New York | 13-4922250 | |||||||||||||||||||||||||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||||||||||||||
200 Vesey Street, New York, New York | 10285 | |||||||||||||||||||||||||||||||
(Address of principal executive offices) | (Zip Code) |
None |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common shares (par value $0.20 per share) | AXP | New York Stock Exchange |
Large accelerated filer | ☑ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☐ |
Class | Outstanding at October | |||||||||||||
Common Shares (par value $0.20 per share) | 805,201,951 | Shares |
Page No. | ||||||||||||||||||||||||||
Three Months Ended September 30 (Millions, except per share amounts) | 2017 | 2016 | ||||||
Revenues | ||||||||
Non-interest revenues | ||||||||
Discount revenue | $ | 4,772 | $ | 4,516 | ||||
Net card fees | 786 | 747 | ||||||
Other fees and commissions | 767 | 694 | ||||||
Other | 436 | 483 | ||||||
Total non-interest revenues | 6,761 | 6,440 | ||||||
Interest income | ||||||||
Interest on loans | 2,129 | 1,690 | ||||||
Interest and dividends on investment securities | 22 | 34 | ||||||
Deposits with banks and other | 91 | 40 | ||||||
Total interest income | 2,242 | 1,764 | ||||||
Interest expense | ||||||||
Deposits | 213 | 150 | ||||||
Long-term debt and other | 354 | 280 | ||||||
Total interest expense | 567 | 430 | ||||||
Net interest income | 1,675 | 1,334 | ||||||
Total revenues net of interest expense | 8,436 | 7,774 | ||||||
Provisions for losses | ||||||||
Charge card | 214 | 174 | ||||||
Card Member loans | 531 | 319 | ||||||
Other | 24 | 11 | ||||||
Total provisions for losses | 769 | 504 | ||||||
Total revenues net of interest expense after provisions for losses | 7,667 | 7,270 | ||||||
Expenses | ||||||||
Marketing and promotion | 814 | 930 | ||||||
Card Member rewards | 1,900 | 1,566 | ||||||
Card Member services and other | 363 | 278 | ||||||
Salaries and employee benefits | 1,265 | 1,263 | ||||||
Other, net | 1,498 | 1,498 | ||||||
Total expenses | 5,840 | 5,535 | ||||||
Pretax income | 1,827 | 1,735 | ||||||
Income tax provision | 471 | 593 | ||||||
Net income | $ | 1,356 | $ | 1,142 | ||||
Earnings per Common Share (Note 15): (a) | ||||||||
Basic | $ | 1.51 | $ | 1.21 | ||||
Diluted | $ | 1.50 | $ | 1.20 | ||||
Average common shares outstanding for earnings per common share: | ||||||||
Basic | 878 | 920 | ||||||
Diluted | 881 | 923 | ||||||
Cash dividends declared per common share | $ | 0.35 | $ | 0.32 |
Nine Months Ended September 30 (Millions, except per share amounts) | 2017 | 2016 | ||||||
Revenues | ||||||||
Non-interest revenues | ||||||||
Discount revenue | $ | 14,106 | $ | 13,983 | ||||
Net card fees | 2,305 | 2,161 | ||||||
Other fees and commissions | 2,232 | 2,076 | ||||||
Other | 1,284 | 1,514 | ||||||
Total non-interest revenues | 19,927 | 19,734 | ||||||
Interest income | ||||||||
Interest on loans | 5,936 | 5,446 | ||||||
Interest and dividends on investment securities | 68 | 104 | ||||||
Deposits with banks and other | 233 | 104 | ||||||
Total interest income | 6,237 | 5,654 | ||||||
Interest expense | ||||||||
Deposits | 538 | 450 | ||||||
Long-term debt and other | 994 | 841 | ||||||
Total interest expense | 1,532 | 1,291 | ||||||
Net interest income | 4,705 | 4,363 | ||||||
Total revenues net of interest expense | 24,632 | 24,097 | ||||||
Provisions for losses | ||||||||
Charge card | 590 | 496 | ||||||
Card Member loans | 1,272 | 831 | ||||||
Other | 64 | 74 | ||||||
Total provisions for losses | 1,926 | 1,401 | ||||||
Total revenues net of interest expense after provisions for losses | 22,706 | 22,696 | ||||||
Expenses | ||||||||
Marketing and promotion | 2,344 | 2,445 | ||||||
Card Member rewards | 5,633 | 5,035 | ||||||
Card Member services and other | 1,033 | 841 | ||||||
Salaries and employee benefits | 3,822 | 4,052 | ||||||
Other, net | 4,281 | 3,388 | ||||||
Total expenses | 17,113 | 15,761 | ||||||
Pretax income | 5,593 | 6,935 | ||||||
Income tax provision | 1,660 | 2,352 | ||||||
Net income | $ | 3,933 | $ | 4,583 | ||||
Earnings per Common Share (Note 15): (a) | ||||||||
Basic | $ | 4.32 | $ | 4.77 | ||||
Diluted | $ | 4.30 | $ | 4.76 | ||||
Average common shares outstanding for earnings per common share: | ||||||||
Basic | 889 | 940 | ||||||
Diluted | 892 | 943 | ||||||
Cash dividends declared per common share | $ | 0.99 | $ | 0.90 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 1,356 | $ | 1,142 | $ | 3,933 | $ | 4,583 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Net unrealized securities (losses) gains, net of tax | (2 | ) | (15 | ) | 4 | (8 | ) | |||||||||
Foreign currency translation adjustments, net of tax | 107 | 11 | 456 | (115 | ) | |||||||||||
Net unrealized pension and other postretirement benefits, net of tax | 7 | 7 | 8 | 39 | ||||||||||||
Other comprehensive income (loss) | 112 | 3 | 468 | (84 | ) | |||||||||||
Comprehensive income | $ | 1,468 | $ | 1,145 | $ | 4,401 | $ | 4,499 |
September 30, | December 31, | |||||||
(Millions, except share data) | 2017 | 2016 | ||||||
Assets | ||||||||
Cash and cash equivalents | ||||||||
Cash and due from banks | $ | 2,820 | $ | 3,278 | ||||
Interest-bearing deposits in other banks (includes securities purchased under resale agreements: 2017, $86; 2016, $115) | 22,059 | 20,779 | ||||||
Short-term investment securities | 1,289 | 1,151 | ||||||
Total cash and cash equivalents | 26,168 | 25,208 | ||||||
Accounts receivable | ||||||||
Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity: 2017, $7,825; 2016, $8,874), less reserves: 2017, $512; 2016, $467 | 51,002 | 46,841 | ||||||
Other receivables, less reserves: 2017, $32; 2016, $45 | 2,701 | 3,232 | ||||||
Loans | ||||||||
Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity: 2017, $24,249; 2016, $26,129), less reserves: 2017, $1,502; 2016, $1,223 | 66,376 | 64,042 | ||||||
Other loans, less reserves: 2017, $64; 2016, $42 | 2,268 | 1,419 | ||||||
Investment securities | 3,250 | 3,157 | ||||||
Premises and equipment, less accumulated depreciation and amortization: 2017, $5,797; 2016, $5,145 | 4,367 | 4,433 | ||||||
Other assets (includes restricted cash of consolidated variable interest entities: 2017, $1,816; 2016, $38) | 12,445 | 10,561 | ||||||
Total assets | $ | 168,577 | $ | 158,893 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Liabilities | ||||||||
Customer deposits | $ | 61,290 | $ | 53,042 | ||||
Travelers Cheques and other prepaid products | 2,366 | 2,812 | ||||||
Accounts payable | 12,240 | 11,190 | ||||||
Short-term borrowings | 2,352 | 5,581 | ||||||
Long-term debt (includes debt issued by consolidated variable interest entities: 2017, $15,026; 2016, $15,113) | 48,762 | 46,990 | ||||||
Other liabilities | 20,482 | 18,777 | ||||||
Total liabilities | 147,492 | 138,392 | ||||||
Contingencies (Note 8) | ||||||||
Shareholders’ Equity | ||||||||
Preferred shares, $1.662/3 par value, authorized 20 million shares; issued and outstanding 1,600 shares as of September 30, 2017 and December 31, 2016 | ― | ― | ||||||
Common shares, $0.20 par value, authorized 3.6 billion shares; issued and outstanding 871 million shares as of September 30, 2017 and 904 million shares as of December 31, 2016 | 175 | 181 | ||||||
Additional paid-in capital | 12,318 | 12,733 | ||||||
Retained earnings | 10,908 | 10,371 | ||||||
Accumulated other comprehensive loss | ||||||||
Net unrealized securities gains, net of tax of: 2017, $7; 2016, $5 | 11 | 7 | ||||||
Foreign currency translation adjustments, net of tax of: 2017, $(486); 2016, $24 | (1,806 | ) | (2,262 | ) | ||||
Net unrealized pension and other postretirement benefits, net of tax of: 2017, $(196); 2016, $(186) | (521 | ) | (529 | ) | ||||
Total accumulated other comprehensive loss | (2,316 | ) | (2,784 | ) | ||||
Total shareholders’ equity | 21,085 | 20,501 | ||||||
Total liabilities and shareholders’ equity | $ | 168,577 | $ | 158,893 |
Nine Months Ended September 30 (Millions) | 2017 | 2016 | ||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 3,933 | $ | 4,583 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provisions for losses | 1,926 | 1,401 | ||||||
Depreciation and amortization | 953 | 810 | ||||||
Deferred taxes and other | (61 | ) | (1,076 | ) | ||||
Stock-based compensation | 212 | 190 | ||||||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||
Other receivables | 1,043 | 485 | ||||||
Other assets | (137 | ) | 115 | |||||
Accounts payable and other liabilities | 1,197 | (963 | ) | |||||
Travelers Cheques and other prepaid products | (485 | ) | (594 | ) | ||||
Net cash provided by operating activities | 8,581 | 4,951 | ||||||
Cash Flows from Investing Activities | ||||||||
Sales of available-for-sale investment securities | 1 | 51 | ||||||
Maturities and redemptions of available-for-sale investment securities | 2,198 | 1,209 | ||||||
Purchases of investments | (2,339 | ) | (1,355 | ) | ||||
Net (increase) decrease in Card Member receivables and loans, including held for sale(a) | (7,535 | ) | 11,818 | |||||
Purchase of premises and equipment, net of sales: 2017, $1; 2016, $2 | (812 | ) | (975 | ) | ||||
Acquisitions/dispositions, net of cash acquired | (210 | ) | (191 | ) | ||||
Net increase in restricted cash | (1,773 | ) | (427 | ) | ||||
Net cash (used in) provided by investing activities | (10,470 | ) | 10,130 | |||||
Cash Flows from Financing Activities | ||||||||
Net increase (decrease) in customer deposits | 8,219 | (1,499 | ) | |||||
Net decrease in short-term borrowings | (3,232 | ) | (2,040 | ) | ||||
Issuance of long-term debt | 19,875 | 5,926 | ||||||
Principal payments on long-term debt | (18,349 | ) | (9,349 | ) | ||||
Issuance of American Express common shares | 82 | 78 | ||||||
Repurchase of American Express common shares | (3,087 | ) | (3,542 | ) | ||||
Dividends paid | (925 | ) | (892 | ) | ||||
Net cash provided by (used in) financing activities | 2,583 | (11,318 | ) | |||||
Effect of foreign currency exchange rates on cash and cash equivalents | 266 | (5 | ) | |||||
Net increase in cash and cash equivalents | 960 | 3,758 | ||||||
Cash and cash equivalents at beginning of period | 25,208 | 22,762 | ||||||
Cash and cash equivalents at end of period | $ | 26,168 | $ | 26,520 |
(Millions) | 2017 | 2016 | ||||||
U.S. Consumer Services(a) | $ | 49,326 | $ | 48,758 | ||||
International Consumer and Network Services | 7,823 | 6,971 | ||||||
Global Commercial Services | 10,729 | 9,536 | ||||||
Card Member loans | 67,878 | 65,265 | ||||||
Less: Reserve for losses | 1,502 | 1,223 | ||||||
Card Member loans, net | $ | 66,376 | $ | 64,042 | ||||
Other loans, net(b) | $ | 2,268 | $ | 1,419 |
(Millions) | 2017 | 2016 | ||||||
U.S. Consumer Services (a) | $ | 11,192 | $ | 12,302 | ||||
International Consumer and Network Services | 6,512 | 5,966 | ||||||
Global Commercial Services | 33,810 | 29,040 | ||||||
Card Member receivables | 51,514 | 47,308 | ||||||
Less: Reserve for losses | 512 | 467 | ||||||
Card Member receivables, net | $ | 51,002 | $ | 46,841 | ||||
Other receivables, net (b) | $ | 2,701 | $ | 3,232 |
2017 (Millions) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total | |||||||||||||||
Card Member Loans: | ||||||||||||||||||||
U.S. Consumer Services | $ | 48,707 | $ | 183 | $ | 128 | $ | 308 | $ | 49,326 | ||||||||||
International Consumer and Network Services | 7,698 | 39 | 27 | 59 | 7,823 | |||||||||||||||
Global Commercial Services | ||||||||||||||||||||
Global Small Business Services | 10,556 | 36 | 24 | 59 | 10,675 | |||||||||||||||
Global Corporate Payments(a) | (b) | (b) | (b) | ― | 54 | |||||||||||||||
Card Member Receivables: | ||||||||||||||||||||
U.S. Consumer Services | 11,055 | 51 | 26 | 60 | 11,192 | |||||||||||||||
International Consumer and Network Services | 6,424 | 28 | 18 | 42 | 6,512 | |||||||||||||||
Global Commercial Services | ||||||||||||||||||||
Global Small Business Services | $ | 15,651 | $ | 75 | $ | 50 | $ | 102 | $ | 15,878 | ||||||||||
Global Corporate Payments(a) | (b) | (b) | (b) | $ | 153 | $ | 17,932 | |||||||||||||
2016 (Millions) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total | |||||||||||||||
Card Member Loans: | ||||||||||||||||||||
U.S. Consumer Services | $ | 48,216 | $ | 156 | $ | 119 | $ | 267 | $ | 48,758 | ||||||||||
International Consumer and Network Services | 6,863 | 32 | 24 | 52 | 6,971 | |||||||||||||||
Global Commercial Services | ||||||||||||||||||||
Global Small Business Services | 9,378 | 34 | 23 | 49 | 9,484 | |||||||||||||||
Global Corporate Payments(a) | (b) | (b) | (b) | ― | 52 | |||||||||||||||
Card Member Receivables: | ||||||||||||||||||||
U.S. Consumer Services | 12,158 | 45 | 30 | 69 | 12,302 | |||||||||||||||
International Consumer and Network Services | 5,888 | 22 | 15 | 41 | 5,966 | |||||||||||||||
Global Commercial Services | ||||||||||||||||||||
Global Small Business Services | $ | 14,047 | $ | 77 | $ | 47 | $ | 102 | $ | 14,273 | ||||||||||
Global Corporate Payments(a) | (b) | (b) | (b) | $ | 135 | $ | 14,767 |
2017 | 2016 | |||||||||||||
Net Write-Off Rate | Net Write-Off Rate | |||||||||||||
Principal Only(a) | Principal, Interest & Fees(a) | 30+ Days Past Due as a % of Total | Principal Only(a) | Principal, Interest & Fees(a) | 30+ Days Past Due as a % of Total | |||||||||
Card Member Loans: | ||||||||||||||
U.S. Consumer Services | 1.7 | % | 2.0 | % | 1.3 | % | 1.5 | % | 1.8 | % | 1.1 | % | ||
International Consumer and Network Services | 2.1 | % | 2.6 | % | 1.6 | % | 2.0 | % | 2.5 | % | 1.7 | % | ||
Global Small Business Services | 1.6 | % | 1.9 | % | 1.1 | % | 1.4 | % | 1.7 | % | 1.1 | % | ||
Card Member Receivables: | ||||||||||||||
U.S. Consumer Services | 1.3 | % | 1.5 | % | 1.2 | % | 1.4 | % | 1.6 | % | 1.4 | % | ||
International Consumer and Network Services | 2.1 | % | 2.2 | % | 1.4 | % | 2.1 | % | 2.3 | % | 1.5 | % | ||
Global Small Business Services | 1.6 | % | 1.8 | % | 1.4 | % | 1.6 | % | 1.8 | % | 1.5 | % | ||
2017 | 2016 | |||||||||||||
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 | 0.10 | % | 0.9 | % | 0.09 | % | 0.8 | % |
As of September 30, 2017 | ||||||||||||||||||||||||||||
Accounts Classified as a TDR(c) | ||||||||||||||||||||||||||||
2017 (Millions) | 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 | |||||||||||||||||||||
Card Member Loans: | ||||||||||||||||||||||||||||
U.S. Consumer Services | $ | 206 | $ | 158 | $ | 162 | $ | 131 | $ | 657 | $ | 593 | $ | 48 | ||||||||||||||
International Consumer and Network Services | 59 | ― | ― | ― | 59 | 58 | ― | |||||||||||||||||||||
Global Commercial Services | 37 | 32 | 28 | 26 | 123 | 113 | 9 | |||||||||||||||||||||
Card Member Receivables: | ||||||||||||||||||||||||||||
U.S. Consumer Services | ― | ― | 12 | 9 | 21 | 21 | 4 | |||||||||||||||||||||
Global Commercial Services | ― | ― | 31 | 16 | 47 | 47 | 8 | |||||||||||||||||||||
Total | $ | 302 | $ | 190 | $ | 233 | $ | 182 | $ | 907 | $ | 832 | $ | 69 |
As of December 31, 2016 | ||||||||||||||||||||||||||||
Accounts Classified as a TDR(c) | ||||||||||||||||||||||||||||
2016 (Millions) | 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 | |||||||||||||||||||||
Card Member Loans: | ||||||||||||||||||||||||||||
U.S. Consumer Services | $ | 178 | $ | 139 | $ | 165 | $ | 129 | $ | 611 | $ | 558 | $ | 51 | ||||||||||||||
International Consumer and Network Services | 52 | ― | ― | ― | 52 | 51 | ― | |||||||||||||||||||||
Global Commercial Services | 30 | 30 | 26 | 26 | 112 | 103 | 9 | |||||||||||||||||||||
Card Member Receivables: | ||||||||||||||||||||||||||||
U.S. Consumer Services | ― | ― | 11 | 6 | 17 | 17 | 7 | |||||||||||||||||||||
Global Commercial Services | ― | ― | 28 | 10 | 38 | 38 | 21 | |||||||||||||||||||||
Total | $ | 260 | $ | 169 | $ | 230 | $ | 171 | $ | 830 | $ | 767 | $ | 88 |
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | |||||||||||||||
(Millions) | Average Balance | Interest Income Recognized | Average Balance | Interest Income Recognized | ||||||||||||
Card Member Loans: | ||||||||||||||||
U.S. Consumer Services | $ | 636 | $ | 17 | $ | 626 | $ | 49 | ||||||||
International Consumer and Network Services | 59 | 4 | 56 | 12 | ||||||||||||
Global Commercial Services | 122 | 5 | 119 | 13 | ||||||||||||
Card Member Receivables: | ||||||||||||||||
U.S. Consumer Services | 20 | ― | 19 | ― | ||||||||||||
Global Commercial Services | 44 | ― | 42 | ― | ||||||||||||
Total | $ | 881 | $ | 26 | $ | 862 | $ | 74 | ||||||||
Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 | |||||||||||||||
(Millions) | Average Balance | Interest Income Recognized | Average Balance | Interest Income Recognized | ||||||||||||
Card Member Loans: | ||||||||||||||||
U.S. Consumer Services | $ | 587 | $ | 14 | $ | 555 | $ | 38 | ||||||||
International Consumer and Network Services | 53 | 4 | 52 | 12 | ||||||||||||
Global Commercial Services | 111 | 4 | 102 | 10 | ||||||||||||
Card Member Receivables: | ||||||||||||||||
U.S. Consumer Services | 13 | ― | 13 | ― | ||||||||||||
Global Commercial Services | 29 | ― | 24 | ― | ||||||||||||
Total | $ | 793 | $ | 22 | $ | 746 | $ | 60 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, 2017 | September 30, 2017 | |||||||||||||||||||||||||||||||
Number of Accounts (in thousands) | Outstanding Balances ($ in millions)(a) | Average Interest Rate Reduction (% Points) | Average Payment Term Extension (# of Months) | Number of Accounts (in thousands) | Outstanding Balances ($ in millions)(a) | Average Interest Rate Reduction (% Points) | Average Payment Term Extension (# of Months) | |||||||||||||||||||||||||
Troubled Debt Restructurings: | ||||||||||||||||||||||||||||||||
Card Member Loans | 8 | $ | 57 | 9 | (b) | 23 | $ | 160 | 10 | (b) | ||||||||||||||||||||||
Card Member Receivables | 1 | 18 | (c) | 31 | 4 | 64 | (c) | 27 | ||||||||||||||||||||||||
Total | 9 | $ | 75 | 27 | $ | 224 | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
September 30, 2016 | September 30, 2016 | |||||||||||||||||||||||||||||||
Number of Accounts (in thousands) | Outstanding Balances ($ in millions)(a) | Average Interest Rate Reduction (% Points) | Average Payment Term Extension (# of Months) | Number of Accounts (in thousands) | Outstanding Balances ($ in millions)(a) | Average Interest Rate Reduction (% Points) | Average Payment Term Extension (# of Months) | |||||||||||||||||||||||||
Troubled Debt Restructurings: | ||||||||||||||||||||||||||||||||
Card Member Loans | 8 | $ | 56 | 9 | (b) | 23 | $ | 163 | 10 | (b) | ||||||||||||||||||||||
Card Member Receivables | 2 | 29 | (c) | 19 | 7 | 94 | (c) | 17 | ||||||||||||||||||||||||
Total | 10 | $ | 85 | 30 | $ | 257 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2017 | September 30, 2017 | |||||||||||||||
Number of Accounts (in thousands) | Aggregated Outstanding Balances Upon Default ($ in millions)(a) | Number of Accounts (in thousands) | Aggregated Outstanding Balances Upon Default ($ in millions)(a) | |||||||||||||
Troubled Debt Restructurings That Subsequently Defaulted: | ||||||||||||||||
Card Member Loans | 2 | $ | 9 | 5 | $ | 30 | ||||||||||
Card Member Receivables | 1 | 2 | 3 | 4 | ||||||||||||
Total | 3 | $ | 11 | 8 | $ | 34 | ||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2016 | September 30, 2016 | |||||||||||||||
Number of Accounts (in thousands) | Aggregated Outstanding Balances Upon Default ($ in millions)(a) | Number of Accounts (in thousands) | Aggregated Outstanding Balances Upon Default ($ in millions)(a) | |||||||||||||
Troubled Debt Restructurings That Subsequently Defaulted: | ||||||||||||||||
Card Member Loans | 3 | $ | 12 | 5 | $ | 30 | ||||||||||
Card Member Receivables | 1 | 1 | 3 | 3 | ||||||||||||
Total | 4 | $ | 13 | 8 | $ | 33 |
(Millions) | 2017 | 2016 | ||||||
Balance, January 1 | $ | 1,223 | $ | 1,028 | ||||
Provisions(a) | 1,272 | 831 | ||||||
Net write-offs(b) | ||||||||
Principal | (856 | ) | (687 | ) | ||||
Interest and fees | (163 | ) | (128 | ) | ||||
Other(c) | 26 | 70 | ||||||
Balance, September 30 | $ | 1,502 | $ | 1,114 |
(Millions) | 2017 | 2016 | ||||||
Card Member loans evaluated individually for impairment(a) | $ | 347 | $ | 346 | ||||
Related reserves (a) | $ | 57 | $ | 60 | ||||
Card Member loans evaluated collectively for impairment(b) | $ | 67,531 | $ | 64,919 | ||||
Related reserves (b) | $ | 1,445 | $ | 1,163 |
(Millions) | 2017 | 2016 | ||||||
Balance, January 1 | $ | 467 | $ | 462 | ||||
Provisions(a) | 590 | 496 | ||||||
Net write-offs(b) | (548 | ) | (518 | ) | ||||
Other(c) | 3 | (3 | ) | |||||
Balance, September 30 | $ | 512 | $ | 437 |
(Millions) | 2017 | 2016 | ||||||
Card Member receivables evaluated individually for impairment(a) | $ | 68 | $ | 55 | ||||
Related reserves (a) | $ | 12 | $ | 28 | ||||
Card Member receivables evaluated collectively for impairment | $ | 51,446 | $ | 47,253 | ||||
Related reserves (b) | $ | 500 | $ | 439 |
2017 | 2016 | |||||||||||||||||||||||||||||||
Gross | Gross | Estimated | Gross | Gross | Estimated | |||||||||||||||||||||||||||
Unrealized | Unrealized | Fair | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||
Description of Securities (Millions) | Cost | Gains | Losses | Value | Cost | Gains | Losses | Value | ||||||||||||||||||||||||
State and municipal obligations | $ | 1,412 | $ | 17 | $ | (2 | ) | $ | 1,427 | $ | 2,019 | $ | 28 | $ | (11 | ) | $ | 2,036 | ||||||||||||||
U.S. Government agency obligations | 12 | ― | ― | 12 | 12 | ― | ― | 12 | ||||||||||||||||||||||||
U.S. Government treasury obligations | 1,115 | 8 | (5 | ) | 1,118 | 465 | 3 | (8 | ) | 460 | ||||||||||||||||||||||
Corporate debt securities | 28 | ― | ― | 28 | 19 | ― | ― | 19 | ||||||||||||||||||||||||
Mortgage-backed securities (a) | 74 | 2 | ― | 76 | 92 | 3 | ― | 95 | ||||||||||||||||||||||||
Equity securities | 1 | ― | ― | 1 | 1 | ― | ― | 1 | ||||||||||||||||||||||||
Foreign government bonds and obligations | 539 | 1 | ― | 540 | 486 | 1 | (1 | ) | 486 | |||||||||||||||||||||||
Other (b) | 50 | ― | (2 | ) | 48 | 50 | ― | (2 | ) | 48 | ||||||||||||||||||||||
Total | $ | 3,231 | $ | 28 | $ | (9 | ) | $ | 3,250 | $ | 3,144 | $ | 35 | $ | (22 | ) | $ | 3,157 |
2017 | 2016 | |||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Less than 12 months | 12 months or more | |||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Description of Securities (Millions) | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | ||||||||||||||||||||||||
State and municipal obligations | $ | 101 | $ | (2 | ) | $ | ― | $ | ― | $ | 153 | $ | (11 | ) | $ | ― | $ | ― | ||||||||||||||
U.S. Government treasury obligations | 366 | (5 | ) | ― | ― | 298 | (8 | ) | ― | ― | ||||||||||||||||||||||
Other | ― | ― | 32 | (2 | ) | ― | ― | 32 | (2 | ) | ||||||||||||||||||||||
Total | $ | 467 | $ | (7 | ) | $ | 32 | $ | (2 | ) | $ | 451 | $ | (19 | ) | $ | 32 | $ | (2 | ) |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Ratio of Fair Value to | Gross | Gross | Gross | |||||||||||||||||||||||||||||||||
Amortized Cost | Number of | Estimated | Unrealized | Number of | Estimated | Unrealized | Number of | Estimated | Unrealized | |||||||||||||||||||||||||||
(Dollars in millions) | Securities | Fair Value | Losses | Securities | Fair Value | Losses | Securities | Fair Value | Losses | |||||||||||||||||||||||||||
2017: | ||||||||||||||||||||||||||||||||||||
90%–100% | 22 | $ | 467 | $ | (7 | ) | 6 | $ | 32 | $ | (2 | ) | 28 | $ | 499 | $ | (9 | ) | ||||||||||||||||||
Total as of September 30, 2017 | 22 | $ | 467 | $ | (7 | ) | 6 | $ | 32 | $ | (2 | ) | 28 | $ | 499 | $ | (9 | ) | ||||||||||||||||||
2016: | ||||||||||||||||||||||||||||||||||||
90%–100% | 33 | $ | 411 | $ | (13 | ) | 6 | $ | 32 | $ | (2 | ) | 39 | $ | 443 | $ | (15 | ) | ||||||||||||||||||
Less than 90% | 4 | 40 | (6 | ) | ― | ― | ― | 4 | 40 | (6 | ) | |||||||||||||||||||||||||
Total as of December 31, 2016 | 37 | $ | 451 | $ | (19 | ) | 6 | $ | 32 | $ | (2 | ) | 43 | $ | 483 | $ | (21 | ) |
Estimated | ||||||||
(Millions) | Cost | Fair Value | ||||||
Due within 1 year | $ | 648 | $ | 648 | ||||
Due after 1 year but within 5 years | 998 | 1,000 | ||||||
Due after 5 years but within 10 years | 268 | 272 | ||||||
Due after 10 years | 1,267 | 1,282 | ||||||
Total | $ | 3,181 | $ | 3,202 |
(Millions) | 2017 | 2016 | ||||||
Lending Trust | $ | 1,814 | $ | 35 | ||||
Charge Trust | 2 | 3 | ||||||
Total | $ | 1,816 | $ | 38 |
(Millions) | 2017 | 2016 | ||||||
U.S.: | ||||||||
Interest bearing | $ | 60,573 | $ | 52,316 | ||||
Non-interest bearing (includes Card Member credit balances of: 2017, $300 million; 2016, $331 million) | 337 | 367 | ||||||
Non-U.S.: | ||||||||
Interest bearing | 32 | 58 | ||||||
Non-interest bearing (includes Card Member credit balances of: 2017, $334 million; 2016, $285 million) | 348 | 301 | ||||||
Total customer deposits | $ | 61,290 | $ | 53,042 |
(Millions) | 2017 | 2016 | ||||||
U.S. retail deposits: | ||||||||
Savings accounts – Direct | $ | 30,780 | $ | 30,980 | ||||
Certificates of deposit:(a) | ||||||||
Direct | 290 | 291 | ||||||
Third-party (brokered) | 17,229 | 11,925 | ||||||
Sweep accounts – Third-party (brokered) | 12,274 | 9,120 | ||||||
Other deposits: | ||||||||
U.S. non-interest bearing deposits | 37 | 36 | ||||||
Non-U.S. deposits | 46 | 74 | ||||||
Card Member credit balances ― U.S. and non-U.S. | 634 | 616 | ||||||
Total customer deposits | $ | 61,290 | $ | 53,042 |
(Millions) | U.S. | Non-U.S. | Total | |||||||||
2017 | $ | 1,450 | $ | 3 | $ | 1,453 | ||||||
2018 | 5,160 | 16 | 5,176 | |||||||||
2019 | 4,252 | ― | 4,252 | |||||||||
2020 | 3,511 | ― | 3,511 | |||||||||
2021 | 1,234 | ― | 1,234 | |||||||||
After 5 years | 1,912 | ― | 1,912 | |||||||||
Total | $ | 17,519 | $ | 19 | $ | 17,538 |
(Millions) | 2017 | 2016 | ||||||
U.S. | $ | 113 | $ | 117 | ||||
Non-U.S. | 8 | 7 | ||||||
Total | $ | 121 | $ | 124 |
Other Assets Fair Value | Other Liabilities Fair Value | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||
Fair value hedges - Interest rate contracts(a) | $ | 26 | $ | 111 | $ | 15 | $ | 69 | ||||||||
Net investment hedges - Foreign exchange contracts | 41 | 347 | 210 | 35 | ||||||||||||
Total derivatives designated as hedging instruments | 67 | 458 | 225 | 104 | ||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||
Foreign exchange contracts, including certain embedded derivatives(b) | 168 | 308 | 102 | 176 | ||||||||||||
Total derivatives, gross | 235 | 766 | 327 | 280 | ||||||||||||
Less: Cash collateral netting(c)(d) | (17 | ) | (54 | ) | (8 | ) | (68 | ) | ||||||||
Derivative asset and derivative liability netting(e) | (92 | ) | (157 | ) | (92 | ) | (157 | ) | ||||||||
Total derivatives, net(f) | $ | 126 | $ | 555 | $ | 227 | $ | 55 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest rate derivative contracts | $ | (31 | ) | $ | (123 | ) | $ | (100 | ) | $ | 103 | |||||
Hedged items | 39 | 134 | 64 | (90 | ) | |||||||||||
Net hedge ineffectiveness | $ | 8 | $ | 11 | $ | (36 | ) | $ | 13 |
2017 | 2016 | |||||||||||||||||||||||||||||||
(Millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Investment securities:(a) | ||||||||||||||||||||||||||||||||
Equity securities and other | $ | 49 | $ | 1 | $ | 48 | $ | ― | $ | 49 | $ | 1 | $ | 48 | $ | ― | ||||||||||||||||
Debt securities | 3,201 | 1,118 | 2,083 | ― | 3,108 | 460 | 2,648 | ― | ||||||||||||||||||||||||
Derivatives(a) | 235 | ― | 235 | ― | 765 | ― | 765 | ― | ||||||||||||||||||||||||
Total Assets | 3,485 | 1,119 | 2,366 | ― | 3,922 | 461 | 3,461 | ― | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Derivatives(a) | 327 | ― | 327 | ― | 280 | ― | 280 | ― | ||||||||||||||||||||||||
Total Liabilities | $ | 327 | $ | ― | $ | 327 | $ | ― | $ | 280 | $ | ― | $ | 280 | $ | ― |
Carrying | Corresponding Fair Value Amount | |||||||||||||||||||
2017 (Billions) | Value | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial Assets: | ||||||||||||||||||||
Financial assets for which carrying values equal or approximate fair value | ||||||||||||||||||||
Cash and cash equivalents(a) | $ | 26 | $ | 26 | $ | 24 | $ | 2 | $ | ― | ||||||||||
Other financial assets(b) | 56 | 56 | ― | 56 | ― | |||||||||||||||
Financial assets carried at other than fair value | ||||||||||||||||||||
Loans, net(c) | 69 | 69 | ― | ― | 69 | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Financial liabilities for which carrying values equal or approximate fair value | 69 | 69 | ― | 69 | ― | |||||||||||||||
Financial liabilities carried at other than fair value | ||||||||||||||||||||
Certificates of deposit(d) | 18 | 18 | ― | 18 | ― | |||||||||||||||
Long-term debt(c) | $ | 49 | $ | 50 | $ | ― | $ | 50 | $ | ― | ||||||||||
Carrying | Corresponding Fair Value Amount | |||||||||||||||||||
2016 (Billions) | Value | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||
Financial Assets: | ||||||||||||||||||||
Financial assets for which carrying values equal or approximate fair value | ||||||||||||||||||||
Cash and cash equivalents(a) | $ | 25 | $ | 25 | $ | 22 | $ | 3 | $ | ― | ||||||||||
Other financial assets(b) | 51 | 51 | ― | 51 | ― | |||||||||||||||
Financial assets carried at other than fair value | ||||||||||||||||||||
Loans, net(c) | 65 | 66 | ― | ― | 66 | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Financial liabilities for which carrying values equal or approximate fair value | 67 | 67 | ― | 67 | ― | |||||||||||||||
Financial liabilities carried at other than fair value | ||||||||||||||||||||
Certificates of deposit(d) | 12 | 12 | ― | 12 | ― | |||||||||||||||
Long-term debt(c) | $ | 47 | $ | 48 | $ | ― | $ | 48 | $ | ― |
Three Months Ended September 30, 2017 (Millions), net of tax | Net Unrealized Gains (Losses) on Investment Securities | Foreign Currency Translation Adjustments | Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains | Accumulated Other Comprehensive (Loss) Income | ||||||||||||
Balances as of June 30, 2017 | $ | 13 | $ | (1,913 | ) | $ | (528 | ) | $ | (2,428 | ) | |||||
Net unrealized losses | (2 | ) | ― | ― | (2 | ) | ||||||||||
Decrease due to amounts reclassified into earnings | ― | (1 | ) | ― | (1 | ) | ||||||||||
Net translation gain of investments in foreign operations | ― | 292 | ― | 292 | ||||||||||||
Net losses related to hedges of investments in foreign operations | ― | (184 | ) | ― | (184 | ) | ||||||||||
Pension and other postretirement benefit | ― | ― | 7 | 7 | ||||||||||||
Net change in accumulated other comprehensive loss | (2 | ) | 107 | 7 | 112 | |||||||||||
Balances as of September 30, 2017 | $ | 11 | $ | (1,806 | ) | $ | (521 | ) | $ | (2,316 | ) | |||||
Nine Months Ended September 30, 2017 (Millions), net of tax | Net Unrealized Gains (Losses) on Investment Securities | Foreign Currency Translation Adjustments | Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains | Accumulated Other Comprehensive (Loss) Income | ||||||||||||
Balances as of December 31, 2016 | $ | 7 | $ | (2,262 | ) | $ | (529 | ) | $ | (2,784 | ) | |||||
Net unrealized gains | 4 | ― | ― | 4 | ||||||||||||
Decrease due to amounts reclassified into earnings | ― | (1 | ) | ― | (1 | ) | ||||||||||
Net translation gain of investments in foreign operations(a) | ― | 972 | ― | 972 | ||||||||||||
Net losses related to hedges of investments in foreign operations | ― | (515 | ) | ― | (515 | ) | ||||||||||
Pension and other postretirement benefit | ― | ― | 8 | 8 | ||||||||||||
Net change in accumulated other comprehensive loss | 4 | 456 | 8 | 468 | ||||||||||||
Balances as of September 30, 2017 | $ | 11 | $ | (1,806 | ) | $ | (521 | ) | $ | (2,316 | ) |
Three Months Ended September 30, 2016 (Millions), net of tax | Net Unrealized Gains (Losses) on Investment Securities | Foreign Currency Translation Adjustments | Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains | Accumulated Other Comprehensive (Loss) Income | ||||||||||||
Balances as of June 30, 2016 | $ | 65 | $ | (2,170 | ) | $ | (516 | ) | $ | (2,621 | ) | |||||
Net unrealized losses | (14 | ) | ― | ― | (14 | ) | ||||||||||
Decrease due to amounts reclassified into earnings | (1 | ) | ― | ― | (1 | ) | ||||||||||
Net translation gain of investments in foreign operations | ― | 29 | ― | 29 | ||||||||||||
Net losses related to hedges of investments in foreign operations | ― | (18 | ) | ― | (18 | ) | ||||||||||
Pension and other postretirement benefit | ― | ― | 7 | 7 | ||||||||||||
Net change in accumulated other comprehensive loss | (15 | ) | 11 | 7 | 3 | |||||||||||
Balances as of September 30, 2016 | $ | 50 | $ | (2,159 | ) | $ | (509 | ) | $ | (2,618 | ) | |||||
Nine Months Ended September 30, 2016 (Millions), net of tax | Net Unrealized Gains (Losses) on Investment Securities | Foreign Currency Translation Adjustments | Net Unrealized Pension and Other Postretirement Benefit (Losses) Gains | Accumulated Other Comprehensive (Loss) Income | ||||||||||||
Balances as of December 31, 2015 | $ | 58 | $ | (2,044 | ) | $ | (548 | ) | $ | (2,534 | ) | |||||
Net unrealized losses | (5 | ) | ― | ― | (5 | ) | ||||||||||
Decrease due to amounts reclassified into earnings | (3 | ) | ― | ― | (3 | ) | ||||||||||
Net translation loss of investments in foreign operations | ― | (140 | ) | ― | (140 | ) | ||||||||||
Net gains related to hedges of investments in foreign operations | ― | 25 | ― | 25 | ||||||||||||
Pension and other postretirement benefit | ― | ― | 39 | 39 | ||||||||||||
Net change in accumulated other comprehensive loss | (8 | ) | (115 | ) | 39 | (84 | ) | |||||||||
Balances as of September 30, 2016 | $ | 50 | $ | (2,159 | ) | $ | (509 | ) | $ | (2,618 | ) |
Tax (benefit) expense | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Investment securities | $ | (1 | ) | $ | (9 | ) | $ | 2 | $ | (7 | ) | |||||
Foreign currency translation adjustments(a) | (25 | ) | (6 | ) | (204 | ) | 30 | |||||||||
Net investment hedges | (99 | ) | (18 | ) | (306 | ) | 7 | |||||||||
Pension and other postretirement benefits | (2 | ) | 7 | (10 | ) | 36 | ||||||||||
Total tax impact | $ | (127 | ) | $ | (26 | ) | $ | (518 | ) | $ | 66 |
Gains (losses) recognized in earnings | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
Amount | Amount | ||||||||||||||||
Description (Millions) | Income Statement Line Item | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Available-for-sale securities | |||||||||||||||||
Reclassifications for previously unrealized net gains on investment securities | Other non-interest revenues | $ | ― | $ | 1 | $ | ― | $ | 5 | ||||||||
Related income tax expense | Income tax provision | ― | ― | ― | (2 | ) | |||||||||||
Reclassification to net income related to available-for-sale securities | ― | 1 | ― | 3 | |||||||||||||
Foreign currency translation adjustments | |||||||||||||||||
Reclassification of realized losses on translation adjustments and related net investments hedges | Other expenses | (6 | ) | ― | (6 | ) | ― | ||||||||||
Related income tax benefit | Income tax provision | 7 | ― | 7 | ― | ||||||||||||
Reclassification to net income related to foreign currency translation adjustments | 1 | ― | 1 | ― | |||||||||||||
Total | $ | 1 | $ | 1 | $ | 1 | $ | 3 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Delinquency fees | $ | 221 | $ | 183 | $ | 653 | $ | 575 | ||||||||
Foreign currency conversion fee revenue | 219 | 207 | 630 | 610 | ||||||||||||
Loyalty coalition-related fees | 116 | 106 | 332 | 304 | ||||||||||||
Travel commissions and fees | 93 | 89 | 267 | 256 | ||||||||||||
Other(a) | 118 | 109 | 350 | 331 | ||||||||||||
Total Other fees and commissions | $ | 767 | $ | 694 | $ | 2,232 | $ | 2,076 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Global Network Services partner revenues | $ | 150 | $ | 156 | $ | 456 | $ | 498 | ||||||||
Other(a) | 286 | 327 | 828 | 1,016 | ||||||||||||
Total Other revenues | $ | 436 | $ | 483 | $ | 1,284 | $ | 1,514 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Occupancy and equipment | $ | 568 | $ | 429 | $ | 1,527 | $ | 1,332 | ||||||||
Professional services | 501 | 630 | 1,534 | 1,862 | ||||||||||||
Gain on sale of HFS portfolios(a) | ― | ― | ― | (1,218 | ) | |||||||||||
Other(b) | 429 | 439 | 1,220 | 1,412 | ||||||||||||
Total Other expenses | $ | 1,498 | $ | 1,498 | $ | 4,281 | $ | 3,388 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | ||||||||||||||||
Basic and diluted: | ||||||||||||||||
Net income | $ | 1,356 | $ | 1,142 | $ | 3,933 | $ | 4,583 | ||||||||
Preferred dividends | (21 | ) | (21 | ) | (61 | ) | (61 | ) | ||||||||
Net income available to common shareholders | 1,335 | 1,121 | 3,872 | 4,522 | ||||||||||||
Earnings allocated to participating share awards(a) | (11 | ) | (9 | ) | (32 | ) | (37 | ) | ||||||||
Net income attributable to common shareholders | $ | 1,324 | $ | 1,112 | $ | 3,840 | $ | 4,485 | ||||||||
Denominator: (a) | ||||||||||||||||
Basic: Weighted-average common stock | 878 | 920 | 889 | 940 | ||||||||||||
Add: Weighted-average stock options (b) | 3 | 3 | 3 | 3 | ||||||||||||
Diluted | 881 | 923 | 892 | 943 | ||||||||||||
Basic EPS | $ | 1.51 | $ | 1.21 | $ | 4.32 | $ | 4.77 | ||||||||
Diluted EPS | $ | 1.50 | $ | 1.20 | $ | 4.30 | $ | 4.76 |
Three Months Ended September 30, 2017 (Millions, except where indicated) | USCS | ICNS | GCS | GMS | Corporate & Other(a) | Consolidated | ||||||||||||||||||
Non-interest revenues | $ | 1,976 | $ | 1,277 | $ | 2,360 | $ | 1,088 | $ | 60 | $ | 6,761 | ||||||||||||
Interest income | 1,509 | 271 | 351 | ― | 111 | 2,242 | ||||||||||||||||||
Interest expense | 202 | 65 | 144 | (65 | ) | 221 | 567 | |||||||||||||||||
Total revenues net of interest expense | 3,283 | 1,483 | 2,567 | 1,153 | (50 | ) | 8,436 | |||||||||||||||||
Net income (loss) | $ | 475 | $ | 286 | $ | 529 | $ | 368 | $ | (302 | ) | $ | 1,356 | |||||||||||
Total assets (billions) | $ | 88 | $ | 39 | $ | 53 | $ | 27 | $ | (38 | ) | $ | 169 | |||||||||||
Total equity (billions) | $ | 7 | $ | 3 | $ | 7 | $ | 3 | $ | 1 | $ | 21 | ||||||||||||
Nine Months Ended September 30, 2017 (Millions, except where indicated) | USCS | ICNS | GCS | GMS | Corporate & Other(a) | Consolidated | ||||||||||||||||||
Non-interest revenues | $ | 5,832 | $ | 3,719 | $ | 6,999 | $ | 3,191 | $ | 186 | $ | 19,927 | ||||||||||||
Interest income | 4,186 | 752 | 1,004 | 1 | 294 | 6,237 | ||||||||||||||||||
Interest expense | 519 | 178 | 382 | (188 | ) | 641 | 1,532 | |||||||||||||||||
Total revenues net of interest expense | 9,499 | 4,293 | 7,621 | 3,380 | (161 | ) | 24,632 | |||||||||||||||||
Net income (loss) | $ | 1,384 | $ | 713 | $ | 1,447 | $ | 1,161 | $ | (772 | ) | $ | 3,933 | |||||||||||
Total assets (billions) | $ | 88 | $ | 39 | $ | 53 | $ | 27 | $ | (38 | ) | $ | 169 | |||||||||||
Total equity (billions) | $ | 7 | $ | 3 | $ | 7 | $ | 3 | $ | 1 | $ | 21 | ||||||||||||
Three Months Ended September 30, 2016 (Millions, except where indicated) | USCS | ICNS | GCS | GMS | Corporate & Other(a) | Consolidated | ||||||||||||||||||
Non-interest revenues | $ | 1,849 | $ | 1,205 | $ | 2,240 | $ | 1,044 | $ | 102 | $ | 6,440 | ||||||||||||
Interest income | 1,178 | 231 | 282 | ― | 73 | 1,764 | ||||||||||||||||||
Interest expense | 125 | 55 | 98 | (60 | ) | 212 | 430 | |||||||||||||||||
Total revenues net of interest expense | 2,902 | 1,381 | 2,424 | 1,104 | (37 | ) | 7,774 | |||||||||||||||||
Net income (loss) | $ | 401 | $ | 155 | $ | 466 | $ | 359 | $ | (239 | ) | $ | 1,142 | |||||||||||
Total assets (billions) | $ | 79 | $ | 34 | $ | 47 | $ | 23 | $ | (30 | ) | $ | 153 | |||||||||||
Total equity (billions) | $ | 8 | $ | 3 | $ | 7 | $ | 2 | $ | 1 | $ | 21 | ||||||||||||
Nine Months Ended September 30, 2016 (Millions, except where indicated) | USCS | ICNS | GCS | GMS | Corporate & Other(a) | Consolidated | ||||||||||||||||||
Non-interest revenues | $ | 5,947 | $ | 3,587 | $ | 6,710 | $ | 3,172 | $ | 318 | $ | 19,734 | ||||||||||||
Interest income | 3,847 | 692 | 913 | 1 | 201 | 5,654 | ||||||||||||||||||
Interest expense | 404 | 167 | 297 | (180 | ) | 603 | 1,291 | |||||||||||||||||
Total revenues net of interest expense | 9,390 | 4,112 | 7,326 | 3,353 | (84 | ) | 24,097 | |||||||||||||||||
Net income (loss) | $ | 2,162 | $ | 571 | $ | 1,527 | $ | 1,089 | $ | (766 | ) | $ | 4,583 | |||||||||||
Total assets (billions) | $ | 79 | $ | 34 | $ | 47 | $ | 23 | $ | (30 | ) | $ | 153 | |||||||||||
Total equity (billions) | $ | 8 | $ | 3 | $ | 7 | $ | 2 | $ | 1 | $ | 21 |
September 30, 2020 | June 30, 2020 | ||||||||||
U.S. Unemployment Rate | |||||||||||
Third quarter of 2020 | 10% - 11% | 8% - 10% | |||||||||
Fourth quarter of 2020 | 10% - 12% | 9% - 11% | |||||||||
Fourth quarter of 2021 | 8% - 13% | 9% - 11% | |||||||||
U.S. GDP Growth (Contraction) (a) | |||||||||||
Third quarter of 2020 | 23% - 8% | 16% - 10% | |||||||||
Fourth quarter of 2020 | 3% - (6%) | 0.6% - (4%) | |||||||||
Fourth quarter of 2021 | 6% - 3% | 8% - 7% |
Three Months Ended September 30, | Change 2020 vs. 2019 | Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages and per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense | $ | 8,751 | $ | 10,989 | $ | (2,238) | (20) | % | $ | 26,736 | $ | 32,191 | $ | (5,455) | (17) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions for credit losses | 665 | 879 | (214) | (24) | % | 4,841 | 2,549 | 2,292 | 90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses | 6,722 | 7,844 | (1,122) | (14) | 19,457 | 23,199 | (3,742) | (16) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax income | 1,364 | 2,266 | (902) | (40) | 2,438 | 6,443 | (4,005) | (62) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision | 291 | 511 | (220) | (43) | 741 | 1,377 | (636) | (46) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 1,073 | 1,755 | (682) | (39) | 1,697 | 5,066 | (3,369) | (67) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per common share — diluted (a) | $ | 1.30 | $ | 2.08 | $ | (0.78) | (38) | % | $ | 2.01 | $ | 5.95 | $ | (3.94) | (66) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return on average equity (b) | 15.3 | % | 31.5 | % | 15.3 | % | 31.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective tax rate | 21.3 | % | 22.6 | % | 30.4 | % | 21.4 | % |
Three Months Ended September 30, | Change 2020 vs. 2019 | Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discount revenue | $ | 4,999 | $ | 6,566 | $ | (1,567) | (24) | % | $ | 14,852 | $ | 19,338 | $ | (4,486) | (23) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net card fees | 1,191 | 1,033 | 158 | 15 | 3,442 | 2,965 | 477 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other fees and commissions | 478 | 825 | (347) | (42) | 1,647 | 2,465 | (818) | (33) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 209 | 362 | (153) | (42) | 707 | 1,087 | (380) | (35) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total non-interest revenues | 6,877 | 8,786 | (1,909) | (22) | 20,648 | 25,855 | (5,207) | (20) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest income | 2,324 | 3,080 | (756) | (25) | 7,796 | 8,999 | (1,203) | (13) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total interest expense | 450 | 877 | (427) | (49) | 1,708 | 2,663 | (955) | (36) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 1,874 | 2,203 | (329) | (15) | 6,088 | 6,336 | (248) | (4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense | $ | 8,751 | $ | 10,989 | $ | (2,238) | (20) | % | $ | 26,736 | $ | 32,191 | $ | (5,455) | (17) | % |
Three Months Ended September 30, | Change 2020 vs. 2019 | Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Card Member receivables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-offs | $ | 219 | $ | 231 | $ | (12) | (5) | % | $ | 776 | $ | 657 | $ | 119 | 18% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve (release) build (a) | (102) | 7 | (109) | # | 293 | 58 | 235 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 117 | 238 | (121) | (51) | 1,069 | 715 | 354 | 50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Card Member loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-offs | 523 | 538 | (15) | (3) | 1,750 | 1,644 | 106 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve build (a) | 48 | 66 | (18) | (27) | 1,666 | 88 | 1,578 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 571 | 604 | (33) | (5) | 3,416 | 1,732 | 1,684 | 97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-offs - Other loans (b) | 27 | 25 | 2 | 8 | 80 | 74 | 6 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-offs - Other receivables (c) | 12 | 10 | 2 | 20 | 20 | 15 | 5 | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve (release) build - Other loans (a)(b) | (53) | 7 | (60) | # | 198 | 16 | 182 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve (release) build - Other receivables (a)(c) | (9) | (5) | (4) | 80 | 58 | (3) | 61 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | (23) | 37 | (60) | # | 356 | 102 | 254 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total provisions for credit losses | $ | 665 | $ | 879 | $ | (214) | (24)% | $ | 4,841 | $ | 2,549 | $ | 2,292 | 90 | % |
Three Months Ended September 30, | Change 2020 vs. 2019 | Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketing and business development | $ | 1,822 | $ | 1,821 | $ | 1 | — | % | $ | 4,889 | $ | 5,172 | $ | (283) | (5) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Card Member rewards | 2,004 | 2,614 | (610) | (23) | 5,745 | 7,717 | (1,972) | (26) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Card Member services | 259 | 558 | (299) | (54) | 923 | 1,671 | (748) | (45) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total marketing, business development, and Card Member rewards and services | 4,085 | 4,993 | (908) | (18) | 11,557 | 14,560 | (3,003) | (21) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits | 1,408 | 1,499 | (91) | (6) | 4,152 | 4,288 | (136) | (3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other, net | 1,229 | 1,352 | (123) | (9) | 3,748 | 4,351 | (603) | (14) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | $ | 6,722 | $ | 7,844 | $ | (1,122) | (14) | % | $ | 19,457 | $ | 23,199 | $ | (3,742) | (16) | % |
As of or for the Three Months Ended September 30, | Change 2020 vs. 2019 | As of or for the Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
Billed business: (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 170.9 | $ | 206.2 | (17) | % | $ | 503.0 | $ | 610.9 | (18) | % | ||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 77.8 | 102.0 | (24) | 230.1 | 304.7 | (24) | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 248.7 | $ | 308.2 | (19) | $ | 733.1 | $ | 915.6 | (20) | ||||||||||||||||||||||||||||||||||||||||
Proprietary | $ | 213.6 | $ | 266.2 | (20) | $ | 631.0 | $ | 788.9 | (20) | ||||||||||||||||||||||||||||||||||||||||
GNS | 35.1 | 42.0 | (17) | 102.1 | 126.7 | (19) | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 248.7 | $ | 308.2 | (19) | $ | 733.1 | $ | 915.6 | (20) | ||||||||||||||||||||||||||||||||||||||||
Cards-in-force: (millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 53.6 | 54.3 | (1) | 53.6 | 54.3 | (1) | ||||||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 57.9 | 60.2 | (4) | 57.9 | 60.2 | (4) | ||||||||||||||||||||||||||||||||||||||||||||
Total | 111.5 | 114.5 | (3) | 111.5 | 114.5 | (3) | ||||||||||||||||||||||||||||||||||||||||||||
Proprietary | 68.8 | 69.9 | (2) | 68.8 | 69.9 | (2) | ||||||||||||||||||||||||||||||||||||||||||||
GNS | 42.7 | 44.6 | (4) | 42.7 | 44.6 | (4) | ||||||||||||||||||||||||||||||||||||||||||||
Total | 111.5 | 114.5 | (3) | 111.5 | 114.5 | (3) | ||||||||||||||||||||||||||||||||||||||||||||
Basic cards-in-force: (millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 42.0 | 42.7 | (2) | 42.0 | 42.7 | (2) | ||||||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 48.8 | 50.3 | (3) | 48.8 | 50.3 | (3) | ||||||||||||||||||||||||||||||||||||||||||||
Total | 90.8 | 93.0 | (2) | 90.8 | 93.0 | (2) | ||||||||||||||||||||||||||||||||||||||||||||
Average proprietary basic Card Member spending: (dollars) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 4,486 | $ | 5,366 | (16) | $ | 13,110 | $ | 15,889 | (17) | ||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 2,989 | 4,027 | (26) | 8,776 | 12,023 | (27) | ||||||||||||||||||||||||||||||||||||||||||||
Worldwide Average | $ | 4,041 | $ | 4,964 | (19) | $ | 11,814 | $ | 14,737 | (20) | ||||||||||||||||||||||||||||||||||||||||
Average discount rate | 2.27 | % | 2.39 | % | 2.29 | % | 2.38 | % | ||||||||||||||||||||||||||||||||||||||||||
Average fee per card (dollars)(a) | $ | 69 | $ | 59 | 17 | % | $ | 66 | $ | 57 | 16 | % |
Three Months Ended September 30, 2020 | |||||||||||||||||
Year over Year Percentage Increase (Decrease) | Year over Year Percentage Increase (Decrease) Assuming No Changes in FX Rates (a) | ||||||||||||||||
Worldwide | |||||||||||||||||
Proprietary | |||||||||||||||||
Proprietary consumer | (17) | % | (18) | % | |||||||||||||
Proprietary commercial | (23) | (23) | |||||||||||||||
Total Proprietary | (20) | (20) | |||||||||||||||
GNS | (17) | (16) | |||||||||||||||
Worldwide Total | (19) | (20) | |||||||||||||||
T&E-related volume (12% of Worldwide Total) (b) | (69) | (69) | |||||||||||||||
Non-T&E-related volume (88% of Worldwide Total) (b) | 1 | 1 | |||||||||||||||
Airline-related volume (1% of Worldwide Total) (b) | (92) | (92) | |||||||||||||||
U.S. | |||||||||||||||||
Proprietary | |||||||||||||||||
Proprietary consumer | (16) | ||||||||||||||||
Proprietary commercial | (19) | ||||||||||||||||
Total Proprietary | (17) | ||||||||||||||||
U.S. Total | (17) | ||||||||||||||||
T&E-related volume (11% of U.S. Total) (b) | (66) | ||||||||||||||||
Non-T&E-related volume (89% of U.S. Total) (b) | 2 | ||||||||||||||||
Airline-related volume (1% of U.S. Total) (b) | (90) | ||||||||||||||||
Outside the U.S. | |||||||||||||||||
Proprietary | |||||||||||||||||
Proprietary consumer | (21) | (23) | |||||||||||||||
Proprietary commercial | (37) | (37) | |||||||||||||||
Total Proprietary | (27) | (29) | |||||||||||||||
Outside the U.S. Total | (24) | (24) | |||||||||||||||
Japan, Asia Pacific & Australia | (15) | (17) | |||||||||||||||
Latin America & Canada | (37) | (31) | |||||||||||||||
Europe, the Middle East & Africa | (30) | (32) |
Nine Months Ended September 30, 2020 | |||||||||||||||||
Year over Year Percentage Increase (Decrease) | Year over Year Percentage Increase (Decrease) Assuming No Changes in FX Rates (a) | ||||||||||||||||
Worldwide | |||||||||||||||||
Proprietary | |||||||||||||||||
Proprietary consumer | (19) | % | (18) | % | |||||||||||||
Proprietary commercial | (22) | (21) | |||||||||||||||
Total Proprietary | (20) | (20) | |||||||||||||||
GNS | (19) | (17) | |||||||||||||||
Worldwide Total | (20) | (19) | |||||||||||||||
T&E-related volume (16% of Worldwide Total) (b) | (59) | (59) | |||||||||||||||
Non-T&E-related volume (84% of Worldwide Total) (b) | (3) | (3) | |||||||||||||||
Airline-related volume (3% of Worldwide Total) (b) | (74) | (74) | |||||||||||||||
U.S. | |||||||||||||||||
Proprietary | |||||||||||||||||
Proprietary consumer | (17) | ||||||||||||||||
Proprietary commercial | (19) | ||||||||||||||||
Total Proprietary | (18) | ||||||||||||||||
U.S. Total | (18) | ||||||||||||||||
T&E-related volume (14% of U.S. Total) (b) | (56) | ||||||||||||||||
Non-T&E-related volume (86% of U.S. Total) (b) | (3) | ||||||||||||||||
Airline-related volume (2% of U.S. Total) (b) | (72) | ||||||||||||||||
Outside the U.S. | |||||||||||||||||
Proprietary | |||||||||||||||||
Proprietary consumer | (23) | (22) | |||||||||||||||
Proprietary commercial | (32) | (31) | |||||||||||||||
Total Proprietary | (27) | (25) | |||||||||||||||
Outside the U.S. Total | (24) | (23) | |||||||||||||||
Japan, Asia Pacific & Australia | (18) | (16) | |||||||||||||||
Latin America & Canada | (33) | (26) | |||||||||||||||
Europe, the Middle East & Africa | (31) | (30) |
As of or for the Three Months Ended September 30, | Change 2020 vs. 2019 | As of or for the Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Worldwide Card Member loans: (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Card Member loans: (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 61.4 | $ | 73.2 | (16) | % | $ | 61.4 | $ | 73.2 | (16) | |||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 8.2 | 10.5 | (22) | 8.2 | 10.5 | (22) | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 69.6 | $ | 83.7 | (17) | $ | 69.6 | $ | 83.7 | (17) | ||||||||||||||||||||||||||||||||||||||||
Credit loss reserves: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance (b) | $ | 5,628 | $ | 2,168 | # | $ | 4,027 | $ | 2,134 | 89 | ||||||||||||||||||||||||||||||||||||||||
Provisions - principal, interest and fees | $ | 571 | $ | 604 | (5) | 3,416 | 1,732 | 97 | ||||||||||||||||||||||||||||||||||||||||||
Net write-offs — principal less recoveries | $ | (432) | $ | (447) | (3) | (1,449) | (1,367) | 6 | ||||||||||||||||||||||||||||||||||||||||||
Net write-offs — interest and fees less recoveries | $ | (91) | $ | (91) | — | (301) | (277) | 9 | ||||||||||||||||||||||||||||||||||||||||||
Other (c) | $ | 12 | $ | (2) | # | (5) | 10 | # | ||||||||||||||||||||||||||||||||||||||||||
Ending balance | $ | 5,688 | $ | 2,232 | # | $ | 5,688 | $ | 2,232 | # | ||||||||||||||||||||||||||||||||||||||||
% of loans | 8.2 | % | 2.7 | % | 8.2 | % | 2.7 | % | ||||||||||||||||||||||||||||||||||||||||||
% of past due | 679 | % | 176 | % | 679 | % | 176 | % | ||||||||||||||||||||||||||||||||||||||||||
Average loans (billions) | $ | 69.9 | $ | 83.3 | (16) | $ | 75.4 | $ | 81.9 | (8) | ||||||||||||||||||||||||||||||||||||||||
Net write-off rate — principal only (d) | 2.5 | % | 2.1 | % | 2.6 | % | 2.2 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate — principal, interest and fees (d) | 3.0 | 2.6 | 3.1 | 2.7 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.2 | % | 1.5 | % | 1.2 | % | 1.5 | % | ||||||||||||||||||||||||||||||||||||||||||
Worldwide Card Member receivables: (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Card Member receivables: (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 29.2 | $ | 39.0 | (25) | $ | 29.2 | $ | 39.0 | (25) | ||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 11.6 | 17.6 | (34) | 11.6 | $ | 17.6 | (34) | |||||||||||||||||||||||||||||||||||||||||||
Total | $ | 40.8 | $ | 56.6 | (28) | $ | 40.8 | $ | 56.6 | (28) | ||||||||||||||||||||||||||||||||||||||||
Credit loss reserves: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance (b) | $ | 519 | $ | 616 | (16) | $ | 126 | $ | 573 | (78) | ||||||||||||||||||||||||||||||||||||||||
Provisions - principal and fees | $ | 117 | $ | 238 | (51) | 1,069 | 715 | 50 | ||||||||||||||||||||||||||||||||||||||||||
Net write-offs - principal and fees less recoveries | $ | (219) | $ | (231) | (5) | (776) | (657) | 18 | ||||||||||||||||||||||||||||||||||||||||||
Other (c) | $ | 5 | $ | (8) | # | 3 | (16) | # | ||||||||||||||||||||||||||||||||||||||||||
Ending balance | $ | 422 | $ | 615 | (31) | % | $ | 422 | $ | 615 | (31) | % | ||||||||||||||||||||||||||||||||||||||
% of receivables | 1.0 | % | 1.1 | % | 1.0 | % | 1.1 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate — principal and fees (d)(e) | 2.2 | % | 1.6 | % | 2.3 | % | 1.6 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
Net interest income | $ | 1,874 | $ | 2,203 | $ | 6,088 | $ | 6,336 | ||||||||||||||||||||||||||||||
Exclude: | ||||||||||||||||||||||||||||||||||||||
Interest expense not attributable to our Card Member loan portfolio (a) | 296 | 461 | 1,041 | 1,412 | ||||||||||||||||||||||||||||||||||
Interest income not attributable to our Card Member loan portfolio (b) | (137) | (308) | (557) | (955) | ||||||||||||||||||||||||||||||||||
Adjusted net interest income (c) | $ | 2,033 | $ | 2,356 | $ | 6,572 | $ | 6,793 | ||||||||||||||||||||||||||||||
Average Card Member loans (billions) | $ | 69.9 | $ | 83.3 | $ | 75.4 | $ | 81.9 | ||||||||||||||||||||||||||||||
Net interest income divided by average Card Member loans (c) | 10.7 | % | 10.6 | % | 10.8 | % | 10.3 | % | ||||||||||||||||||||||||||||||
Net interest yield on average Card Member loans (c) | 11.6 | % | 11.2 | % | 11.6 | % | 11.1 | % |
Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | 2020 | 2019 | 2020 vs. 2019 | 2020 | 2019 | 2020 vs. 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest revenues | $ | 3,517 | $ | 4,226 | $ | (709) | (17) | % | $ | 10,343 | $ | 12,331 | $ | (1,988) | (16) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 1,916 | 2,402 | (486) | (20) | 6,298 | 6,971 | (673) | (10) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | 242 | 437 | (195) | (45) | 842 | 1,318 | (476) | (36) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 1,674 | 1,965 | (291) | (15) | 5,456 | 5,653 | (197) | (3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense | 5,191 | 6,191 | (1,000) | (16) | 15,799 | 17,984 | (2,185) | (12) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions for credit losses | 412 | 653 | (241) | (37) | 3,108 | 1,855 | 1,253 | 68 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense after provisions for credit losses | 4,779 | 5,538 | (759) | (14) | 12,691 | 16,129 | (3,438) | (21) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketing, business development, and Card Member rewards and services | 2,504 | 3,042 | (538) | (18) | 6,929 | 8,898 | (1,969) | (22) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits and other operating expenses | 1,177 | 1,233 | (56) | (5) | 3,606 | 3,649 | (43) | (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 3,681 | 4,275 | (594) | (14) | 10,535 | 12,547 | (2,012) | (16) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax segment income | 1,098 | 1,263 | (165) | (13) | 2,156 | 3,582 | (1,426) | (40) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision | 243 | 272 | (29) | (11) | 573 | 756 | (183) | (24) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 855 | $ | 991 | $ | (136) | (14) | % | $ | 1,583 | $ | 2,826 | $ | (1,243) | (44) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective tax rate | 22.1 | % | 21.5 | % | 26.6 | % | 21.1 | % |
As of or for the Three Months Ended September 30, | Change 2020 vs. 2019 | As of or for the Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Proprietary billed business: (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 83.9 | $ | 99.9 | (16) | % | $ | 242.9 | $ | 292.9 | (17) | % | ||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 30.2 | 38.3 | (21) | 86.4 | 112.2 | (23) | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 114.1 | $ | 138.2 | (17) | $ | 329.3 | $ | 405.1 | (19) | ||||||||||||||||||||||||||||||||||||||||
Proprietary cards-in-force: | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 37.5 | 37.7 | (1) | 37.5 | 37.7 | (1) | ||||||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 16.8 | 17.4 | (3) | 16.8 | 17.4 | (3) | ||||||||||||||||||||||||||||||||||||||||||||
Total | 54.3 | 55.1 | (1) | 54.3 | 55.1 | (1) | ||||||||||||||||||||||||||||||||||||||||||||
Proprietary basic cards-in-force: | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | 26.5 | 26.8 | (1) | 26.5 | 26.8 | (1) | ||||||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 11.7 | 12.0 | (3) | 11.7 | 12.0 | (3) | ||||||||||||||||||||||||||||||||||||||||||||
Total | 38.2 | 38.8 | (2) | 38.2 | 38.8 | (2) | ||||||||||||||||||||||||||||||||||||||||||||
Average proprietary basic Card Member spending: (dollars) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 3,162 | $ | 3,719 | (15) | $ | 9,080 | $ | 10,861 | (16) | ||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | $ | 2,555 | $ | 3,189 | (20) | $ | 7,209 | $ | 9,425 | (24) | ||||||||||||||||||||||||||||||||||||||||
Average | $ | 2,975 | $ | 3,555 | (16) | $ | 8,501 | $ | 10,421 | (18) | ||||||||||||||||||||||||||||||||||||||||
Total segment assets (billions) | $ | 81.3 | $ | 99.4 | (18) | $ | 81.3 | $ | 99.4 | (18) | ||||||||||||||||||||||||||||||||||||||||
Card Member loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total loans (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 49.8 | $ | 59.7 | (17) | $ | 49.8 | $ | 59.7 | (17) | ||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 7.7 | 10.1 | (24) | 7.7 | 10.1 | (24) | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 57.5 | $ | 69.8 | (18) | $ | 57.5 | $ | 69.8 | (18) | ||||||||||||||||||||||||||||||||||||||||
Average loans (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 50.0 | $ | 59.7 | (16) | $ | 53.8 | $ | 59.0 | (9) | ||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 7.8 | 10.0 | (22) | 8.6 | 9.8 | (12) | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 57.8 | $ | 69.7 | (17) | % | $ | 62.4 | $ | 68.8 | (9) | % | ||||||||||||||||||||||||||||||||||||||
U.S. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal only (a) | 2.4 | % | 2.2 | % | 2.6 | % | 2.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal, interest and fees (a) | 2.9 | 2.6 | 3.1 | 2.8 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.1 | 1.5 | 1.1 | 1.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal only (a) | 3.3 | 2.4 | 3.2 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal, interest and fees (a) | 4.1 | 3.0 | 4.0 | 2.9 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.8 | 1.7 | 1.8 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal only (a) | 2.5 | 2.2 | 2.7 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal, interest and fees (a) | 3.1 | 2.7 | 3.2 | 2.8 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.2 | % | 1.6 | % | 1.2 | % | 1.6 | % |
As of or for the Three Months Ended September 30, | Change 2020 vs. 2019 | As of or for the Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Card Member receivables: (billions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 10.3 | $ | 12.9 | (20) | % | $ | 10.3 | $ | 12.9 | (20) | % | ||||||||||||||||||||||||||||||||||||||
Outside the U.S. | 5.8 | 7.8 | (26) | 5.8 | 7.8 | (26) | ||||||||||||||||||||||||||||||||||||||||||||
Total receivables | $ | 16.1 | $ | 20.7 | (22) | % | $ | 16.1 | $ | 20.7 | (22) | % | ||||||||||||||||||||||||||||||||||||||
U.S. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal only (a) | 1.0 | % | 1.3 | % | 1.6 | % | 1.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal and fees (a) | 1.1 | 1.4 | 1.7 | 1.5 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 0.6 | 1.3 | 0.6 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Outside the U.S. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal only (a) | 2.8 | 2.4 | 2.9 | 2.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal and fees (a) | 3.1 | 2.6 | 3.1 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.2 | 1.4 | 1.2 | 1.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal only (a) | 1.7 | 1.7 | 2.0 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Net write-off rate – principal and fees (a) | 1.8 | 1.9 | 2.2 | 1.8 | ||||||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 0.8 | % | 1.4 | % | 0.8 | % | 1.4 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||
U.S. | ||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 1,470 | $ | 1,707 | $ | 4,732 | $ | 4,910 | ||||||||||||||||||||||||||||||
Exclude: | ||||||||||||||||||||||||||||||||||||||
Interest expense not attributable to our Card Member loan portfolio (a) | 81 | 67 | 224 | 203 | ||||||||||||||||||||||||||||||||||
Interest income not attributable to our Card Member loan portfolio (b) | (42) | (55) | (156) | (161) | ||||||||||||||||||||||||||||||||||
Adjusted net interest income (c) | $ | 1,509 | $ | 1,719 | $ | 4,800 | $ | 4,952 | ||||||||||||||||||||||||||||||
Average Card Member loans (billions) | $ | 50.0 | $ | 59.7 | $ | 53.8 | $ | 59.0 | ||||||||||||||||||||||||||||||
Net interest income divided by average Card Member loans (c) | 11.8 | % | 11.4 | % | 11.7 | % | 11.1 | % | ||||||||||||||||||||||||||||||
Net interest yield on average Card Member loans (c) | 12.0 | % | 11.4 | % | 11.9 | % | 11.2 | % | ||||||||||||||||||||||||||||||
Outside the U.S. | ||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 203 | $ | 258 | $ | 723 | $ | 743 | ||||||||||||||||||||||||||||||
Exclude: | ||||||||||||||||||||||||||||||||||||||
Interest expense not attributable to our Card Member loan portfolio (a) | 34 | 22 | 69 | 63 | ||||||||||||||||||||||||||||||||||
Interest income not attributable to our Card Member loan portfolio (b) | (2) | (4) | (9) | (10) | ||||||||||||||||||||||||||||||||||
Adjusted net interest income (c) | $ | 235 | $ | 276 | $ | 783 | $ | 796 | ||||||||||||||||||||||||||||||
Average Card Member loans (billions) | $ | 7.8 | $ | 10.0 | $ | 8.6 | $ | 9.8 | ||||||||||||||||||||||||||||||
Net interest income divided by average Card Member loans (c) | 10.4 | % | 10.3 | % | 11.2 | % | 10.1 | % | ||||||||||||||||||||||||||||||
Net interest yield on average Card Member loans (c) | 11.9 | % | 11.0 | % | 12.2 | % | 10.8 | % | ||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 1,674 | $ | 1,965 | $ | 5,456 | $ | 5,653 | ||||||||||||||||||||||||||||||
Exclude: | ||||||||||||||||||||||||||||||||||||||
Interest expense not attributable to our Card Member loan portfolio (a) | 115 | 89 | 292 | 266 | ||||||||||||||||||||||||||||||||||
Interest income not attributable to our Card Member loan portfolio (b) | (45) | (59) | (165) | (171) | ||||||||||||||||||||||||||||||||||
Adjusted net interest income (c) | $ | 1,744 | $ | 1,995 | $ | 5,583 | $ | 5,748 | ||||||||||||||||||||||||||||||
Average Card Member loans (billions) | $ | 57.8 | $ | 69.7 | $ | 62.4 | $ | 68.8 | ||||||||||||||||||||||||||||||
Net interest income divided by average Card Member loans (c) | 11.6 | % | 11.3 | % | 11.7 | % | 11.0 | % | ||||||||||||||||||||||||||||||
Net interest yield on average Card Member loans (c) | 12.0 | % | 11.4 | % | 12.0 | % | 11.2 | % |
Three Months Ended September 30, | Change 2020 vs. 2019 | Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest revenues | $ | 2,327 | $ | 3,070 | $ | (743) | (24) | % | $ | 7,129 | $ | 9,055 | $ | (1,926) | (21) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 351 | 485 | (134) | (28) | 1,252 | 1,407 | (155) | (11) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | 139 | 262 | (123) | (47) | 493 | 787 | (294) | (37) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 212 | 223 | (11) | (5) | 759 | 620 | 139 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense | 2,539 | 3,293 | (754) | (23) | 7,888 | 9,675 | (1,787) | (18) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions for credit losses | 250 | 222 | 28 | 13 | 1,657 | 682 | 975 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense after provisions for credit losses | 2,289 | 3,071 | (782) | (25) | 6,231 | 8,993 | (2,762) | (31) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketing, business development, and Card Member rewards and services | 1,221 | 1,562 | (341) | (22) | 3,653 | 4,596 | (943) | (21) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits and other operating expenses | 796 | 796 | — | — | 2,309 | 2,342 | (33) | (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 2,017 | 2,358 | (341) | (14) | 5,962 | 6,938 | (976) | (14) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax segment income | 272 | 713 | (441) | (62) | 269 | 2,055 | (1,786) | (87) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision | 52 | 145 | (93) | (64) | 71 | 414 | (343) | (83) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 220 | $ | 568 | $ | (348) | (61) | % | $ | 198 | $ | 1,641 | $ | (1,443) | (88) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective tax rate | 19.1 | % | 20.3 | % | 26.4 | % | 20.1 | % |
As of or for the Three Months Ended September 30, | Change 2020 vs 2019 | As of or for the Nine Months Ended September 30, | Change 2020 vs 2019 | |||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Proprietary billed business (billions) | $ | 98.5 | $ | 127.3 | (23) | % | $ | 297.4 | $ | 380.3 | (22) | % | ||||||||||||||||||||||||||||||||||||||
Proprietary cards-in-force | 14.5 | 14.8 | (2) | 14.5 | 14.8 | (2) | ||||||||||||||||||||||||||||||||||||||||||||
Average Card Member spending (dollars) | $ | 6,776 | $ | 8,627 | (21) | $ | 20,268 | $ | 25,947 | (22) | ||||||||||||||||||||||||||||||||||||||||
Total segment assets (billions) | $ | 39.9 | $ | 53.7 | (26) | $ | 39.9 | $ | 53.7 | (26) | ||||||||||||||||||||||||||||||||||||||||
GSBS Card Member loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total loans (billions) | $ | 12.0 | $ | 13.8 | (13) | $ | 12.0 | $ | 13.8 | (13) | ||||||||||||||||||||||||||||||||||||||||
Average loans (billions) | $ | 12.1 | $ | 13.6 | (11) | $ | 13.0 | $ | 13.1 | (1) | ||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal only (a) | 2.2 | % | 1.8 | % | 2.1 | % | 1.8 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal, interest and fees (a) | 2.5 | % | 2.1 | % | 2.4 | % | 2.1 | % | ||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.1 | % | 1.3 | % | 1.1 | % | 1.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Calculation of Net Interest Yield on Average Card Member Loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 212 | $ | 223 | $ | 759 | $ | 620 | ||||||||||||||||||||||||||||||||||||||||||
Exclude: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense not attributable to our Card Member loan portfolio (b) | 111 | 195 | 375 | 588 | ||||||||||||||||||||||||||||||||||||||||||||||
Interest income not attributable to our Card Member loan portfolio (c) | (34) | (56) | (145) | (163) | ||||||||||||||||||||||||||||||||||||||||||||||
Adjusted net interest income (d) | $ | 289 | $ | 362 | $ | 989 | $ | 1,045 | ||||||||||||||||||||||||||||||||||||||||||
Average Card Member loans (billions) | $ | 12.1 | $ | 13.6 | $ | 13.1 | $ | 13.1 | ||||||||||||||||||||||||||||||||||||||||||
Net interest income divided by average Card Member loans (d) | 7.0 | % | 6.6 | % | 7.7 | % | 6.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Net interest yield on average Card Member loans (d) | 9.5 | % | 10.5 | % | 10.1 | % | 10.6 | % | ||||||||||||||||||||||||||||||||||||||||||
Card Member receivables: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total receivables (billions) | $ | 24.7 | $ | 35.9 | (31) | $ | 24.7 | 35.9 | (31) | |||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal and fees (a)(e) | 2.5 | % | 1.5 | % | 2.4 | % | 1.4 | % | ||||||||||||||||||||||||||||||||||||||||||
GCP Card Member receivables: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total receivables (billions) | $ | 10.4 | $ | 18.5 | (44) | $ | 10.4 | $ | 18.5 | (44) | ||||||||||||||||||||||||||||||||||||||||
90+ days past billing as a % of total (e) | 0.6 | % | 0.7 | % | 0.6 | % | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal and fees (a) (e) | 2.4 | % | 0.9 | % | 2.2 | % | 0.8 | % | ||||||||||||||||||||||||||||||||||||||||||
GSBS Card Member receivables: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total receivables (billions) | $ | 14.3 | $ | 17.4 | (18) | % | $ | 14.3 | $ | 17.4 | (18) | % | ||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal only (a) | 2.3 | % | 1.9 | % | 2.3 | % | 1.9 | % | ||||||||||||||||||||||||||||||||||||||||||
Net write-off rate - principal and fees (a) | 2.5 | % | 2.1 | % | 2.6 | % | 2.1 | % | ||||||||||||||||||||||||||||||||||||||||||
30+ days past due as a % of total | 1.0 | % | 1.7 | % | 1.0 | % | 1.7 | % |
Three Months Ended September 30, | Change 2020 vs. 2019 | Nine Months Ended September 30, | Change 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages and where indicated) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest revenues | $ | 1,111 | $ | 1,471 | $ | (360) | (24) | % | $ | 3,376 | $ | 4,398 | $ | (1,022) | (23) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 4 | 6 | (2) | (33) | 14 | 22 | (8) | (36) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (18) | (74) | 56 | (76) | (60) | (241) | 181 | (75) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net interest income | 22 | 80 | (58) | (73) | 74 | 263 | (189) | (72) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense | 1,133 | 1,551 | (418) | (27) | 3,450 | 4,661 | (1,211) | (26) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provisions for credit losses | 2 | 4 | (2) | (50) | 75 | 11 | 64 | # | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues net of interest expense after provisions for credit losses | 1,131 | 1,547 | (416) | (27) | 3,375 | 4,650 | (1,275) | (27) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketing, business development, and Card Member rewards and services | 340 | 365 | (25) | (7) | 913 | 1,005 | (92) | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits and other operating expenses | 440 | 480 | (40) | (8) | 1,357 | 1,429 | (72) | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total expenses | 780 | 845 | (65) | (8) | 2,270 | 2,434 | (164) | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax segment income | 351 | 702 | (351) | (50) | 1,105 | 2,216 | (1,111) | (50) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax provision | 88 | 179 | (91) | (51) | 359 | 558 | (199) | (36) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 263 | $ | 523 | $ | (260) | (50) | $ | 746 | $ | 1,658 | $ | (912) | (55) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective tax rate | 25.1 | % | 25.5 | % | 32.5 | % | 25.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total segment assets (billions) | $ | 12.3 | $ | 17.2 | (28) | % | $ | 12.3 | $ | 17.2 | (28) | % |
Basel III Minimum | Ratios as of September 30, 2020 | |||||||||||||
Risk-Based Capital | ||||||||||||||
Common Equity Tier 1 | 7.0 | % | ||||||||||||
American Express Company | 13.9 | % | ||||||||||||
American Express National Bank | 16.1 | |||||||||||||
Tier 1 | 8.5 | |||||||||||||
American Express Company | 15.1 | |||||||||||||
American Express National Bank | 16.1 | |||||||||||||
Total | 10.5 | |||||||||||||
American Express Company | 16.7 | |||||||||||||
American Express National Bank | 18.3 | |||||||||||||
Tier 1 Leverage | 4.0 | % | ||||||||||||
American Express Company | 10.8 | |||||||||||||
American Express National Bank | 10.1 | % |
American Express Company | September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-Based Capital | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Equity Tier 1 | $ | 18.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 Capital | 19.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 2 Capital | 2.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Capital | 22.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-Weighted Assets | 131.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average Total Assets to
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. CET1 is also adjusted for the CECL interim final rule discussed below. 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. 25 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) 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. 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 of adopting the CECL methodology pursuant to new accounting guidance for the recognition of credit losses on certain financial instruments, effective January 1, 2020. In March 2020, the federal banking regulators issued an interim final rule that provides banking organizations with an alternative option to temporarily delay for two years the estimated impact of the adoption of the CECL methodology on regulatory capital, followed by the three-year phase-in period. The cumulative amount that is not recognized in regulatory capital will be phased in at 25 percent per year beginning January 1, 2022. In the first quarter of 2020, we elected to adopt the March 2020 interim final rule. As of September 30, 2020, our reported regulatory capital excluded the $0.9 billion impact to retained earnings upon the adoption of the CECL methodology and 25 percent of the impact of the $2.2 billion increase in reserves for credit losses from January 1, 2020 to September 30, 2020. On March 4, 2020, the Federal Reserve issued a final rule to replace the 2.5 percent capital conservation buffer with a dynamic stress capital buffer (SCB), which has a floor of 2.5 percent. Under the rule, the stress capital buffer equals (i) the difference between a banking organization’s starting and minimum projected Common Equity Tier 1 capital ratios under the supervisory severely adverse stress testing scenario, plus (ii) one year of planned common stock dividends as a percentage of risk-weighted assets. On August 10, the Federal Reserve announced our SCB requirement of 2.5 percent, and resulting Common Equity Tier 1 capital requirement of 7.0 percent. Failure to maintain minimum regulatory 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. In light of the COVID-19 pandemic and its impact on the economy, the Federal Reserve is requiring all banking organizations participating in Comprehensive Capital Analysis and Review (CCAR), including us, to resubmit capital plans by November 2, 2020 to reflect changes in financial markets and the macroeconomic outlook. Share Repurchases and Dividends We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans. During the three and nine months ended September 30, 2020, we returned $0.3 billion and $1.9 billion, respectively, to our shareholders in the form of common stock dividends of $0.3 billion and $1.0 billion, respectively, and share repurchases of nil and $0.9 billion, respectively. In addition, during the three and nine months ended September 30, 2020, we paid $16 million and $65 million, respectively, in dividends on non-cumulative perpetual preferred shares outstanding. Our decisions on capital distributions will depend on various factors, including: our capital levels and regulatory capital requirements; actual and forecasted business results; economic and market conditions; revisions to, or revocation of, the Federal Reserve’s authorization of our capital plan; and the CCAR process. Due to the uncertain business environment, we have suspended share repurchases since March 2020 to maintain financial strength. Since then, the Federal Reserve has announced that it is prohibiting share repurchases in the third and fourth quarters for all banking organizations participating in CCAR and will allow them to pay common stock dividends provided (a) they do not increase the amount of the dividend and (b) they do not exceed the average of a firm's net income for the four preceding calendar quarters. 26 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. 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. 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. Given the significant reductions in our business volumes and changes in growth outlook, we do not currently expect to have meaningful unsecured or secured term debt issuances for the remainder of 2020. Summary of Consolidated Debt We had the following consolidated debt and customer deposits outstanding as of September 30, 2020 and December 31, 2019: Table 18: Summary of Consolidated Debt and Customer Deposits
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 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. Table 19: Unsecured Debt Ratings
Credit Agency | American Express |
N/A | A2 | Negative | Moody's | American Express Credit Corporation | Prime-1 | A2 | Negative | Moody's | American Express National Bank | Prime-1 | A3 | Negative | Moody's | American Express Company | N/A | A3 | Negative | S&P | American Express Travel Related Services Company, Inc. | N/A | A- | Stable | S&P | American Express Credit Corporation and American Express National Bank | A-2 | A- | Stable | S&P | American Express |
27 Liquidity Management 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. 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. We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements. As of September 30, 2020, we had Cash and cash equivalents of $33.0 billion. The increase of $9.1 billion from $23.9 billion as of December 31, 2019 was primarily driven by the decline in the balances of our Card Member loans and receivables. The net interest expense to maintain these liquidity resources depends on the amount of liquidity resources we maintain and the difference between our cost of funding these amounts and their investment yields. As the amount of our liquidity resources has increased, the level of future net interest expense to maintain these resources is expected to be significant, as the investment income is less than the cost of funding. Securitized Borrowing Capacity As of September 30, 2020, 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 American Express Issuance Trust II (the Charge Trust). As the balance of Card Member receivables in the Charge Trust fluctuates over time in line with business volumes, our capacity to draw on the Charge Trust facility may be reduced when volumes decline. 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 September 30, 2020, 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 $61.7 billion as of September 30, 2020 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 September 30, 2020 of $3.5 billion, with a maturity date of October 15, 2022. As of September 30, 2020, no amounts were drawn on this facility. 28 Unused Credit Outstanding and Certain Contractual Obligations As of September 30, 2020, we had approximately $313 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 that covers losses associated with purchased goods and services. See Note 7 to the Consolidated Financial Statements for further information. Cash Flows The following table summarizes our cash flow activity for the nine months ended September 30: Table 20: Cash Flows
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 credit 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 decrease in net cash provided by operating activities over the periods of comparison was primarily driven by the significant decline in billed business, resulting in lower accounts payable and other liabilities, and purchases of loyalty program points from certain of our cobrand partners, which resulted in an increase in Other assets. These points are held as prepaid assets until they are used for rewards, promotions and incentives. Cash Flows from Investing Activities Our cash flows from investing activities primarily include changes in Card Member loans and receivables, as well as changes in our available-for-sale investment securities portfolio. The increase in net cash provided by investing activities over the periods of comparison was primarily driven by a decline in the balances outstanding from Card Member loans and receivables as Card Members continued to pay down outstanding balances, combined with a significant decline in Card Member spending during the period due to the continued impacts of the COVID-19 pandemic and the resulting containment measures, partially offset by a net increase in the investment securities portfolio. Cash 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 over the periods of comparison was primarily driven by higher net repayment of debt, partially offset by higher growth in customer deposits and the suspension of the share repurchase program. 29 OTHER MATTERS Certain Legislative, Regulatory and Other Developments Supervision & Regulation 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 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. Please see the “Supervision and Regulation” and “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K) for further information. Government Responses to COVID-19 Pandemic In response to the COVID-19 pandemic, authorities around the world have implemented numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. In addition to these measures, which have substantially curtailed household and business activity, fiscal and monetary policy measures have been deployed for the stated purpose of attempting to mitigate the adverse effects on the economy. In the United States, this has included the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and a number of emergency lending and liquidity facilities established by the Federal Reserve. Among other things, the CARES Act created a new loan guarantee program in which we participated called the Paycheck Protection Program, designed to provide small businesses with support to cover payroll and certain other expenses. The CARES Act also provides financial institutions with the option to temporarily suspend (i) certain requirements under U.S. GAAP for loan modifications related to the COVID-19 pandemic that would otherwise be treated as troubled debt restructurings and (ii) any determination that a loan modified as a result of the COVID-19 pandemic is a troubled debt restructuring (including impairment for accounting purposes). There have also been various governmental actions taken or proposed to provide forms of relief, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance, with respect to certain loans and fees. Governmental actions taken in response to the COVID-19 pandemic have not always been coordinated or consistent across jurisdictions but, in general, have been expanding in scope and intensity. The efficacy and ultimate effect of these actions is not known. We continue to monitor federal, state and international regulatory developments in relation to the COVID-19 pandemic and their potential impact on our operations. 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. 30 The European Union, 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. 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. 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. Given differing interpretations by regulators and participants in cobrand arrangements, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU. Broad regulatory oversight over payment systems can also include, in some cases, requirements for international card networks to localize aspects of their operations, such as processing infrastructure and data storage, which could increase our costs and diminish the value of our closed loop. 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. For more information on payments regulation, as well as the potential impacts on our results of operations and business, please see the “Supervision and Regulation” and “Risk Factors” sections of the 2019 Form 10-K. Surcharging 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. For more information on the potential impacts of surcharging and other actions that could impair the Card Member experience, please see the “Risk Factors” section of the 2019 Form 10-K. Consumer 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. For more information on consumer financial products regulation, as well as the potential impacts on our results of operations and business, please see the “Supervision and Regulation” and “Risk Factors” sections of the 2019 Form 10-K. Community Reinvestment Act AENB is subject to the Community Reinvestment Act of 1977 (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 May 2020, the Office of the Comptroller of the Currency issued a final rule 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. The final rule retains the current community development test for limited purpose banks, such as AENB. It will also require banks to designate additional deposit-based assessment areas. AENB must comply with the final rule by January 1, 2023. 31 China During the third quarter of 2020, our joint venture with Lianlian DigiTech Co., Ltd, a Chinese fintech services company, began processing transactions pursuant to a network clearing license in mainland China. There can be no assurance that we will be able to successfully compete in China with domestic payment card networks and alternative payment providers. Antitrust Litigation The U.S. Department of Justice and certain states’ attorneys general brought an action against us in 2010 alleging that the provisions in our card acceptance agreements with merchants that prohibit merchants from engaging in various actions to discriminate against our card products violate the U.S. antitrust laws. On June 25, 2018, the Supreme Court found in favor of American Express in that case. We continue to vigorously defend similar antitrust claims initiated by merchants. See Note 7 to the "Consolidated Financial Statements" for descriptions of the cases. It is possible that actions impairing the Card Member experience, or the resolution of one or any combination of these merchant claims for damages, could have a material adverse effect on our business. For more information on the potential impacts of an adverse decision in the merchant litigations on our business, please see the “Risk Factors” section of the 2019 Form 10-K. Privacy, 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 laws, meet evolving customer expectations and support and enable business innovation and growth. 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 cyber attacks, 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 more information on privacy, data protection and information and cyber security regulation and the potential impacts of a major information or cyber security incident on our results of operations and business, please see the “Supervision and Regulation” and “Risk Factors” sections of the 2019 Form 10-K. 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. Airline-related volume — Represents spend at airlines as a merchant. 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. 32 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 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. Credit cards — Represents cards that have a range of revolving payment terms, grace periods, and rate and fee structures. Discount revenue — Primarily represents the amount earned on transactions occurring at merchants that have entered into a card acceptance agreement with us, a GNS partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members. 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. 33 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 credit losses and are thus not included in the net interest yield calculation. 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. Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios. Reserve build represents the amount by which the provision for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for credit losses. Return on average equity — Calculated by dividing one-year period net income by one-year average total shareholders’ equity. T&E-related volume — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories. Non-T&E-related volume includes spend in all other merchant categories. 34 CAUTIONARY 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: •uncertainty regarding the duration, extent and severity of the pandemic; a further deterioration in global economic and business conditions and consumer and business spending generally; an inability or unwillingness of Card Members to pay amounts owed to us; insufficient governmental stimulus and relief programs to address the impact of the pandemic; prolonged measures to contain the spread of COVID-19 or premature easing of such containment measures, both of which could further exacerbate the effects on business activity and our Card Members, partners and merchants; health concerns associated with the pandemic continuing to affect consumer behavior, spending levels and preferences, and travel patterns and demand even after government restrictions are lifted and economies reopen; our inability to manage risk in an uncertain environment; market volatility, changes in capital and credit market conditions and the availability and cost of capital; issues impacting brand perceptions and our reputation; and an inability of business partners to meet their obligations to us and our customers due to slowdowns or disruptions in their businesses, bankruptcy or liquidation, or otherwise; •future credit performance, which will depend in part on macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; collections capabilities; the enrollment in, and effectiveness of, hardship programs and troubled debt restructurings; the availability of government stimulus programs for borrowers; and governmental actions that provide forms of relief with respect to certain loans and fees, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance; •net interest income and the amount of loans outstanding being higher or lower than current expectations, which will depend on the behavior of Card Members and their actual spending and borrowing patterns, our ability to manage risk and enhance the Card Member value propositions, and changes in interest rates and our cost of funds; •the actual amount to be spent on marketing, which will be based in part on continued changes in macroeconomic conditions and business performance; management’s assessment of competitive opportunities; and the receptivity of Card Members and prospective customers to advertising initiatives; and management’s ability to realize efficiencies and optimize investment spending; •the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by Card Members’ interest in the value propositions we offer; further enhancements to product benefits to make them attractive to Card Members, potentially in a manner that is not cost effective; 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 (including travel redemptions); the costs related to reward point redemptions; and new and renegotiated contractual obligations with business partners; •our ability to control our operating expenses, which could be impacted by, among other things, an inability to balance expense control and investments in the business; management’s decision to increase or decrease spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities depending on overall business performance; an inability to innovate efficient channels of customer interactions, such as chat supported by artificial intelligence; restructuring activity; higher-than-expected cyber, fraud or compliance expenses or consulting, legal and other professional fees, including as a result of increased litigation or internal and regulatory reviews; the level of M&A activity and related expenses; the payment of civil money penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; impairments of goodwill or other assets; the impact of changes in foreign currency exchange rates on costs; and greater than expected inflation; 35 •net card fees not growing consistent with current expectations, which could be impacted by, among other things, the further deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees; higher attrition rates; Card Members continuing to be attracted to our premium card products and the pace of Card Member acquisition activity; and an inability to address competitive pressures and implement our strategies and business initiatives, including introducing new and enhanced benefits and services that are designed for the current environment; •a further decline of the average discount rate, including as a result of further changes in the mix of spending by location and industry, merchant negotiations (including merchant incentives, concessions and volume-related pricing discounts), competition, pricing regulation (including regulation of competitors’ interchange rates) and other factors; •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; •changes affecting our plans regarding the return of capital to shareholders, including our intention to maintain our current quarterly common share dividend for the fourth quarter of 2020, subject to approval by the Board of Directors, which will depend on factors such as our capital levels and regulatory capital ratios; changes in the stress testing and capital planning process and approval of our capital plans by the Federal Reserve; our results of operations and financial condition; our credit ratings and rating agency considerations; and the economic environment and market conditions in any given period; •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; •further 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 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 and other third parties, 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 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 •factors beyond our control such as resurgences of COVID-19 cases, severe weather conditions, natural and man-made disasters, power loss, disruptions in telecommunications, 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 the 2019 Form 10-K, the Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2020, and other reports filed with the Securities and Exchange Commission. 36 ITEM 1. FINANCIAL STATEMENTS AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(a)Represents net income less (i) earnings allocated to participating share awards of $7 million and $11 million for the three months ended September 30, 2020 and 2019, respectively, and (ii) dividends on preferred shares of $16 million and $21 million for the three months ended September 30, 2020 and 2019, respectively. See Notes to Consolidated Financial Statements. 37 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(a)Represents net income less (i) earnings allocated to participating share awards of $10 million and $35 million for the nine months ended September 30, 2020 and 2019, respectively, and (ii) dividends on preferred shares of $65 million and $61 million for the nine months ended September 30, 2020 and 2019, respectively. See Notes to Consolidated Financial Statements. 38 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
See Notes to Consolidated Financial Statements. 39 AMERICAN EXPRESS COMPANY CONSOLIDATED BALANCE SHEETS (Unaudited)
See Notes to Consolidated Financial Statements. 40 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
See Notes to Consolidated Financial Statements. 41 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(a)Represents $1,170 million, net of tax of $288 million, related to the impact as of January 1, 2020 of adopting the new accounting guidance for the recognition of credit losses on certain financial instruments. See Notes to Consolidated Financial Statements. 42 AMERICAN EXPRESS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
See Notes to Consolidated Financial Statements. 43 1. Basis of Presentation 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. The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. If not materially different, certain note disclosures included therein have been omitted from these Consolidated Financial Statements. The interim Consolidated Financial Statements included in this report have not been audited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim Consolidated Financial Statements, have been made. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates reflect the best judgment of management, but actual results could differ. Certain reclassifications of prior period amounts have been made to conform to the current period presentation. Recently Adopted Accounting Standards Effective January 1, 2020, we adopted the new credit reserving methodology, applicable to certain financial instruments, known as the Current Expected Credit Loss (CECL) methodology under a modified retrospective transition. 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. Upon implementation, total loan reserves increased by $1,663 million and total receivable reserves decreased by $493 million, along with the associated current and deferred tax impact of $288 million, and an offset to the opening balance of retained earnings, net of tax, of $882 million. There were no material changes to our business processes or internal controls as a result of adopting the new guidance. Refer to Note 3 for additional information on how management estimates reserves for credit losses in accordance with the CECL methodology. In addition, for available-for-sale debt securities, the new methodology 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. There was no financial impact related to this implementation. Refer to Note 4 for additional information. 44 2. Loans and Card Member Receivables Our lending and charge payment card products result in the generation of Card Member loans and Card Member receivables. We also extend credit to consumer and commercial customers through non-card financing products, resulting in Other loans. Reserves for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods. Card Member loans by segment and Other loans as of September 30, 2020 and December 31, 2019 consisted of:
(a)Includes approximately $25.2 billion and $32.2 billion of gross Card Member loans available to settle obligations of a consolidated variable interest entity (VIE) as of September 30, 2020 and December 31, 2019, respectively. (b)Other loans represent consumer and commercial non-card financing products, and Small Business Administration Paycheck Protection Program (PPP) loans. There were $0.7 billion of gross PPP loans as of September 30, 2020. Other loans are presented net of reserves for credit losses of $370 million and $152 million as of September 30, 2020 and December 31, 2019, respectively. Card Member receivables by segment as of September 30, 2020 and December 31, 2019 consisted of:
(a)Includes NaN and $8.3 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of September 30, 2020 and December 31, 2019, respectively. (b)Includes $4.2 billion and NaN of gross Card Member receivables available to settle obligations of a consolidated VIE as of September 30, 2020 and December 31, 2019, respectively. 45 Card Member Loans and 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 September 30, 2020 and December 31, 2019:
(a)Global Corporate Payments (GCP) reflects global, large and middle market corporate accounts. 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. 46 Credit Quality Indicators for Card Member Loans and Receivables The following tables present the key credit quality indicators as of or for the nine months ended September 30:
(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. (b)Net write-off rate based on principal losses only is not available due to system constraints. (c)For GCP Card Member receivables, delinquency data is tracked based on days past billing status rather than days past due. Delinquency data for periods other than 90+ days past billing is not available due to system constraints. 90+ Days Past Billing as a % of total was 0.6% and 0.7% for the periods ended September 30, 2020 and 2019, respectively. (d)Net loss ratio was the credit quality indicator for GCP Card Member receivables for prior periods and represents the ratio of GCP Card Member receivables 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. The net loss ratio for the nine months ended September 30, 2019 was 0.08%. Refer to Note 3 for additional indicators, including external environmental qualitative factors, management considers in its evaluation process for reserves for credit losses. 47 Impaired Loans and Receivables Impaired 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 customer 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 customer is experiencing financial difficulty, we may modify, through various financial relief programs, loans and receivables with the intention to minimize losses and improve collectability, while providing customers with temporary or permanent financial relief. We have classified loans and receivables in these modification programs as TDRs and continue to classify customer 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 customer on a fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the customer exits the modification program. Upon entering the modification program, the customer’s ability to make future purchases is either limited, canceled, or in certain cases suspended until the customer successfully exits from the modification program. In accordance with the modification agreement with the customer, loans and/or receivables may revert back to the original contractual terms (including the contractual interest rate where applicable) when the customer exits the modification program, which is (i) when all payments have been made in accordance with the modification agreement or (ii) when the customer defaults out of the modification program. Reserves for modifications deemed TDRs are measured individually and incorporate a discounted cash flow model. All changes in the impairment measurement are included within provisions for credit losses. In response to the COVID-19 pandemic, the United States introduced the Coronavirus Aid, Relief, and Economic Security Act, which among other things provides financial institutions with the option to temporarily suspend (i) certain requirements under U.S. GAAP for loan modifications related to the COVID-19 pandemic that would otherwise be treated as TDRs and (ii) any determination that a loan modified as a result of the COVID-19 pandemic is a TDR (including impairment for accounting purposes). Based on the nature of our programs, we have not elected the accounting and reporting relief afforded by this guidance and continue to report modifications as TDRs. In the first quarter of 2020, we created a Customer Pandemic Relief (CPR) program for customers who have been impacted by the COVID-19 pandemic to provide a concession in the form of payment deferrals and waivers of certain fees and interest. We assessed the CPR program and determined that eligible loan modifications were temporary in nature, for example, less than three months, and not considered TDRs. Our short-term CPR programs are no longer widely available with immaterial balances remaining in the program as of September 30, 2020. 48 The following tables provide additional information with respect to our impaired loans and receivables as of September 30, 2020 and December 31, 2019:
(a)Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for interest that we believe will not be collected. Amounts presented exclude loans classified as a TDR. (b)Non-accrual loans not in modification programs primarily include certain loans placed with outside collection agencies for which we have ceased accruing interest. Amounts presented exclude loans classified as TDRs. (c)Accounts classified as a TDR include $31 million and $26 million that are over 90 days past due and accruing interest and $9 million and $10 million that are non-accruals as of September 30, 2020 and December 31, 2019, respectively. (d)In Program TDRs include accounts that are currently enrolled in a modification program. (e)Out of Program TDRs include $256 million and $188 million of accounts that have successfully completed a modification program and $91 million and $72 million of accounts that were not in compliance with the terms of the modification programs as of September 30, 2020 and December 31, 2019, respectively. (f)Other loans primarily represent consumer and commercial non-card financing products. Prior period balances were not significant. 49 Loans and Receivables Modified as TDRs The following table provides additional information with respect to loans and receivables modified as TDRs for the three and nine months ended September 30, 2020 and 2019:
(a)Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on loans and principal and fees on 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. (d)Other loans primarily represent consumer and commercial non-card financing products. Prior period balances were not significant. 50 The following table provides information with respect to loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification. A customer can miss up to three payments before being considered in default, depending on the terms of the modification program. For all customers that defaulted from a modification program, the probability of default is factored into the reserves for loans and receivables.
(a)The outstanding balances upon default include principal, fees and accrued interest on loans, and principal and fees on receivables. (b)Other loans primarily represent consumer and commercial non-card financing products. Prior period balances were not significant. 51 3. Reserves for Credit Losses Reserves for credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date. We make various judgments combined with historical loss experience to calculate a reserve rate that is applied to the outstanding loan or receivable balance to produce a reserve for expected credit losses. We use a combination of statistically-based models that incorporate current and future economic conditions throughout the R&S Period. The process of estimating expected credit losses is based on several key models: Probability of Default (PD), Exposure at Default (EAD), and future recoveries for each month of the R&S Period. Beyond the R&S Period, we estimate expected credit losses using our historical loss rates. •PD models are used to estimate the likelihood an account will be written-off. •EAD models are used to estimate the balance of an account at the time of write-off. This includes balances less expected repayments based on historical payment and revolve behavior, which vary by customer. Due to the nature of revolving loan portfolios, the EAD models are complex and involve assumptions regarding the relationship between future spend and payment behaviors. •Recovery models are used to estimate amounts that are expected to be received from Card Members after default occurs, typically as a result of collection efforts. Future recoveries are estimated taking into consideration the time of default, time elapsed since default and macroeconomic conditions. We also estimate the likelihood and magnitude of recovery of previously written off accounts considering how long ago the account was written off and future economic conditions. Our models are developed using historical loss experience covering the economic cycle and consider the impact of account characteristics on expected losses. Future economic conditions that are incorporated over the R&S Period include multiple macroeconomic scenarios provided to us by an independent third party. Management reviews these economic scenarios quarterly and uses their judgment to weight them in order to reflect the uncertainty surrounding these scenarios. These macroeconomic scenarios contain certain variables, including unemployment rates and real gross domestic product, that are significant to our models. We also evaluate whether to include qualitative reserves to cover losses that are expected but, in our assessment, may not be adequately represented in the quantitative methods or the economic assumptions. We consider whether to adjust the quantitative reserves (higher or lower) to address possible limitations within the models or factors not included within the models, such as external conditions, emerging portfolio trends, the nature and size of the portfolio, portfolio concentrations, the volume and severity of past due accounts, or management risk actions. Lifetime losses for most of our loans and receivables are evaluated at an appropriate level of granularity, including assessment on a pooled basis where financial assets share similar risk characteristics, such as past spend and remittance behaviors, credit bureau scores where available, delinquency status, tenure of balance outstanding, amongst others. Credit losses on accrued interest are measured and presented as part of Reserves for credit losses on the Consolidated Balance Sheets and within the Provisions for credit losses in the Consolidated Statements of Income, rather than reversing interest income. Separate models are used for accounts deemed a troubled debt restructuring, which are measured individually using a discounted cash flow model. See Note 2 for information on troubled debt restructurings. Loans and receivable balances are written off when we consider 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 for pay in full or revolving loans and 120 days past due for term loans. Loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon notification. Results for reporting periods beginning after January 1, 2020 are presented using the CECL methodology while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods. 52 Changes in Card Member Loans Reserve for Credit Losses Card Member loans reserve for credit losses increased for the three months ended September 30, 2020, primarily driven by further deterioration of the global macroeconomic outlook and greater weight placed on the downside scenario given continued high levels of uncertainty regarding the pace of recovery, partially offset by improved credit performance. Card Member loans reserve for credit losses increased for the nine months ended September 30, 2020, primarily driven by deterioration of the global macroeconomic outlook, including unemployment and GDP, and changes in portfolio mix, partially offset by a decline in outstanding balances. The following table presents changes in the Card Member loans reserve for credit losses for the three and nine months ended September 30:
(a)For the nine months ended September 30, 2020, beginning balance includes an increase of $1,643 million as of January 1, 2020, related to the adoption of the CECL methodology. (b)Provisions for principal, interest and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs. (c)Principal write-offs are presented less recoveries of $142 million and $135 million for the three months ended September 30, 2020 and 2019, respectively, and $421 million and $389 million for the nine months ended September 30, 2020 and 2019, respectively. Recoveries of interest and fees were not significant. Amounts include net (write-offs) recoveries from TDRs of $(35) million and $(20) million for the three months September 30, 2020 and 2019, respectively, and $(98) million and $(53) million for the nine months ended September 30, 2020 and 2019, respectively. (d)Primarily includes foreign currency translation adjustments of $13 million and $(6) million for the three months ended September 30, 2020 and 2019, respectively, and $(4) million and $(3) million for the nine months ended September 30, 2020 and 2019, respectively. 53 Changes in Card Member Receivables Reserve for Credit Losses Card Member receivables reserve for credit losses decreased for the three months ended September 30, 2020, primarily driven by improved credit performance. Card Member receivables reserve for credit losses increased for the nine months ended September 30, 2020, primarily driven by deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by a decline in outstanding balances. The following table presents changes in the Card Member receivables reserve for credit losses for the three and nine months ended September 30:
(a)For the nine months ended September 30, 2020, beginning balance includes a decrease of $493 million as of January 1, 2020, related to the adoption of the CECL methodology. (b)Provisions for principal and fee reserve components. Provisions for credit losses includes reserve build (release) and replenishment for net write-offs. (c)Net write-offs are presented less recoveries of $103 million and $94 million for the three months ended September 30, 2020 and 2019, respectively, and $283 million and $278 million for the nine months ended September 30, 2020 and 2019, respectively. Amounts include net (write-offs) recoveries from TDRs of $(15) million and $(5) million for the three months ended September 30, 2020 and 2019, respectively, and $(31) million and $(11) million, for the nine months ended September 30, 2020 and 2019, respectively. (d)Primarily includes foreign currency translation adjustments of $3 million and $(6) million for the three months ended September 30, 2020 and 2019, respectively, and $2 million and $(3) million for the nine months ended September 30, 2020 and 2019, respectively. 54 4. Investment Securities Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance Sheets. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses for all available-for-sale debt securities in an unrealized loss position. Comparative information continues to be reported in accordance with the methodology in effect for prior periods. When estimating a security’s probability of default and the recovery rate, we assess the security’s credit indicators, including credit ratings. If our assessment indicates that an expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record an allowance for the expected credit loss through the Consolidated Statements of Income in Other loans Provision for credit losses. Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. We had accrued interest on our available-for-sale debt securities totaling $54 million and $20 million, as of September 30, 2020 and December 31, 2019, respectively, presented as Other assets on the Consolidated Balance Sheets. Investment securities also include equity securities carried at fair value on the Consolidated Balance Sheets with unrealized gains and losses recorded in the Consolidated Statements of Income as Other, net expense. Realized gains and losses are recognized upon disposition of the securities using the specific identification method. The following is a summary of investment securities as of September 30, 2020 and December 31, 2019:
(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. 55 The following table provides information about our available-for-sale debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2019. There were 0 available-for-sale debt securities with gross unrealized losses as of September 30, 2020.
The following table summarizes the gross unrealized losses by ratio of fair value to amortized cost as of December 31, 2019. There were 0 available-for-sale debt securities with gross unrealized losses as of September 30, 2020.
Contractual maturities for investment securities with stated maturities as of September 30, 2020 were as follows:
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. 56 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. 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 September 30, 2020 and December 31, 2019, our ownership of variable interests was $10.9 billion and $12.9 billion, respectively, for the Lending Trust and $4.3 billion and $8.3 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 following table provides information on the restricted cash held by the Trusts as of September 30, 2020 and December 31, 2019, included in Other assets on the Consolidated Balance Sheets:
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 nine months ended September 30, 2020 and the year ended December 31, 2019, no such triggering events occurred. 57 6. Customer Deposits As of September 30, 2020 and December 31, 2019, customer deposits were categorized as interest-bearing or non-interest-bearing as follows:
Customer deposits by deposit type as of September 30, 2020 and December 31, 2019 were as follows:
The scheduled maturities of certificates of deposit as of September 30, 2020 were as follows:
As of September 30, 2020 and December 31, 2019, certificates of deposit in denominations of $250,000 or more, in the aggregate, were as follows:
58 7. 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. Plaintiffs have appealed part of this decision. On February 25, 2020, we were named as a defendant in a case filed in the Superior Court of California, Los Angeles County, captioned Laurelwood Cleaners LLC v. American Express Co., et al., in which the plaintiff seeks a public injunction prohibiting American Express from enforcing its anti-steering and non-discrimination provisions and from requiring merchants “to offer the service of Amex-card acceptance for free.” We intend to vigorously defend the case. 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. On August 28, 2020, the court granted plaintiffs' motion for class certification. 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. 59 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. 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 0 to $200 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. In addition, we face exposure associated with Card Member purchases of goods and services, including with respect to the following: •Return Protection — refunds the price of qualifying purchases made with eligible cards, where the merchant will not accept the return, for up to 90 days from the date of purchase; and •Merchant Protection — protects Card Members primarily against non-delivery of goods and services, usually in the event of the bankruptcy or liquidation of a merchant. When this occurs, the Card Member may dispute the transaction for which we will generally credit the Card Member’s account. If we are unable to collect the amount from the merchant, we may bear the loss for the amount credited to the Card Member. The largest component of the exposure relates to Card Member transactions associated with travel-related merchants, primarily through business arrangements where we have remitted payment to such merchants for a Card Member travel purchase that has not yet been used or “flown.” We have an accrual of $17 million related to these exposures as of September 30, 2020. To date, we have not experienced significant losses related to these exposures; however, our historical experience may not be representative in the current environment given the economic and financial disruptions caused by the COVID-19 pandemic and resulting containment measures. A reasonable possible loss related to these exposures in excess of the recorded accrual cannot be quantified as the Card Member purchases that may include or result in claims are not sufficiently estimable, although we believe our risk of loss has increased in the current environment. 60 8. 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. 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 September 30, 2020, these derivatives were not in a significant net liability position. Based on our assessment of the credit risk of our derivative counterparties and our own credit risk as of September 30, 2020 and December 31, 2019, no credit risk adjustment to the derivative portfolio was required. A majority of our derivative assets and liabilities as of September 30, 2020 and December 31, 2019 are subject to master netting agreements with our derivative counterparties. We present derivative assets and liabilities subject to enforceable netting arrangements with the same counterparty on a net basis on the Consolidated Balance Sheets. The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of September 30, 2020 and December 31, 2019:
(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 $42 million and $47 million as of September 30, 2020 and December 31, 2019, 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. 61 Fair Value Hedges 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 $15.8 billion and $22.6 billion of fixed-rate debt obligations designated in fair value hedging relationships as of September 30, 2020 and December 31, 2019, respectively. The following table presents the gains and losses recognized in Interest expense on the Consolidated Statements of Income associated with the fair value hedges of our fixed-rate long-term debt for the three and nine months ended September 30:
The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $16.5 billion and $22.7 billion as of September 30, 2020 and December 31, 2019, respectively, including the cumulative amount of fair value hedging adjustments of $714 million and $217 million for the respective periods. We recognized a net decrease of $81 million and a net increase of $28 million in Interest expense on Long-term debt for the three months ended September 30, 2020 and 2019, respectively, and a net decrease of $183 million and a net increase of $102 million for the nine months ended September 30, 2020, and 2019, respectively, primarily related to the net settlements (interest accruals) on our interest rate derivatives designated as fair value hedges. Net Investment Hedges We had notional amounts of approximately $10.1 billion and $9.8 billion of foreign currency derivatives designated as net investment hedges as of September 30, 2020 and December 31, 2019, respectively. The gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment, was a loss of $170 million and a gain of $138 million for the three months ended September 30, 2020 and 2019, respectively, and gains of $223 million and $63 million for the nine months ended September 30, 2020 and 2019, respectively. Net investment hedge reclassifications out of AOCI into the Consolidated Statements of Income associated with the sale or liquidation of a business, net of taxes, were NaN for both the three months ended September 30, 2020 and 2019, a gain of $1 million and NaN for the nine months ended September 30, 2020 and 2019, respectively. Derivatives Not Designated as Hedges 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 net gains of $4 million and $25 million for the three months ended September 30, 2020 and 2019, respectively, and net gains of $22 million and $52 million for the nine months ended September 30, 2020 and 2019, respectively, that are recognized in Other, net expenses in the Consolidated Statements of Income. 62 9. Fair Values 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 of September 30, 2020 and December 31, 2019
(a)Refer to Note 4 for the fair values of investment securities and to Note 8 for the fair values of derivative assets and liabilities, on a further disaggregated basis. 63 Financial 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 September 30, 2020 and December 31, 2019. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of September 30, 2020 and December 31, 2019, 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.
(a)Level 2 amounts reflect time deposits and short-term investments. (b)Balances include Card Member receivables (including fair values of Card Member receivables of $4.2 billion and $8.2 billion held by a consolidated VIE as of September 30, 2020 and December 31, 2019, 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 $25.1 billion and $32.0 billion as of September 30, 2020 and December 31, 2019, respectively, and the fair values of Long-term debt were $14.9 billion and $19.8 billion as of September 30, 2020 and December 31, 2019, respectively. (d)Presented as a component of Customer deposits on the Consolidated Balance Sheets. 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 nine months ended September 30, 2020 and the year ended December 31, 2019, we did 0t 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. 64 10. 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 $23 million, respectively, as of September 30, 2020, and $1 billion and $29 million, respectively, as of December 31, 2019, 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. 11. Changes in Accumulated Other Comprehensive Income AOCI 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 and nine months ended September 30, 2020 and 2019 were as follows:
65
The following table shows the tax impact for the three and nine months ended September 30 for the changes in each component of AOCI presented above:
Reclassifications out of AOCI into the Consolidated Statements of Income associated with the sale or liquidation of a business, net of taxes, were NaN for both the three months ended September 30, 2020 and 2019, and a gain of $3 million and NaN for the nine months ended September 30, 2020 and 2019, respectively. 66 12. Other Fees and Commissions and Other Expenses The following is a detail of Other fees and commissions for the three and nine months ended September 30:
(a)Other includes Membership Rewards program fees that are not related to contracts with customers. 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) are not required to be disclosed. Non-interest revenue expected to be recognized in future periods through remaining contracts with customers is not material. The following is a detail of Other expenses for the three and nine months ended September 30:
(a)Other expense primarily includes general operating expenses, unrealized gains and losses on certain equity investments, communication expenses, Card Member and merchant-related fraud losses, non-income taxes, foreign currency-related gains and losses, and litigation expenses. 13. Income Taxes The effective tax rate was 21.3 percent and 22.6 percent for the three months ended September 30, 2020 and 2019, respectively, and 30.4 percent and 21.4 percent for the nine months ended September 30, 2020 and 2019, respectively. The decline in the effective tax rate for the three month period primarily reflected changes in the level and geographic mix of pretax income. The increase in the effective tax rate for the nine month period primarily reflected the impact of discrete tax charges in the current period related to the realizability of certain foreign deferred tax assets. 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. We are currently under examination by the IRS for the 2017 and 2018 tax years. We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next 12 months by as much as $106 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 $106 million of unrecognized tax benefits, approximately $90 million relates to amounts that, if recognized, would impact the effective tax rate in a future period. 67 14. Earnings Per Common Share (EPS) The computations of basic and diluted EPS for the three and nine months ended September 30 were as follows:
(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 0.9 million and NaN of options for the three months ended September 30, 2020 and 2019, respectively, and 0.6 million and 0.3 million of options for the nine months ended September 30, 2020 and 2019, respectively, because inclusion of the options would have been anti-dilutive. 68 15. Reportable Operating Segments Effective for the first quarter of 2020, we made certain enhancements to our transfer pricing methodology related to the sharing of revenues between our card issuing, network and merchant businesses, and our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios. These enhancements resulted in certain changes to Non-interest revenues, Interest expense and operating expenses across our reportable operating segments. Prior period amounts have been revised to conform to the current period presentation. These changes had no impact on our Consolidated Results of Operations. The following table presents certain selected financial information for our reportable operating segments and Corporate & Other as of or for the three and nine months ended September 30:
(a)Corporate & Other includes adjustments and eliminations for intersegment activity. (b)Includes discount revenue, certain other fees and commissions and other revenues from customers. 69 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include (i) interest rate risk due to changes in the relationship between the interest rates on our assets (such as loans, receivables and investment securities) and the interest rates on our liabilities (such as debt and deposits); and (ii) foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S. dollar. Interest Rate Risk We analyze a variety of interest rate scenarios in response to changes in balance sheet composition, market conditions, and other factors. As of September 30, 2020, the composition of the balance sheet shifted substantially compared to December 31, 2019. There was a substantial net reduction in total fixed rate assets within Card Member loans, Card Member receivables and investment securities, and an increase in floating rate assets such as cash and cash equivalents. Largely as a result of this change in balance sheet composition, the adverse impact of changes in market interest rates on our net interest income has been significantly lowered since December 31, 2019. A hypothetical, immediate 100 basis point increase or decrease in market interest rates would have a detrimental effect of no greater than $70 million on our annual net interest income, based on the balance sheet as of September 30, 2020. The detrimental impact from rate changes is measured by instantaneously increasing or decreasing the anticipated future interest rates by 100 basis points, using a static asset liability gapping model. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities that reprice within the twelve-month horizon generally reprice by the same magnitude as benchmark rate changes, and these benchmark rates do not fall below zero percent. It is further assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate movements, and the magnitude of this repricing in turn depends on, among other factors, the direction of rate movements. These assumptions are 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. Foreign Exchange Risk With respect to earnings denominated in foreign currencies, the adverse impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been approximately $38 million and $173 million on our pretax income for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (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, our 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 Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There have not been any changes in our 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 fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 70 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS For information that updates the disclosures set forth under Part I, Item 3. “Legal Proceedings” in our 2019 Form 10-K, refer to Note 7 to the “Consolidated Financial Statements” in this Form 10-Q. ITEM 1A. RISK FACTORS For a discussion of our risk factors, see Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K) and Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the First Quarter Form 10-Q). The information included in the "Risk Factors" section of the First Quarter Form 10-Q is incorporated by reference herein. The risks and uncertainties that we face are not limited to those set forth in the 2019 Form 10-K, as supplemented and updated in the First Quarter Form 10-Q. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities, particularly in light of the fast-changing nature of the COVID-19 pandemic, containment and stimulus measures, continued outbreaks and increasing rates of infection, and the related impacts to economic and operating conditions. 71 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (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 three months ended September 30, 2020.
(a)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. See “MD&A – Consolidated Capital Resources and Liquidity” for additional information regarding share repurchases. (b)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. 72 ITEM 5. OTHER INFORMATION 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. In 2020, we became aware of credit card accounts opened with American Express International, Inc. (Hong Kong branch) by the Acting Consul General of the Iranian Consulate in Hong Kong, and his predecessor, the now-former Consul General. We believe these cards were used only for personal expenses. The Acting Consul General had two cards, both of which were opened in 2018 and one of which was closed by client request on or about April 3, 2019, and the other of which was cancelled by us on or about June 16, 2020. The former Consul General’s card was issued in January 2019 and cancelled by us on or about March 13, 2019. We had negligible gross revenues and net profits attributable to these accounts. As all of the accounts were cancelled, we do not intend to continue to engage in this activity. 73 ITEM 6. EXHIBITS The following exhibits are filed as part of this Quarterly Report:
74 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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