviewed by the operating segment manager.
86
We evaluate goodwill for impairment annually as of June 30, or more frequently if events occur or circumstances change
that would more likely than not reduce the fair value of one or more of our reporting units below its carrying value. Prior to
completing the assessment of goodwill for impairment, we also perform a recoverability test of certain long-lived assets.
We have the option to perform a qualitative assessment of goodwill impairment to determine whether it is more likely
than not that the fair value of a reporting unit is less than its carrying value. Alternatively, we can perform a more detailed
quantitative assessment of goodwill impairment.
This qualitative assessment entails the evaluation of factors such as economic conditions, industry and market
considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-
specific events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, we then perform the impairment evaluation using the quantitative assessment.
Under the quantitative assessment, the first step identifies whether there is a potential impairment by comparing the fair
value of a reporting unit to the carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds the
fair value, then a test is performed to determine the implied fair value of goodwill. An impairment loss is recognized based
on the amount that the carrying amount of goodwill exceeds the implied fair value.
When measuring the fair value of our reporting units in the quantitative assessment, we use widely accepted valuation
techniques, applying a combination of the income approach (discounted cash flows) and market approach (market
multiples). When preparing discounted cash flow models under the income approach, we use internal forecasts to
estimate future cash flows expected to be generated by the reporting units. To discount these cash flows, we use the
expected cost of equity, determined by using a capital asset pricing model. We believe the discount rates used
appropriately reflect the risks and uncertainties in the financial markets generally and specifically in our internally-
developed forecasts. When using market multiples under the market approach, we apply comparable publicly traded
companies’ multiples (e.g., earnings or revenues) to our reporting units’ actual results.
For the years ended December 31, 2019 and 2018, we performed a qualitative assessment in connection with our annual
goodwill impairment evaluation and determined that it was more likely than not that the fair values of each of our
reporting units exceeded their carrying values.
PPremises and Equipment
Premises and equipment, including leasehold improvements, are carried at cost less accumulated depreciation. Costs
incurred during construction are capitalized and are depreciated once an asset is placed in service. Depreciation is
generally computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 10
years for equipment, furniture and building improvements, and from 40 to 50 years for premises, which are depreciated
based upon their estimated useful life at the acquisition date.
Certain costs associated with the acquisition or development of internal-use software are also capitalized and recorded in
Premises and equipment. Once the software is ready for its intended use, these costs are amortized on a straight-line
basis over the software’s estimated useful life, generally 5 years. We review these assets for impairment using the same
impairment methodology used for our intangible assets.
Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining term of the
leased facility, or the economic life of the improvement, and range from 5 to 10 years. We recognize lease restoration
obligations at the fair value of the restoration liabilities when incurred and amortize the restoration assets over the lease
term.
Leases
On January 1, 2019, we adopted the new accounting guidance on leases using the modified retrospective method. We
elected the package of practical expedients and transition provisions allowing us to bring our existing operating leases
onto the Consolidated Balance Sheet on January 1, 2019 without adjusting comparative periods. The adoption of the new
lease guidance did not have a material impact on our financial position, results of operations and cash flows.
We have operating leases worldwide for facilities and equipment, which, for those leases with terms greater than 12
months, are recorded as lease-related assets and liabilities. We do not separate lease and non-lease components. Lease-
related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the
respective lease liabilities, adjusted for prepaid lease payments, initial direct costs and lease incentives. Lease liabilities
are recognized at the present value of the contractual fixed lease payments, discounted using our incremental borrowing
rate as of the lease commencement date or upon modification of the lease. Operating lease expense is recognized on a
straight-line basis over the lease term, while variable lease payments are expensed as incurred.
87
OOTHER SIGNIFICANT ACCOUNTING POLICIES
The following table identifies our other significant accounting policies, along with the related Note.
Significant Accounting Policy
Note
Number
Note Title
Loans and Accounts Receivable
Note 2
Loans and Accounts Receivable
Reserves for Losses
Investment Securities
Asset Securitizations
Legal Contingencies
Note 3
Reserves for Losses
Note 4
Investment Securities
Note 5
Asset Securitizations
Note 12
Contingencies and Commitments
Derivative Financial Instruments and Hedging Activities
Note 13
Derivatives and Hedging Activities
Fair Value Measurements
Guarantees
Income Taxes
CLASSIFICATION OF VARIOUS ITEMS
Note 14
Fair Values
Note 15
Guarantees
Note 20
Income Taxes
Certain reclassifications of prior period amounts have been made to conform to the current period presentation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance for the recognition of
credit losses on certain financial instruments. The guidance, as amended and effective January 1, 2020, introduces a new
credit reserving methodology known as the Current Expected Credit Loss (CECL) approach, which differs significantly
from the incurred loss approach used through December 31, 2019 and alters the estimation process, inputs and
assumptions used in estimating credit losses. The CECL methodology requires measurement of expected credit losses
for the estimated life of the financial instrument, not only based on historical experience and current conditions, but also
by including reasonable and supportable forecasts incorporating forward-looking information. Our approach incorporates
separate reasonable and supportable periods for loans and receivables and uses a weighted average of multiple future
economic scenarios. Additionally, the guidance requires a modified retrospective transition, which records the difference
between the reserves measured using the CECL methodology and the reserves using the incurred loss approach, tax
effected, as a cumulative effect adjustment upon adoption through retained earnings. As a result, our financial position,
results of operations and regulatory risk-based capital for periods prior to January 1, 2020 will not be restated.
We currently estimate an increase to total loan reserves of approximately $1.7 billion and a decrease to total receivable
reserves of approximately $0.5 billion, along with the associated current and deferred tax impact of approximately $0.3
billion, and an offset to the opening balance of retained earnings, net of tax, of approximately $0.9 billion as of January 1,
2020. Our cross-functional implementation team is finalizing our operational processes, controls and governance.
In addition, for available-for-sale debt securities, the new guidance replaces the other-than-temporary impairment model
and requires the recognition of an allowance for reductions in a security’s fair value attributable to declines in credit
quality, instead of a direct write-down of the security, when a valuation decline is determined to be other-than-temporary.
We have completed our evaluation of the new guidance for our available-for-sale debt securities and, while there was no
impact of the new guidance on adoption, we have updated our processes to evaluate and measure potential future credit
losses.
88
NNOTE 2
LOANS AND ACCOUNTS RECEIVABLE
Our lending and charge payment card products result in the generation of Card Member loans and Card Member
receivables.
CARD MEMBER AND OTHER LOANS
Card Member loans are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and
represent revolving amounts due on lending card products, as well as amounts due from charge Card Members who
utilize the Pay Over Time features on their account and revolve a portion of the outstanding balance by entering into a
revolving payment arrangement with us. These loans have a range of terms such as credit limits, interest rates, fees and
payment structures, which can be revised over time based on new information about Card Members, and in accordance
with applicable regulations and the respective product’s terms and conditions. Card Members holding revolving loans are
typically required to make monthly payments based on pre-established amounts and the amounts that Card Members
choose to revolve are subject to finance charges. Card Member loans are presented on the Consolidated Balance Sheets
net of reserves for losses (refer to Note 3), and include principal and any related accrued interest and fees. Our policy
generally is to cease accruing interest on a Card Member loan at the time the account is written off, and establish
reserves for interest that we believe will not be collected.
Other loans are recorded at the time any extension of credit is provided to consumer and commercial customers for non-
card financing products. These loans have a range of fixed terms such as interest rates, fees and repayment periods.
Borrowers are typically required to make pre-established monthly payments over the term of the loan. Non-card financing
products are not associated with a Card Member agreement, and instead are governed by a separate borrowing
relationship. Other loans are presented on the Consolidated Balance Sheets net of reserves for losses, and include
principal and any related accrued interest and fees.
Card Member loans by segment and Other loans as of December 31, 2019 and 2018 consisted of:
(Millions)
Global Consumer Services Group(a)
Global Commercial Services
Card Member loans
Less: Reserve for losses
Card Member loans, net
Other loans, net(b)
2019
73,266 $
14,115
87,381
2,383
84,998 $
4,626 $
$
$
$
2018
69,458
12,396
81,854
2,134
79,720
3,676
(a)
Includes approximately $32.2 billion and $33.2 billion of gross Card Member loans available to settle obligations of a consolidated
VIE as of December 31, 2019 and 2018, respectively.
(b) Other loans primarily represent consumer and commercial non-card financing products. Other loans are presented net of reserves
for losses of $152 million and $124 million as of December 31, 2019 and 2018, respectively.
CARD MEMBER RECEIVABLES
Card Member receivables are also recorded at the time a Card Member enters into a point-of-sale transaction with a
merchant and represent amounts due on charge card products. Each charge card transaction is authorized based on its
likely economics, a Card Member’s most recent credit information and spend patterns.
Charge Card Members generally must pay the full amount billed each month. Card Member receivable balances are
presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 3), and include principal and any
related accrued fees.
89
Card Member receivables by segment as of December 31, 2019 and 2018 consisted of:
(Millions)
Global Consumer Services Group (a)
Global Commercial Services
Card Member receivables
Less: Reserve for losses
Card Member receivables, net
22019
222,844 $
334,569
557,413
6619
556,794 $
2018
21,455
34,438
55,893
573
55,320
$$
$$
(a)
Includes $8.3 billion and $8.5 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of
December 31, 2019 and 2018, respectively.
CCARD MEMBER LOANS AND CARD MEMBER RECEIVABLES AGING
Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing
statement date. The following table presents the aging of Card Member loans and receivables as of December 31, 2019
and 2018:
2019 (millions)
Card Member Loans:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
Cardd Member Receivables:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
2018 (millions)
Card Memmber Loans:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
Cardd Member Receivables:
Global Consumer Services Group
Global Commercial Services
Global Small Business Services
Global Corporate Payments(a)
Current
30-59
Days Past Due
60-89
Days Past Due
90+
Days Past
Due
Total
$
72,101 $
322 $
253 $
590 $
73,266
13,898
(b)
22,560
56
(b)
86
40
(b)
58
85
—
140
$
17,113 $
(b)
99 $
(b)
58 $
(b) $
134 $
136 $
14,079
36
22,844
17,404
17,165
Current
30-59
Days Past Due
60-89
Days Past Due
90+
Days Past
Due
Total
$
68,442 $
290 $
220 $
506 $
69,458
12,195
(b)
21,207
51
(b)
80
32
(b)
50
73
—
118
$
16,460 $
(b)
101 $
(b)
53 $
(b) $
114 $
129 $
12,351
45
21,455
16,728
17,710
(a) Delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90
days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we
initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan or
receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation
purposes. See also (b).
(b) Delinquency data for periods other than 90+ days past billing is not available due to system constraints. Therefore, such data has
not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference
between the Total and the 90+ Days Past Due balances.
90
CCREDIT QUALITY INDICATORS FOR CARD MEMBER LOANS AND RECEIVABLES
The following tables present the key credit quality indicators as of or for the years ended December 31:
2019
Net Write-Off Rate
2018
Net Write-Off Rate
Card Member Loans:
Global Consumer Services Group
Global Small Business Services
Card Member Receivables:
Global Consumer Services Group
Global Small Business Services
Principal
Only(a)
Principal,
Interest, &
Fees(a)
2.3 %
1.9 %
1.7 %
1.9 %
2.8 %
2.2 %
1.9 %
2.1 %
30+
Days Past
Due
as a % of
Total
1.6 %
1.3 %
1.2 %
1.7 %
30+
Days Past
Due
as a % of
Total
1.5 %
1.3 %
1.2 %
1.6 %
Principal
Only(a)
Principal,
Interest, &
Fees(a)
2.1 %
1.7 %
1.6 %
1.7 %
2.5 %
2.0 %
1.8 %
2.0 %
2018
2019
Net Loss Ratio as
a % of Charge
Volume
90+ Days Past
Billing as a %
of Receivables
Net Loss Ratio
as a % of
Charge Volume
90+ Days Past
Billing as a %
of Receivables
Card Member Receivables:
Global Corporate Payments
0.08 %
0.8 %
0.11 %
0.7 %
(a) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry
convention. In addition, because we consider uncollectible interest and/or fees in estimating our reserves for credit losses, a net
write-off rate including principal, interest and/or fees is also presented.
Refer to Note 3 for additional indicators, including external environmental qualitative factors, management considers in
its monthly evaluation process for reserves for losses.
IMPAIRED CARD MEMBER LOANS AND RECEIVABLES
Impaired Card Member loans and receivables are individual larger balance or homogeneous pools of smaller balance
loans and receivables for which it is probable that we will be unable to collect all amounts due according to the original
contractual terms of the Card Member agreement. We consider impaired loans and receivables to include: (i) loans over
90 days past due still accruing interest, (ii) nonaccrual loans and (iii) loans and receivables modified as troubled debt
restructurings (TDRs).
In instances where the Card Member is experiencing financial difficulty, we may modify, through various programs, Card
Member loans and receivables in order to minimize losses and improve collectability, while providing Card Members with
temporary or permanent financial relief. We have classified Card Member loans and receivables in these modification
programs as TDRs and continue to classify Card Member accounts that have exited a modification program as a TDR,
with such accounts identified as “Out of Program TDRs.”
Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (possibly as low
as zero percent, in which case the loan is characterized as non-accrual in our TDR disclosures), (ii) placing the Card
Member on a fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the Card Member
exits the modification program. Upon entering the modification program, the Card Member’s ability to make future
purchases is either canceled, or in certain cases suspended until the Card Member successfully exits the modification
program. In accordance with the modification agreement with the Card Member, loans may revert back to the original
contractual terms (including the contractual interest rate) when the Card Member exits the modification program, which
is (i) when all payments have been made in accordance with the modification agreement or, (ii) when the Card Member
defaults out of the modification program. We establish a reserve for Card Member interest charges and fees considered
to be uncollectible.
Reserves for Card Member loans and receivables modified as TDRs are determined as the difference between the cash
flows expected to be received from the Card Member (taking into consideration the probability of subsequent defaults),
discounted at the original effective interest rates, and the carrying value of the related Card Member loan or receivables
balance. We determine the original effective interest rate as the interest rate in effect prior to the imposition of any
penalty interest rate. All changes in the impairment measurement are included in Provisions for losses in the
Consolidated Statements of Income.
91
The following tables provide additional information with respect to our impaired Card Member loans and receivables as of
December 31, 2019, 2018 and 2017. Impaired Card Member loans and receivables outside the U.S. are not significant as of
December 31, 2019, 2018 and 2017; therefore, such loans and receivables are not included in the following tables unless
otherwise noted.
As of December 31, 2019
Accounts Classified as a TDR (c)
Over 90
days Past
Due &
Accruing
Interest(a)
Non-
Accruals(b)
In
Program(d)
Out of
Program(e)
Total
Impaired
Balance
Unpaid
Principal
Balance
Allowance
for TDRs
$$
$$
3384 $$
444
——
——
4428 $$
2284 $$
554
——
——
3338 $$
5500 $$
997
1175 $$
338
11,343 $$
2233
11,199 $$
2220
116
556
330
1109
7762 $$
2259 $$
As of December 31, 2018
772
1139
11,787 $$
772
1138
11,629 $$
1137
222
33
66
1168
Accounts Classified as a TDR (c)
Over 90
days Past
Due &
Accruing
Interest(a)
Non-
Accruals(b)
In
Program(d)
Out of
Program(e)
Total
Impaired
Balance
Unpaid
Principal
Balance
Allowance
for TDRs
$
$
344 $
43
—
—
387 $
236 $
43
—
—
279 $
313 $
59
131 $
29
1,024 $
174
923 $
161
13
29
25
61
198 $
462 $
As of December 31, 2017
42
86
1,326 $
42
86
1,212 $
80
14
2
5
101
Accounts Classified as a TDR (c)
Over 90
days Past
Due &
Accruing
Interest(a)
Non-
Accruals(b)
In
Program(d)
Out of
Program(e)
Total
Impaired
Balance
Unpaid
Principal
Balance
Allowance
for TDRs
$
289 $
38
168 $
31
178 $
31
131 $
27
766 $
127
694 $
118
49
8
1
2
60
(Millions)
CCard Member Loans:
Global Consumer Services(f)
Global Commercial Services
CCard Member Receivables:
Global Consumer Services
Global Commercial Services
Total
(Millions)
CCard Member Loans:
Global Consumer Services(f)
Global Commercial Services
CCard Member Receivables:
Global Consumer Services
Global Commercial Services
Total
(Millions)
CCard Member Loans:
Global Consumer Services(f)
Global Commercial Services
CCard Member Receivables:
Global Consumer Services
Global Commercial Services
Total
—
—
199 $
(a) Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for
24
56
892 $
—
—
327 $
9
19
186 $
15
37
261 $
24
56
973 $
$
interest that we believe will not be collected. Amounts presented exclude Card Member loans classified as a TDR.
(b) Non-accrual loans not in modification programs primarily include certain Card Member loans placed with outside collection
agencies for which we have ceased accruing interest. Amounts presented exclude Card Member loans classified as a TDR.
(c) Accounts classified as a TDR include $26 million, $17 million and $15 million that are over 90 days past due and accruing interest
and $10 million, $6 million and $5 million that are non-accruals as of December 31, 2019, 2018 and 2017, respectively.
In Program TDRs include Card Member accounts that are currently enrolled in a modification program.
(d)
(e) Out of Program TDRs include $188 million, $148 million and $141 million of Card Member accounts that have successfully
completed a modification program and $72 million, $50 million and $45 million of Card Member accounts that were not in
compliance with the terms of the modification programs as of December 31, 2019, 2018 and 2017, respectively.
(f) GCSG includes balances outside the U.S. of $93 million, $69 million and $56 million that are over 90 days and accruing interest and
$77 million, $68 million and $55 million in unpaid principal as of December 31, 2019, 2018 and 2017, respectively.
92
The following table provides information with respect to our average balances and interest income recognized from
impaired Card Member loans and the average balances of impaired Card Member receivables for the years ended
December 31:
2019 (Millions)
CCard Membber Loans:
Global Consumer Services Group
Global Commercial Services
CCard Member Receivables:
Global Consumer Services Group
Global Commercial Services
Total
2018 (Millions)
CCard Member Loans:
Global Consumer Services Group
Global Commercial Services
CCard Member Receivables:
Global Consumer Services Group
Global Commercial Services
Total
2017 (Millions)
CCard Member Loans:
Global Consumer Services Group
Global Commercial Services
CCard Member Receivables:
Global Consumer Services Group
Global Commercial Services
Total
Average
Balance
Interest
Income
Recognized
$$
$$
11,159 $$
2203
556
1112
11,530 $$
1136
225
——
——
1161
Average
Balance
Interest
Income
Recognized
878 $
150
33
73
1,134 $
109
21
—
—
130
Average
Balance
Interest
Income
Recognized
699 $
120
20
45
884 $
85
17
—
—
102
$
$
$
$
93
CCARD MEMBER LOANS AND RECEIVABLES MODIFIED AS TDRs
The following table provides additional information with respect to Card Member loans and receivables modified as TDRs
for the years ended December 31:
2019
Troubled Debt Restruccturings:
Card Member Loans
Card Member Receivables
Total
2018
Troubled Debt RRestructurings:
Card Member Loans
Card Member Receivables
Total
2017
Troubled Debt RRestructurings:
Card Member Loans
Card Member Receivables
Total
Number of
Accounts
(in thousands)
Outstanding
Balances
($ in millions) (a)
Average
Interest Rate
Reduction
(% points)
Average
Payment
Term
Extensions
(# of months)
78 $
9
87 $
602
210
812
13
(c)
(b)
26
Number of
Accounts
(in thousands)
Outstanding
Balances
($ in millions) (a)
51 $
6
57 $
377
110
487
Average
Interest Rate
Reduction
(% points)
Average
Payment
Term
Extensions
(# of months)
12
(c)
(b)
28
Number of
Accounts
(in thousands)
Outstanding
Balances
($ in millions) (a)
Average
Interest Rate
Reduction
(% points)
Average
Payment
Term
Extensions
(# of months)
33 $
6
39 $
224
83
307
10
(c)
(b)
28
(a) Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and
accrued interest on Card Member loans and principal and fees on Card Member receivables. Modifications did not reduce the
principal balance.
(b) For Card Member loans, there have been no payment term extensions.
(c) We do not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.
94
The following table provides information with respect to Card Member loans and receivables modified as TDRs that
subsequently defaulted within 12 months of modification for the years ended December 31, 2019, 2018 and 2017. A Card
Member is considered in default of a modification program after one and up to two missed payments, depending on the
terms of the modification program. For all Card Members that defaulted from a modification program, the probability of
default is factored into the reserves for Card Member loans and receivables.
22019
TTroubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans
Card Member Receivables
Total
2018
TTroubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans
Card Member Receivables
Total
2017
TTroubled Debt Restructurings That Subsequently Defaulted:
Card Member Loans
Card Member Receivables
Total
Number of
Accounts
(thousands)
Aggregated
Outstanding
Balances
Upon Default(a)
(millions)
112 $$
44
116 $$
886
220
1106
Number of
Accounts
(thousands)
Aggregated
Outstanding
Balances
Upon Default(a)
(millions)
8 $
4
12 $
46
11
57
Number of
Accounts
(thousands)
Aggregated
Outstanding
Balances
Upon Default(a)
(millions)
6 $
3
9 $
39
7
46
(a) The outstanding balances upon default include principal, fees and accrued interest on Card Member loans, and principal and fees on
Card Member receivables.
NNOTE 3
RESERVES FOR LOSSES
Reserves for losses relating to Card Member loans and receivables represent management’s best estimate of the
probable inherent losses in our outstanding portfolio of loans and receivables, as of the balance sheet date.
Management’s evaluation process requires certain estimates and judgments.
Reserves for losses are primarily based upon statistical and analytical models that analyze portfolio performance and
reflect management’s judgments regarding the quantitative components of the reserve. The models take into account
several factors, including delinquency-based loss migration rates, loss emergence periods and average losses and
recoveries over an appropriate historical period. Management considers whether to adjust the quantitative reserves for
certain external and internal qualitative factors, which may increase or decrease the reserves for losses on Card Member
loans and receivables. These external factors include employment, spend, sentiment, housing and credit, and changes in
the legal and regulatory environment, while the internal factors include increased risk in certain portfolios, impact of risk
management initiatives, changes in underwriting requirements and overall process stability. As part of this evaluation
process, management also considers various reserve coverage metrics, such as reserves as a percentage of past due
amounts, reserves as a percentage of Card Member loans or receivables, and net write-off coverage ratios.
Card Member loans and receivables balances are written off when management considers amounts to be uncollectible,
which is generally determined by the number of days past due and is typically no later than 180 days past due, or 120 days
past due for closed-end loans categorized as Other loans. Card Member loans and receivables and Other loans in
bankruptcy or owed by deceased individuals are generally written off upon notification.
95
CCHANGES IN CARD MEMBER LOANS RESERVE FOR LOSSES
The following table presents changes in the Card Member loans reserve for losses for the years ended December 31:
(Millions)
Balance, January 1
Provisions(a)
Net write-offs (b)
Principal
Interest and fees
Other(c)
Balance, December 31
2019
2,134 $
2,462
(1,860)
(375)
22
2,383 $
$
$
2018
1,706 $
2,266
(1,539)
(304)
5
2,134 $
2017
1,223
1,868
(1,181)
(227)
23
1,706
(a) Provisions for principal, interest and fee reserve components.
(b) Principal write-offs are presented less recoveries of $525 million, $444 million and $409 million for the years ended December 31,
2019, 2018 and 2017, respectively. Recoveries of interest and fees were not significant. Amounts include net (write-offs) recoveries
from TDRs of $(79) million, $(33) million and $(30) million for the years ended December 31, 2019, 2018 and 2017, respectively.
Includes foreign currency translation adjustments of $4 million, $(11) million and $8 million, and other adjustments of $18 million,
$16 million and $15 million for the years ended December 31, 2019, 2018 and 2017, respectively.
(c)
CARD MEMBER LOANS EVALUATED INDIVIDUALLY AND COLLECTIVELY FOR IMPAIRMENT
The following table presents Card Member loans evaluated individually and collectively for impairment and related
reserves as of December 31:
(Millions)
Card Member loans evaluated individually for impairment (a)
Related reserves(a)
Card Member loans evaluated collectively for impairment (b)
Related reserves(b)
2019
810 $
159 $
86,571 $
2,224 $
2018
532 $
94 $
81,322 $
2,040 $
2017
367
57
73,032
1,649
$
$
$
$
(a) Represents loans modified as a TDR and related reserves.
(b) Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual
loans. The reserves include the quantitative results of analytical models that are specific to individual pools of loans, and reserves
for internal and external qualitative risk factors that apply to loans that are collectively evaluated for impairment.
CHANGES IN CARD MEMBER RECEIVABLES RESERVE FOR LOSSES
The following table presents changes in the Card Member receivables reserve for losses for the years ended
December 31:
(Millions)
Balance, January 1
Provisions(a)
Net write-offs(b)
Other(c)
Balance, December 31
2019
573 $
963
(900)
(17)
619 $
$
$
2018
521 $
937
(859)
(26)
573 $
2017
467
795
(736)
(5)
521
(a) Provisions for principal and fee reserve components.
(b) Net write-offs are presented less recoveries of $374 million, $367 million and $366 million for the years ended December 31, 2019,
2018 and 2017, respectively. Amounts include net recoveries (write-offs) from TDRs of $(16) million, nil and $2 million, for the years
ended December 31, 2019, 2018 and 2017, respectively.
Includes foreign currency translation adjustments of nil, $(6) million and $12 million, and other adjustments of $(17) million, $(20)
million and $(17) million for the years ended December 31, 2019, 2018 and 2017, respectively.
(c)
96
CCARD MEMBER RECEIVABLES EVALUATED INDIVIDUALLY AND COLLECTIVELY FOR IMPAIRMENT
The following table presents Card Member receivables evaluated individually and collectively for impairment and related
reserves as of December 31:
(Millions)
Card Member receivables evaluated individually for impairment(a)
Related reserves(a)
Card Member receivables evaluated collectively for impairment
Related reserves(b)
2019
211 $
9 $
57,202 $
610 $
2018
128 $
7 $
55,765 $
566 $
2017
80
3
53,967
518
$
$
$
$
(a) Represents receivables modified as a TDR and related reserves.
(b) The reserves include the quantitative results of analytical models that are specific to individual pools of receivables, and reserves for
internal and external qualitative risk factors that apply to receivables that are collectively evaluated for impairment.
NOTE 4
INVESTMENT SECURITIES
Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated
Balance Sheets, with unrealized gains and losses recorded in AOCI, net of income taxes. Investment securities also
include equity securities carried at fair value on the Consolidated Balance Sheets. Effective January 1, 2018, the
unrealized gains and losses on equity securities are recorded in the Consolidated Statements of Income; prior to January
1, 2018, the unrealized gains and losses on equity securities were recorded in AOCI, net of income taxes.
Realized gains and losses are recognized upon disposition of available-for-sale securities using the specific identification
method.
Refer to Note 14 for a description of our methodology for determining the fair value of investment securities.
The following is a summary of investment securities as of December 31:
2019
2018
2017
Description
of Securities
(Millions)
Available-for-
sale debt
iti
State and
municipal
obligations
U.S.
Government
agency
obligations
U.S.
Government
treasury
obligations
Corporate
debt
securities
Mortgage-
backed
securities (a)
Foreign
government
bonds and
obligations
Equity
securities (b)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Cost
Cost
$ 2236 $
88 $$
((1) $
2243 $ 594 $
4 $
(2) $
596 $ 1,369 $
11 $
(3) $
1,377
9
—
—
9
10
—
—
10
11
—
—
11
7,395
35
((1)
7,429
3,452
5
(17)
3,440
1,051
3
(9)
1,045
27
—
—
27
28
—
—
28
28
—
—
28
—
41
50
1
—
51
67
2
—
69
339
578
2
1
55
25((c)
((2)
78
51
—
579
474
—
—
—
474
581
(3)
48
51
—
—
—
581
(3)
48
771 $$
$$ 88,339 $
((4) $ 88,406 $ 4,659 $
Total
(a) Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
(b) Equity securities comprise investments in common stock, exchange-traded funds and mutual funds.
(c) During 2019, an equity investment transferred from Other assets to Investment securities following the completion of an initial public offering by the
issuer of the securities. The investment had a fair value of $28 million with an associated cost of $3 million as of December 31, 2019. The gross
unrealized gains include $9 million that were recognized during 2018.
(22) $ 4,647 $ 3,158 $
10 $
16 $
(15) $ 3,159
97
The following table provides information about our investment securities with gross unrealized losses and the length of
time that individual securities have been in an unrealized loss position as of December 31:
Less than 12 months
12 months or more
Less than 12 months
12 months or more
22019
2018
Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
Estimated
Fair
Value
Gross
Unrealized
Losses
118 $$
((1) $$
—— $$
—— $
— $
— $
82 $
——
118 $$
——
3324
((1)
224
(2)
791
((1) $$
3324 $
(1) $
224 $
(2) $
873 $
(1)
(15)
(16)
Description of
Securities (Millions)
State and municipal
obligations
U.S. Government
treasury obligations
Total
$$
$$
The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to
amortized cost as of December 31:
Less than 12 months
12 months or more
Total
Ratio of Fair Value to
Amortized Cost (Dollars
in millions)
Number of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
Number of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
Number of
Securities
Estimated
Fair Value
Gross
Unrealized
Losses
22019:
90%–100%
Total as of December 31,
2019
2018:
90%–100%
Total as of December 31,
2018
22 $$
118 $$
((1)
33 $$
3324 $$
22 $$
118 $$
((1)
33 $$
3324 $$
((1)
((1)
55 $$
3342 $$
55 $$
3342 $$
((2)
((2)
2 $
224 $
(2)
29 $
873 $
(16)
31 $
1,097 $
(18)
2 $
224 $
(2)
29 $
873 $
(16)
31 $
1,097 $
(18)
The gross unrealized losses for available-for-sale debt securities are attributed to wider credit spreads for specific
issuers, adverse changes in benchmark interest rates, or a combination thereof, all compared to those prevailing when
the investment securities were purchased.
Overall, for the available-for-sale debt securities in gross unrealized loss positions, (i) we do not intend to sell the
securities, (ii) it is more likely than not that we will not be required to sell the securities before recovery of the unrealized
losses, and (iii) we expect that the contractual principal and interest will be received on the securities. As a result, we
recognized no other-than-temporary impairment during the periods presented.
Weighted average yields and contractual maturities for investment securities with stated maturities as of December 31,
2019 were as follows:
(Millions)
Due within 1
year
Due after 1 year
but within 5 years
Due after 5
years but within
10 years
Due after 10
years
State and municipal obligations(a)
$$
66
$$
339
$$
330
$$
1168
$$
U.S. Government agency obligations(a)
U.S. Government treasury obligations
Corporate debt securities
Mortgage-backed securities(a)
Foreign government bonds and obligations
Total Estimated Fair Value
Total Cost
Weighted average yields(b)
——
66,019
55
——
5577
——
11,270
222
——
11
——
1140
——
——
11
99
——
——
441
——
$$
$$
66,607
$$
11,332
$$
1171
$$
2218
$$
88,328
66,602
$$
11,307
$$
1166
$$
2209
$$
88,284
22.17 %%
22.27 %%
33.01 %%
33.99 %%
22.25 %%
Total
2243
99
77,429
227
4411
5579
(a) The expected payments on state and municipal obligations, U.S. government agency obligations and mortgage-backed securities may not coincide
with their contractual maturities because the issuers have the right to call or prepay certain obligations.
(b) Average yields for investment securities have been calculated using the effective yield on the date of purchase. Yields on tax-exempt investment
securities have been computed on a tax-equivalent basis using the U.S. federal statutory tax rate of 21 percent.
98
NNOTE 5
ASSET SECURITIZATIONS
We periodically securitize Card Member loans and receivables arising from our card businesses through the transfer of
those assets to securitization trusts, American Express Credit Account Master Trust (the Lending Trust) and American
Express Issuance Trust II (the Charge Trust and together with the Lending Trust, the Trusts). The Trusts then issue debt
securities collateralized by the transferred assets to third-party investors.
The Trusts are considered VIEs as they have insufficient equity at risk to finance their activities, which are to issue debt
securities that are collateralized by the underlying Card Member loans and receivables. Refer to Note 1 for further details
on the principles of consolidation. We perform the servicing and key decision making for the Trusts, and therefore have
the power to direct the activities that most significantly impact the Trusts’ economic performance, which are the
collection of the underlying Card Member loans and receivables. In addition, we hold all of the variable interests in both
Trusts, with the exception of the debt securities issued to third-party investors. As of December 31, 2019 and 2018, our
ownership of variable interests was $12.9 billion and $15.5 billion, respectively, for the Lending Trust and $8.3 billion and
$7.0 billion, respectively, for the Charge Trust. These variable interests held by us provide us with the right to receive
benefits and the obligation to absorb losses, which could be significant to both the Lending Trust and the Charge Trust.
Based on these considerations, we are the primary beneficiary of the Trusts and therefore consolidate the Trusts.
The debt securities issued by the Trusts are non-recourse to us. The securitized Card Member loans and receivables held
by the Lending Trust and the Charge Trust, respectively, are available only for payment of the debt securities or other
obligations issued or arising in the securitization transactions (refer to Note 2). The long-term debt of each Trust is
payable only out of collections on their respective underlying securitized assets (refer to Note 8).
The following table provides information on the restricted cash held by the Trusts as of December 31, 2019 and 2018,
included in Other assets on the Consolidated Balance Sheets:
(Millions)
Lending Trust
Charge Trust
Total
2018
67
3
70
2019
$
85 $
—
85 $
$
These amounts relate to collections of Card Member loans and receivables to be used by the Trusts to fund future
expenses and obligations, including interest on debt securities, credit losses and upcoming debt maturities.
Under the respective terms of the Lending Trust and the Charge Trust agreements, the occurrence of certain triggering
events associated with the performance of the assets of each Trust could result in payment of trust expenses,
establishment of reserve funds, or, in a worst-case scenario, early amortization of debt securities. During the year ended
December 31, 2019, no such triggering events occurred.
NOTE 6
OTHER ASSETS
The following is a summary of Other assets as of December 31:
(Millions)
Goodwill
Other intangible assets, at amortized cost
Other(a)
Total
2019
3,315 $
267
11,149
14,7311 $
2018
3,072
275
10,031
13,378
$
$
(a) Primarily includes other receivables net of reserves, investments in non-consolidated entities, prepaid expenses, net deferred tax
assets, tax credit investments, right-of-use lease assets and restricted cash. Restricted cash represents amounts available to settle
obligations related to certain Card Member credit balances and customer deposits, as well as coupon and maturity obligations of
consolidated VIEs.
99
GGOODWILL
The changes in the carrying amount of goodwill reported in our reportable operating segments were as follows:
(Millions)
Balance as of December 31, 2017
Acquisitions
Dispositions
Other(a)
Balance as of December 31, 2018
Acquisitions
Dispositions
Other(a)
Balance as of December 31, 2019
GCSG
637 $
90
—
(20)
707 $
189
—
(7)
889 $
$
$
$
GCS
1,724 $
—
—
(6)
1,718 $
66
—
(3)
1,781 $
GMNS
648 $
—
—
(1)
647 $
—
—
(2)
645 $
Total
3,009
90
—
(27)
3,072
255
—
(12)
3,315
(a) Primarily includes foreign currency translation.
Accumulated impairment losses were $221 million as of both December 31, 2019 and 2018.
OTHER INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over their estimated useful lives of 1 to 22 years. We review long-
lived assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate
their carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recoverable
and exceeds the asset or asset group’s fair value.
The gross carrying amount for other intangible assets as of December 31, 2019 and 2018 was $704 million and $702
million, respectively, with accumulated amortization of $437 million and $427 million, respectively.
Amortization expense, which is recorded within Other expense in the Consolidated Statements of Income, was $49
million, $212 million and $207 million for the years ended December 31, 2019, 2018 and 2017, respectively.
TAX CREDIT INVESTMENTS
We account for our tax credit investments, including Qualified Affordable Housing (QAH) investments, using the equity
method of accounting. As of December 31, 2019 and 2018, we had $1,154 million and $1,043 million in tax credit
investments, respectively, included in Other assets on the Consolidated Balance Sheets, of which $1,109 million and
$1,006 million, respectively, related to QAH investments. Included in QAH investments as of December 31, 2019 and
2018, we had $1,032 million and $936 million, respectively, related to investments in unconsolidated VIEs for which we do
not have a controlling financial interest.
As of December 31, 2019, we committed to provide funding related to certain of these QAH investments, which is
expected to be paid between 2020 and 2043, resulting in $211 million in unfunded commitments reported in Other
liabilities, of which $187 million specifically related to unconsolidated VIEs.
In addition, as of December 31, 2019 we had contractual off-balance sheet obligations, which were not deemed probable
of being drawn, to provide additional funding up to $78 million for these QAH investments, fully related to unconsolidated
VIEs.
During the years ended December 31, 2019 and 2018, we recognized equity method losses related to our QAH
investments of $101 million and $126 million, respectively, which were recognized in Other, net expenses; and associated
tax credits of $119 million and $97 million, respectively, recognized in Income tax provision.
100
NNOTE 7
CUSTOMER DEPOSITS
As of December 31, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:
(Millions)
U.S.:
Interest-bearing
Non-interest-bearing (includes Card Member credit balances of: 2019, $389 million; 2018, $376
million)
Non-U.S.:
Interest-bearing
Non-interest-bearing (includes Card Member credit balances of: 2019, $401 million; 2018, $367
million)
Total customer deposits
Customer deposits by deposit type as of December 31 were as follows:
(Millions)
U.S. retail deposits:
Savings accounts — Direct
Certificates of deposit:(a)
Direct
Third-party (brokered)
Sweep accounts —Third-party (brokered)
Other deposits:
U.S. non-interest-bearing deposits
Non-U.S. deposits
Card Member credit balances — U.S. and non-U.S.
Total customer deposits
2019
2018
$
72,445 $
69,144
415
23
412
28
404
73,287 $
376
69,960
$
2019
2018
$
46,394 $
39,491
1,854
8,076
16,121
26
26
790
73,287 $
817
12,667
16,169
36
37
743
69,960
$
(a) The weighted average remaining maturity and weighted average interest rate at issuance on the total portfolio of U.S. retail
certificates of deposit issued through direct and third-party programs were 48 months and 2.53 percent, respectively, as of
December 31, 2019.
The scheduled maturities of certificates of deposit as of December 31, 2019 were as follows:
(Millions)
2020
2021
2022
2023
2024
After 5 years
Total
U.S.
4,618 $
2,302
2,385
374
251
—
9,930 $
Non-U.S.
14 $
—
—
—
—
—
14 $
Total
4,632
2,302
2,385
374
251
—
9,9444
$
$
As of December 31, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:
(Millions)
U.S.
Non-U.S.
Total
$
$
2019
622 $
4
626 $
2018
276
9
285
101
NNOTE 8
DEBT
SHORT-TERM BORROWINGS
Our short-term borrowings outstanding, defined as borrowings with original contractual maturity dates of less than one
year, as of December 31 were as follows:
2019
2018
(Millions, except percentages)
Commercial paper(b)
Other short-term borrowings(c)
Total
Outstanding
Balance
3,001
3,441
6,442
$
$
Year-End
Stated
Interest Rate
on Debt(a)
1.94 % $
1.28
1.59 % $
Outstanding
Balance
752
2,348
3,100
Year-End
Stated
Interest Rate
on Debt(a)
2.71 %
1.94
2.13 %
(a) For floating-rate issuances, the stated interest rates are weighted based on the outstanding principal balances and interest rates in
effect as of December 31, 2019 and 2018.
(b) Average commercial paper outstanding was $299 million and $228 million in 2019 and 2018, respectively.
(c) Primarily includes book overdrafts with banks due to timing differences arising in the ordinary course of business.
We maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up to $2.0
billion face amount of eligible certificates issued from the Lending Trust at any time through September 15, 2022. The
facility was undrawn as of both December 31, 2019 and 2018.
We paid $7.7 million and $7.8 million in fees to maintain the secured borrowing facility in 2019 and 2018, respectively. The
committed facility does not contain a material adverse change clause, which might otherwise preclude borrowing under
the facility, nor is it dependent on our credit rating.
102
LLONG-TERM DEBT
Our long-term debt outstanding, defined as debt with original contractual maturity dates of one year or greater, as of
December 31 was as follows:
(Millions, except percentages)
American Express Company
(Parent Company only)
Fixed Rate Senior Notes
Floating Rate Senior Notes
Fixed Rate Subordinated Notes
American Exxpress Credit
Corporation
Fixed Rate Senior Notes
Floating Rate Senior Notes
American Express Lending Trust
Fixed Rate Senior Notes
Floating Rate Senior Notes
Fixed Rate Subordinated Notes
Floating Rate Subordinated Notes
American Express Charge Trust II
Floating Rate Conduit Borrowings
Other
Finance Leases
Floating Rate Borrowings
Unamortized Underwriting Fees
Total Long-Term Debt
2019
2018
Original
Contractual
Maturity
Dates
Outstanding
Balance(a)
Year-End
Interest Rate
on Debt(b)
Year-End
Interest Rate
with
Swaps(b)(c)
Outstanding
Balance(a)
Year-End
Interest Rate
on Debt(b)
Year-End
Interest Rate
with
Swaps(b)(c)
2020 -- 22042 $
119,326
3.17 %%
2.86 % $
14,043
3.48 %
3.64 %
2020 -- 22023
2024
4,500
598
2020 -- 22027
2020 -- 22022
11,839
1,650
2020 -- 22023
2021 -- 22023
2020 -- 22022
2022 -- 22023
15,074
4,125
420
79
3.16
3.63
2.40
3.36
2.42
2.74
2.53
2.45
2024 -- 22033
2020 -- 22022
—
—
25
311
(112)
5.65
0.40
—
2.99
2.56
—
2.43
—
—
—
—
3,600
598
16,677
3,800
12,474
5,125
240
167
3.17
3.63
2.28
3.31
2.28
2.80
2.37
2.96
1,535
2.89
—
— %
19
262
(117)
5.54
0.42
$
557,835
2.78 %%
$
58,423
2.77 %
—
3.66
3.06
—
—
—
—
—
—
—
— %
(a) The outstanding balances include (i) unamortized discount, (ii) the impact of movements in exchange rates on foreign currency
denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating
rate through the use of interest rate swaps. Refer to Note 13 for more details on our treatment of fair value hedges.
(b) For floating-rate issuances, the stated interest rate on debt is weighted based on the outstanding principal balances and interest
rates in effect as of December 31, 2019 and 2018.
Interest rates with swaps are only presented when swaps are in place to hedge the underlying debt. The interest rates with swaps
are weighted based on the outstanding principal balances and the interest rates on the floating leg of the swaps in effect as of
December 31, 2019 and 2018.
(c)
Aggregate annual maturities on long-term debt obligations (based on contractual maturity or anticipated redemption
dates) as of December 31, 2019 were as follows:
(Millions)
2020
2021
2022
2023
2024
Thereafter
Total
American Express Company (Parent
Company only)
$
22,000 $
55,000 $
55,675 $
4,350 $
55,000 $
22,872 $ 224,897
American Express Credit Corporation
American Express Lending Trust
Other
6,600
6,924
91
2,864
3,709
137
2,050
6,381
82
—
2,685
—
—
—
15
2,000
—
11
13,514
19,699
336
$
115,615 $
111,710 $
114,188 $
7,035 $
55,015 $
44,883 $ 558,446
Unamortized Underwriting Fees
Unamortized Discount and Premium
Impacts due to Fair Value Hedge
Accounting
Total Long-Term Debt
(112)
(716)
217
$ 557,835
We maintained a bank line of credit of $3.5 billion as of December 31, 2019 and 2018, all of which was undrawn as of the
respective dates. The availability of the credit line is subject to our compliance with certain financial covenants, principally
103
the maintenance by American Express Credit Corporation (Credco) of a 1.25 ratio of combined earnings and fixed
charges, to fixed charges. As of December 31, 2019 and 2018, we were not in violation of any of our debt covenants.
Additionally, we maintained a three-year committed, revolving, secured borrowing facility that gives us the right to sell up
to $3.0 billion face amount of eligible notes issued from the Charge Trust at any time through July 15, 2022. As of
December 31, 2019 and 2018, nil and $1.5 billion, respectively, were drawn on this facility.
We paid $16.5 million and $14.2 million in fees to maintain these lines in 2019 and 2018, respectively. These committed
facilities do not contain material adverse change clauses, which might otherwise preclude borrowing under the credit
facilities, nor are they dependent on our credit rating.
We paid total interest, primarily related to short- and long-term debt, corresponding interest rate swaps and customer
deposits, of $3.4 billion, $2.7 billion and $2.0 billion in 2019, 2018 and 2017, respectively.
NNOTE 9
OTHER LIABILITIES
The following is a summary of Other liabilities as of December 31:
(Millions)
Membership Rewards liability
Employee-related liabilities(a)
Card Member rebate and reward accruals(b)
Income tax liability(c)
Other(d)
Total
$
2019
8,892 $
2,429
1,790
1,122
10,715
24,948 $
2018
8,414
2,164
1,596
1,079
9,321
22,574
$
(a) Employee-related liabilities include employee benefit plan obligations and incentive compensation.
(b) Card Member rebate and reward accruals include payments to third-party reward partners and cash-back rewards.
(c)
Includes repatriation tax liability of $1,012 million and $1,689 million as of December 31, 2019 and 2018, respectively, which
represents our remaining obligation under the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act) to pay a one-time
transition tax on unrepatriated earnings and profits of certain foreign subsidiaries.
(d) Primarily includes Travelers Cheques and other prepaid products, net deferred card and other fees, book overdraft balances, lease
liabilities, client incentives, restructuring and reengineering reserves, dividends payable, and derivative and hedge liabilities.
MEMBERSHIP REWARDS
The Membership Rewards program allows enrolled Card Members to earn points that can be redeemed for a broad range
of rewards including travel, shopping, gift cards, and covering eligible charges. We record a balance sheet liability that
represents management’s best estimate of the cost of points earned that are expected to be redeemed in the future. The
weighted average cost (WAC) per point and the Ultimate Redemption Rate (URR) are key assumptions used to estimate
the Membership Rewards liability. We use statistical and actuarial models to estimate the URR based on redemption
trends, card product type, enrollment tenure, card spend levels and credit attributes.
The expense for Membership Rewards points is included in Card Member rewards expense. We periodically evaluate our
liability estimation process and assumptions based on developments in redemption patterns, cost per point redeemed,
partner contract changes and other factors.
DEFERRED CARD AND OTHER FEES, NET
The carrying amount of deferred card and other fees, net of deferred direct acquisition costs and reserves for
membership cancellations as of December 31, was as follows:
(Millions)
Deferred card and other fees(a)
Deferred direct acquisition costs
Reserves for membership cancellations
Deferred card and other fees, net
2019
2,532 $
(270)
(200)
2,,062 $
$
$
2018
2,208
(282)
(167)
1,759
Includes deferred fees for Membership Rewards program participants.
(a)
NOTE 10
104
SSTOCK PLANS
STOCK OPTION AND AWARD PROGRAMS
Under our 2016 Incentive Compensation Plan and previously under our 2007 Incentive Compensation Plan (collectively,
Incentive Compensation Plans), awards may be granted to employees and other key individuals who perform services for
us and our participating subsidiaries. These awards may be in the form of stock options, restricted stock units or awards
(collectively referred to as RSUs), portfolio grants (PGs) or other incentives or similar awards designed to meet the
requirements of non-U.S. jurisdictions.
For our Incentive Compensation Plans, there were a total of 9 million, 12 million and 14 million common shares unissued
and available for grant as of December 31, 2019, 2018, and 2017, respectively, as authorized by our Board of Directors and
shareholders. We generally issue new common shares upon exercise of options and vesting of RSUs.
Stock-based compensation expense recognized in Salaries and employee benefits in the Consolidated Statements of
Income was $280 million, $288 million and $283 million in 2019, 2018, and 2017, respectively, with corresponding income
tax benefits of $67 million, $69 million, and $102 million in those respective periods.
A summary of stock option and RSU activity as of December 31, 2019, and corresponding changes during the year, are as
follows:
(Shares in thousands)
Outstanding as of December 31, 2018
Granted
Exercised/vested
Forfeited
Expired
Outstanding as of December 31, 2019
Options vested and expected to vest as of
December 31, 2019
Options exercisable as of December 31, 2019
Stock Options
Weighted-
Average
Exercise
Price
64.73
101.43
51.92
92.19
—
72.70
72.70
61.15
Shares
5,484 $
408
(1,626)
(94)
—
4,172
4,171
2,357 $
Service-Based RSUs
Weighted-
Average
Grant
Price
80.15
103.93
76.07
89.79
—
91.42
Shares
2,544 $
1,041
(1,001)
(172)
—
2,412 $
Service and
Performance-Based
Weighted-
Average
Grant
Price
74.22
90.34
58.28
93.74
—
88.25
$
$
Shares
4,022
1,358
(1,819)
(169)
—
3,392
The cost of employee stock awards granted in exchange for employee services is generally recognized ratably based on
the grant-date fair value of the award, net of expected forfeitures, over the vesting period. The vesting period is the
shorter of the vesting schedule as defined in each award agreement or the date an individual will become eligible to retire.
Retirement eligibility is dependent upon age and/or years of service.
STOCK OPTIONS
Each stock option has an exercise price equal to the market price of our common stock on the date of grant. Stock
options generally vest on the third anniversary of the grant date and have a contractual term of 10 years from the date of
grant.
The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of
our stock price exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and
expected to vest as of December 31, 2019, were as follows:
Weighted-average remaining contractual life (in years)
Aggregate intrinsic value (millions)
Outstanding
5.3
216 $
Exercisable
4.0
149 $
$
Vested and
Expected to
Vest
5.3
216
105
As of December 31, 2019, there was $7 million of total unrecognized compensation cost related to unvested options,
which will be recognized ratably over the weighted-average remaining vesting period of 1.2 years.
The fair value of each option is estimated on the date of grant using a Black-Scholes-Merton option-pricing model. The
following weighted-average assumptions were used for options granted in 2019, 2018 and 2017:
Dividend yield
Expected volatility(a)
Risk-free interest rate
Expected life of stock option (in years)(b)
Weighted-average fair value per option
$$
22019
11.5 %%
224 %%
22.6 %%
77.1
2018
1.4 %
22 %
2.7 %
7.1
223.38
$
23.17
$
2017
1.8 %
24 %
2.3 %
6.9
18.18
(a) The expected volatility is based on both weighted historical and implied volatilities of our common stock price.
(b) The expected life of stock options was determined using both historical data and expectations of option exercise behavior.
On October 31, 2017, certain senior executives were granted stock options with a term of seven years, and include a three-
year service condition, as well as performance and market conditions. Therefore, the fair values of these options were
estimated at the grant date using a Monte Carlo valuation model with the following assumptions:
Dividend yield
Expected volatility(a)
Risk-free interest rate
Expected life of stock option (in years)
Fair value per option
October 31, 2017
1.58 %
21.41 %
2.26 %
7
19.18
$
(a) The expected volatility is based on both weighted historical and implied volatilities of our common stock price.
For stock options that were exercised during 2019, 2018 and 2017, the intrinsic value, based upon the fair value of our
stock price at the date the options were exercised, was $104 million, $104 million and $197 million, respectively; cash
received from the exercise of stock options was $84 million, $87 million and $130 million during those respective periods.
The income tax benefit recognized in the Consolidated Statements of Income related to stock option exercises was $18
million, $18 million and $59 million in 2019, 2018 and 2017, respectively.
RRESTRICTED STOCK UNITS/AWARDS
We grant RSUs that contain either a) service conditions or b) both service and performance conditions. RSUs containing
only service conditions generally vest 25 percent per year beginning with the first anniversary of the grant date. RSUs
containing both service and performance conditions generally vest on the third anniversary of the grant date, and the
number of shares earned depends on the achievement of predetermined Company metrics. All RSU holders receive non-
forfeitable dividends or dividend equivalents.
We added a relative total shareholder return (r-TSR) modifier to the performance-based RSUs that were granted in 2019,
so that our actual shareholder return relative to a competitive peer group is one of the performance conditions that
determines the number of shares ultimately granted upon vesting.
The fair value of RSUs that do not include the r-TSR modifier, including those that contain only service conditions, is
measured using our stock price on the grant date. The fair value of service and performance-based RSUs that include the
r-TSR modifier is determined using a Monte Carlo valuation model with the following weighted-average assumptions:
Expected volatility(a)
Risk-free interest rate
Remaining performance period (in years)
(a) The expected volatility is based on historical volatility of our common stock price.
2019
20 %
2.5 %
2.9
106
As of December 31, 2019, there was $195 million of total unrecognized compensation cost related to non-vested RSUs,
which will be recognized ratably over the weighted-average remaining vesting period of 2.1 years.
The weighted-average grant date fair value of RSUs granted in 2019, 2018 and 2017 was $96.24, $98.20 and $77.80,
respectively.
For RSUs vested during 2019, 2018 and 2017, the total fair value, based upon our stock price at the date the RSUs vested,
was $286 million, $239 million and $180 million, respectively.
LLIABILITY-BASED AWARDS
In 2018 and 2017, certain employees were awarded PGs and other incentive awards that can be settled with cash or equity
shares at our discretion, and final Compensation and Benefits Committee payout approval; beginning in 2019, we
discontinued granting PGs. These awards earn value based on performance, market and/or service conditions, and vest
over periods of one to three years.
PGs and other incentive awards are generally settled with cash and thus are classified as liabilities; therefore, the fair
value is determined at the date of grant and remeasured quarterly as part of compensation expense over the vesting
period. Cash paid upon vesting of these awards in 2019, 2018 and 2017 was $81 million, $56 million and $48 million,
respectively.
NOTE 11
RETIREMENT PLANS
DEFINED CONTRIBUTION RETIREMENT PLANS
We sponsor defined contribution retirement plans, the principal plan being the Retirement Savings Plan (RSP), a 401(k)
savings plan with a profit-sharing component. The RSP is a tax-qualified retirement plan subject to the Employee
Retirement Income Security Act of 1974 and covers most employees in the United States. The total expense for all
defined contribution retirement plans globally was $278 million, $272 million and $349 million in 2019, 2018 and 2017,
respectively.
DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
Our primary defined benefit pension plans that cover certain employees in the United States and United Kingdom are
closed to new entrants and existing participants do not accrue any additional benefits. Most employees outside the
United States and United Kingdom are covered by local retirement plans, some of which are funded, while other
employees receive payments at the time of retirement or termination under applicable labor laws or agreements. We
comply with minimum funding requirements in all countries. We also sponsor unfunded other postretirement benefit
plans that provide health care and life insurance to certain retired U.S. employees. For these plans, the total net benefit
was $8 million and $0.4 million in 2019 and 2018, respectively, and the total net expense was $25 million in 2017.
We recognize the funded status of our defined benefit pension plans and other postretirement benefit plans, measured as
the difference between the fair value of the plan assets and the projected benefit obligation, on the Consolidated Balance
Sheets. As of December 31, 2019 and 2018, the unfunded status related to the defined benefit pension plans and other
postretirement benefit plans was $640 million and $563 million, respectively, and is recorded in Other liabilities.
107
NNOTE 12
CONTINGENCIES AND COMMITMENTS
CONTINGENCIES
In the ordinary course of business, we and our subsidiaries are subject to various pending and potential legal actions,
arbitration proceedings, claims, investigations, examinations, information gathering requests, subpoenas, inquiries and
matters relating to compliance with laws and regulations (collectively, legal proceedings).
Based on our current knowledge, and taking into consideration our litigation-related liabilities, we do not believe we are a
party to, nor are any of our properties the subject of, any legal proceeding that would have a material adverse effect on
our consolidated financial condition or liquidity. However, in light of the uncertainties involved in such matters, including
the fact that some pending legal proceedings are at preliminary stages or seek an indeterminate amount of damages, it is
possible that the outcome of legal proceedings could have a material impact on our results of operations. Certain legal
proceedings involving us or our subsidiaries are described below.
A putative merchant class action in the Eastern District of New York, consolidated in 2011 and collectively captioned In re:
American Express Anti-Steering Rules Antitrust Litigation (II), alleged that provisions in our merchant agreements
prohibiting merchants from differentially surcharging our cards or steering a customer to use another network’s card or
another type of general-purpose card (“anti-steering” and “non-discrimination” contractual provisions) violate U.S.
antitrust laws. On January 15, 2020, our motion to compel arbitration of claims brought by merchants who accept
American Express and to dismiss claims of merchants who do not was granted.
In July 2004, we were named as a defendant in another putative class action filed in the Southern District of New York and
subsequently transferred to the Eastern District of New York, captioned The Marcus Corporation v. American Express
Co., et al., in which the plaintiffs allege an unlawful antitrust tying arrangement between certain of our charge cards and
credit cards in violation of various state and federal laws. The plaintiffs in this action seek injunctive relief and an
unspecified amount of damages.
On March 8, 2016, plaintiffs B&R Supermarket, Inc. d/b/a Milam’s Market and Grove Liquors LLC, on behalf of
themselves and others, filed a suit, captioned B&R Supermarket, Inc. d/b/a Milam’s Market, et al. v. Visa Inc., et al., for
violations of the Sherman Antitrust Act, the Clayton Antitrust Act, California’s Cartwright Act and unjust enrichment in
the United States District Court for the Northern District of California, against American Express Company, other credit
and charge card networks, other issuing banks and EMVCo, LLC. Plaintiffs allege that the defendants, through EMVCo,
conspired to shift liability for fraudulent, faulty and otherwise rejected consumer credit card transactions from
themselves to merchants after the implementation of EMV chip payment terminals. Plaintiffs seek damages and
injunctive relief. An amended complaint was filed on July 15, 2016. On September 30, 2016, the court denied our motion
to dismiss as to claims brought by merchants who do not accept American Express cards, and on May 4, 2017, the
California court transferred the case to the United States District Court for the Eastern District of New York.
We are being challenged in a number of countries regarding our application of value-added taxes (VAT) to certain of our
international transactions, which are in various stages of audit, or are being contested in legal actions. While we believe
we have complied with all applicable tax laws, rules and regulations in the relevant jurisdictions, the tax authorities may
determine that we owe additional VAT. In certain jurisdictions where we are contesting the assessments, we were
required to pay the VAT assessments prior to contesting.
Our legal proceedings range from cases brought by a single plaintiff to class actions with millions of putative class
members to governmental proceedings. These legal proceedings involve various lines of business and a variety of claims
(including, but not limited to, common law tort, contract, application of tax laws, antitrust and consumer protection
claims), some of which present novel factual allegations and/or unique legal theories. While some matters pending
against us specify the damages sought, many seek an unspecified amount of damages or are at very early stages of the
legal process. Even when the amount of damages claimed against us are stated, the claimed amount may be exaggerated
and/or unsupported. As a result, some matters have not yet progressed sufficiently through discovery and/or
development of important factual information and legal issues to enable us to estimate an amount of loss or a range of
possible loss, while other matters have progressed sufficiently such that we are able to estimate an amount of loss or a
range of possible loss.
We have accrued for certain of our outstanding legal proceedings. An accrual is recorded when it is both (a) probable that
a loss has occurred and (b) the amount of loss can be reasonably estimated. There may be instances in which an
exposure to loss exceeds the accrual. We evaluate, on a quarterly basis, developments in legal proceedings that could
cause an increase or decrease in the amount of the accrual that has been previously recorded, or a revision to the
disclosed estimated range of possible losses, as applicable.
108
For those disclosed material legal proceedings where a loss is reasonably possible in future periods, whether in excess of
a recorded accrual for legal or tax contingencies, or where there is no such accrual, and for which we are able to estimate
a range of possible loss, the current estimated range is zero to $190 million in excess of any accruals related to those
matters. This range represents management’s estimate based on currently available information and does not represent
our maximum loss exposure; actual results may vary significantly. As such legal proceedings evolve, we may need to
increase our range of possible loss or recorded accruals. In addition, it is possible that significantly increased merchant
steering or other actions impairing the Card Member experience as a result of an adverse resolution in one or any
combination of the disclosed merchant cases could have a material adverse effect on our business.
CCOMMITMENTS
Total lease expense includes rent expenses, adjustments for rent concessions, rent escalations and leasehold
improvement allowances and is recognized on a straight-line basis over the lease term. Total lease expense for the years
ended December 31, 2019, 2018 and 2017 was $151 million, $142 million and $151 million, respectively.
Effective January 1, 2019, we adopted the new accounting guidance on leases (refer to Note 1 for additional details). Lease
liabilities are recognized at the present value of the contractual fixed lease payments, discounted using our incremental
borrowing rate as of the lease commencement date or upon modification of the lease. For lease liabilities outstanding as
of December 31, 2019, the weighted average remaining lease term was 22 years and the weighted average rate used to
discount lease commitments was 4 percent.
The following represents the maturities of our outstanding lease commitments as of December 31, 2019:
(Millions)
2020
2021
2022
2023
2024
Thereafter
Total Outstanding Fixed Lease Payments
Less: Amount representing interest
Lease Liabilities
$
$
$
$
134
114
100
89
77
842
1,356
(573)
783
As of December 31, 2019, we had $5 billion in commitments outstanding related to agreements with certain cobrand
arrangements under which we make payments based primarily on the amount of Card Member spending and
corresponding rewards earned on such spending and, under certain arrangements, on the number of cobrand accounts
acquired and retained. As of December 31, 2019, we also had certain cobrand arrangements that include commitments
based on variables, the values of which are not yet determinable and thus the amount is not quantifiable.
109
NNOTE 13
DERIVATIVES AND HEDGING ACTIVITIES
We use derivative financial instruments to manage exposures to various market risks. These instruments derive their
value from an underlying variable or multiple variables, including interest rates, foreign exchange rates, and an equity
index or price, and are carried at fair value on the Consolidated Balance Sheets. These instruments enable end users to
increase, reduce or alter exposure to various market risks and, for that reason, are an integral component of our market
risk management. We do not transact in derivatives for trading purposes.
Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk
exposures include:
•
Interest rate risk due to changes in the relationship between interest rates on our assets (such as loans, receivables
and investment securities) and interest rates on our liabilities (such as debt and deposits); and
Foreign exchange risk related to earnings, funding, transactions and investments in currencies other than the U.S.
dollar.
•
We centrally monitor market risks using market risk limits and escalation triggers as defined in our Asset/Liability
Management Policy. Our market exposures are in large part by-products of the delivery of our products and services.
Interest rate risk primarily arises through the funding of Card Member receivables and fixed-rate loans with variable-rate
borrowings, as well as through the risk to net interest margin from changes in the relationship between benchmark rates
such as Prime, LIBOR and the overnight indexed swap rate. Interest rate exposure within our charge card and fixed-rate
lending products is managed by varying the proportion of total funding provided by short-term and variable-rate debt and
deposits compared to fixed-rate debt and deposits. In addition, interest rate swaps are used from time to time to
economically convert fixed-rate debt obligations to variable-rate obligations, or to convert variable-rate debt obligations
to fixed-rate obligations. We may change the mix between variable-rate and fixed-rate funding based on changes in
business volumes and mix, among other factors.
Foreign exchange risk is generated by Card Member cross-currency spend, foreign currency balance sheet exposures,
foreign subsidiary equity and foreign currency earnings in entities outside the United States. Our foreign exchange risk is
managed primarily by entering into agreements to buy and sell currencies on a spot basis or by hedging this market
exposure, to the extent it is economical, through various means, including the use of derivatives such as foreign exchange
forwards and cross-currency swap contracts.
Derivatives may give rise to counterparty credit risk, which is the risk that a derivative counterparty will default on, or
otherwise be unable to perform pursuant to, an uncollateralized derivative exposure. We manage this risk by considering
the current exposure, which is the replacement cost of contracts on the measurement date, as well as estimating the
maximum potential value of the contracts over the next 12 months, considering such factors as the volatility of the
underlying or reference index. To mitigate derivative credit risk, counterparties are required to be pre-approved by us and
rated as investment grade, and counterparty risk exposures are centrally monitored.
Additionally, in order to mitigate the bilateral counterparty credit risk associated with derivatives, we have in certain
instances entered into master netting agreements with our derivative counterparties, which provide a right of offset for
certain exposures between the parties. A majority of our derivative assets and liabilities as of December 31, 2019 and
2018 are subject to such master netting agreements with our derivative counterparties, and there are no instances in
which management makes an accounting policy election to not net assets and liabilities subject to an enforceable master
netting agreement on the Consolidated Balance Sheets. To further mitigate counterparty credit risk, we exercise our
rights under executed credit support agreements with the respective derivative counterparties for most of our bilateral
interest rate swaps and select foreign exchange contracts. These agreements require that, in the event the fair value
change in the net derivatives position between the two parties exceeds certain dollar thresholds, the party in the net
liability position posts collateral to its counterparty. All derivative contracts cleared through a central clearinghouse are
collateralized to the full amount of the fair value of the contracts.
In relation to our credit risk, certain of our bilateral derivative agreements include provisions that allow our counterparties
to terminate the agreement in the event of a downgrade of our debt credit rating below investment grade and settle the
outstanding net liability position. As of December 31, 2019, these derivatives were not in a significant net liability position.
We have no individually significant derivative counterparties and therefore, no significant risk exposure to any single
derivative counterparty. Based on our assessment of the credit risk of our derivative counterparties and our own credit
risk as of December 31, 2019 and 2018, no credit risk adjustment to the derivative portfolio was required.
110
Our derivatives are carried at fair value on the Consolidated Balance Sheets. The accounting for changes in fair value
depends on the instruments’ intended use and the resulting hedge designation, if any, as discussed below. Refer to Note
14 for a description of our methodology for determining the fair value of derivatives.
The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of
December 31:
Other Assets Fair Value
Other Liabilities Fair Value
2018
22019
2018
(Millions)
Derivatives designated as hedging instruments:
Fair value hedges - Interest rate contracts(a)
Net investment hedges - Foreign exchange contracts
Total derivatives designated as hedging instruments
Derivatives not designated as hedging instruments:
$$
Foreign exchange contracts, including certain embedded derivatives
Total derivatives, gross
Derivative asset and derivative liability netting(b)
Cash collateral netting(c) (d)
Total derivatives, net
22019
1185 $
224
2209
1134
3343
((90)
((185)
668 $
$$
34 $$
222
256
258
514
(90)
(28)
396 $$
—— $
1186
1186
2254
4440
((90)
((9)
3341 $
74
61
135
79
214
(90)
(78)
46
(a) For our centrally cleared derivatives, variation margin payments are legally characterized as settlement payments as opposed to
collateral.
(b) Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an
enforceable master netting arrangement.
(c) Represents the offsetting of the fair value of bilateral interest rate contracts and certain foreign exchange contracts with the right to
cash collateral held from the counterparty or cash collateral posted with the counterparty.
(d) We posted $47 million and $84 million as of December 31, 2019 and 2018, respectively, as initial margin on our centrally cleared
interest rate swaps; such amounts are recorded within Other assets on the Consolidated Balance Sheets and are not netted against
the derivative balances.
DDERIVATIVE FINANCIAL INSTRUMENTS THAT QUALIFY FOR HEDGE ACCOUNTING
Derivatives executed for hedge accounting purposes are documented and designated as such when we enter into the
contracts. In accordance with our risk management policies, we structure our hedges with terms similar to those of the
item being hedged. We formally assess, at inception of the hedge accounting relationship and on a quarterly basis,
whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of the hedged
items. These assessments usually are made through the application of a regression analysis method. If it is determined
that a derivative is not highly effective as a hedge, we will discontinue the application of hedge accounting.
FAIR VALUE HEDGES
A fair value hedge involves a derivative designated to hedge our exposure to future changes in the fair value of an asset or
a liability, or an identified portion thereof, that is attributable to a particular risk.
Interest Rate Contracts
We are exposed to interest rate risk associated with our fixed-rate debt obligations. At the time of issuance, certain fixed-
rate long-term debt obligations are designated in fair value hedging relationships, using interest rate swaps, to
economically convert the fixed interest rate to a floating interest rate. We have $22.6 billion and $24.0 billion of fixed-rate
debt obligations designated in fair value hedging relationships as of December 31, 2019 and 2018, respectively.
Gains or losses on the fair value hedging instrument principally offset the losses or gains on the hedged item attributable
to the hedged risk. The changes in the fair value of the derivative and the changes in the hedged item may not fully offset
due to differences between a debt obligation’s interest rate and the benchmark rate, primarily due to credit spreads at
inception of the hedging relationship that are not reflected in the fair value of the interest rate swap. Furthermore, the
difference may be caused by changes in 1-month LIBOR, 3-month LIBOR and the overnight indexed swap rate, as spreads
between these rates impact the fair value of the interest rate swap without an exact offsetting impact to the fair value of
the hedged debt.
111
The following table presents the gains and losses associated with the fair value hedges of our fixed-rate long-term debt
for the years ended December 31:
Gains (losses)
(Millions)
Fixed-rate long-term debt
Derivatives designated as hedging instruments
Total
IInterest expense
$
22019
2018
((a) Interest expense
(a)
59 $
(43)
16 $
4 $
(458) $
462
2017
Other, net
expenses
206
(246)
(40)
$
(a) We adopted a new accounting guidance providing targeted improvements to the accounting for hedging activities effective January 1,
2018. In compliance with the standard, amounts previously recorded in Other expenses have been prospectively recorded in Total
interest expense.
The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were
$22.7 billion and $23.7 billion as of December 31, 2019 and 2018, respectively, including the cumulative amount of fair
value hedging adjustments of $217 million and $(241) million for the respective periods.
We recognized net increases of $102 million and $51 million in Interest expense on Long-term debt for the years ended
December 31, 2019 and 2018, respectively, and a net reduction of $133 million for the year ended December 31, 2017,
primarily related to the net settlements (interest accruals) on our interest rate derivatives designated as fair value
hedges.
NET INVESTMENT HEDGES
A net investment hedge is used to hedge future changes in currency exposure of a net investment in a foreign operation.
We primarily designate foreign currency derivatives, typically foreign exchange forwards, and on occasion foreign
currency denominated debt, as hedges of net investments in certain foreign operations. These instruments reduce
exposure to changes in currency exchange rates on our investments in non-U.S. subsidiaries. We had notional amounts of
approximately $9.8 billion and $9.6 billion of foreign currency derivatives designated as net investment hedges as of
December 31, 2019 and 2018, respectively. The gain or loss on net investment hedges, net of taxes, recorded in AOCI as
part of the cumulative translation adjustment, were a loss of $140 million, a gain of $328 million and a loss of $370 million
for the years ended December 31, 2019, 2018 and 2017, respectively.
DERIVATIVES NOT DESIGNATED AS HEDGES
We have derivatives that act as economic hedges, but are not designated as such for hedge accounting purposes. Foreign
currency transactions from time to time may be partially or fully economically hedged through foreign currency
contracts, primarily foreign exchange forwards. These hedges generally mature within one year. Foreign currency
contracts involve the purchase and sale of designated currencies at an agreed upon rate for settlement on a specified
date.
We also have certain operating agreements containing payments that may be linked to a market rate or price, primarily
foreign currency rates. The payment components of these agreements may meet the definition of an embedded
derivative, in which case the embedded derivative is accounted for separately and is classified as a foreign exchange
contract based on its primary risk exposure.
The changes in the fair value of derivatives that are not designated as hedges are intended to offset the related foreign
exchange gains or losses of the underlying foreign currency exposures. The changes in the fair value of the derivatives
and the related underlying foreign currency exposures resulted in a net gain of $64 million, a net gain of $60 million, and a
net loss of $29 million for the years ended December 31, 2019, 2018, and 2017, respectively, that are recognized in Other,
net expenses in the Consolidated Statements of Income. Included in the net gain of $64 million for the year ended
December 31, 2019, is a gain of $3 million, specifically related to a change in the fair value of an embedded derivative. The
changes in the fair value of embedded derivatives for the years ended December 31, 2018 and 2017 resulted in losses of
$11 million and nil, respectively, that are recognized in Card Member services expense in the Consolidated Statements of
Income.
112
NNOTE 14
FAIR VALUES
Fair value is defined as the price that would be required to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, based on the principal or, in the absence of a
principal, most advantageous market for the specific asset or liability.
GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:
•
•
Level 1 — Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity
can access.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the asset or liability, including:
– Quoted prices for similar assets or liabilities in active markets;
– Quoted prices for identical or similar assets or liabilities in markets that are not active;
– Inputs other than quoted prices that are observable for the asset or liability; and
– Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•
Level 3 — Inputs that are unobservable and reflect our own estimates about the estimates market participants would
use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally
derived assumptions surrounding the timing and amount of expected cash flows). We did not measure any financial
instruments presented on the Consolidated Balance Sheets at fair value on a recurring basis using significant
unobservable inputs (Level 3) during the years ended December 31, 2019 and 2018, although the disclosed fair value
of certain assets that are not carried at fair value, as presented later in this Note, are classified within Level 3.
We monitor the market conditions and evaluate the fair value hierarchy levels at least quarterly. For the years ended
December 31, 2019 and 2018, there were no Level 3 transfers.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
The following table summarizes our financial assets and financial liabilities measured at fair value on a recurring basis,
categorized by GAAP’s fair value hierarchy (as described in the preceding paragraphs), as of December 31:
2019
2018
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
(Millions)
Assets:
Investment securities:(a)
Equity securities
Debt securities
Derivatives, gross(a)
Total Assets
Liabilities:
Derivatives, gross(a)
Total Liabilities
$
78 $
8,328
343
8,749
440
440 $
$
77 $
—
—
77
—
— $
1 $
8,328
343
8,672
440
440 $
— $
—
—
—
—
— $
48 $
4,599
514
5,161
214
214 $
1 $
—
—
1
—
— $
47 $
4,599
514
5,160
214
214 $
—
—
—
—
—
—
(a) Refer to Note 4 for the fair values of investment securities and to Note 13 for the fair values of derivative assets and liabilities, on a
further disaggregated basis.
113
VVALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND
FINANCIAL LIABILITIES CARRIED AT FAIR VALUE
For the financial assets and liabilities measured at fair value on a recurring basis (categorized in the valuation hierarchy
table above), we apply the following valuation techniques:
Investment Securities
When available, quoted prices of identical investment securities in active markets are used to estimate fair value. Such
investment securities are classified within Level 1 of the fair value hierarchy.
When quoted prices of identical investment securities in active markets are not available, the fair values for our
investment securities are obtained primarily from pricing services engaged by us, and we receive one price for each
security. The fair values provided by the pricing services are estimated using pricing models, where the inputs to those
models are based on observable market inputs or recent trades of similar securities. Such investment securities are
classified within Level 2 of the fair value hierarchy. The inputs to the valuation techniques applied by the pricing services
vary depending on the type of security being priced but are typically benchmark yields, benchmark security prices, credit
spreads, prepayment speeds, reported trades and broker-dealer quotes, all with reasonable levels of transparency. The
pricing services did not apply any adjustments to the pricing models used. In addition, we did not apply any adjustments
to prices received from the pricing services.
We reaffirm our understanding of the valuation techniques used by our pricing services at least annually. In addition, we
corroborate the prices provided by our pricing services by comparing them to alternative pricing sources. In instances
where price discrepancies are identified between different pricing sources, we evaluate such discrepancies to ensure that
the prices used for our valuation represent the fair value of the underlying investment securities. Refer to Note 4 for
additional fair value information.
Derivative Financial Instruments
The fair value of our derivative financial instruments is estimated internally by using third-party pricing models, where the
inputs to those models are readily observable from active markets. The pricing models used are consistently applied and
reflect the contractual terms of the derivatives as described below. We reaffirm our understanding of the valuation
techniques at least annually and validate the valuation output on a quarterly basis. Our derivative instruments are
classified within Level 2 of the fair value hierarchy.
The fair value of our interest rate swaps is determined based on a discounted cash flow method using the following
significant inputs: the contractual terms of the swap such as the notional amount, fixed coupon rate, floating coupon rate
and tenor, as well as discount rates consistent with the underlying economic factors of the currency in which the cash
flows are denominated.
The fair value of foreign exchange forward contracts is determined based on a discounted cash flow method using the
following significant inputs: the contractual terms of the forward contracts such as the notional amount, maturity dates
and contract rate, as well as relevant foreign currency forward curves, and discount rates consistent with the underlying
economic factors of the currency in which the cash flows are denominated.
Credit valuation adjustments are necessary when the market parameters, such as a benchmark curve, used to value
derivatives are not indicative of our credit quality or that of our counterparties. We consider the counterparty credit risk
by applying an observable forecasted default rate to the current exposure. Refer to Note 13 for additional fair value
information.
114
FFINANCIAL ASSETS AND FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE
The following table summarizes the estimated fair values of our financial assets and financial liabilities that are measured
at amortized cost, and not required to be carried at fair value on a recurring basis, as of December 31, 2019 and 2018. The
fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of
December 31, 2019 and 2018, and require management’s judgment. These figures may not be indicative of future fair
values, nor can the fair value of American Express be estimated by aggregating the amounts presented.
Carrying
VValue
Corresponding Fair Value Amount
Total
Level 1
Level 2
Level 3
2019 ((Billions)
Financial Assets:
Financial assets for which carrying values equal or
approximate fair value
Cash and cash equivalents(a)
Other financial assets(b)
Financial assets carried at other than fair value
Loans, net(c)
Financial Liabilities:
$
24 $
60
24 $
60
23 $
—
1 $
60
90
91
—
—
Financial liabilities for which carrying values equal or
approximate fair value
Financial liabilities carried at other than fair value
92
92
—
92
Certificates of deposit(d)
Long-term debt(c)
$
10
58 $
10
60 $
—
— $
10
60 $
2018 (Billions)
Financial Assets:
Financial assets for which carrying values equal or
approximate fair value
Cash and cash equivalents(a)
Other financial assets(b)
Financial assets carried at other than fair value
Loans, net(c)
Financial Liabiilities:
Carrying
Value
Corresponding Fair Value Amount
Total
Level 1
Level 2
Level 3
$
27 $
58
27 $
58
26 $
—
83
84
—
1 $
58
—
Financial liabilities for which carrying values equal or
approximate fair value
Financial liabilities carried at other than fair value
Certificates of deposit(d)
Long-term debt(c)
81
81
—
81
$
13
58 $
13
59 $
—
— $
13
59 $
(a) Level 2 amounts reflect time deposits and short-term investments.
(b)
Includes Card Member receivables (including fair values of Card Member receivables of $8.2 billion and $8.5 billion held by a
consolidated VIE as of December 31, 2019 and 2018, respectively), other receivables, restricted cash and other miscellaneous
assets.
(c) Balances include amounts held by a consolidated VIE for which the fair values of Card Member loans were $32.0 billion and $33.0
billion as of December 31, 2019 and 2018, respectively, and the fair values of Long-term debt were $19.8 billion and $19.4 billion as
of December 31, 2019 and 2018, respectively.
(d) Presented as a component of Customer deposits on the Consolidated Balance Sheets.
115
—
—
91
—
—
—
—
—
84
—
—
—
VVALUATION TECHNIQUES USED IN THE FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND
FINANCIAL LIABILITIES CARRIED AT OTHER THAN FAIR VALUE
For the financial assets and liabilities that are not required to be carried at fair value on a recurring basis (categorized in
the valuation hierarchy table), we apply the following valuation techniques to measure fair value:
Financial Assets For Which Carrying Values Equal Or Approximate Fair Value
Financial assets for which carrying values equal or approximate fair value include cash and cash equivalents, Card
Member receivables, accrued interest and certain other assets. For these assets, the carrying values approximate fair
value because they are short term in duration, have no defined maturity or have a market-based interest rate.
Financial Assets Carried At Other Than Fair Value
Loans, net
Loans are recorded at historical cost, less reserves, on the Consolidated Balance Sheets. In estimating the fair value for
our loans, we use a discounted cash flow model. Due to the lack of a comparable whole loan sales market for similar loans
and the lack of observable pricing inputs thereof, we use various inputs to estimate fair value. Such inputs include
projected income, discount rates and relevant credit losses. The valuation does not include economic value attributable to
future receivables generated by the accounts associated with the loans.
Financial Liabilities For Which Carrying Values Equal Or Approximate Fair Value
Financial liabilities for which carrying values equal or approximate fair value include accrued interest, customer deposits
(excluding certificates of deposit, which are described further below), Travelers Cheques and other prepaid products
outstanding, accounts payable, short-term borrowings and certain other liabilities for which the carrying values
approximate fair value because they are short term in duration, have no defined maturity or have a market-based interest
rate.
Financial Liabilities Carried At Other Than Fair Value
Certificates of Deposit
Certificates of deposit (CDs) are recorded at their historical issuance cost on the Consolidated Balance Sheets. Fair value
is estimated using a discounted cash flow methodology based on the future cash flows and the discount rate that reflects
the current market rates for similar types of CDs within similar markets.
Long-term Debt
Long-term debt is recorded at historical issuance cost on the Consolidated Balance Sheets adjusted for (i) unamortized
discount and unamortized fees, (ii) the impact of movements in exchange rates on foreign currency denominated debt
and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate
through the use of interest rate swaps. The fair value of our long-term debt is measured using quoted offer prices when
quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting
the future cash flows of each instrument at rates currently observed in publicly-traded debt markets for debt of similar
terms and credit risk. For long-term debt, where there are no rates currently observable in publicly traded debt markets of
similar terms and comparable credit risk, we use market interest rates and adjust those rates for necessary risks,
including our own credit risk. In determining an appropriate spread to reflect our credit standing, we consider credit
default swap spreads, bond yields of other long-term debt offered by us, and interest rates currently offered to us for
similar debt instruments of comparable maturities.
NONRECURRING FAIR VALUE MEASUREMENTS
We have certain assets that are subject to measurement at fair value on a nonrecurring basis. For these assets,
measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be
impaired or where there are observable price changes for equity investments without readily determinable fair values.
During the years ended December 31, 2019 and 2018, we did not have any material assets that were measured at fair
value due to impairment and there were no material fair value adjustments for equity investments without readily
determinable fair values.
116
NNOTE 15
GUARANTEES
The maximum potential undiscounted future payments and related liability resulting from guarantees and
indemnifications provided by us in the ordinary course of business were $1 billion and $29 million, respectively, as of
December 31, 2019, and $1 billion and $46 million, respectively, as of December 31, 2018, all of which were primarily
related to our real estate and business dispositions.
To date, we have not experienced any significant losses related to guarantees or indemnifications. Our recognition of
these instruments is at fair value. In addition, we establish reserves when a loss is probable and the amount can be
reasonably estimated.
NOTE 16
COMMON AND PREFERRED SHARES
The following table shows authorized shares and provides a reconciliation of common shares issued and outstanding for
the years ended December 31:
(Millions, except where indicated)
Common shares authorized (billions)(a)
Shares issued and outstanding at beginning of year
Repurchases of common shares
Other, primarily stock option exercises and restricted stock awards granted
Shares issued and outstanding as of December 31
2019
3.6
847
(40)
3
810
2018
3.6
859
(15)
3
847
2017
3.6
904
(50)
5
859
(a) Of the common shares authorized but unissued as of December 31, 2019, approximately 19 million shares are reserved for issuance
under employee stock and employee benefit plans.
On September 23, 2019, the Board of Directors authorized the repurchase of up to 120 million common shares from time
to time, subject to market conditions and in accordance with our capital plans. This authorization replaced the prior
repurchase authorization and does not have an expiration date. During 2019, 2018 and 2017, we repurchased 40 million
common shares with a cost basis of $4.6 billion, 15 million common shares with a cost basis of $1.6 billion, and 50 million
common shares with a cost basis of $4.3 billion, respectively. The cost basis includes commissions paid of $6.2 million,
$2.2 million and $2.9 million in 2019, 2018 and 2017, respectively. As of December 31, 2019, we had approximately 109
million common shares remaining under the Board share repurchase authorization.
Common shares are generally retired by us upon repurchase (except for 2.6 million, 2.7 million and 2.9 million shares held
as treasury shares as of December 31, 2019, 2018 and 2017, respectively); retired common shares and treasury shares
are excluded from the shares outstanding in the table above. The treasury shares, with a cost basis of $292 million, $207
million and $217 million as of December 31, 2019, 2018 and 2017, respectively, are included as a reduction to Additional
paid-in capital in Shareholders’ equity on the Consolidated Balance Sheets.
117
PPREFERRED SHARES
The Board of Directors is authorized to permit us to issue up to 20 million Preferred Shares at a par value of $1.662/3
without further shareholder approval. We have the following perpetual Fixed Rate/Floating Rate Noncumulative Preferred
Share series issued and outstanding as of December 31, 2019:
Issuance date
Securities issued
Aggregate liquidation preference
Fixed dividend rate per annum
Semi-annual fixed dividend payment dates
Floating dividend rate per annum
Quarterly floating dividend payment dates
Fixed to floating rate conversion date(a)
Series B
November 10, 2014
750 Preferred Shares; represented by
750,000 depositary shares
$750 million
5.20%
Beginning May 15, 2015
3 month LIBOR+ 3.428%
Beginning February 15, 2020
November 15, 2019
Series C
March 2, 2015
850 Preferred Shares; represented by
850,000 depositary shares
$850 million
4.90%
Beginning September 15, 2015
3 month LIBOR+ 3.285%
Beginning June 15, 2020
March 15, 2020
(a) The date on which dividends convert from a fixed-rate calculation to a floating rate calculation.
In the event of the voluntary or involuntary liquidation, dissolution or winding up of the Company, the preferred stock then
outstanding takes precedence over our common stock for the payment of dividends and the distribution of assets out of
funds legally available for distribution to shareholders. Each outstanding series of Preferred Shares has a liquidation price
of $1 million per Preferred Share, plus any accrued but unpaid dividends. We may redeem these Preferred Shares at $1
million per Preferred Share (equivalent to $1,000 per depositary share) plus any declared but unpaid dividends in whole
or in part, from time to time, on any dividend payment date on or after the respective fixed to floating rate conversion
date, or in whole, but not in part, within 90 days of certain bank regulatory changes.
There were no warrants issued and outstanding as of December 31, 2019, 2018 and 2017.
118
NNOTE 17
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME
AOCI is a balance sheet item in Shareholders’ equity on the Consolidated Balance Sheets. It is comprised of items that
have not been recognized in earnings but may be recognized in earnings in the future when certain events occur. Changes
in each component for the three years ended December 31 were as follows:
Net Unrealized
Gains (Losses)
on Investment
Securities
Foreign
Currency
Translation
Adjustment
Gains (Losses)
Net Unrealized
Pension
and Other
Postretirement
Benefit
Gains (Losses)
(Millions), net of tax
Balance as of DDecember 31, 2016
Net unrealized losses
Decrease due to amounts reclassified into earnings
Net translation gains on investments in foreign
operations (a)
Net losses related to hedges of investments in foreign
operations
Pension and other postretirement benefits
Net change in accumulated other comprehensive (loss)
income
Balance as of December 31, 2017
Net unrealized losses
Net translation losses on investments in foreign
operations
Net gain related to hedges of investments in foreign
operations
Pension and other postretirement benefits
Other
Net change in accumulated other comprehensive (loss)
income
Balance as of December 31, 2018
Net unrealized gains
Net translation gains on investments in foreign
operations
Net losses related to hedges of investments in foreign
operations
Pension and other postretirement benefits
Net change in accumulated other comprehensive (loss)
income
Balance as of December 31, 2019
$
7 $
(7)
—
—
—
—
(7)
—
(10)
—
—
—
2
(8)
(8)
41
—
(2,262) $
—
(7)
678
(370)
—
301
(1,961)
—
(500)
328
—
—
(172)
(2,133)
—
84
—
—
41
33 $
(140)
—
(56)
(2,189) $
$
Includes $289 million of recognized tax benefits in the year ended December 31, 2017 (refer to Note 20).
(a)
(529) $
—
—
—
—
62
62
(467)
—
—
—
11
—
11
(456)
—
—
—
(125)
(125)
(581) $
Accumulated
Other
Comprehensive
(Loss)
Income
(2,784)
(7)
(7)
678
(370)
62
356
(2,428)
(10)
(500)
328
11
2
(169)
(2,597)
41
84
(140)
(125)
(140)
(2,737)
The following table shows the tax impact for the years ended December 31 for the changes in each component of AOCI
presented above:
(Millions)
Net unrealized investment securities
Net translation on investments in foreign operations(a)
Net hedges of investments in foreign operations
Pension and other postretirement benefits
Total tax impact
Tax expense (benefit)
$
$
2019
12 $
24
(43)
(38)
(45) $
2018
(2) $
(44)
107
9
70 $
2017
(4)
(172)
(215)
7
(384)
(a)
Includes $289 million of recognized tax benefits in the year ended December 31, 2017 (refer to Note 20).
119
The following table presents the effects of reclassifications out of AOCI and into the Consolidated Statements of Income
for the years ended December 31:
Description (Millions)
Foreign currency translation adjustments
Income Statement Line
Gains (losses) recognized in earnings
2017
2018
22019
Reclassification of translation adjustments and related hedges Other expenses
Related income tax
Reclassification of foreign currency translation adjustments
Income tax provision
$$
$$
—— $
——
—— $
1 $
(1)
— $
(7)
14
7
NNOTE 18
OTHER FEES AND COMMISSIONS AND OTHER EXPENSES
The following is a detail of Other fees and commissions for the years ended December 31:
(Millions)
Fees charged to Card Members:
2019
Delinquency fees
Foreign currency conversion fee revenue
Other customer fees:
$
1,028 $
982
Loyalty coalition-related fees
Travel commissions and fees
Service fees and other(a)
Total Other fees and commissions
456
424
407
3,297 $
(a) Other includes Membership Rewards program fees that are not related to contracts with customers.
$
2018
959 $
921
461
395
417
3,153 $
2017
888
851
452
364
435
2,990
The following is a detail of Other expenses for the years ended December 31:
(Millions)
Professional services
Occupancy and equipment
Other(a)
Total Other expenses
2019
2,091 $
2,168
1,609
5,868 $
2018
2,125 $
2,033
1,513
5,671 $
2017
2,040
2,018
1,576
5,634
$
$
(a) Other expense primarily includes general operating expenses, communication expenses, Card Member and merchant-related fraud
losses, litigation expenses, other non-income taxes and unrealized gains and losses on certain equity investments. For the year
ended December 31, 2018, Other expense also includes the loss on a transaction involving the operations of our prepaid reloadable
and gift card business. For the year ended December 31, 2017, Other expense also includes charges related to our U.S. loyalty
coalition and prepaid businesses.
NOTE 19
RESTRUCTURING
We periodically initiate restructuring programs to support new business strategies and to enhance our overall
effectiveness and efficiency. In connection with these programs, we will typically incur severance and other exit costs.
We had $135 million, $69 million and $199 million accrued in total restructuring reserves as of December 31, 2019, 2018
and 2017, respectively. New charges, including net revisions to existing restructuring reserves, which primarily relate to
the redeployment of displaced colleagues to other positions, were $125 million, $(23) million and $42 million, for the
years ended December 31, 2019, 2018 and 2017, respectively. Cumulatively, we recognized $424 million relating to the
restructuring programs that were in progress during 2019 and initiated at various dates between 2014 and 2019, the
majority of which has been reflected within Corporate & Other.
120
NNOTE 20
INCOME TAXES
The Tax Act, enacted on December 22, 2017, made broad and complex changes to the U.S. federal corporate income tax
rules. Most notably, effective January 1, 2018, the Tax Act reduced the U.S. federal statutory corporate income tax rate
from 35 percent to 21 percent, introduced a territorial tax system in which future dividends paid from earnings outside the
United States to a U.S. corporation are not subject to U.S. federal taxation and imposed new U.S. federal corporate
income taxes on certain foreign operations.
The components of income tax expense for the years ended December 31 included in the Consolidated Statements of
Income were as follows:
(Millions)
Current income tax expense:
2019
2018
2017
U.S. federal
U.S. state and local
Non-U.S.
Total current income tax expense
Deferred income tax (benefit) expense:
U.S. federal
U.S. state and local
Non-U.S.
Total deferred income tax (benefit) expense
Total income tax expense
$
$
1,108 $
276
437
1,821
(58)
(31)
(62)
(151)
1,670 $
70 $
150
681
901
276
78
(54)
300
1,201 $
3,408
259
387
4,054
544
(12)
91
623
4,677
A reconciliation of the U.S. federal statutory rate of 21 percent as of both December 31, 2019 and 2018, and 35 percent as
of December 31, 2017, to our actual income tax rate was as follows:
U.S. statutory federal income tax rate
(Decrease) increase in taxes resulting from:
Tax-exempt income
State and local income taxes, net of federal benefit
Non-U.S. subsidiaries' earnings(a)
Tax settlements(b)
U.S. Tax Act(c)
U.S. Tax Act - related adjustments(d)
Other
Actual tax rates
2019
21.0 %
2018
21.0 %
(1.9)
2.8
(0.7)
(0.3)
—
—
(1.7)
2.8
(0.5)
(1.9)
(1.1)
(3.2)
(1.1)
19.8 %
(0.6)
14.8 %
2017
35.0 %
(1.7)
2.3
(5.7)
(0.7)
34.8
—
(1.0)
63.0 %
(a) 2017 primarily included tax benefits associated with the undistributed earnings of certain non-U.S. subsidiaries that were previously
deemed to be reinvested indefinitely. In addition, 2017 included tax benefits of $156 million, which decreased the actual tax rate by
2.1 percent, related to the realization of certain foreign tax credits.
(b) 2018 primarily included a settlement of the IRS examination for tax years 2008-2014, as well as the resolution of certain tax matters
in various jurisdictions.
(c) 2017 included a $2.6 billion provisional charge for the impacts of the Tax Act and the adjustments thereto are included in 2018.
(d) Related to changes to the tax method of accounting for certain expenses.
We record a deferred income tax (benefit) provision when there are differences between assets and liabilities measured
for financial reporting and for income tax return purposes. These temporary differences result in taxable or deductible
amounts in future years and are measured using the tax rates and laws that will be in effect when such differences are
expected to reverse.
121
The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:
(Millions)
Deferred tax assets:
Reserves not yet deducted for tax purposes
Employee compensation and benefits
Other
Gross deferred tax assets
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liabilities:
Intangibles and fixed assets
Deferred revenue
Deferred interest
Investment in joint ventures
Other
Gross deferred tax liabilities
Net deferred tax assets
22019
22,633 $
33665
5536
33,5534
((66)
33,4468
11,2279
3315
1162
1122
1129
22,007
11,461 $
2018
2,612
360
431
3,403
(61)
3,342
1,083
435
171
137
210
2,036
1,306
$$
$$
A valuation allowance is established when management determines that it is more likely than not that all or some portion
of the benefit of the deferred tax assets will not be realized. The valuation allowances as of December 31, 2019 and 2018
are associated with net operating losses and other deferred tax assets in certain non-U.S. operations.
Accumulated earnings of certain non-U.S. subsidiaries, which totaled approximately $0.7 billion as of December 31, 2019,
are intended to be permanently reinvested outside the U.S. We do not provide for state income and foreign withholding
taxes on foreign earnings intended to be permanently reinvested outside the U.S. Accordingly, state income and foreign
withholding taxes, which would have aggregated to approximately $0.1 billion as of December 31, 2019, have not been
provided on those earnings.
Net income taxes paid by us during 2019, 2018 and 2017, were approximately $1.7 billion, $2.0 billion and $1.4 billion,
respectively. These amounts include estimated tax payments and cash settlements relating to prior tax years.
We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign
jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts
is sometimes open to interpretation. Given these inherent complexities, we must make judgments in assessing the
likelihood that a tax position will be sustained upon examination by the taxing authorities based on the technical merits of
the tax position. A tax position is recognized only when, based on management’s judgment regarding the application of
income tax laws, it is more likely than not that the tax position will be sustained upon examination. The amount of benefit
recognized for financial reporting purposes is based on management’s best judgment of the largest amount of benefit
that is more likely than not to be realized on ultimate settlement with the taxing authority given the facts, circumstances
and information available at the reporting date. We adjust the level of unrecognized tax benefits when there is new
information available to assess the likelihood of the outcome.
We are under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and
states in which we have significant business operations. The tax years under examination and open for examination vary
by jurisdiction. Tax years from 2016 onwards are open for examination by the IRS.
122
The following table presents changes in unrecognized tax benefits:
(Millions)
Balance, January 1
Increases:
Current year tax positions
Tax positions related to prior years
Effects of foreign currency translations
Decreases:
Tax positions related to prior years(a)
Settlements with tax authorities(b)
Lapse of statute of limitations
Effects of foreign currency translations
Balance, December 31
22019
7701 $
2018
821 $
$$
666
778
110
((14)
((40)
((75)
—
7726 $
152
47
—
(74)
(192)
(44)
(9)
701 $
$$
2017
974
200
39
—
(289)
(77)
(26)
—
821
(a) Decrease in 2017 due to the resolution with the IRS of an uncertain tax position in January 2017, which resulted in the recognition of
$289 million in AOCI.
2018 included a settlement of the IRS examination for tax years 2008-2014 and the resolution of certain tax matters in various
jurisdictions.
(b)
Included in the unrecognized tax benefits of $0.7 billion, $0.7 billion and $0.8 billion for December 31, 2019, 2018 and
2017, respectively, are approximately $623 million, $599 million and $723 million, respectively, that, if recognized, would
favorably affect the effective tax rate in a future period.
We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next 12 months by as
much as $113 million, principally as a result of potential resolutions of prior years’ tax items with various taxing
authorities. The prior years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or
losses and the attribution of taxable income to a particular jurisdiction or jurisdictions. Of the $113 million of unrecognized
tax benefits, approximately $96 million relates to amounts that, if recognized, would impact the effective tax rate in a
future period.
Interest and penalties relating to unrecognized tax benefits are reported in the income tax provision. For the year ended
December 31, 2019, we recognized approximately $5 million in expenses for interest and penalties. For the years ended
December 31, 2018 and 2017, we recognized benefits of approximately $18 million and $90 million, respectively, for
interest and penalties. The interest expense benefit in 2017 includes approximately $56 million related to the resolution of
an uncertain tax position with the IRS in January 2017, which had no net impact on the income tax provision.
We had approximately $70 million and $65 million accrued for the payment of interest and penalties as of December 31,
2019 and 2018, respectively.
123
NNOTE 21
EARNINGS PER COMMON SHARE (EPS)
The computations of basic and diluted EPS for the years ended December 31 were as follows:
2019
(Millions, except per share amounts)
Numerator:
Basic and diluted:
Net income
Preferred dividends
Net income available to common shareholders
Earnings allocated to participating share awards(a)
Net income attributable to common shareholders
Denominator:(a)
Basic: Weighted-average common stock
Add: Weighted-average stock options(b)
Diluted
Basic EPS
Diluted EPS
$
$
$
$
6,759 $
(81)
6,678
(47)
6,631 $
828
2
830
8.00 $
7.99 $
2018
2017
6,921 $
(80)
6,841
(54)
6,787 $
856
3
859
7.93 $
7.91 $
2,748
(81)
2,667
(21)
2,646
883
3
886
3.00
2.99
(a) Our unvested restricted stock awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are
considered participating securities. Calculations of EPS under the two-class method exclude from the numerator any dividends paid
or owed on participating securities and any undistributed earnings considered to be attributable to participating securities. The
related participating securities are similarly excluded from the denominator.
(b) The dilutive effect of unexercised stock options excludes from the computation of EPS 0.2 million, 0.7 million and 0.6 million of
options for the years ended December 31, 2019, 2018 and 2017, respectively, because inclusion of the options would have been anti-
dilutive.
124
NNOTE 22
REGULATORY MATTERS AND CAPITAL ADEQUACY
We are supervised and regulated by the Board of Governors of the Federal Reserve System (the Federal Reserve) and are
subject to the Federal Reserve’s requirements for risk-based capital and leverage ratios. Our U.S. bank subsidiary,
American Express National Bank (AENB), is subject to supervision and regulation, including regulatory capital and
leverage requirements, by the Office of the Comptroller of the Currency (OCC).
Under the risk-based capital guidelines of the Federal Reserve, we are required to maintain minimum ratios of CET1, Tier 1
and Total (Tier 1 plus Tier 2) capital to risk-weighted assets, as well as a minimum Tier 1 leverage ratio (Tier 1 capital to
average adjusted on-balance sheet assets).
Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary
actions by regulators, that, if undertaken, could have a direct material effect on our operating activities.
As of December 31, 2019 and 2018, we met all capital requirements to which we were subject and maintained regulatory
capital ratios in excess of those required to qualify as well capitalized.
The following table presents the regulatory capital ratios:
CET 1
capital
Tier 1
capital
Total
capital
$ 18,056 $ 19,628 $ 22,2113
$ 13,600
(Millions, except percentages)
December 31, 2019: (a)
American Express Company
American Express National Bank $ 13,600
December 31, 2018:(a)
American Express Company
$ 17,498 $ 19,070 $ 21,653
American Express National Bank $ 11,564 $ 11,564 $ 13,574
Well-capitalized ratios(b)
Basel III Standards 2019(c)
Minimum capital ratios(d)
$ 15,688
CET 1
Capital
ratio
Tier 1
capital
ratio
Total
capital
ratio
Tier 1
leverage
ratio
Supplementary
Leverage
Ratio
10.7 %
13.4 %
11.6 %
13.4 %
13.2 %
15.4 %
10.2 %
11.1 %
11.0 %
12.1 %
6.5 %
7.0 %
4.5 %
12.0 %
12.1 %
8.0 %
8.5 %
6.0 %
13.6 %
14.2 %
10.0 %
10.5 %
8.0 %
10.4 %
9.9 %
5.0 %
4.0 %
4.0 %
8.8 %
9.3 %
8.9 %
8.2 %
N/A
3.0 %
3.0 %
(a) Capital ratios are reported using Basel III capital definitions, inclusive of transition provisions for the capital ratios and risk-weighted
assets using the Basel III standardized approach.
(b) Represents requirements for banking subsidiaries to be considered “well capitalized” pursuant to regulations issued under the
Federal Deposit Insurance Corporation Improvement Act. There is no CET1 capital ratio, Tier 1 leverage ratio or supplementary
leverage ratio (SLR) requirement for a bank holding company to be considered “well capitalized.”
(c) Basel III minimum capital requirement and additional capital conservation buffer as defined by the Federal Reserve and OCC for
calendar year 2019. The additional capital conservation buffer does not apply to Tier 1 leverage ratio or SLR.
(d) As defined by the regulations issued by the Federal Reserve and OCC.
RESTRICTED NET ASSETS OF SUBSIDIARIES
Certain of our subsidiaries are subject to restrictions on the transfer of net assets under debt agreements and regulatory
requirements. These restrictions have not had any effect on our shareholder dividend policy and management does not
anticipate any impact in the future. Procedures exist to transfer net assets between the Company and its subsidiaries,
while ensuring compliance with the various contractual and regulatory constraints. As of December 31, 2019, the
aggregate amount of net assets of subsidiaries that are restricted to be transferred was approximately $10.0 billion.
BANK HOLDING COMPANY DIVIDEND RESTRICTIONS
We are limited in our ability to pay dividends by the Federal Reserve, which could prohibit a dividend that would be
considered an unsafe or unsound banking practice. It is the policy of the Federal Reserve that bank holding companies
generally should pay dividends on preferred and common stock only out of net income available to common shareholders
generated over the past year, and only if prospective earnings retention is consistent with the organization’s current and
expected future capital needs, asset quality and overall financial condition. Moreover, bank holding companies are
required by statute to be a source of strength to their insured depository institution subsidiaries and should not maintain
dividend levels that undermine their ability to do so. On an annual basis, we are required to develop and maintain a capital
plan, which includes planned dividends over a two-year horizon. We may be limited in our ability to pay dividends if the
Federal Reserve objects to our capital plan.
125
In addition, the Capital Rules include a capital conservation buffer of 2.5 percent as of December 31, 2019, which can be
satisfied only with CET1 capital. If our risk-based capital ratios were to fall below the applicable buffer levels, we would be
subject to certain restrictions on dividends, stock repurchases and other capital distributions, as well as discretionary
bonus payments to executive officers.
BBANK DIVIDEND RESTRICTIONS
In the year ended December 31, 2019, AENB paid dividends from retained earnings to its parent of $3.9 billion.
AENB is limited in its ability to pay dividends by banking statutes, regulations and supervisory policy. In general,
applicable federal and state banking laws prohibit, without first obtaining regulatory approval, insured depository
institutions, such as AENB, from making dividend distributions if such distributions are not paid out of available retained
earnings or would cause the institution to fail to meet capital adequacy standards. AENB must maintain a capital
conservation buffer. If AENB's risk-based capital ratios do not satisfy minimum requirements plus the combined capital
conservation buffer, it will face graduated constraints on dividends and other capital distributions based on the amount of
the shortfall. As of December 31, 2019, AENB's retained earnings available for the payment of dividends was $4.9 billion.
In determining the dividends to pay its parent, AENB must also consider the effects on applicable risk-based capital and
leverage ratio requirements, as well as policy statements of the federal regulatory agencies. In addition, AENB's banking
regulators have authority to limit or prohibit the payment of a dividend by AENB under a number of circumstances,
including if, in the banking regulator’s opinion, payment of a dividend would constitute an unsafe or unsound banking
practice in light of the financial condition of the banking organization.
126
NNOTE 23
SIGNIFICANT CREDIT CONCENTRATIONS
Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of
counterparties whose aggregate credit exposure is material in relation to American Express’ total credit exposure. Our
customers operate in diverse industries, economic sectors and geographic regions.
The following table details our maximum credit exposure of the on-balance sheet assets by category as of December 31:
2018
123
30
20
4
177
(Billions)
Individuals(a)
Financial Services(b)
Institutions(c)
U.S. Government and agencies(d)
Total on-balance sheet
2019
131 $
26
20
8
185 $
$
$
(a) Primarily reflects loans and receivables from global consumer and small business Card Members, which are governed by individual
credit risk management.
(b) Represents banks, broker-dealers, insurance companies and savings and loan associations.
(c) Primarily reflects loans and receivables from global corporate Card Members, which are governed by institutional credit risk
management.
(d) Represent debt obligations of the U.S. Government and its agencies, states and municipalities and government-sponsored entities.
As of December 31, 2019 and 2018, our most significant concentration of credit risk was with individuals, including Card
Member loans and receivables. These amounts are generally advanced on an unsecured basis. However, we review each
potential customer’s credit application and evaluate the applicant’s financial history and ability and willingness to repay.
We also consider credit performance by customer tenure, industry and geographic location in managing credit exposure.
The following table details our Card Member loans and receivables exposure (including unused lines-of-credit available to
Card Members as part of established lending product agreements) in the United States and outside the United States as
of December 31:
(Billions)
On-balance sheet:
U.S.
Non-U.S.
On-balance sheet
Unused lines-of-credit:(a)
U.S.
Non-U.S.
Total unused lines-of-credit
2019
115 $
30
145
245
61
306 $
$
$
2018
111
27
138
249
53
302
(a) Total unused credit available to Card Members does not represent potential future cash requirements, as a significant portion of this
unused credit will likely not be drawn. Our charge card products generally have no pre-set spending limit, and therefore are not
reflected in unused credit available to Card Members.
127
NNOTE 24
REPORTABLE OPERATING SEGMENTS AND GEOGRAPHIC OPERATIONS
REPORTABLE OPERATING SEGMENTS
We consider a combination of factors when evaluating the composition of our reportable operating segments, including
the results reviewed by the chief operating decision maker, economic characteristics, products and services offered,
classes of customers, product distribution channels, geographic considerations (primarily United States versus outside
the United States), and regulatory environment considerations.
The following is a brief description of the primary business activities of our three reportable operating segments:
• Global Consumer Services Group (GCSG) primarily issues a wide range of proprietary consumer cards globally. GCSG
also provides services to consumers, including travel and lifestyle services and non-card financing products, and
manages certain international joint ventures and our partnership agreements in China.
• Global Commercial Services (GCS) primarily issues a wide range of proprietary corporate and small business cards
and provides payment and expense management services globally. In addition, GCS provides commercial financing
products.
• Global Merchant and Network Services (GMNS) operates a global payments network that processes and settles card
transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data
analytics, leveraging our global integrated network. GMNS manages our partnership relationships with third-party
card issuers, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American
Express brand and extending the reach of the global network. GMNS also manages loyalty coalition businesses in
certain countries.
Corporate functions and certain other businesses and operations are included in Corporate & Other.
During 2019, we moved intercompany assets and liabilities, previously recorded in the operating segments, to Corporate
& Other. Prior period amounts have been revised to conform to the current period presentation.
128
The following table presents certain selected financial information for our reportable operating segments and Corporate
& Other as of or for the years ended December 31, 2019, 2018 and 2017:
(Millions, except where indicated)
22019
Non-interest revenues
Revenue from contracts with customers(b)
Interest income
Interest expense
Total revenues net of interest expense
Total provisions
Pretax income (loss) from continuing operations
Income tax provision (benefit)
Net income (loss)
Total assets (billions)
2018
Non-interest revenues
Revenue from contracts with customers(b)
Interest income
Interest expense
Total revenues net of interest expense
Total provisions
Pretax income (loss) from continuing operations
Income tax provision (benefit)
Net income (loss)
Total assets (billions)
2017
Non-interest revenues
Revenue from contracts with customers(b)
Interest income
Interest expense
Total revenues net of interest expense
Total provisions
Pretax income (loss) from continuing operations
Income tax provision
Net income (loss)
Total assets (billions)
GCSG
GCS
GMNS
Corporate &
Other(a) Consolidated
$$
$$
$
$
$
115,,972 $$
111,041
99,413
11,806
223,579
22,636
44,024
7762
33,262
1106 $$
14,675 $
10,294
8,323
1,542
21,456
2,430
3,714
637
3,077
102 $
112,623 $$
110,891
11,900
9995
113,528
9917
33,066
5590
22,476
553 $$
11,882 $
10,309
1,621
827
12,676
899
2,895
555
2,340
51 $
13,378 $
9,448
6,789
1,047
19,120
1,996
3,645
1,053
2,592
10,942 $
9,471
1,361
595
11,708
743
2,843
914
1,929
66,252 $$
66,215
228
((365)
66,645
220
33,148
7736
22,412
118 $$
6,069 $
5,988
30
(294)
6,393
22
2,844
704
2,140
16 $
6,025 $
5,846
42
(188)
6,255
16
2,645
857
1,788
20 $
889 $$
112
7743
11,028
((196)
——
((1,809)
((418)
((1,391)
221 $$
49 $
16
632
868
(187)
1
(1,331)
(695)
(636)
20 $
82 $
15
371
658
(205)
5
(1,708)
1,853
(3,561)
17 $
334,936
228,159
112,084
33,464
443,556
33,573
88,429
11,670
66,759
1198
32,675
26,607
10,606
2,943
40,338
3,352
8,122
1,201
6,921
189
30,427
24,780
8,563
2,112
36,878
2,760
7,425
4,677
2,748
181
49 $
(a) Corporate & Other includes adjustments and eliminations for intersegment activity.
(b)
Includes discount revenue, certain other fees and commissions and other revenues from customers.
95 $
$
TTotal Revenues Net of Interest Expense
We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within
the GCSG and GCS segments, discount revenue generally reflects the issuer component of the overall discount revenue
generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network
and acquirer component of the overall discount revenue.
Net card fees and other fees and commissions are directly attributable to the segment in which they are reported.
Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported.
Interest expense represents an allocated funding cost based on a combination of segment funding requirements and
internal funding rates.
129
PProvisions for Losses
The provisions for losses are directly attributable to the segment in which they are reported.
Expenses
Marketing and business development expense is included in each segment based on the actual expenses incurred. Global
brand advertising is primarily reflected in Corporate & Other and may be allocated to the segments based on the actual
expense incurred. Rewards and Card Member services expenses are included in each segment based on the actual
expenses incurred within the segment.
Salaries and employee benefits and other operating expenses reflect expenses such as professional services, occupancy
and equipment and communications incurred directly within each segment. In addition, expenses related to support
services, such as technology costs, are allocated to each segment primarily based on support service activities directly
attributable to the segment. Certain other overhead expenses are allocated from Corporate & Other to the segments
based on the relative levels of revenue and Card Member loans and receivables.
Income Taxes
An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates
applicable to various businesses that comprise the segment. The charge of $2.6 billion related to the Tax Act in the fourth
quarter of 2017 was allocated in full to Corporate & Other.
GEOGRAPHIC OPERATIONS
The following table presents our total revenues net of interest expense and pretax income (loss) from continuing
operations in different geographic regions based, in part, upon internal allocations, which necessarily involve
management’s judgment:
(Millions)
2019
Total revenues net of interest expense $
Pretax income (loss) from continuing
operations
2018
Total revenues net of interest expense $
Pretax income (loss) from continuing
operations
2017
Total revenues net of interest expense $
Pretax income (loss) from continuing
operations
United
States
EMEA(a)
JAPA(a)
LACC(a)
Other
Unallocated(b) Consolidated
32,557 $
7,262
4,465 $
1,243
3,915 $
833
2,816 $
903
(197) $
(1,812)
43,556
8,429
29,864 $
6,696
4,419 $
1,212
3,656 $
764
2,584 $
782
(185) $
40,338
(1,332)
8,122
27,187 $
3,927 $
3,464 $
2,505 $
(205) $
36,878
6,412
1,150
763
806
(1,706)
7,425
(a) EMEA represents Europe, the Middle East and Africa; JAPA represents Japan, Asia/Pacific and Australia; and LACC represents Latin
America, Canada and the Caribbean.
(b) Other Unallocated includes net costs which are not directly allocated to specific geographic regions, including costs related to the
net negative interest spread on excess liquidity funding and executive office operations expenses.
130
NNOTE 25
PARENT COMPANY
PARENT COMPANY – CONDENSED STATEMENTS OF INCOME
Years Ended December 31 (Millions)
Revenues
Non-interest revenues
Other
Total non-interest revenues
Interest income
Interest expense
Total revenues net of interest expense
Expenses
Salaries and employee benefits
Other
Total expenses
Pretax loss
Income tax benefit
Net loss before equity in net income of subsidiaries and affiliates
Equity in net income of subsidiaries and affiliates
Net income
PARENT COMPANY – CONDENSED BALANCE SHEETS
2019
2018
2017
$
$
598 $
598
692
902
388
366
816
1,182
(794)
(282)
(512)
7,271
6,759 $
426 $
426
422
615
233
336
607
943
(710)
(179)
(531)
7,452
6,921 $
358
358
258
493
123
362
553
915
(792)
(354)
(438)
3,186
2,748
As of December 31 (Millions)
Assets
Cash and cash equivalents
Equity in net assets of subsidiaries and affiliates
Loans to subsidiaries and affiliates
Due from subsidiaries and affiliates
Other assets
Total assets
Liabilitiies and Shareholders’ Equity
Liabilities
Accounts payable and other liabilities
Due to subsidiaries and affiliates
Debt with subsidiaries and affiliates
Long-term debt
Total liabilities
Shareholdders’ Equity
Total shareholders’ equity
Total liabilities and shareholders’ equity
2019
2018
$
4,430 $
23,165
22,350
1,168
223
51,336
2,197
609
1,091
24,368
28,265
23,071
51,336 $
$
3,287
22,298
17,945
1,783
297
45,610
1,961
577
2,591
18,191
23,320
22,290
45,610
131
PPARENT COMPANY – CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31 (Millions)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Equity in net income of subsidiaries and affiliates
Dividends received from subsidiaries and affiliates
Other operating activities, primarily with subsidiaries and affiliates
Net cash provided by operating activities
Cash Flows from Investing Activities
Maturities and redemptions of investment securities
Loans to subsidiaries and affiliates
Investments in subsidiaries and affiliates
Other investing activities
Net cash used in investing activities
Cash Flows from Financing Activities
Proceeds from long-term debt
Payments of long-term debt
Short-term debt of subsidiaries and affiliates
Issuance of American Express common shares
Repurchase of American Express common shares and other
Dividends paid
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
NOTE 26
2019
2018
2017
$
6,759 $
6,921 $
2,748
(7,271)
6,370
1,315
7,173
1
(4,405)
(15)
82
(4,337)
(7,452)
3,222
(257)
2,434
—
(6,281)
(30)
—
(6,311)
6,469
(641)
(1,500)
86
(4,685)
(1,422)
(1,693)
1,143
3,287
4,430 $
9,350
(3,850)
(140)
87
(1,685)
(1,324)
2,438
(1,439)
4,726
3,287 $
$
(3,186)
5,755
659
5,976
—
(4,044)
—
—
(4,044)
5,900
(1,500)
(1,313)
129
(4,400)
(1,251)
(2,435)
(503)
5,229
4,726
QUARTERLY FINANCIAL DATA (UNAUDITED)
(Millions, except per share amounts)
Quarters Ended
3/31
Total revenues net of interest expense $ 11,365 $ 10,989 $ 10,838 $ 10,364 $ 10,474 $ 10,144 $ 10,002 $ 9,718
Pretax income
2,082
Net income
1,634
Earnings Per Common Share — Basic:
Net income attributable to common
shareholders(a)
1,986
1,693
1,958
1,550
2,219
1,761
2,266
1,755
2,091
1,623
2,118
1,654
1,831
2,010
9/30
12/31
9/30
12/31
6/30
2.09
2.04
2.07
3/31
6/30
2.33
1.89
1.85
1.81
2019
1.86
2018
Earnings Per Common Share —
Diluted:
Net income attributable to common
shareholders(a)
Cash dividends declared per common
share
2.03
2.08
2.07
1.80
2.32
1.88
1.84
1.86
$ 0.43 $ 0.43 $ 0.39 $ 0.39 $ 0.39 $ 0.39 $
0.35 $ 0.35
(a) Represents net income, less (i) earnings allocated to participating share awards of $12 million, $11 million, $13 million and $11
million for the quarters ended December 31, September 30, June 30 and March 31, 2019, respectively, and $16 million, $13 million,
$12 million and $13 million for the quarters ended December 31, September 30, June 30 and March 31, 2018, respectively, and (ii)
dividends on preferred shares of $20 million, $21 million, $19 million and $21 million for the quarters ended December 31,
September 30, June 30 and March 31, 2019, respectively, and $19 million, $20 million, $20 million and $21 million for the quarters
ended December 31, September 30, June 30 and March 31, 2018, respectively.
132
IITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the
Company’s disclosure controls and procedures are effective and designed to ensure that the information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported
within the requisite time periods specified in the applicable rules and forms, and that it is accumulated and communicated
to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fourth quarter that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
“Management’s Report on Internal Control over Financial Reporting,” which sets forth management’s evaluation of
internal control over financial reporting, and the “Report of Independent Registered Public Accounting Firm” on the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 are set forth in “Financial
Statements and Supplementary Data.”
ITEM 9B. OTHER INFORMATION
Not applicable.
133
PPART III
ITEMS 10, 11, 12 and 13. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE; EXECUTIVE COMPENSATION;
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
We expect to file with the SEC in March 2020 (and, in any event, not later than 120 days after the close of our last fiscal
year), a definitive proxy statement, pursuant to SEC Regulation 14A in connection with our Annual Meeting of
Shareholders to be held May 5, 2020, which involves the election of directors. The following information to be included in
such proxy statement is incorporated herein by reference:
•
•
•
•
•
•
•
•
•
Information included under the caption “Corporate Governance at American Express — Our Corporate
Governance Framework — Our Board’s Independence”
Information included under the caption “Corporate Governance at American Express — Our Board
Committees — Board Committee Responsibilities”
Information included under the caption “Corporate Governance at American Express — Our Corporate
Governance Framework — Director Attendance”
Information included under the caption “Corporate Governance at American Express — Compensation of
Directors”
Information included under the caption “Stock Ownership Information”
Information included under the caption “Corporate Governance at American Express — Item 1 — Election of
Directors for a Term of One Year”
Information included under the caption “Executive Compensation”
Information under the caption “Corporate Governance at American Express — Certain Relationships and
Transactions”
Information under the caption “Stock Ownership Information — Delinquent Section 16(a) Reports”
In addition, the information regarding executive officers called for by Item 401(b) of Regulation S-K may be found under
the caption “Information About Our Executive Officers” in this Report.
We have adopted a set of Corporate Governance Principles, which together with the charters of the four standing
committees of the Board of Directors (Audit and Compliance; Compensation and Benefits; Nominating, Governance and
Public Responsibility; and Risk), our Code of Conduct (which constitutes our code of ethics) and the Code of Business
Conduct for the Members of the Board of Directors, provide the framework for our governance. A complete copy of our
Corporate Governance Principles, the charters of each of the Board committees, the Code of Conduct (which applies not
only to our Chief Executive Officer, Chief Financial Officer and Controller, but also to all our other colleagues) and the
Code of Business Conduct for the Members of the Board of Directors may be found by clicking on the “Corporate
Governance” link found on our Investor Relations website at http://ir.americanexpress.com. We also intend to disclose
any amendments to our Code of Conduct, or waivers of our Code of Conduct on behalf of our Chief Executive Officer,
Chief Financial Officer or Controller, on our website. You may also access our Investor Relations website through our main
website at www.americanexpress.com by clicking on the “About American Express” link, which is located at the bottom of
the Company’s homepage. (Information from such sites is not incorporated by reference into this Report.) You may also
obtain free copies of these materials by writing to our Corporate Secretary at our headquarters.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information set forth under the heading “Item 2 — Ratification of Appointment of Independent Registered Public
Accounting Firm — PricewaterhouseCoopers LLP Fees and Services,” which will appear in our definitive proxy statement
in connection with our Annual Meeting of Shareholders to be held May 5, 2020, is incorporated herein by reference.
134
PPART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
1.
2.
Financial Statements:
See the “Index to Consolidated Financial Statements” under “Financial Statements and Supplementary Data.”
Financial Statement Schedules:
All schedules are omitted since the required information is either not applicable, not deemed material, or shown
in the Consolidated Financial Statements.
3.
Exhibits:
The following exhibits are filed as part of this report. The exhibit numbers preceded by an asterisk (*) indicate
exhibits electronically filed herewith. All other exhibit numbers indicate exhibits previously filed and are hereby
incorporated herein by reference. Exhibits numbered 10.1 through 10.43 are management contracts or
compensatory plans or arrangements.
3.1
3.2
4.1
*4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Company's Amended and Restated Certificate of Incorporation as amended through February 27, 2015 (incorporated by
reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter
ended March 31, 2015).
Company's By-Laws, as amended through September 26, 2016 (incorporated by reference to Exhibit 3.1 of the Company's
Current Report on Form 8-K (Commission File No. 1-7657), dated September 26, 2016).
The instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries are
omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company hereby agrees to furnish copies of
these instruments to the SEC upon request.
Description of American Express Company’s securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended.
American Express Company Deferred Compensation Plan for Directors and Advisors, as amended and restated effective
April 1, 2018 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended March 31, 2018).
American Express Company 2007 Pay-for-Performance Deferral Program Document (incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 20, 2006 (filed
November 22, 2006)).
Description of amendments to 1994–2006 Pay-for-Performance Deferral Programs (incorporated by reference to
Exhibit 10.13 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2006).
American Express Company 2006 Pay-for-Performance Deferral Program Guide (incorporated by reference to Exhibit 10.1
of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 21, 2005 (filed
November 23, 2005)).
American Express Company 2005 Pay-for-Performance Deferral Program Guide (incorporated by reference to
Exhibit 10.10 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2004).
Description of American Express Company Pay-for-Performance Deferral Program (incorporated by reference to
Exhibit 10.2 of the Company's Current Report on Form 8-K (Commission File No. 1-7657), dated November 22, 2004 (filed
January 28, 2005)).
Amendment to the Pre-2008 Nonqualified Deferred Compensation Plans of American Express Company (incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2008).
135
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
American Express Company Retirement Plan for Non-Employee Directors, as amended (incorporated by reference to
Exhibit 10.12 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 1988).
Certificate of Amendment of the American Express Company Retirement Plan for Non-Employee Directors dated
March 21, 1996 (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the year ended December 31, 1995).
American Express Key Executive Life Insurance Plan, as amended (incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the fiscal year ended December 31, 1991).
Amendment to American Express Company Key Executive Life Insurance Plan (incorporated by reference to Exhibit 10.3
of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30,
1994).
Amendment to American Express Company Key Executive Life Insurance Plan, effective as of January 22, 2007
(incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657)
for the year ended December 31, 2006).
Amendment to American Express Company Key Executive Life Insurance Plan, effective as of January 1, 2011
(incorporated by reference to Exhibit 10.24 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657)
for the year ended December 31, 2010).
American Express Key Employee Charitable Award Program for Education (incorporated by reference to Exhibit 10.13 of
the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1990).
American Express Directors' Charitable Award Program (incorporated by reference to Exhibit 10.14 of the Company's
Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1990).
American Express Company Salary/Bonus Deferral Plan (incorporated by reference to Exhibit 10.20 of the Company's
Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 1988).
Amendment to American Express Company Salary/Bonus Deferral Plan (incorporated by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30, 1994).
American Express Senior Executive Severance Plan, as amended and restated effective May 1, 2018 (incorporated by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter
ended June 30, 2018).
Amendments of (i) the American Express Salary/Bonus Deferral Plan and (ii) the American Express Key Executive Life
Insurance Plan (incorporated by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the year ended December 31, 1997).
Second Amendment and Restatement of the American Express Retirement Restoration Plan (f/k/a Supplemental
Retirement Plan) (as amended and restated effective as of January 1, 2012) (incorporated by reference to Exhibit 10.28 of
the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2011).
Third Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
March 29, 2012) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission
File No. 1-7657) for the quarter ended March 31, 2012).
Fourth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
October 24, 2012) (incorporated by reference to Exhibit 10.31 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the year ended December 31, 2012).
Fifth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
May 1, 2013) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission File
No. 1-7657) for the quarter ended March 31, 2013).
Sixth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
August 16, 2013) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q (Commission
File No. 1-7657) for the quarter ended September 30, 2013).
Seventh Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
September 26, 2013) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q
(Commission File No. 1-7657) for the quarter ended September 30, 2013).
Eighth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
December 1, 2013) (incorporated by reference to Exhibit 10.36 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the year ended December 31, 2013).
Ninth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
December 14, 2016) (incorporated by reference to Exhibit 10.30 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the year ended December 31, 2016).
136
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
Tenth Amendment to the American Express Retirement Restoration Plan (f/k/a Supplemental Retirement Plan) (dated
December 17, 2018) (incorporated by reference to Exhibit 10.28 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the year ended December 31, 2018).
American Express Company 2003 Share Equivalent Unit Plan for Directors, as amended and restated, effective January 1,
2015 (incorporated by reference to Exhibit 10.38 of the Company's Annual Report on Form 10-K (Commission File No. 1-
7657) for the year ended December 31, 2015).
Description of Compensation Payable to Non-Management Directors effective January 1, 2015 (incorporated by reference
to Exhibit 10.39 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended
December 31, 2014).
American Express Company 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K (Commission File No. 1-7657), dated April 23, 2007 (filed April 27, 2007)).
American Express Company 2007 Incentive Compensation Plan Master Agreement (as amended and restated effective
January 1, 2011) (incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K (Commission
File No. 1-7657) for the year ended December 31, 2010).
American Express Company 2007 Incentive Compensation Plan Master Agreement (as amended and restated effective
January 23, 2012) (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (Commission
File No. 1-7657), dated January 23, 2012 (filed January 27, 2012)).
Form of nonqualified stock option award agreement for executive officers under the American Express Company 2007
Incentive Compensation Plan (for awards made after January 26, 2016) (incorporated by reference to Exhibit 10.43 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2015).
Form of restricted stock unit award agreement for executive officers under the American Express Company 2007
Incentive Compensation Plan (for awards made after January 26, 2016) (incorporated by reference to Exhibit 10.44 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2015).
American Express Company 2016 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K (Commission File No. 1-7657), dated May 2, 2016).
Form of nonqualified stock option award agreement for executive officers under the American Express Company 2016
Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to Exhibit 10.41 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
Form of restricted stock unit award agreement for executive officers under the American Express Company 2016
Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to Exhibit 10.42 of the
Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31, 2016).
Form of award agreement for executive officers in connection with Performance Grant awards (a/k/a Executive Annual
Incentive Awards) under the American Express Company 2016 Incentive Compensation Plan (for awards made after May
2, 2016) (incorporated by reference to Exhibit 10.43 of the Company's Annual Report on Form 10-K (Commission File No.
1-7657) for the year ended December 31, 2016).
Form of award agreement for executive officers in connection with Portfolio Grant awards under the American Express
Company 2016 Incentive Compensation Plan (for awards made after May 2, 2016) (incorporated by reference to Exhibit
10.44 of the Company's Annual Report on Form 10-K (Commission File No. 1-7657) for the year ended December 31,
2016).
*10.41
Amendment to the Form of nonqualified stock option award agreement and Form of restricted stock unit award for
executive officers under the American Express Company 2016 Incentive Compensation Plan (for awards made after
January 29, 2020).
*10.42
Form of notice agreement in connection with Annual Incentive Awards under the American Express Company 2016
Incentive Compensation Plan.
10.43
10.44
10.45
10.46
Contract of Employment, dated March 11, 2018, by and between American Express Services Europe Limited and Anna
Marrs (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-
7657) for the quarter ended March 31, 2019).
Restated Letter Agreement, dated May 6, 2019, between American Express Company and Berkshire Hathaway Inc., on
behalf of itself and its subsidiaries (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-
K (Commission File No. 1-7657), dated May 6, 2019).
Time Sharing Agreement, dated February 13, 2018, by and between American Express Travel Related Services Company,
Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.48 of the Company's Annual Report on Form 10-K
(Commission File No. 1-7657) for the year ended December 31, 2017).
Amendment No. 1, dated March 29, 2019, to the Time Sharing Agreement, dated February 13, 2018, by and between
American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended March 31, 2019).
137
10.47
*21
*23
*31.1
*31.2
*32.1
Amendment No. 2, dated July 26, 2019, to the Time Sharing Agreement, dated February 13, 2018, by and between
American Express Travel Related Services Company, Inc. and Stephen J. Squeri (incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q (Commission File No. 1-7657) for the quarter ended September 30,
2019).
Subsidiaries of the Company.
Consent of PricewaterhouseCoopers LLP.
Certification of Stephen J. Squeri, Chief Executive Officer, pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended.
Certification of Jeffrey C. Campbell, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the Securities
Exchange Act of 1934, as amended.
Certification of Stephen J. Squeri, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2
Certification of Jeffrey C. Campbell, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are
embedded within the inline XBRL document
*101.SCH XBRL Taxonomy Extension Schema Document
*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
*101.LAB XBRL Taxonomy Extension Label Linkbase Document
*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*101.DEF XBRL Taxonomy Extension Definition Linkbase Document
*104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
IITEM 16. FORM 10-K SUMMARY
Not applicable.
138
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SSIGNATURES
February 13, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the date indicated.
AMERICAN EXPRESS COMPANY
/s/ JEFFREY C. CAMPBELL
Jeffrey C. Campbell
Chief Financial Officer
/s/ MICHAEL O. LEAVITT
Michael O. Leavitt
DDirector
/s/ THEODORE J. LEONSIS
Theodore J. Leonsis
DDirector
/s/ KAREN L. PARKHILL
Karen L. Parkhill
Director
/s/ LYNN A. PIKE
Lynn A. Pike
DDirector
/s/ DANIEL L. VASELLA
Daniel L. Vasella
DDirector
/s/ RONALD A. WILLIAMS
Ronald A. Willliams
DDirector
/s/ CHRISTOPHER D. YOUNG
Christopher D. Young
Director
/s/ STEPHEN J. SQUERI
Stephen J. Squeri
CChairman, Chief Executive Officer and Director
/s/ JEFFREY C. CAMPBELL
Jeffrey C. Campbell
CChief Financial Officer
/s/ RICHARD PETRINO
Richard Petrino
EExecutive Vice President and Corporate Controller
(Principal AAccounting Officer)
/s/ CHARLENE BARSHEFSKY
Charlene Barshefsky
DDirector
/s/ JOHN J. BRENNAN
John J. Brennan
DDirector
/s/ PETER CHERNIN
Peter Chernin
DDirector
/s/ RALPH DE LA VEGA
Ralph de la Vega
Director
/s/ ANNE LAUVERGEON
Anne LLauvergeon
DDirector
February 13, 2020
139
GUIDE 3 – STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
The accompanying supplemental information should be read in conjunction with the “MD&A”, “Consolidated Financial
Statements” and notes thereto.
Certain reclassifications of prior period amounts have been made to conform to the current period presentation. These
reclassifications did not have a material impact on our financial position or results of operations.
AAppendix
A-1
DDistribution of Assets, Liabilities, and Shareholders’ Equity; Interest Rates and Interest Differential
The following tables provide a summary of our consolidated average balances including major categories of interest-
earning assets and interest-bearing liabilities along with an analysis of net interest earnings. Consolidated average
balances, interest, and average yields are segregated between U.S. and non-U.S. offices. Assets, liabilities, interest
income and interest expense are attributed to the United States and outside the United States based on the location of
the office recording such items.
Years Ended December 31,
(Millions, except percentages)
Average
Balance (a)
Interest
Income
Average
Yield
Average
Balance (a)
Interest
Income
Average
Yield
Average
Balance (a)
Interest
Income
Average
Yield
2019
2018
2017
Interest--earning assets
Interest-bearing deposits in
other banks (b)
U.S.
Non-U.S.
Federal funds sold and securities
purchased under agreements to
resell
U.S.
Non-U.S.
Short-term investment
securities
U.S.
Non-U.S.
Card Member loans (c)
U.S.
Non-U.S.
Other loans (c)
U.S.
Non-U.S.
Taxable investment securities(d)
U.S.
Non-U.S.
Non-taxable investment
U.S.
Other assets (e)
Primarily U.S.
Total interest-earning
assets (f)
U.S.
Non-U.S.
$ 222,552
$$
5527
22.3 %% $ 25,001
$
491
2.0 % $ 24,510
$
277
1.1 %
2,085
448
22.3
1,830
33
1.8
1,773
17
1.0
3
66
15.8
110.7
—
58
—
7
—
12.1
—
80
19
56
26
93
11
11
72,422
10,362
99,452
11,400
4,101
170
6,335
589
4413
443
1147
227
33.8
11.1
113.1
113.5
110.1
225.3
22.3
44.6
3
149
—
1
66,620
9,136
8,387
1,206
3,110
145
3,025
562
312
36
68
23
—
0.7
12.6
13.2
10.0
24.8
2.2
4.1
—
6
1
7
182
1,070
58,853
6,894
7,847
1,038
1,887
148
1,216
547
195
27
24
17
—
7.5
0.5
0.7
11.7
13.2
10.3
18.2
2.0
3.1
237
111
55.9
855
25
3.7
1,510
48
4.9
17
55
nn.m.
1
17
n.m.
1
12
n.m.
$ 1119,064
$$ 112,084
105,709
10,559
13,355
11,525
110.2 %% $ 110,495
$ 10,606
9.6 % $ 99,624
$ 8,563
8.6 %
98,615
9,300
11,880
1,306
88,159
11,465
7,451
1,112
n.m. Denotes rates determined to not be meaningful.
(a) Averages based on month-end balances.
(b) Amounts include (i) average interest-bearing restricted cash balances of $580 million, $663 million and $868 million for 2019, 2018
and 2017, respectively, which are included in other assets on the Consolidated Balance Sheets, and (ii) the associated interest income.
(c) Average non-accrual loans were included in the average Card Member loan balances in amounts of $307 million, $230 million and
$187 million in U.S. for 2019, 2018 and 2017, respectively. Average other loan balances for U.S. include average non-accrual loans of
$7 million, $4 million and $3 million for 2019, 2018 and 2017, respectively. Average non-accrual loans are considered to determine
the average yield on loans.
(d) Average yields for both taxable and non-taxable investment securities have been calculated using amortized cost balances and do not
include changes in fair value recorded in other comprehensive loss. Average yield on non-taxable investment securities is calculated
on a tax-equivalent basis using the U.S. federal statutory tax rate of 21 percent for both 2019 and 2018 and 35 percent for 2017.
(e) Amounts include (i) average equity securities balances, which are included in investment securities on the Consolidated Balance
Sheets, and (ii) the associated income.
(f) The average yield on total interest-earning assets is adjusted for the impacts of the items mentioned in footnote (d).
A-2
Years Ended December 31,
(Millions, except percentages)
NNon--iinterest--eearnning assets
Cash and due from banks
U.S.
Non-U.S.
Card Member receivables, net
U.S.
Non-U.S.
Reserves for Card Member and other loans losses
U.S.
Non-U.S.
Other assets (b)
U.S.
Non-U.S.
TTotal non--iinterest--eearning assets
U.S.
Non-U.S.
TTotal assets
U.S.
Non-U.S.
22019
Average
Balance (a)
2018
Average
Balance (a)
2017
Average
Balance (a)
$$
22,842
$
2,793
$
7732
527
227,724
228,040
((2,057)
((258)
112,689
55,593
775,305
441,198
334,107
26,435
27,100
(1,740)
(217)
12,351
5,077
72,326
39,839
32,487
$$
1194,369
$
182,821
$
1146,908
447,461
138,454
44,367
2,393
489
21,262
27,621
(1,264)
(177)
12,462
5,000
67,786
34,853
32,933
167,410
123,012
44,398
PPercentage of total average assetss attributable to non--UU.S. activities
224.4 %%
24.3 %
26.5 %
(a) Averages based on month-end balances.
(b)
Includes premises and equipment, net of accumulated depreciation and amortization.
A-3
Years Ended December 31,
(Millions, except percentages)
Average
Balance (a)
Interest
Expense
Average
Rate
Average
Balance (a)
Interest
Expense
Average
Rate
Average
Balance (a)
Interest
Expense
Average
Rate
22019
2018
2017
IInterest--bbearing liabilities
Customer deposits
U.S.
Savings
Time
Demand
Non-U.S.
Other time and savings
Other demand
Short-term borrowings
U.S.
Non-U.S.
$$ 559,087
$$ 11,247
112,179
2298
4447
116
110
4407
22,621
99
11
44
222
115
Long-term debt and other (b)
U.S.
Non-U.S.
557,936
11,859
3325
99
22.1 %% $ 50,499
$
919
1.8 % $ 42,134
$
471
1.1 %
22.4
22.0
66.3
440.0
55.4
00.6
33.2
22.8
15,975
285
21
12
274
2,106
357
6
1
4
14
19
54,631
390
1,613
10
2.2
2.1
4.8
33.3
5.1
0.9
3.0
2.6
14,701
215
17
18
1,188
2,145
301
3
1
3
15
18
51,366
725
1,281
19
2.0
1.4
5.9
16.7
1.3
0.8
2.5
2.6
TTootal interest--bbearing liabilities
$$1133,028
$$ 33,464
22.6 %% $ 124,193
$ 2,943
2.4 % $ 112,509
$ 2,112
1.9 %
U.S.
Non-U.S.
1130,056
33,435
121,664
2,909
109,604
2,071
22,972
229
2,529
34
2,905
41
NNon--iinterest--bbearing liabilities
Accounts payable
U.S.
Non-U.S.
Customer Deposits(c)
U.S.
Non-U.S.
Other liabilities
U.S.
Non-U.S.
TTotal nnon--iinterest--bbearing
lliabilities
U.S.
Non-U.S.
TTotal liabilities
U.S.
Non-U.S.
Total shareholders' equity
TTotal liabilities and
sshareholders' equity
$$
PPercentage of total average
lliabilities attributable to non--
U.S. activities
Interest rate spread
Net interest income and net
average yield on interest-
earning assets(d)`
77,116
66,202
3385
3387
118,360
66,079
338,529
225,861
112,668
1171,557
1155,917
115,640
222,812
1194,369
7,120
6,064
377
370
18,619
5,428
37,978
26,116
11,862
162,171
147,780
14,391
20,650
6,788
5,254
351
331
16,366
4,954
34,044
23,505
10,539
146,553
133,109
13,444
20,857
$ 182,821
$ 167,410
9.1 %
8.9 %
9.2 %
77.6 %%
7.2 %
6.7 %
$ 8,620
77.2 %%
$ 7,663
6.9 %
$ 6,451
6.5 %
(a) Averages based on month-end balances.
(b)
Interest expense primarily reflects interest on long-term financing and interest incurred on derivative instruments in qualifying hedging relationships
on the hedged debt instruments. Additionally, we adopted new accounting guidance providing targeted improvements to the accounting for hedging
activities effective January 1, 2018. In compliance with the standard, amounts previously recorded in Other expenses have been prospectively recorded
in Total interest expense.
(c) U.S. non-interest-bearing Customer deposits include average Card Member credit balances of $353 million, $342 million and $314 million for 2019,
2018 and 2017, respectively. Non-U.S. non-interest-bearing Customer deposits include average Card Member credit balances of $381 million, $359
million and $318 million for 2019, 2018 and 2017, respectively.
(d) Net average yield on interest-earning assets is defined as net interest income divided by average total interest-earning assets as adjusted for the items
mentioned in footnote (d) from the table on A-1.
A-4
CChanges in Net Interest Income − Volume and Rate Analysis (a)
The following table presents the amount of changes in interest income and interest expense due to changes in both
average volume and average rate. Major categories of interest-earning assets and interest-bearing liabilities have been
segregated between U.S. and non-U.S. offices. Average volume/rate changes have been allocated between the average
volume and average rate variances on a consistent basis based upon the respective percentage changes in average
balances and average rates.
Years Ended December 31, (Millions)
Interest--earning assets
Interest-bearing deposits in other
banks
U.S.
Non-U.S.
Federal funds sold and securities
purchased under agreements to resell
U.S.
Non-U.S.
Short-term investment securities
U.S.
Non-U.S.
Card Member loans
U.S.
Non-U.S.
Other loans
U.S.
Non-U.S.
Taxable investment securities
U.S.
Non-U.S.
Non-taxable investment securities
U.S.
Other assets
Primarily U.S.
Change in interest incomme
Interest--bearing liabilities
Customer deposits
U.S.
Savings
Time
Demand
Non-U.S.
Other time and savings
Other demand
Short-term borrowings
U.S.
Non-U.S.
Long-term debt and other
U.S.
Non-U.S.
Change in interest expense
2019 Versus 2018
2018 Versus 2017
Increase (Decrease)
due to change in:
Average
Volume
Average
Rate
Net Change
Increase (Decrease)
due to change in:
Average
Volume
Average
Rate
Net Change
$
(488)
$$
884
$$
36
$
6
$
208
$
5
—
—
—
—
730
162
99
6
72
1
(18)
272
1,281
156
(85)
3
—
(1)
7
5
98
(2)
181
110
3
((1)
11
——
3335
332
22
11
77
33
44
115
3
((1)
11
——
11,065
1194
1101
77
779
44
((14)
1
—
(2)
(1)
(6)
910
170
126
(1)
36
1
(17)
((284)
197
((12)
1,478
—
1,223
1172
226
——
——
11
11
((9)
1148
11
340
3328
((59)
33
——
——
88
((4)
2246
((1)
521
94
26
1
—
(1)
(12)
—
81
(9)
180
15
—
3
—
—
583
(2)
(9)
10
8
5
(6)
5
820
354
30
2
—
2
11
1
251
—
651
214
16
—
1
(1)
(6)
1,493
168
117
9
44
6
(23)
5
2,043
448
56
3
—
1
(1)
1
332
(9)
831
Change in net interest income
1,100
1,043
(a) Refer to footnotes from “Distribution of Assets, Liabilities and Shareholders’ Equity” for additional information.
((143)
957
$
$
$
$
$
169
$
1,212
A-5
LLoans and Card Member Receivables Portfolios
The following table presents gross loans and Card Member receivables by customer type, segregated between U.S. and
non-U.S., based on the domicile of the borrowers. Refer to Notes 2 and 3 to the “Consolidated Financial Statements” for
additional information.
December 31, (Millions)
Loans (a) (b)
U.S. loans
Card Member (c)
Other (d)
Non--U.S. loans
Card Member (c)
Other (d)
2019
2018
2017
2016
2015
$
76,027
$
72,007
$
64,542
$
58,242
$
51,446
4,605
3,666
2,554
1,350
1,073
11,354
173
9,847
134
8,857
133
7,023
111
7,127
201
Total loans
$
92,159
$
85,654
$
76,086
$
66,726
$
59,847
Card Member receivables (a) (b)
U.S. Card Member receivables
Consumer (e)
Commercial (f)
Non--U.S. Card Member receivablles
Consumer (e)
Commercial (f)
28,187
10,827
12,061
6,338
27,558
11,478
10,625
6,232
26,754
10,868
10,311
6,114
24,768
9,685
7,772
5,083
23,255
8,961
7,101
4,816
Total Card Member receivables
$
57,413
$
55,893
$
54,047
$
47,308
$
44,133
(a) As of December 31, 2019, we had approximately $306 billion of unused credit available to Card Members as part of established
lending product agreements. Total unused credit available to Card Members does not represent potential future cash requirements,
as a significant portion of this unused credit will likely not be drawn. Our charge card products generally have no pre-set spending
limit, and therefore are not reflected in unused credit available to Card Members.
(b) As of December 31, 2019, our exposure to any concentration of gross loans and Card Member receivables combined, which exceeds
10 percent of total loans and Card Member receivables is further split between $131 billion for individuals and $19 billion for
commercial. Loans and Card Member receivables concentrations are defined as loans and Card Member receivables due from
multiple borrowers engaged in similar activities that would cause these borrowers to be impacted similarly to certain economic or
other related conditions. Refer to Note 23 to the “Consolidated Financial Statements” for additional information on concentrations.
(c) Primarily represents loans to individuals and small businesses.
(d) Other loans primarily represent consumer and commercial non-card financing products.
(e) Represents receivables from individual and small business charge card customers.
(f) Represents receivables from global, large and middle market corporate accounts.
A-6
MMaturities and Sensitivities to Changes in Interest Rates
The following table presents contractual maturities of loans and Card Member receivables by customer type, and
segregated between U.S. and non-U.S. borrowers, and distribution between fixed and floating interest rates for loans due
after one year based upon the stated terms of the loan agreements.
December 31, (Millions)
2019
Within
1 year (a) (b)
1-5
years (b) (c)
After
5 years (c)
Total
Loans
U.S. loans
Card Member
Other
Non--U.S. loans
Card Member
Other
Total loans
Loans due after one year at fixed interest rates
Loans due after one year at variable interest rates
Total loans
Card Member receivables
U.S. Card Member receivables
Consumer
Commercial
Non--U.S. Card Member receivables
Consumer
Commercial
$
775,707 $
1,606
3320 $
2,810
—— $
189
776,027
4,605
11,354
1443
888,8110 $
$
$
$
$
228,102 $
10,827
12,061
6,338
557,328 $
—
30
33,1660 $
33,1442 $
18
33,1660 $
885 $
—
—
—
885 $
—
—
1189 $
665 $
1244
1189 $
11,354
173
992,159
33,2207
142
33,3449
—— $
—
228,187
10,827
—
—
—— $
12,061
6,338
557,413
Total Card Member receivables
$
(a) Card Member loans have no stated maturity and are therefore included in the due within one year category. However, many of our Card Members will
revolve their balances, which may extend their repayment period beyond one year for balances outstanding as of December 31, 2019.
(b) Card Member receivables are immediately due upon receipt of Card Member statements, have no stated interest rate and are included within the due
within one year category. Receivables due after one year represent modification programs classified as Troubled Debt Restructurings (TDRs), wherein
the terms of a receivable have been modified for Card Members that are experiencing financial difficulties and a long-term concession (more than 12
months) has been granted to the borrower.
(c) Card Member and other loans due after one year primarily represent installment loans and TDRs.
A-7
RRisk Elements
The following table presents the amounts of non-performing loans and Card Member receivables that are either non-
accrual, past due, or restructured, segregated between U.S. and non-U.S. borrowers. Past due loans are loans that are
contractually past due 90 days or more as to principal or interest payments. Restructured loans and Card Member
receivables are those that meet the definition of a TDR.
December 31, (Millions)
Loans
Non--accrual loans ((a)
U.S.
Total non--accrual loans
Loans contractually 90 days past--due
aand still accruing interest (b)
U.S.
Non-U.S.
Total loans contractually 90 days
ppast-ddue and still accruing interest
Restructured loans ((c)
U.S.
Total restructuured loans
Total non--performing loans
Card Member receivables
Restructured Card Member receivables
((c)
U.S.
Total restructured Card Member
rreceivables
$
$
$
$
$
$
$
$
$
$
2019
2018
2017
2016
2015
3346 $
3346 $
286 $
286 $
203 $
203 $
173 $
173 $
3338 $
994 $
321 $
69 $
273 $
56 $
208 $
52 $
4432 $
390 $
329 $
260 $
8810 $
8810 $
11,588 $
532 $
532 $
1,208 $
367 $
367 $
899 $
346 $
346 $
779 $
2211 $
128 $
80 $
2211 $
128 $
80 $
55 $
55 $
154
154
164
52
216
279
279
649
33
33
(a) Non-accrual loans not in modification programs primarily include certain Card Member loans placed with outside collection
agencies for which we have ceased accruing interest. Amounts presented exclude Card Member loans classified as a TDR.
(b) Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for
(c)
interest that we believe will not be collected. Amounts presented exclude loans classified as a TDR.
In instances where the Card Member is experiencing financial difficulty, we may modify, through various programs, Card Member
loans and receivables in order to minimize losses and improve collectability, while providing Card Members with temporary or
permanent financial relief. We have classified Card Member loans and receivables in these modification programs as TDRs and
continue to classify Card Member accounts that have exited a modification program as a TDR, with such accounts identified as “Out
of Program TDRs.” Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (possibly
as low as zero percent, in which case the loan is characterized as non-accrual in our TDR disclosures), (ii) placing the Card Member
on a fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the Card Member exits the modification
program. Refer to Note 2 to the “Consolidated Financial Statements” for additional information.
Impact of Non-performing Loans on Interest Income
The following table presents the gross interest income for both non-accrual and restructured loans for 2019 that would
have been recognized if such loans had been current in accordance with their original contractual terms and had been
outstanding throughout the period or since origination if held for only part of 2019. The table also presents the interest
income related to these loans that was actually recognized for the period. These amounts are segregated between U.S.
and non-U.S. borrowers.
Year Ended December 31, (Millions)
Gross amount of interest income that would have been recorded in accordance
with the original contractual terms (a)
Interest income actually recognized
Total interest revenue foregone
2019
U.S.
Non-U.S.
Total
152
38
114
—
—
—
152
38
114
(a) We determine the original effective interest rate as the interest rate in effect prior to the imposition of any penalty interest rate.
Potential Problem Loans and Card Member Receivables
This disclosure presents outstanding amounts as well as specific reserves for certain loans and Card Member receivables
where information about possible credit problems of the borrowers causes management to have serious doubts as to the
ability of such borrowers to comply with the present repayment terms. At December 31, 2019, we did not identify any
significant potential problem loans or receivables within the Card Member loans and receivables portfolio that were not
already included in the “Risk Elements” section.
A-8
CCross-border Outstandings
Cross-border disclosure is based upon the Federal Financial Institutions Examinations Council’s (FFIEC) guidelines
governing the determination of cross-border risk.
The following table presents the aggregate amount of cross-border outstandings from borrowers or counterparties for
each foreign country that exceeds 1 percent of consolidated total assets for any of the periods reported below.
The table separately presents the amounts of cross-border outstandings by type of borrower including Governments and
official institutions, Banks and other financial institutions, Non-Bank Financial Institutions (NBFIs) and Other.
Years Ended
December 31,
(Millions)
Australia
Governments
and official
institutions
Canada
United
Mexico
Japan
Other
2019 $
2018
2017
2019 $
2018
2017
2019 $
2018
2017
2019 $
2018
2017
2019 $
2018
2017
2019 $
2018
2017
$
Banks and
other
financial
institutions NBFIs Other
177 $ — $ 3,890
3,633
——
207
3,594
—
259
468 $ 39 $ 2,966 $
2,706
41
676
2,730
40
6 $ 5,702 $
5,012
9
4,568
86
992
2,254 $
1,807
1,286
351 $ 22 $ 2,701 $
40
237
7
97
701 $ 206 $ 4,626 $
298
2,512
2,229
226
177
3,729
3,082
7 $ 4,554 $
4,175
11
4,268
14
74
332 $
287
187
3,304
3,085
Gross
foreign-
office
liabilities
Total
exposure
(net of
liabilities)
3,759 $
3,476
3,349
481 $
366
504
491 $ 3,409 $
465
1,032
Total
cross-border
outstandings
(a)
4,,240 $
3,842
3,853
3,900 $
3,769
4,117
8,075 $ 3,575 $ 4,500 $
6,870
6,008
3,352 $
2,874
2,418
5,854 $ 4,786 $
4,255
3,337
5,248 $
4,684
4,627
3,890
3,106
824 $ 4,424 $
666
928
2,942
2,124
2,679 $
2,209
1,862
1,068 $
365
231
3,928
3,884
673 $
665
556
Cross-border
commitments
6,360
6,948
6,635
10,490
9,970
12,174
21,830
18,234
15,578
1,486
1,254
1,125
5,707
2,924
2,290
730
720
682
4,018
3,699
173 $
2
—
427 $
346
355
113 $
42
68
278 $
85
85
321 $
2
4
355 $
211
158
(a) Total cross-border outstandings include loans, receivables, interest-bearing deposits with other banks, other interest-bearing
investments, derivative contracts and other monetary assets.
(b) Cross-border outstandings between 0.75 percent and 1.0 percent of consolidated total assets are included in Other Countries. For
comparability, countries that meet the threshold for any year presented are included for all years. Countries included are France,
Italy and Germany.
A-9
SSummary of Loan Loss Experience – Analysis of the Allowance for Loan Losses
The following table summarizes the changes to our allowance for Card Member loan losses. The table segregates such
changes between U.S. and non-U.S. borrowers.
$
Years Ended December 31,
(Millions, except percentages)
Card Member loans
AAllowance for loan losses at beginning
oof year
U.S. loans
Non-U.S. loans
Total allowance for losses
Card Member lending provisions ((a)
U.S. loans
Non-U.S. loans
Total Card Member lending provisions
Write--offs
U.S. loans
Non-U.S. loans
Tootal write-ooffs
Recoveries
U.S. loans
Non-U.S. loans
Total recoveries
Net write--offs ((b)
Transfer of reserves on HFS loans
pportfolios
U.S. loans
Other ((c)
U.S. loans
Non-U.S. loans
Total other
Allowance for loan losses at end of year
U.S. loans
Non-U.S. loans
Total alloowance for losses
$
Principal only net write-offs / average
Card Member loans outstanding (d) (e)
Principal, interest and fees net write-offs
/ average Card Member loans
(d) ( )
di
2019
2018
2017
2016
2015
$
1,899
235
2,134
2,123
339
2,462
(2,403)
(357)
(2,760)
466
59
525
(2,235)
—
—
22
22
$
$
1,507
199
1,706
2,003
263
2,266
(2,002)
(285)
(2,287)
391
53
444
(1,843)
—
—
5
5
1,068
155
1,223
1,655
213
1,868
(1,572)
(245)
(1,817)
356
53
409
(1,408)
—
—
23
23
$
882
146
1,028
1,056
179
1,235
(1,262)
(222)
(1,484)
325
54
379
(1,105)
—
67
(2)
65
2,085
298
2,383
$
1,899
235
2,134
$
1,507
199
1,706
$
1,068
155
1,223
$
1,036
165
1,201
1,032
158
1,190
(1,321)
(226)
(1,547)
359
59
418
(1,129)
(224)
—
(10)
(10)
882
146
1,028
2.2 %
2.7 %
2.0 %
2.4 %
1.8 %
2.1 %
1.6 %
1.8 %
1.4 %
1.7 %
(a) Refer to Note 3 to the “Consolidated Financial Statements” for a discussion of management’s process for evaluating the allowance
for loan losses.
(b) Net write-offs include principal, interest and fees balances.
(c)
Includes foreign currency translation adjustments and other adjustments. The year ended December 31, 2016, included reserves of
$67 million associated with $265 million of retained Card Member loans reclassified from HFS to held for investment as a result of
retaining certain loans in connection with the respective sales of JetBlue and Costco cobrand card portfolios.
(d) The net write-off rate presented is on a worldwide basis and is based on principal losses only (i.e., excluding interest and fees) to be
consistent with industry convention. In addition, because we consider uncollectible interest and fees in estimating our reserves for
credit losses, a net write-off rate including principal, interest and fees is also presented.
(e) Average Card Member loans outstanding are based on month-end balances.
A-10
The following table summarizes the changes to our allowance for other loan losses. The table segregates such changes
between U.S. and non-U.S. borrowers.
22019
2018
2017
2016
2015
Years Ended December 31, (Millions,
except percentages)
OOther loans
AAllowance for loan losses at beginning of
yyear
U.S. loans
Non-U.S. loans
TTotal allowance for losses
$$
PProvisions for other loan losses ((a)
U.S. loans
Non-U.S. loans
TTotal provisions for other loan
WWritte--ooffs
U.S. loans
Non-U.S. loans
TTotal write--ooffs
RRecoveries
U.S. loans
Non-U.S. loans
TTotal recoveries
NNet write--ooffs
1122
22
1124
1124
11
1125
((111)
((2)
((113)
115
11
116
((97)
$
$
78
2
80
121
1
122
(82)
(2)
(84)
5
1
6
(78)
122
2
124
$
39
3
42
71
1
72
(37)
(3)
(40)
5
1
6
(34)
$
17
3
20
56
1
57
(39)
(2)
(41)
5
1
6
(35)
8
4
12
21
1
22
(15)
(3)
(18)
3
1
4
(14)
17
3
20
AAllowance for loan losses at end of year
U.S. loans
Non-U.S. loans
TTotal allowance for losses
$$
1150
22
1152
$
78
2
80
$
39
3
42
$
$
NNet write--offs/average other loans
outstanding (b)
2.3 %
2.4 %
1.7 %
2.9 %
1.3 %
(a) Provisions for other loan losses are determined based on a specific identification methodology and models that analyze specific
portfolio statistics.
(b) The net write-off rate presented is on a worldwide basis and is based on write-offs of principal, interest and fees. Average other
loans outstanding are based on month-end balances.
A-11
The following table summarizes the changes to our allowance for Card Member receivables losses. The table segregates
such changes between U.S. and non-U.S. borrowers.
Years Ended December 31, (Millions, except
percentages)
CCard Member receivables
AAllowance for losses at beginning of year
UU.S. receivables
Consumer
Commercial
TTotal U.S. receivables
NNon--UU.S. receivables
Consumer
Commercial
TTotal non--UU.S. receivables
TTotal allowance for losses
PProvisions for losses ((a)
UU.S. receivables
Consumer
Commercial
TTotal U.S. provisions
NNon--UU.S. receivables
Consumer
Commercial
TTotal non--UU.S. provisions
TTotal provisions for losses
WWrite--ooffs
UU.S. rreceivables
Consumer
Commercial
TTotal U.S. write--ooffs
NNon--UU.S. receivables
Consumer
Commercial
TTotal non--UU.S. write--ooffs
TTotal write--ooffs
22019
2018
2017
2016
2015
$$
2299 $
770
3369
1135
669
2204
5573
5553
774
6627
2283
553
3336
9963
$
277
73
350
119
52
171
521
471
92
563
245
129
374
937
266
53
319
95
53
148
467
413
114
527
201
67
268
795
((722)
((131)
((853)
(659)
(151)
(810)
(633)
(139)
(772)
$
268 $
51
319
93
50
143
462
366
69
435
176
85
261
696
(637)
(112)
(749)
((324)
((102)
((426)
((1,279) $
(278)
(138)
(416)
(1,226)
$
(233)
(97)
(330)
(1,102)
$
(218)
(101)
(319)
(1,068) $
$$
276
53
329
93
43
136
465
420
76
496
169
72
241
737
(698)
(123)
(821)
(204)
(89)
(293)
(1,114)
(a) Refer to Note 3 to the “Consolidated Financial Statements” for a discussion of management’s process for evaluating the allowance
for receivable losses.
A-12
Years Ended December 31, (Millions, except
percentages)
CCard Member receivables
RRecoveries
UU.S. receivables
Consumer
Commercial
$$
TTotal U.S. recoveries
NNon--UU.S. receivables
Consumer
Commercial
TTotal non--UU.S. recoveries
TTotal recoveries
NNet write--ooffs ((a)
OOther ((b)
UU.S. receivables
Consumer
Commercial
TTotal U.S. other
NNon--UU.S. receivables
Consumer
Commercial
TTotal non--UU.S.. other
TTotal other
AAllowance for losses at end of year
UU.S. receivables
Consumer
Commercial
TTotal U.S. receivables
NNon--UU.S. receivables
Consumer
Commercial
TTotal non--UU.S. receivables
TTotal aallowance for losses
$$
NNet write--offs / average Card Member
receivables outstanding (c) (d)
(a) Net write-offs include principal and fees balances.
(b)
22019
2018
2017
2016
2015
2214
449
2263
779
337
1116
3379
((900)
——
——
—
((15)
((2)
((17)
((17)
3344
662
4406
1158
555
2213
6619
$
$
210
56
266
70
31
101
367
(859)
——
——
—
(21)
(5)
(26)
(26)
299
70
369
135
69
204
573
$
$
233
45
278
63
25
88
366
(736)
(2)
——
(2)
(7)
4
(3)
(5)
277
73
350
119
52
171
521
$
$
269
43
312
59
23
82
394
(674)
——
2
2
(15)
(4)
(19)
(17)
266
53
319
95
53
148
467
$
$
271
45
316
57
28
85
401
(713)
(1)
——
(1)
(22)
(4)
(26)
(27)
268
51
319
93
50
143
462
1.6 %
1.6 %
1.5 %
1.5 %
1.6 %
Includes foreign currency translation adjustments and other adjustments. Additionally, 2015 included the impact of transfer of the
HFS receivables portfolio, which was not significant.
(c) The net write-off rate presented is on a worldwide basis and is based on write-offs of principal and fees.
(d) Average Card Member receivables outstanding are based on month-end balances.
A-13
AAllocation of Allowance for Losses
The following table presents an allocation of the allowance for loans and Card Member receivables and the percentage of
allowance for losses on loans and Card Member receivables in each category, to the total allowance, respectively, by
customer type. The table segregates allowance for losses on loans and Card Member receivables between U.S. and non-
U.S. borrowers.
December 31,
2019
2018
2017
2016
2015
(Millions, except
percentages)
Allowance for
losses
at end of year
applicable to
Loans
U.S. loans
Amount
Percentage
(a)
Amount
Percentage
(a)
Amount
Percentage
(a)
Amount
Percentage
(a)
Amount
Percentage
(a)
Card Member $ 22,085
82 %% $ 1,899
84 % $ 1,507
85 % $ 1,068
85 % $ 882
Other
150
6
122
Non--U.S. loans
Card Member
298
Other
2
12
—
235
2
5
11
—
78
199
2
4
11
—
39
3
17
155
3
12
—
146
3
84 %
2
14
—
$ 22,535
100 %% $ 2,258
100 % $ 1,786
100 % $ 1,265
100 % $ 1,048
100 %
Card Member
rreceivables
U.S. Card
Member
receivables
Consumer
$ 3344
56 %% $ 299
52 % $
277
53 % $ 266
57 % $ 268
Commercial
62
10
70
12
73
14
53
11
51
Non--U.S. Card
Member
receivables
Consumer
Commercial
158
55
25
9
135
69
24
12
119
52
23
10
95
53
21
11
93
50
100 % $ 462
(a) Percentage of allowance for losses on loans and Card Member receivables in each category to the total allowance.
100 %% $ 573
100 % $ 467
$ 6619
100 % $
521
58 %
11
20
11
100 %
Time Certificates of Deposit of $100,000 or More
The following table presents the amount of time certificates of deposit of $100,000 or more issued by us in our U.S.
offices, further segregated by time remaining until maturity.
By remaining maturity as of DDecember 31, 2019
(Millions)
U.S. time certificates of deposit ($100,000 or more)
3 months
or less
$
194 $
Over 3
months
but within 6
months
113 $
Over 6
months
but within
12 months
Over
12 months
288 $
690 $
Total
1,285
As of December 31, 2019, time certificates of deposit and other time deposits in amounts of $100,000 or more issued by
non-U.S. offices was $7 million.
A-14
AAPPENDIX TO THE CHAIRMAN’S LETTER
APPENDIX I
RECONCILIATION OF ADJUSTMENTS
Diluted EPS –– GGAAP
Litigation related charge
Resolution of certain prior years’ tax audits
Adjustment to Tax Act provisional charge
Certain other discrete tax impacts (a)
Total Discrete Tax Items
2019
2018
$
7.999
$
7..91
YOY %
Change
1
0.21
0.21
(0.18)
(0.09)
(0.31)
(0.58)
Adjusted Diluted EPS
$
8.20
$
7.33
12
(a) Reflects the impact of changes in the tax method of accounting for certain expense
(cid:3)
EXECUTIVE OFFICERS
Stephen J. Squeri
Chairman and Chief Executive Officer
Douglas E. Buckminster
Group President, Global Consumer
Services Group
Jeffrey C. Campbell
Chief Financial Officer
Marc D. Gordon
Chief Information Officer
Monique Herena
Chief Colleague Experience Officer
BOARD OF DIRECTORS
ADVISORS TO THE BOARD OF
DIRECTORS
Charlene Barshefsky
Senior International Partner
WilmerHale
Vernon E. Jordan, Jr.
Senior Managing Director
Lazard Freres & Co. LLC
John J. Brennan
Chairman Emeritus and Senior Advisor
The Vanguard Group, Inc.
Henry A. Kissinger
Chairman, Kissinger Associates, Inc.
Former Secretary of State of the United States of
America
Peter Chernin
Founder and CEO
Chernin Entertainment, LLC
Ralph de la Vega
Former Vice Chairman,
AT&T, Inc.
Raymond Joabar
Chief Risk Officer and President, Global
Risk, Banking & Compliance
Anne Lauvergeon
Chairman and Chief Executive Officer
A.L.P.
Anna Marrs
President, Global Commercial Services
Denise Pickett
President, Global Services Group
Elizabeth Rutledge
Chief Marketing Officer
Laureen E. Seeger
Chief Legal Officer
Jennifer Skyler
Chief Corporate Affairs Officer
Anré Williams
Group President, Global Merchant and
Network Services
Michael O. Leavitt
Founder and Chairman
Leavitt Partners, LLC
Theodore J. Leonsis
Chairman and Chief Executive Officer
Monumental Sports & Entertainment,
LLC
Karen L. Parkhill
Executive Vice President and Chief
Financial Officer, Medtronic
Lynn A. Pike
Former President, Capital One Bank
Stephen J. Squeri
Chairman and Chief Executive Officer
American Express Company
Daniel L. Vasella
Honorary Chairman and Former
Chairman and Chief Executive Officer
Novartis AG
Ronald A. Williams
Former Chairman and Chief Executive
Officer
Aetna, Inc.
Christopher D. Young
Former Chief Executive Officer
McAfee, LLC
(cid:3)
GENERAL INFORMATION
EXECUTIVE OFFICES
American Express Company
200 Vesey Street
New York, NY 10285
212.640.2000
INFORMATION AVAILABLE TO
SHAREHOLDERS
Copies of the Company’s Form 10-K,
proxy statement, press releases and
other documents, as well as information
on financial results, products and
services, are available on the American
Express website at
ir.americanexpress.com.
Information on the Company’s
corporate social responsibility
programs and a report on the
Company’s federal and state political
contributions are available at
ir.americanexpress.com. Written copies
of these materials are available without
charge upon written request to the
Corporate Secretary’s Office at the
address above.
TRANSFER AGENT AND REGISTRAR
Computershare, Inc.
462 South 4th Street, Suite 1600
Louisville, KY 40233-5000
800.463.5911 or 201.680.6578
Hearing impaired: 1.800.231.5469
www.computershare.com/investor
STOCK EXCHANGE LISTING
New York Stock Exchange (Symbol:
AXP)
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
ANNUAL MEETING
The Annual Meeting of Shareholders of
American Express Company will be held
at the Company’s headquarters at 200
Vesey Street, New York, NY 10285, on
Tuesday, May 5, 2020, at 9:00 a.m.,
Eastern Time.
A live audio webcast of the meeting will
be accessible to the general public
through the American Express Investor
Relations website at
ir.americanexpress.com and an audio
replay will be available on the website
following the event. A written transcript
of the meeting will be available upon
written request to the Corporate
Secretary’s Office.
(cid:3)
(cid:3)
CORPORATE GOVERNANCE
TRADEMARKS AND SERVICE MARKS
Copies of American Express Company’s
governance documents, including its
Corporate Governance Principles, as
well as the charters of the standing
committees of the Board of Directors
and the American Express Company
Code of Conduct, are available on the
Company’s Investor Relations website
at ir.americanexpress.com. Copies of
these materials are also available
without charge upon written request to
the Corporate Secretary’s Office at the
address above.
DIRECT DEPOSIT OF DIVIDENDS
The Company has established an
Electronic Direct Deposit of Dividends
service for the electronic payment of
quarterly dividends on the Company’s
common shares. With this service,
registered shareholders may have their
dividend payments sent electronically
to their checking account or financial
institution on the payment date.
Shareholders interested in enrolling in
this service should call Computershare,
Inc. at 1.800.463.5911.
STOCK PURCHASE PLAN
The CIP Plan, a direct stock purchase
plan sponsored and administered by
Computershare, Inc., provides
shareholders and new investors with a
convenient way to purchase common
shares through optional cash
investments and reinvestment of
dividends.
For more information, contact:
Computershare, Inc.
P.O. Box 505000
Louisville, KY 40233-5000
1.800.463.5911
www.computershare.com/investor
SHAREHOLDER AND INVESTOR
INQUIRIES
Written shareholder inquiries may be
sent either to Computershare, Inc.
Investor Care Network, P.O. Box
505000, Louisville, KY 40233-5000, or
to the Corporate Secretary’s Office at
the American Express office address
above. Written inquiries from the
investment community should be sent
to Investor Relations at the American
Express office address above.
The following American Express trademarks
and service marks may appear in this report:
AMERICAN EXPRESS®
AMERICAN EXPRESS Box Logo
AMERICAN EXPRESS Card Design
AMERICAN EXPRESS CARDREFRESHER®
AMERICAN EXPRESS GLOBAL LOUNGE
COLLECTION®
AMERICAN EXPRESS NATIONAL BANK™
AMERICAN EXPRESS SELECTS®
AMERICAN EXPRESS vPAYMENT™
AMERICAN EXPRESS WORLD SERVICE &
Design
AMERICAN EXPRESS SAFEKEY®
AMERICAN EXPRESS @ WORK®
AMEX®
AMEX EVERYDAY®
BLACK CARD®
BLUE CASH®
BLUE FROM AMERICAN EXPRESS®
BLUE FROM AMERICAN EXPRESS Card Design
CASH MAGNET®
CENTURION®
DEPARTURES®
DON’T LIVE LIFE WITHOUT IT™
DON’T DO BUSINESS WITHOUT IT™
EVERYDAY®
FINE HOTELS & RESORTS®
Gladiator Head Design
Globe Design
GLOBAL ASSIST®
MEMBERSHIP REWARDS®
OPTBLUE®
PAY IT PLAN IT®
PAYBACK®
PLATINUM CARD®
PLUM CARD®
POWERFUL BACKING™
RELATIONSHIP CARE®
SHOP SMALL®
SIMPLYCASH®
SMALL BUSINESS SATURDAY®
THE CENTURION®
FORWARD-LOOKING STATEMENTS
Various forward-looking statements are made
in this Annual Report, which generally include
the words “believe,” “expect,” “anticipate,”
“intend,” “plan,” “aim,” “will,” “may,” “should,”
“could,” “would,” “likely”, “estimate,” “predict,”
“potential,” “continue,” “forecast,” “target,”
“project” and similar expressions. Certain
factors that may affect these forward-looking
statements, including American Express
Company’s ability to achieve its goals referred
to herein, are discussed on pages 71-73.
©2020 American Express Company. All rights
reserved
American Express Company
200 Vesey Street
New York, New York 10285
This document was printed on
paper from responsibly managed
forests at a facility that uses 100%
electricity from renewable wind
energy and soy ink.