Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2018March 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____
Commission file No. 1-6908
AMERICAN EXPRESS CREDIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 11-1988350
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)  
   
200 Vesey Street, New York, New York 10285
(Address of principal executive offices) (Zip Code)
   
Registrant’s telephone number, including area code: (212) 640-2000
None
(Former name, former address and former fiscal year, if changed since last report.)
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT IN ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED UNDER GENERAL INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
2.375 percent Medium-Term Senior Notes
Series F, due May 26, 2020
AXP/20New York Stock Exchange
0.625 percent Senior Notes, due 2021 AXP/21New York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at AugustMay 3, 20182019
Common Stock (par value $0.10 per share) 1,504,938 Shares

    

Table of Contents
AMERICAN EXPRESS CREDIT CORPORATION
FORM 10-Q
INDEX
       
Part I. Page No.
       
  Item 1.  
       
    1
       
    2
       
    3
       
    4
Consolidated Statements of Shareholder’s Equity – three months ended March 31, 2019 and 2018 5
       
    56
       
  Item 2. 1715
       
  Item 4. 2422
       
Part II.    
       
  Item 1A. 2624
       
  Item 5. 2624
       
  Item 6. 2624
       
     2725
       
     E-1
       

Throughout this report the term “Credco” refers to American Express Credit Corporation and its subsidiaries on a consolidated basis, unless stated or the context implies otherwise.



 
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS(Unaudited)
(Unaudited)

 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(Millions) 2018  2017  2018  2017 
Three Months Ended March 31 (Millions)
 2019  2018 
Revenues                  
Discount revenue earned from purchased Card Member receivables and loans $248  $174  $462  $359 
Discount revenue earned from purchased Card Member receivables and Card Member loans $303  $214 
Interest income from affiliates and other  90   68   179   123   110   89 
Finance revenue  13   11   28   23   19   15 
Total revenues  351   253   669   505   432   318 
Expenses                        
Provisions for losses  58   54   122   116   63   64 
Interest expense  173   123   304   220   169   131 
Interest expense to affiliates  40   13   69   22   104   29 
Other, net  (13)  11   (27)  29   (23)  (14)
Total expenses  258   201   468   387   313   210 
Pretax income  93   52   201   118   119   108 
Income tax provision (benefit)  5   (5)  (16)  2   16   (21)
Net income  88   57   217   116  $103  $129 
                
Retained earnings at beginning of period  2,837   3,370   2,708   3,311 
Retained earnings at end of period $2,925  $3,427  $2,925  $3,427 

See Notes to Consolidated Financial Statements.



1



 
AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)


 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
(Millions) 2018  2017  2018  2017 
Three Months Ended March 31 (Millions)
 2019  2018 
Net income $88  $57  $217  $116  $103  $129 
Other comprehensive (loss) income:                
Other comprehensive income:        
Foreign currency translation adjustments, net of tax  (21)  14   (11)  322   7   10 
Other comprehensive (loss) income  (21)  14   (11)  322 
Other comprehensive income  7   10 
Comprehensive income $67  $71  $206  $438  $110  $139 

See Notes to Consolidated Financial Statements.

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AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATEDCONSOLIDATED BALANCE SHEETS
(Unaudited)


 June 30,  December 31,  March 31,  December 31, 
(Millions, except share data) 2018  2017  2019  2018 
Assets            
Cash and cash equivalents $185  $196  $65   102 
Card Member receivables, less reserves: 2018, $157; 2017, $145  22,635   20,131 
Card Member loans, less reserves: 2018, $5; 2017, $5  576   556 
Card Member receivables, less reserves: 2019, $175; 2018, $167  25,832    24,429 
Card Member loans, less reserves: 2019, $6; 2018, $5  637    636 
Loans to affiliates and other  13,402   14,527   14,235    14,136 
Due from affiliates  17   189   19    210 
Other assets  421   290   274    529 
Total assets $37,236  $35,889  $41,062   40,042 
Liabilities and Shareholder’s Equity                 
Liabilities                 
Short-term debt $113  $1,308  $93   826 
Short-term debt to affiliates  8,171   5,997   6,352    5,899 
Long-term debt  23,564   24,153   18,259    20,447 
Long-term debt to affiliates  265   270   10,581    7,523 
Total debt  32,113   31,728   35,285    34,695 
Due to affiliates  2,852   1,988   3,059    2,869 
Accrued interest and other liabilities  194   302   412    282 
Total liabilities $35,159  $34,018  $38,756   37,846 
Shareholder’s Equity                
Common stock, $0.10 par value, authorized 3 million shares; issued and outstanding 1.5 million shares      
Common stock, $0.10 par value, authorized 3 million shares; issued         
and outstanding 1.5 million shares as of March 31, 2019 and December 31, 2018       
Additional paid-in capital  161   161   161    161 
Retained earnings  2,925   2,708   3,198    3,095 
Accumulated other comprehensive loss                 
Foreign currency translation adjustments, net of tax of: 2018, $5; 2017, $17  (1,009)  (998)
Foreign currency translation adjustments, net of tax of: 2019, $19; 2018, $34  (1,053)   (1,060)
Total accumulated other comprehensive loss  (1,009)  (998)  (1,053)   (1,060)
Total shareholder’s equity  2,077   1,871   2,306    2,196 
Total liabilities and shareholder’s equity $37,236  $35,889  $41,062   40,042 

See Notes to Consolidated Financial Statements.

3

AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATEDCONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30 (Millions)
  2018  2017 
Three Months Ended March 31(Millions)
          2019   2018 
Cash Flows from Operating Activities                       
Net income     $217  $116               $103   $129 
Adjustments to reconcile net income to net cash provided by operating activities:         
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                  
Provisions for losses   122   116            63    64 
Amortization of underwriting expense   13   13            6    7 
Deferred taxes   (24)  (51)           (3)   (42)
Changes in operating assets and liabilities:                           
Interest, taxes and other amounts due to/from affiliates   (114)  256            18    23 
Other operating assets and liabilities   (41)  12            153    (290)
Net cash provided by operating activities   173   462 
Net cash provided by (used in) operating activities           340    (109)
Cash Flows from Investing Activities                           
Net increase in Card Member receivables and loans   (2,805)  (3,529)
Net increase in Card Member receivables and Card Member loans           (1,396)   (4,527)
Net decrease in loans to affiliates and other   930   968            130    1,365 
Net increase (decrease) in due to/from affiliates   1,160   (756)
Net increase in due to/from affiliates           358    1,083 
Net cash used in investing activities   (715)  (3,317)           (908)   (2,079)
Cash Flows from Financing Activities                           
Net decrease in short-term debt   (1,195)  (1,995)           (733)   (1,166)
Net increase in short-term debt to affiliates(a)   2,174   380            453    3,796 
Proceeds from long-term debt      8,443 
Principal payments of long-term debt   (447)  (3,900)           (2,250   (447)
Proceeds from long-term debt to affiliates(a)
           8,379     
Principal payments of long-term debt to affiliates(a)
           (5,318    
Net cash provided by financing activities   532   2,928            531    2,183 
Effect of foreign currency exchange rates on cash and cash equivalents   (6)  29 
Net (decrease) increase in cash, cash equivalents and restricted cash   (16)  102 
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash           2    (1)
Net decrease in cash, cash equivalents and restricted cash           (35   (6)
Cash, cash equivalents and restricted cash at beginning of period   296   1,211            195    296 
Cash, cash equivalents and restricted cash at end of period     $280  $1,313               $160   $290 
                  
Supplemental cash flow information                  
                  
Cash, cash equivalents and restricted cash reconciliation  Mar-19  Dec-18    Mar-18   Dec-17 
Cash and cash equivalents per Consolidated Balance Sheets  65  102   $  191  $   196 
Restricted cash included in Other assets per Consolidated Balance Sheets(b)    95    93     99     100  
Total cash, cash equivalents and restricted cash $              160               195   $  290  $  296  
                  
Supplementary cash flow information          
    Jun-18   Dec-17 Jun-17 Dec-16 
Cash and cash equivalents per Consolidated Balance Sheets$185 $196 $1,313 $1,211 
Restricted cash included in Other assets per Consolidated Balance Sheets(a)
  95   100     
Total cash, cash equivalents and restricted cash$280 296 $1,313 $1,211 
(a)
Pursuant to the revision of the master note arrangement with American Express Company during the fourth quarter of 2018, Credco has changed the classification of the net borrowings from short-term debt to affiliates to long-term debt to affiliates.
(b)
Represents cash placeddeposited with Amex Bank of Canada relating to the purchase of Card Member receivables and the collateralized loan arrangement for transfer of Card Member loans and the purchase of Card Member receivables..

See Notes to Consolidated Financial Statements.

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AMERICAN EXPRESS CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY
(Unaudited)

           Accumulated    
        Additional  Other    
Three months ended March 31, 2019   Common  Paid-in  Comprehensive  Retained 
(Millions) Total  Stock  Capital  Loss Earnings 
Balances as of December 31, 2018 $2,196  $  $161  $(1,060) $3,095 
Net income  103            103 
Other comprehensive income  7         7    
Balances as of March 31, 2019 $2,306  $  $161  $(1,053) $3,198 
                     
              Accumulated     
          Additional  Other     
Three months ended March 31, 2018    Common  Paid-in  Comprehensive  Retained 
(Millions) Total  Stock  Capital  Loss Earnings 
Balances as of December 31, 2017 $1,871  $  $161  $(998) $2,708 
Net income  129            129 
Other comprehensive income  10         10    
Balances as of March 31, 2018 $2,010  $  $161  $(988) $2,837 

See Notes to Consolidated Financial Statements.

5

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATEDCONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.   Basis of Presentation

The Company

American Express Credit Corporation (Credco), together with its subsidiaries,Credco is a wholly owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), which is a wholly owned subsidiary of American Express Company (American Express).
Credco is engaged in the business of financing certain non-interest-earning Card Member receivables arising from the use of the American Express charge cards issued in the United States and in certain countries outside the United States. Credco also finances certain interest-earning revolving loans generated by Card Member spending on American Express credit cards issued in non-U.S. markets.
Credco executes material transactions with its affiliates. The agreements between Credco and its affiliates provide that the parties intend that the transactions thereunder be conducted on an arm’s lengtharm’s-length basis; however, there can be no assurance that the terms of these arrangements are the same as would be negotiated between independent, unrelated parties.
American Express provides Credco with financial support with respect to maintenance of its minimum overallrequired 1.25 fixed charge coverage ratio, which is achieved by charging appropriate discount rates on the purchases of receivables Credco makes from, and the interest rates on the loans Credco provides to, TRS and other American Express subsidiaries. Each monthly period, the discount and interest rates are determined to generate income for Credco that is sufficient to maintain its minimum fixed charge coverage ratio. The revenue earned by Credco from purchasing Card Member receivables and Card Member loans at a discount is reported as discount revenue on the Consolidated Statements of Income and Retained Earnings.Income.
The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements included in Credco’s Annual Report on Form 10-K for the year ended December 31, 2017 (Form 10-K).2018. If not materially different, certain footnotenote disclosures included therein have been omitted from this Quarterly Report on Form 10-Q.these Consolidated Financial Statements.
The interim consolidated financial information in this report has not been audited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period consolidated financial information, 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. These accounting estimates reflect the best judgment of management, but actual results could differ.

56

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RECENTLY  ISSUED  AND  ADOPTED  ACCOUNTING  STANDARDS
Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance for the recognition of credit losses on financial instruments, effective January 1, 2020, with early adoption permitted on January 1, 2019.2020. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (CECL) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. The guidance also requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. Credco does not intendcontinues to adopt the new standard early and is currently evaluatingevaluate the impact the new guidance will have on itsCredco’s financial position and results of operations and cash flows; however, it is expected that theoperations. The CECL model will alter the assumptions used in estimating credit losses on Card Member receivables and loans, and Credco may result inhave material increaseschanges to Credco’sits credit reserves as the new guidance involves earlier recognition of expected losses for the life of the assets. However, the extent of the impact will depend on the characteristics of Credco’s loan portfolio, macroeconomic conditions and forecasted information at the date of adoption. American Express continues to drive its cross-functional implementation efforts and has established an enterprise-wide, cross-discipline governance structure to implementsubstantially completed development of CECL models. Continuing through 2019, American Express is validating and analyzing model output during CECL parallel runs, and developing the business processes, policies and controls that satisfy the requirements of the new standard, and continue to identify and conclude on key interpretive issues along with evaluating American Express’ existing credit loss forecasting models and processes in relation to the new guidance to determine what modifications may be required.standard.
Recently Adopted Accounting Standards
In February 2018, as a result of the enactment of the Tax Cuts and Jobs Act (the Tax Act)Act), the FASB issued new accounting guidance on the reclassification of certain tax effects from accumulated other comprehensive income (loss) (AOCI) to retained earnings. The optionalCredco adopted the new guidance is effective January 1, 2019 with early adoption permitted. Credco is evaluating whether it will adopt the new guidance along with any impacts on Credco’s financial position, results of operations and cash flows, none of which are expected to be material.
Recently Adopted Accounting Standards
In January 2016, the FASB issued new accounting guidance on the recognition and measurement of financial assets and financial liabilities, which was effective and adopted by Credco as of January 1, 2018. The guidance makes targeted changes to GAAP; specifically to the classification and measurement of equity securities, and to certain disclosure requirements associated with the fair value of financial assets and liabilities. The adoption of the guidance did not have a material impact on Credco’s financial position, results of operations and cash flows. Credco implemented changes to its accounting policies, business processes and internal controls in support ofelect the new guidance. Such changes were not material.
In November 2016, the FASB issued new accounting guidance on the cash flow classification and presentation of changes in restricted cash or restricted cash equivalents, effective January 1, 2018. The guidance provides specifically that amounts generally described as restricted cash and restricted cash equivalents are to be included with cash and cash equivalents on the statements of cash flows. Credco holds a restricted cash balance such that it becomes a material change to the way balances are presented on the statements of cash flows. Beginning with the quarter ended March 31, 2018, Credco’s consolidated statements of cash flows reflect the adoption of the standard using the full retrospective method, which applies the new standard to each prior reporting period presented.
In August 2017, the FASB issued new accounting guidance providing targeted improvements to the accounting for hedging activities, effective January 1, 2019, with early adoption permitted in any interim period or fiscal year before the effective date. The guidance introduces a number of amendments, several of which are optional that are designed to simplify the application of hedge accounting, improve financial statement transparency and more closely align hedge accounting with an entity’s risk management strategies. Effective January 1, 2018, Credco adopted the guidance with no material impact on its financial position, results of operations and cash flows, along with associated changes to its accounting policies, business processes and internal controls in support of the new guidance. Such changes were not material.reclassification.

6

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other Information
Effective for the second quarter of 2018, American Express realigned its reportable operating segments to reflect the organizational changes announced during the first quarter of 2018 which combined its U.S. and International consumer businesses into a global consumer services organization, among other changes. To enhance the comparability and usefulness of Credco’s financial statements with that of American Express, Credco has also combined its U.S. and International consumer Card Member receivables and loans in Note 2 for the periods presented. This change did not have any impact on Credco’s underlying assumptions or judgments with respect to reserves for losses or credit performance.
2.   Card Member Receivables and Card Member Loans

American Express’ charge and lending payment card products result in the generation of Card Member receivables and Card Member loans, respectively.
Card Member receivables as of June 30, 2018March 31, 2019 and December 31, 20172018 consisted of:
(Millions) 2018  2017 
Global Consumer Services Group (a)
 $6,428  $5,384 
Global Commercial Services (b)
  16,364   14,892 
Card Member receivables (c)
  22,792   20,276 
Less: Reserve for losses  157   145 
Card Member receivables, net (d)
 $22,635  $20,131 
(Millions) 2019  2018 
Global Consumer Services Group(a)
 $8,902  $8,485 
Global Commercial Services(b)
  17,105   16,111 
Card Member receivables(c)
  26,007   24,596 
Less: Reserve for losses  175   167 
Card Member receivables, net(d)
 $25,832  $24,429 

(a)Comprised of U.S. and International Consumer Services.
(b)Comprised of Corporate and Small Business Services.
(c)Net of deferred discount revenue totaling $57$87 million and $43$68 million as of June 30, 2018March 31, 2019 and December 31, 2017,2018, respectively.
(d)Card Member receivables modified in a troubled debt restructuring (TDR) program were immaterial.
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AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Card Member loans as of June 30, 2018March 31, 2019 and December 31, 20172018 consisted of:
(Millions) 2018  2017  2019  2018 
Global Consumer Services Group (a)
 $581  $561  $643  $641 
Less: Reserve for losses  5   5   6   5 
Card Member loans, net (b)
 $576  $556  $637  $636 

(a)Comprised of International Consumer Services.
(b)Card Member loans modified in a TDR program were immaterial.
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AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Card Member Receivables and Card Member Loans 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 receivables and Card Member loans as of June 30, 2018March 31, 2019 and December 31, 2017:2018:
     30-59   60-89       
    Days  Days  90+ Days    
2019 (Millions)
 Current  Past Due  Past Due  Past Due  Total 
Card Member Receivables:                 
Global Consumer Services Group $8,840  $23  $13  $26  $8,902 
Global Commercial Services                    
Global Small Business Services  1,981   8   4   8   2,001 
Global Corporate Payments(a)
 (b)  (b)  (b)   95   15,104 
Card Member Loans:                    
Global Consumer Services Group $638  $2  $1  $2  $643 
                    
      30-59   60-89         
     Days  Days  90+ Days     
2018 (Millions)
 Current   30-59
Days
Past Due
  60-89
Days
Past Due
  90+ Days
Past Due
  Total  Current  Past Due  Past Due  Past Due  Total 
Card Member Receivables:                                     
Global Consumer Services Group $6,380  $16  $9  $23  $6,428  $8,432  $17  $12  $24  $8,485 
Global Commercial Services                                        
Global Small Business Services  1,617   6   3   7   1,633   1,787   7   4   7   1,805 
Global Corporate Payments (a)
 (b)  (b)  (b)   119   14,731  (b)  (b)  (b)   103   14,306 
Card Member Loans:                                        
Global Consumer Services Group $577  $1  $1  $2  $581  $636  $2  $1  $2  $641 

2017 (Millions)
 Current  
30-59
Days
Past Due
  
60-89
Days
Past Due
  
90+ Days
Past Due
  Total 
Card Member Receivables:                    
Global Consumer Services Group $5,336  $18  $11  $19  $5,384 
Global Commercial Services                    
Global Small Business Services  1,397   5   4   6   1,412 
Global Corporate Payments (a)
 (b)  (b)  (b)   112   13,480 
Card Member Loans:                    
Global Consumer Services Group $557  $1  $1  $2  $561 
(a)
For Global Corporate Payments Card Member receivables in Global Commercial Services, 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 collection procedures are initiated on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes. See also (b).
(b)Delinquency data for periods other than 9090+ 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.

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AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
Credit Quality Indicators for Card Member Receivables and Card Member Loans

The following tables present the key credit quality indicators as of or for the sixthree months ended June 30:March 31:

  2018  2017 
  
Net
Write-off
Rate
 (a) 
30+ Days
Past Due
as a % of
Total
  
Net
Write-off
Rate
 (a) 
30+ Days
Past Due
as a % of
Total
 
Card Member Receivables:            
Global Consumer Services Group  1.30%  0.75%  0.90%  0.82%
Global Small Business Services  1.56  0.98%  1.03%  1.10%
Card Member Loans:                
Global Consumer Services Group  1.06  0.69%  1.28%  0.85%

  2019  2018 
      30+ Days      30+ Days 
  Net   Past Due  Net   Past Due 
  Write-off   as a % of  Write-off   as a % of 
  Rate (a)  Total  Rate (a)  Total 
Card Member Receivables:              
  Global Consumer Services Group  1.20 %   0.70%  1.25 %   1.00%
  Global Small Business Services  1.47 %   1.00%  1.42 %   1.30%
Card Member Loans:                  
  Global Consumer Services Group  1.25 %   0.78%  1.40 %   0.89%
 
  2019 2018 
Net Loss   90+ Days Net Loss   90+ Days 
Ratio as a   Past Ratio as a   Past 
  % of Billing % of Billing 
 2018  2017 Charge as a % of Charge as a % of 
 
Net Loss
Ratio as a
% of
Charge
Volume
 (b) 
90+ Days
Past
Billing
as a % of
Receivables
  
Net Loss
Ratio as a
% of
Charge
Volume
 (b) 
90+ Days
Past
Billing
as a % of
Receivables
 Volume (b)Receivables  Volume (b)Receivables 
Card Member Receivables:                              
Global Corporate Payments  0.07  0.81%  0.08%  0.84%0.06 %0.63 %0.07 %0.86


(a)Represents the amount of Card Member receivables or Card Member loans owned by Credco that are written off, net of recoveries, expressed as a percentage of the average Card Member receivables or Card Member loans balances in each of the periods indicated.
(b)Represents the amount of Card Member receivables owned by Credco that are written off, net of recoveries, expressed as a percentage of the volume of Card Member receivables purchased by Credco in each of the periods indicated.


9

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3.   Reserves for Losses

Reserves for losses relating to Card Member receivables and Card Member loans represent management’s best estimate of the probable inherent losses in Credco’s outstanding portfolio of receivables and loans, as of the balance sheet date. Management’s evaluation process requires certain estimates and judgments.

Changes in Card Member Receivables Reserve for Losses

The following table presents changes in the Card Member receivables reserve for losses for the sixthree months ended June 30:
March 31:
(Millions) 2019  2018 
Balance, January 1 $167  $145 
  Provisions  60   62 
  Other credits(a)
  9   28 
  Net write-offs(b)
  (61)  (56)
Balance, March 31 $175  $179 
(Millions) 2018  2017 
Balance, January 1 $145  $110 
Provisions  119   113 
Other credits (a)
  32   33 
Net write-offs (b)
  (119)  (94)
Other debits (c)
  (20)  (16)
Balance, June 30 $157  $146 
(a)Primarily reserve balances applicablerelated to new groups of, and participation interests in, Card Member receivables purchased from TRS and certain of its subsidiaries and participation interests from affiliates. New groups of Card Member receivables purchased totaled $5.5affiliates, totaling $1.6 billion and $6.0$4.3 billion for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively.
(b)Net of recoveries of $55$31 million and $45$28 million for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively.
(c)Primarily reserve balances related to participation interests in Card Member receivables sold to an affiliate. Participation interests in Card Member receivables sold totaled $3.4 billion and $2.6 billion for the six months ended June 30, 2018 and 2017, respectively.

9

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Changes in Card Member Loans Reserve for Losses
The following table presents changes in the Card Member loans reserve for losses for the sixthree months ended June 30:March 31:
(Millions) 2018  2017  2019  2018 
Balance, January 1 $5  $5  $5  $5 
Provisions  3   3   3   2 
Net write-offs(a)
  (3)  (3)  (2)  (1)
Balance, June 30 $5  $5 
Balance, March 31 $6  $6 

(a)Net of recoveries of $1.0$0.3 million for each ofboth the sixthree months ended June 30, 2018March 31, 2019 and 2017.2018.

10

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4.   Derivatives and Hedging Activities
Credco uses derivative financial instruments (derivatives) to manage exposures to various market risks. These instruments derive their value from an underlying variable or multiple variables, including interest rates and foreign exchange rates, 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 Credco’s market risk management. Credco does not transact in derivatives for trading purposes.
In relation to Credco’s credit risk, under the termscertain of theCredco’s bilateral derivative agreements it has with its variousinclude provisions that allow counterparties Credco is not required to either immediately settle any outstanding liability balances or post collateral uponterminate the occurrenceagreement in the event of a specifieddowngrade of Credco’s debt credit risk-related event.rating below investment grade and settle the outstanding net liability position. As of March 31, 2019, these derivatives were not in a material net liability position. Based on Credco’s assessment of the credit risk of its derivative counterparties as of June 30, 2018March 31, 2019 and December 31, 2017,2018, no credit risk adjustment to the derivative portfolio was required.
A majority of Credco’s derivative assets and liabilities as of March 31, 2019 and December 31, 2018 are subject to master netting agreements with its derivative counterparties. Credco has no derivative amounts subject to enforceable master netting arrangements that are not offset on the Consolidated Balance Sheets.
The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of June 30, 2018March 31, 2019 and December 31, 2017:2018:

      Other Assets     Other Liabilities 
      Fair Value     Fair Value 
(Millions) 2019  2018  2019  2018 
Derivatives designated as hedging instruments:            
Fair value hedges - Interest rate contracts (a)(b)
 $  $  $6  $ 
  Net investment hedges - Foreign exchange contracts  19   57   40   10 
Total derivatives designated as hedging instruments  19   57   46   10 
Derivatives not designated as hedging instruments:                
  Foreign exchange contracts  30   220   114   6 
Total derivatives, gross  49   277   160   16 
Less: Derivative asset and derivative liability netting (c)
  (27)  (11)  (27)  (11)
Total derivatives, net $22  $266  $133  $5 

   Other Assets  Other Liabilities 
   Fair Value  Fair Value 
(Millions) 2018  2017  2018  2017 
Derivatives designated as hedging instruments:            
Fair value hedges - Interest rate contracts (a)
 $  $  $1  $ 
Net investment hedges - Foreign exchange contracts  129   54   7   38 
Total derivatives designated as hedging instruments  129   54   8   38 
Derivatives not designated as hedging instruments:                
Foreign exchange contracts  65   9   14   57 
Total derivatives, gross  194   63   22   95 
Less: Cash collateral netting (b)
            
          Derivative asset and derivative liability netting (c)
  (10)  (26)  (10)  (26)
Total derivatives, net $184  $37  $12  $69 
(a)For Credco’s centrally cleared derivatives, variation margin payments are legally characterized as settlement payments as opposed to collateral. Accordingly, the amounts disclosed for centrally cleared derivatives are based on gross assets and gross liabilities, net of variation margin.
(b)Credco posted $81$44 million and $115$55 million as of June 30, 2018March 31, 2019 and December 31, 2017,2018, respectively, as initial margin on its centrally cleared interest rate swaps; such amounts are recorded within Other assets on Credco’s Consolidated Balance Sheets and are not netted against the derivative balances.
(c)Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterpartycounterparties under an enforceable master netting arrangement.
A majority of Credco’s derivative assets and liabilities as of June 30, 2018 and December 31, 2017 are subject to master netting agreements with its derivative counterparties. Credco has no derivative amounts subject to enforceable master netting arrangements that are not offset on the Consolidated Balance Sheets.



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Table of Contents
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Fair Value Hedges
Credco is exposed to interest rate risk associated with its fixed-rate long-term debt obligations. At the time of issuance, certain fixed-rate 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. Credco has $15.3$12.5 billion and $16.2$13.8 billion of its fixed-rate debt obligations designated in fair value hedging relationships as of June 30, 2018March 31, 2019 and December 31, 2017,2018, respectively.
The following table representspresents the gains and losses recognized in Interest expense associated with the fair value hedges of Credco’s fixed-rate long-term debt:

 Gains (losses)     Gains (losses) 
 Three Months Ended  Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
(Millions) 2018  2017  2018  2017  2019  2018 
 
Interest Expense(a)
  Other Expenses  
Interest Expense(a)
  Other Expenses 
Fixed-rate long-term debt $12  $(37) $127  $(8) $(67)  $115 
Derivatives designated as hedging instruments  (20)  20   (115)  (30)  65   (95)
Total $(8) $(17) $12  $(38) $(2)  $20 
(a)Credco adopted new accounting guidance providing targeted improvements to the accounting for hedging activities effective January 1, 2018. In compliance with the standard, amounts previously recorded in Other expenses have been prospectively recorded in Interest expense. Refer to Note 1 for additional information.


The carrying values of the hedged liabilities, recorded within Long-term debt on the Consolidated Balance Sheets, were $15.0$12.4 billion and $16.0$13.5 billion as of June 30, 2018March 31, 2019 and December 31, 2017,2018, respectively, including offsetting amounts of $282$116 million and $155$184 million for the respective periods, related to the cumulative amount of fair value hedging adjustments.
Credco recognized a net increase of $19$32 million and a net reduction of $17$4 million in interestInterest expense on long-term debt for the three months ended June 30,March 31, 2019 and 2018, and 2017, respectively, and a net increase of $23 million and a net reduction of $39 million for the six months ended June 30, 2018 and 2017, respectively, primarily related to the net settlements (interest accruals) on Credco’s interest rate derivatives designated as fair value hedges.

Net Investment Hedges

Credco had notional amounts of approximately $2.9 billion of foreign currency derivatives designated as net investment hedges as of both March 31, 2019 and December 31, 2018. The gain or loss on net investment hedges, net of taxes, recorded in AOCI as part of the cumulative translation adjustment, was a gainwere losses of $105$57 million and a loss of $40$43 million for the three months ended June 30,March 31, 2019 and 2018, and 2017, respectively and a gain of $62 million and a loss of $168 million for the six months ended June 30, 2018 and 2017, respectively. No amounts associated with net investment hedges were reclassified from AOCI into income for the three and six months ended June 30, 2018March 31, 2019 and 2017.
2018.

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 $15$23 million and $6$15 million for the three months ended June 30,March 31, 2019 and 2018, and 2017, respectively, and net gains of $30 million and $10 million for the six months ended June 30, 2018 and 2017, respectively, and are recognized in Other expenses.



1211



Table of Contents
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5.   Fair Values

Financial Assets and Financial Liabilities Carried at Fair Value

The following table summarizes Credco’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by GAAP’s fair value hierarchy as Level 2, as of June 30, 2018March 31, 2019 and December 31, 2017:2018:
(Millions) 2018  2017 
Assets:      
Derivatives (a)
 $194  $63 
Total assets  194   63 
Liabilities:        
Derivatives (a)
  22   95 
Total liabilities $22  $95 

(Millions) 2019  2018 
Assets:      
Derivatives, gross (a)
 $49  $277 
Total assets  49   277 
Liabilities:        
Derivatives, gross (a)
  160   16 
Total liabilities $160  $16 

(a)Refer to Note 4 for the fair values of derivative assets and liabilities, on a further disaggregated basis.

Financial Assets and Financial Liabilities Carried at Other Than Fair Value
The following table summarizes the estimated fair value for Credco’s 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 June 30, 2018March 31, 2019 and December 31, 2017.2018. The fair values of these financial instruments are estimates based upon the market conditions and perceived risks as of June 30, 2018March 31, 2019 and December 31, 20172018, and require management judgment. These figures may not be indicative of future fair values, nor can Credco’sthe fair value of Credco be estimated by aggregating the amounts presented.
   Carrying  Corresponding Fair Value Amount 
2018 (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)
 $0.2  $0.2  $0.2  $  $ 
Other financial assets (b)
  22.9   22.9   0.1   22.8    
Financial assets carried at other than fair value                    
Card Member loans, net  0.6   0.6         0.6 
Loans to affiliates and other  13.4   13.3      8.4   4.9 
Financial Liabilities:                    
Financial liabilities for which carrying values equal or approximate fair value  10.5   10.5      10.5    
Financial liabilities carried at other than fair value                    
Long-term debt  23.6   23.7      23.7    
Long-term debt with affiliates $0.3  $0.3  $  $0.3  $ 

   Carrying  Corresponding Fair Value Amount 
2019 (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)
 $0.1  $0.1  $0.1  $  $ 
   Other financial assets(b)
  26.0   26.0   0.1   25.9    
Financial assets carried at other than fair value                    
   Card Member loans, net  0.6   0.6         0.6 
   Loans to affiliates and other  14.2   14.3      7.6   6.7 
Financial Liabilities:                    
Financial liabilities for which carrying values equal                    
or approximate fair value  8.9   8.9      8.9    
Financial liabilities carried at other than fair value                    
   Long-term debt  18.3   18.5      18.5    
   Long-term debt to affiliates $10.6  $10.6  $  $10.6  $ 



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Table of Contents
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 Carrying  Corresponding Fair Value Amount  Carrying  Corresponding Fair Value Amount 
2017 (Billions)
 Value  Total  Level 1  Level 2  Level 3 
2018 (Billions)
 Value  Total  Level 1  Level 2  Level 3 
Financial Assets:                              
Financial assets for which carrying values equal or approximate fair value               
Financial assets for which carrying values               
equal or approximate fair value               
Cash and cash equivalents (a)
 $0.2  $0.2  $0.2  $  $  $0.1  $0.1  $0.1  $  $ 
Other financial assets (b)
  20.6   20.6   0.1   20.5      24.9   24.9   0.1   24.8    
Financial assets carried at other than fair value                                        
Card Member loans, net  0.6   0.6         0.6   0.6   0.6         0.6 
Loans to affiliates and other  14.5   14.4      10.0   4.4   14.1   14.1      7.4   6.7 
Financial Liabilities:                                        
Financial liabilities for which carrying values equal or approximate fair value  8.6   8.6      8.6    
Financial liabilities for which carrying values equal                    
or approximate fair value  9.0   9.0      9.0    
Financial liabilities carried at other than fair value                                        
Long-term debt  24.2   24.5      24.5      20.4   20.5      20.5    
Long-term debt with affiliates $0.3  $0.3  $  $0.3  $ 
Long-term debt to affiliates $7.5  $7.3  $  $7.3  $ 

(a)Amounts reflect interest-bearing deposits.
(b)Level 1 amounts reflect interest-bearing restricted cash and Level 2 amounts primarily reflect Card Member receivables.

Nonrecurring Fair Value Measurements
During the sixthree months ended June 30, 2018March 31, 2019 and during the year ended December 31, 2017,2018, Credco did not have any assets that were measured at fair value due to impairment on a nonrecurring basis.
6.  Variable Interest Entity
Credco established a Variable Interest Entity, American Express Canada Credit Corporation (AECCC), primarily to issue notes in Canada under a medium-term note program and lend the proceeds to affiliates. The notes issued under the medium-term note program are fully guaranteed by Credco. Credco is considered the primary beneficiary of the entity and owns all of the outstanding voting interests and, therefore, consolidates the entity.
As of June 30, 2018 and December 31, 2017, total assets of AECCC were $8 million and $466 million, respectively, and total liabilities were nil and $457 million, respectively, none of which were eliminated in consolidation. In March 2018, the funds lent by AECCC were repaid by the affiliates and used to satisfy the scheduled maturity of notes issued under the medium-term note program.

14

AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7.6.  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 Foreign Currency Translation Adjustments for the three and six months ended June 30,March 31, 2019 and 2018 and 2017 were as follows:

Three Months Ended June 30, 2018 (Millions), net of tax
 
Foreign
Currency
Translation
Adjustments
 
Balances as of March 31, 2018 $(988)
Net translation loss of investments in foreign operations  (126)
Net gains related to hedges of investment in foreign operations  105 
Net change in accumulated other comprehensive loss  (21)
Balances as of June 30, 2018 $(1,009)
  Foreign Currency 
  Translation 
  Adjustments 
2019 (Millions), net of tax
 Gains (Losses) 
Balances as of December 31, 2018 $(1,060)
Net translation gain of investments in foreign operations  64 
Net losses related to hedges of investment in foreign operations  (57)
Net change in accumulated other comprehensive loss  7 
Balances as of March 31, 2019 $(1,053)
     
    
     
  Foreign Currency 
  Translation 
  Adjustments 
2018 (Millions), net of tax
 Gains (Losses) 
Balances as of December 31, 2017 $(998)
Net translation gain of investments in foreign operations  53 
Net losses related to hedges of investments in foreign operations  (43)
Net change in accumulated other comprehensive loss  10 
Balances as of March 31, 2018 $(988)
Six Months Ended June 30, 2018 (Millions), net of tax
 
Foreign
Currency
Translation
Adjustments
 
Balances as of December 31, 2017 $(998)
Net translation loss of investments in foreign operations  (73)
Net gains related to hedges of investment in foreign operations  62 
Net change in accumulated other comprehensive loss  (11)
Balances as of June 30, 2018 $(1,009)
Three Months Ended June 30, 2017 (Millions), net of tax
 
Foreign
Currency
Translation
Adjustments
 
Balances as of March 31, 2017 $(955)
Net translation gain of investments in foreign operations  54 
Net losses related to hedges of investment in foreign operations  (40)
Net change in accumulated other comprehensive loss  14 
Balances as of June 30, 2017 $(941)
Six Months Ended June 30, 2017 (Millions), net of tax
 
Foreign
Currency
Translation
Adjustments
 
Balances as of December 31, 2016 $(1,263)
Net translation gain of investments in foreign operations(a)
  490 
Net losses related to hedges of investment in foreign operations  (168)
Net change in accumulated other comprehensive loss  322 
Balances as of June 30, 2017 $(941)
(a)Includes $289 million of tax benefits recognized in the six months ended June 30, 2017.


1513

Table of Contents
AMERICAN EXPRESS CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table shows the tax impact for the three and six months ended June 30March 31 for the changes in Foreign Currency Translation Adjustments presented above:
  Tax (benefit) expense 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
(Millions) 2018  2017  2018  2017 
Foreign currency translation adjustments (a)
 $(23) $(3) $(31) $(245)
Net investment hedges  33   (24)  19   (100)
Total tax impact $10  $(27) $(12) $(345)
(a)Includes $289 million of tax benefits recognized in the six months ended June 30, 2017.

                   Tax (benefit) expense 
                  Three Months Ended 
                    March 31, 
(Millions) 2019  2018 
Net translation on investments in foreign operations  3  $(8)
Net hedges of investments in foreign operations   (18)  (14)
Total tax impact  (15) $(22)


No amounts were reclassified out of AOCI into the Consolidated Statements of Income and Retained Earnings for the three and six months ended June 30, 2018March 31, 2019 and 2017.2018.

8.7.   Income Taxes
The results of operations of Credco are included in the consolidated U.S. federal income tax return of American Express. Under an agreement with American Express, provision for income taxes is recognized on a separate company basis. If benefits for net operating losses, future tax deductions and foreign tax credits cannot be recognized on a separate company basis, such benefits are then recognized based upon a share, derived by formula, of those deductions and credits that are recognizable on an American Express consolidated reporting basis.
The effective tax rate was 5.413.4 percent and (9.6)(19.4) percent for the three months ended June 30,March 31, 2019 and 2018, and 2017, respectively, and (8.0) percent and 1.7 percent for the six months ended June 30, 2018 and 2017, respectively. The changes in tax rates for both periods primarily reflect a reduction in the U.S. statutory corporate income tax rate from 35 percent to 21 percent effective January 1, 2018, as a result of the Tax Act. The tax rate for the sixthree months ended June 30,March 31, 2018 includes a $24 million discrete tax benefit related to the Tax Act that reduced the reported effective tax rate by 11.9 percent and is related to a revision to the provisional tax charge recorded in 2017 as a result of the Tax Act. The revision to the provisional tax charge results from additional analysis of the foreign withholding tax consequences of future cash dividends paid from non-U.S. subsidiaries. Credco is still analyzing the impacts of the Tax Act; therefore, the 2017 tax charge continues to be provisional.22.2 percent.
The tax rate in each of the periods reflects the geographic mix of expenses in the United States that generates a tax benefit at the U.S. statutory rate and foreign earnings taxed at lower rates, and the favorable impact of the tax benefit related to Credco’s ongoing funding activities outside the United States. Credco’s provision for income taxes for interim financial periods is not based on an estimated annual effective rate due to volatility in certain components of revenues and expenses that prevents Credco from projecting a reliable estimate of full year pretax income. A discrete calculation of the provision for income taxes is recorded for each interim period.
American ExpressCredco is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which American Expressit has significant business operations. The tax years under examination and open for examination vary by jurisdiction. American Express is currently under examination with the IRSIn 2018, Credco settled its U.S. federal income tax audits for tax years 20082008-2014, and the statute of limitations for these years remain open through 2014.2019. Tax years from 2015 onwards are open for examination by the IRS.

Credco believes it is reasonably possible that its unrecognized tax benefits could decrease by an immaterial amount within the next 12 months, 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 attribution of taxable income to a particular jurisdiction or jurisdictions. The resolution of such items would not have a material impact on Credco’s effective tax rate.


1614

Item 2.
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

Overview
American Express Credit Corporation (Credco), together with its subsidiaries,Credco is a wholly owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), which is a wholly owned subsidiary of American Express Company (American Express). Both American Express and TRS are bank holding companies.
Credco is engaged in the business of financing certain non-interest-earning Card Member receivables arising from the use of the American Expresscharge cards issued in the United States and in certain countries outside the United States. Credco also finances certain interest-earning revolving loans generated by Card Member spending on American Express credit cards issued in non-U.S. markets.
Certain of the statements in this Form 10-Q report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to the “Cautionary Note Regarding Forward-Looking Statements” section.
Business Overview
Management’s discussion of the results of Credco is in the context of the wider business environment for American Express.
American Express’ results for the secondfirst quarter reflect strong performance that continues the momentum from the beginning ofa solid start to the year, as it progresses againstwith broad based billings and revenue growth across its four strategic imperatives – strengtheningbusinesses and geographies. American Express continued to invest in new services and Card Member benefits, new card acquisitions and expanding its leadership position with premium consumers, extending its strong position in the commercial payments space, strengthening its global, integratedmerchant network, and making it returned a significant amount of capital to its shareholders through share repurchases and dividends.
American Express an essential partcontinues to see attractive growth opportunities across its businesses and plans to invest to take advantage of its customers’ digital lives.
them in order to drive revenue growth over the moderate to long term. While American Express continues to see some headwinds in the environment, including from a rising interest rate environment, regulation in countries around the world and intense competition, it remains focused on delivering differentiated value to its merchants, customersCard Members and business partners whileand delivering appropriate returns to its shareholders.
Effective for the second quarter of 2018, American Express realigned its reportable operating segments to reflect the organizational changes announced during the first quarter of 2018 which combined its U.S. and International consumer businesses into a global consumer services organization, among other changes. To enhance the comparability and usefulness of Credco’s financial statements with that of American Express, Credco has also combined its U.S. and International consumer Card Member receivables and loans in Note 2 to the Consolidated Financial Statements for the periods presented. This change did not have any impact on Credco’s underlying assumptions or judgments with respect to reserves for losses or credit performance.
Results of Operations for the SixThree Months Ended June 30,March 31, 2019 and 2018 and 2017

Net income depends largely on the volume of Card Member receivables and Card Member loans purchased, the discount rate used to determine purchase price, interest earned, interest expense, collectability of purchased Card Member receivables and Card Member loans, and income taxes.

Credco’s consolidated net income increaseddecreased by $101$26 million to $217$103 million, as compared to net income of $116$129 million for the same period in 2017.2018. The year-over-year increasedecrease in net income is primarily driven by an increasethe discrete tax benefit of $24 million related to the Tax Cuts and Jobs Act (the Tax Act) recorded in discount revenue earned from Card Member receivables and loans and higher interest income from affiliates and other, partially offset by higher interest expense.
17

2018.
Table 1: Total Revenues Summary
Six Months Ended June 30,       Change 
(Millions, except percentages) 2018  2017  2018 vs. 2017 
Discount revenue earned from purchased Card Member receivables and loans $462  $359  $103  29%
Interest income from affiliates and other  179   123   56  46 
Finance revenue  28   23   5  22 
Total revenues $669  $505  $164  32%

Three Months Ended March 31,       Change 
(Millions, except percentages) 2019  2018  2019 vs. 2018 
Discount revenue earned from purchased Card Member receivables and Card Member loans $303  $214  $89   42%
Interest income from affiliates and other  110   89   21   24 
Finance revenue  19   15   4   27 
Total revenues $432  $318  $114   36%

Total revenues
Discount revenue increased, due to higher discount raterates and higher volumes of receivables purchased.
Interest income increased, primarily due to higher interest rates and higher average loan balances.rates.
Finance revenue increased, primarily due to higher average outstanding Card Member loan balances.

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Table 2: Total Expense Summary

Six Months Ended June 30,       Change 
(Millions, except percentages) 2018  2017  2018 vs. 2017 
Provisions for losses $122  $116  $6  5%
Interest expense  304   220   84  38 
Interest expense to affiliates  69   22   47  # 
Other, net  (27)  29   (56) # 
Total expenses $468  $387  $81  21%
Three Months Ended March 31,       Change 
(Millions, except percentages) 2019  2018  2019 vs. 2018 
Provisions for losses $63  $64  $(1)  (2)%
Interest expense  169   131   38   29 
Interest expense to affiliates  104   29   75   # 
Other, net  (23)  (14)  (9)  64 
Total expenses $313  $210  $103   49%

# Denotes a variance greater than 100 percent

Total expenses
Provisions for losses increased, primarily due to higher write-offs.
Interest expense increased, primarily due to higher LIBOR rates partially offset byand a fair value hedge ineffectiveness gains previously reportedloss during the quarter ended March 31, 2019 as compared to a fair value hedge ineffectiveness gain in Other expense.the prior period.
Interest expense to affiliates increased, primarily due to higher LIBOR rates andan increase in average debt balances.balances and higher interest rates.
Other expenses decreased, primarily driven by a fair value hedge ineffectiveness loss of $38 million in the prior period, now reported in Interest expense and higher forward point gains of $20 million.gains.
Income taxes
The effective tax rates were 5.413.4 percent and (9.6)(19.4) percent for the three months ended June 30,March 31, 2019 and 2018, and 2017, respectively, and (8.0) percent and 1.7 percent for the six months ended June 30, 2018 and 2017, respectively. The changes in tax rates for both periods primarily reflect a reduction in the U.S. statutory corporate income tax rate from 35 percent to 21 percent effective January 1, 2018, as a result of the Tax Cuts and Jobs Act (the Tax Act). The tax rate for the sixthree month period ended June 30,March 31, 2018 includes a $24 million discrete tax benefit related to a revision to the provisional tax charge recorded in 2017.Tax Act. Refer to Note 87 to the Consolidated Financial Statements for additional information.

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Card Member Receivables and Card Member Loans
The net volume of Card Member receivables and Card Member loans purchased during the sixthree months ended June 30,March 31, 2019 and 2018 and 2017 was approximately $142$78 billion and $126$74 billion, respectively.
As of June 30, 2018March 31, 2019 and December 31, 2017,2018, Credco owned $22.8$26.0 billion and $20.3$24.6 billion, respectively, of gross Card Member receivables. Card Member receivables represent amounts due on American Express charge card products and are recorded at the time they are purchased from the seller. Included in Card Member receivables are Credco Receivables Corporation’s (CRC) purchases of participation interests from RFC VIII in conjunction with TRS’ securitization program. As of June 30, 2018March 31, 2019 and December 31, 2017,2018, CRC owned approximately $4.8$7.5 billion and $4.1$6.7 billion, respectively, of such participation interests.
As of June 30, 2018March 31, 2019 and December 31, 2017,2018, Credco owned gross Card Member loans totaling $581$643 million and $561$641 million, respectively. These loans generally represent revolving amounts due on American Express lending card products.

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The following table summarizes selected information related to the Card Member receivables portfolio as of June 30:March 31:

Table 3: Selected Information Related to Card Member Receivables
(Millions, except percentages and where indicated) 2018  2017 
Total gross Card Member receivables (a)
 $22,792  $21,876 
Loss reserves ― Card Member receivables (a)
 $157  $146 
Loss reserves as a % of receivables  0.7%  0.7%
Average life of Card Member receivables (# in days) (b)
  29   29 

(Millions, except percentages and where indicated) 2019  2018 
Total gross Card Member receivables(a)
 $26,007  $24,864 
Loss reserves ― Card Member receivables(a)
 $175  $179 
Loss reserves as a % of receivables  0.7%  0.7%
Average life of Card Member receivables (# in days)(b)
  29   28 

(a)Refer to Notes 2 and 3 to the Consolidated Financial Statements for further discussion.
(b)Represents the average life of Card Member receivables owned by Credco, based upon the ratio of the average amount of both billed and unbilled receivables owned by Credco at the end of each month, during the periods indicated, to the volume of Card Member receivables purchased by Credco.

Loans to Affiliates and Other
Credco’s loans to affiliates and other represent floating-rate interest-bearing borrowings by wholly owned subsidiaries of TRS and the joint ventures that issue American Express cards in certain countries. The components of loans to affiliates and other as of June 30, 2018March 31, 2019 and December 31, 20172018 were as follows:

Table 4: Loans to Affiliates and Other

(Millions) 2018  2017 
American Express Limited $3,847  $3,847 
American Express Services Europe Limited  2,826   2,747 
American Express Australia Limited  1,734   1,616 
American Express International, Inc.  1,222   1,180 
Amex Bank of Canada  1,141   1,737 
Amex Global Holdings C.V.  888   888 
American Express Company (Mexico) S.A. de C.V.  829   812 
American Express International, Inc.– Branch – Singapore  344   124 
American Express Bank (Mexico) S.A.  337   325 
Alpha Card S.C.R.L./C.V.B.A  117   138 
American Express International (NZ), Inc.  74   80 
American Express Saudi Arabia (C) JSC  28   34 
Amex Funding Management (Europe) Limited  15   38 
American Express Company     961 
Total(a)
 $13,402  $14,527 
(Millions) 2019  2018 
American Express Limited $3,847  $3,847 
American Express Services Europe Limited  3,551   3,552 
American Express Australia Limited  1,888   1,839 
Amex Bank of Canada  1,302   1,334 
American Express International, Inc.  1,255   1,243 
Amex Global Holdings C.V.  888   888 
American Express Company (Mexico) S.A. de C.V.  496   463 
American Express International, Inc.– Branch – Singapore  379   383 
American Express Bank (Mexico) S.A.  376   348 
Alpha Card S.C.R.L./C.V.B.A  107   114 
American Express Saudi Arabia (C) JSC  74   53 
American Express International (NZ), Inc.  72   72 
Total(a)
 $14,235  $14,136 

(a)As of June 30, 2018both March 31, 2019 and December 31, 2017,2018, approximately $5.4$7.2 billion and $5.0 billion, respectively, were collateralized by the underlying Card Member receivables and Card Member loans transferred with recourse.
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Due from/to Affiliates
As of June 30, 2018March 31, 2019 and December 31, 2017,2018, amounts due from affiliates were $17$19 million and $189$210 million, respectively. As of June 30, 2018March 31, 2019 and December 31, 2017,2018, amounts due to affiliates were $2.9$3.0 billion and $2.0$2.9 billion, respectively. These amounts relate primarily to timing differences from the purchase of Card Member receivables, net of remittances from TRS and its subsidiaries, as well as from operating activities. As of both June 30, 2018March 31, 2019 and December 31, 2017,2018, due to affiliates also includes an amount pertaining to tax liability on account of the Tax Act.
Restricted Cash with Affiliates
As of June 30, 2018March 31, 2019 and December 31, 2017,2018, the amount of interest-bearing restricted cash was $95 million and $100$93 million, respectively, which represents cash placeddeposited with Amex Bank of Canada relating to the purchase of Card Member receivables and the collateralized loan arrangement for transfer of Card Member loans and the purchase of Card Member receivables.loans. It has beenis included under “Other assets” on the Consolidated Balance Sheets.

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Short-term Debt to Affiliates
Short-term debt to affiliates consists primarily of interest-bearing master notes repayablepayable on demand. Credco does not expect any changes to its short-term funding strategies with affiliates. Components of short-term debt to affiliates as of June 30, 2018March 31, 2019 and December 31, 20172018 were as follows:

Table 5: Short-term Debt to Affiliates
(Millions) 2018  2017 
AE Exposure Management Limited $4,823  $4,548 
American Express Company  2,016    
American Express Europe LLC  587   765 
American Express Swiss Holdings GmbH  499   444 
American Express Holdings Netherlands CV  192   192 
Accertify, Inc.  54   48 
Total $8,171  $5,997 

(Millions) 2019  2018 
AE Exposure Management Limited $5,272  $5,122 
American Express Europe LLC  816   517 
American Express Holdings Netherlands CV  192   192 
Accertify, Inc.  72   68 
Total $6,352  $5,899 

Long-term Debt to Affiliates

Long-term debt to affiliates represents an unsecured amount dueconsists primarily of master note agreements with original contractual maturity dates of one year or greater and are not payable on demand. Components of long-term debt to LB Luxembourg Two S.a.r.l amounting to $265 million and $270 millionaffiliates as of June 30, 2018March 31, 2019 and December 31, 2017, respectively,2018 were as follows:

Table 6: Long-term Debt to Affiliates

(Millions) 2019  2018 
American Express Company(a)
 $10,273  $7,240 
Amex Funding Management (Europe) Limited(b)
  308   283 
Total $10,581  $7,523 

(a)  Amounts payable by December 2020.November 2023.
(b)  Amounts payable by September 2021.

Service Fees to Affiliates

Credco’s affiliates do not explicitly charge Credco a service fee for the servicing of receivables purchased. Instead Credco receives a lower discount rate on the receivables purchased than would be the case if servicing fees were charged. If a servicing fee had been charged by these affiliates from which Credco purchases receivables, fees to affiliates for servicing receivables would have been approximately $130$69 million and $117$63 million for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively. Correspondingly, discount revenue would have increased by approximately the same amounts in these periods.

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CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY

Credco’s balance sheet management objectives are to maintain:

·
A broad, deep and diverse set of funding sources to finance its assets and meet operating requirements; and

·●Liquidity programs that enable Credco to continuously meet expected future financing obligations and business requirements for at least a twelve-month period, even in the event it is unable to continue to raise new funds under its traditional funding programs during a substantial weakening in economic conditions.

Funding Strategy
American Express has in place an enterprise-wide funding policy. The principal funding objective is to maintain broad and well-diversified funding sources to allow American Express, including Credco, to meet its maturing obligations, cost-effectively finance current and future asset growth in its global businesses as well as to maintain a strong liquidity profile.

Credco has historically relied on intercompany borrowings and the debt capital markets to fulfill a substantial amount of its funding needs. It has a variety of funding sources available to access the debt capital markets, including senior unsecured debentures and commercial paper. One of the principal tenets of Credco’s funding strategy is to issue debt with a wide range of maturities to distribute its refinancing requirements across future periods. Credco continues to assess its funding needs and investor demand and could change the mix of its existing sources as well as add new sources to its funding mix. Credco’s funding plan is subject to various risks and uncertainties, such as the disruption of financial markets or reductions in market capacity and demand for securities offered by Credco as well as any regulatory changes or changes in its long-term or short-term credit ratings. Many of these risks and uncertainties are beyond Credco’s control.

Credco’s funding strategy is designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Dominion Bond Rating Services (DBRS), Fitch Ratings (Fitch), Moody’s Investor Services (Moody’s) and Standard & Poor’s (S&P). Such ratings help support Credco’s access to cost-effective unsecured funding as part of its overall funding strategy.

Table 6:7: Unsecured Debt Ratings

Credit Agency Short-Term Ratings Long-Term Ratings Outlook
DBRSR-1 (middle)A (high)Stable
Fitch F1 A Stable
Moody’s Prime 1Prime-1 A2 Stable
S&P A-2 A- Stable

Downgrades in the ratings of Credco’s unsecured debt could result in higher funding costs, as well as higher fees related to borrowings under its unused lines of credit. Declines in credit ratings could also reduce Credco’s borrowing capacity in the unsecured term debt and commercial paper markets. The overall level of the funding provided by Credco to other American Express affiliates is impacted by a variety of factors, among them Credco’s ratings. To the extent that Credco is subject to a higher cost of funds, whether due to an adverse ratings action or otherwise, the affiliates could continue to use, or could increase their use of, alternative sources of funding for their receivables that offer better pricing.

Short-term Funding Programs
Short-term borrowings, such as commercial paper, is defined as debt with original contractual maturity of twelve months or less. Credco’s issuance and sale of commercial paper is primarily utilized for working capital needs. The amount of short-term borrowings issued in the future will depend on Credco’s funding strategy, its needs and market conditions. As of June 30, 2018March 31, 2019 and December 31, 2017,2018, Credco had nil and $1.2$0.8 billion, respectively, of commercial paper outstanding. The average commercial paper outstanding was $0.4$0.33 billion and $1.1$0.23 billion for the sixthree months ended June 30, 2018March 31, 2019 and the year ended December 31, 2017,2018, respectively.


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Long-term Debt Programs

During 2018,the three months ended March 31, 2019, Credco hasdid not issuedissue any unsecured debt securities. Long-term debt is raised through the offering of debt securities both in and outside the United States. Long-term debt is generally defined as any debt with an original contractual maturity greater than twelve months. Credco had the following long-term debt outstanding as of June 30, 2018March 31, 2019 and December 31, 2017:2018:

Table 7:8: Long-Term Debt Outstanding

(Billions) 2018  2017 
Long-term debt outstanding (a)
 $23.6  $24.2 
Average long-term debt (b)
 $24.2  $24.3 
(Billions) 2019  2018 
Long-term debt outstanding (a)
 $18.3  $20.4 
Average long-term debt (b)
 $20.3  $22.8 

(a)The outstanding balances include (i) unamortized discount, premium and fees, (ii) the impact of movements in exchange rates on foreign currency denominated debt and (iii) the impact of fair value hedge accounting on certain fixed-rate notes that have been swapped to floating rate through the use of interest rate swaps.
(b)Average long-term debt outstanding during the six and twelvethree months ended June 30, 2018March 31, 2019 and the year ended December 31, 2017,2018, respectively.

Credco has the ability to issue debt securities under the shelf registrationsregistration statement filed with the Securities and Exchange Commission (SEC). The latest shelf registration statement filed with the SEC is for an unspecified amount of debt securities. As of both June 30, 2018March 31, 2019 and December 31, 2017,2018, Credco had $23.9$18.4 billion and $20.7 billion of debt securities outstanding, respectively, issued under the SEC registration statement. Credco 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.

Credco has also established a program in Australia for the issuance of debt securities of up to approximately $4.4$4.3 billion (AUD $6 billion). During the sixthree months ended June 30, 2018,March 31, 2019, no notes were issued under this program. As of June 30, 2018March 31, 2019 and December 31, 2017,2018, the entire amount of approximately $4.4$4.3 billion and $4.7$4.2 billion, respectively, of notes was available for issuance under this program and there were no outstanding notes as of such dates.
Credco also established a medium-term note program in Canada provided for the issuance of notes by American Express Canada Credit Corporation (AECCC), an indirect wholly owned subsidiary of Credco. As of June 30, 2018 and December 31, 2017, AECCC had nil and $0.5 billion, respectively, of medium-term notes outstanding under this program. AECCC’s financial results are included in the consolidated financial results of Credco.

The covenants of debt instruments issued by Credco impose the requirement that Credco maintain a minimum consolidated net worth of $50 million, which limits the amount of dividends Credco can pay to its parent. During the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, Credco did not pay any cash dividends to TRS. When considering the amount of dividends it pays, Credco takes into account the amount of capital required to maintain capital strength, support business growth and meet the expectations of debt investors. To the extent excess capital is available, it may be distributed to TRS, Credco’s parent company, via dividends. There are no significant restrictions on the ability of Credco to obtain funds from its subsidiaries by dividend or loan. Additionally, there are no limitations on the amount of debt that can be issued by Credco, provided it maintains the minimum required fixed charge coverage ratio of 1.25. As of June 30, 2018,March 31, 2019, Credco was in compliance with all restrictive covenants contained in its debt agreements.
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Liquidity Management
American Express, including Credco, incurs liquidity risk that arises in the course of its activities. The liquidity objective of American Express and its subsidiaries, including Credco, is to maintain access to a diverse set of on- andon-and off-balance sheet liquidity sources. American Expresssources and its subsidiaries, including Credco, seek to maintain liquidity sources in amounts sufficient to meet their expected future financial obligations and business requirements for liquidity for a period of at least twelve months in the event they are unable to raise new funds under their regular funding programs during a substantial weakening in economic conditions. General principles and the overall framework for managing liquidity risk across American Express on an enterprise-wide basis are set out in American Express’ Liquidity Risk Policy.
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The liquidity risk exposure could arise from a wide variety of scenarios. The liquidity management strategy thus includes a number of elements, including, but not limited to:
·●Maintaining diversified funding sources;
·●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 American Express’ capital adequacy framework.

Credco regularly accesses liquidity through its various funding programs, and maintains a variety of contingent sources of cash and financing, such as access to securitizations of Card Member receivables through sales of receivables to TRS for securitization by RFC VIII and the American Express Issuance Trust II, as well as a committed bank facility.
As of June 30, 2018,March 31, 2019, Credco had cash and cash equivalents of approximately $0.2 billion.$65 million. In addition to its actual holdings of cash and cash equivalents, Credco maintains access to additional liquidity, in the form of cash and cash equivalents held by certain affiliates, through intercompany loan agreements.
Committed Bank Credit Facility

Credco maintained a U.S. dollar denominateddollar-denominated committed syndicated bank credit facility as of June 30, 2018March 31, 2019 of $3.5 billion, which expires onwith a maturity date of October 16, 2020. As of June 30, 2018,March 31, 2019, no amounts were drawn on this facility. The capacity of the facility mainly served to further enhance Credco’s contingent funding resources. The availability of this facility is subject to Credco’s compliance with certain financial covenants that require maintenance of a 1.25 ratio of earnings tominimum required fixed charges.charge coverage ratio. The ratio of earnings to fixed chargescharge coverage ratio for Credco was 1.541.44 and 1.49 for the sixthree months ended June 30, 2018. The ratio of earnings to combined fixed chargesMarch 31, 2019 and preferred stock dividends for American Express for the six monthsyear ended June 30,December 31, 2018, was 3.99.respectively.
The committed syndicated bank credit facility does not contain a material adverse change clause, which might otherwise preclude borrowing under the credit facility, nor is it dependent on Credco’s credit rating.

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ITEM 4.
ITEM 4.  CONTROLS AND PROCEDURES

Credco’s management, with the participation of Credco’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Credco’s 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, Credco’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Credco’s disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in Credco’s 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 Credco’s management, including Credco’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There have not been any changes in Credco’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during Credco’s fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Credco’s internal control over financial reporting.


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Cautionary Note Regarding Forward-Looking Statements
Various statements have been made in this Quarterly Report on this SecondFirst Quarter 20182019 Form 10-Q that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be made in Credco’s other reports filed with or furnished to the Securities and Exchange Commission (SEC) and in other documents. In addition, from time to time, Credco, through its management, may make oral forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from such statements. The words “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar expressions are intended to identify forward-looking statements. Credco cautions you that the risk factors described in Credco’s Annual Report on Form 10-K for the year ended December 31, 20172018 (the 20172018 Form 10-K) and other factors described below are not exclusive. There may also be other risks that Credco is unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. 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. Credco undertakes no obligation to update or revise any forward-looking statements.
Factors that could cause actual results to differ materially from Credco’s forward-looking statements include, but are not limited to, the following:


·credit trends, which will depend in part on the economic environment, including, among other things, the housing market and the rates of bankruptcies, which can affect spending on card products and debt payments by individual and corporate customers;
·the effectiveness of Credco’s risk management policies and procedures, including Credco’s ability to accurately estimate the provisions for losses in Credco’s outstanding portfolio of Card Member receivables and Card Member loans, and operational risk;
·fluctuations in foreign currency exchange rates;
·negative changes in Credco’s credit ratings, which could result in decreased liquidity and higher borrowing costs;
·changes in laws or government regulations affecting American Express’ business, including the potential impact of regulations adopted by regulators relating to certain credit and charge card practices;
·the effect of fluctuating interest rates, which could affect Credco’s borrowing costs and have an adverse effect on the market price of notes issued by Credco;
·the impact on American Express’ business resulting from continuing geopolitical uncertainty;
·the impact on American Express’ business of changes in the substantial and increasing worldwide competition in the payments industry;
·the impact on American Express’ business resulting from a failure in or breach of operational or security systems, processes or infrastructure, or those of third parties, including as a result of cyber attacks,cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of data, disrupt operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;
·the impact on American Express’ business that could result from litigation such as class actions or proceedings brought by governmental and regulatory agencies;
·Credco’s ability to satisfy its liquidity needs and execute on its funding plans, which will depend on, among other things, Credco’s future business growth, the impact of global economic, political and other events on market capacity, Credco’s credit ratings, demand for securities offered by Credco, performance by Credco’s counterparties under its bank credit facilities and other lending facilities, and regulatory changes; and
·Credco’s tax rate remaining in line with current expectations, which could be impacted by, among other things, changes in interpretations and assumptions Credco has made and actions Credco may take as a result of the Tax Act, Credco’s geographic mix of income, further changes in tax laws and regulation, unfavorable tax audits and other unanticipated tax items; and the impact of accounting changes; and
·the implementation of legislation and additional guidance or context from the Internal Revenue Service, the U.S. Treasury Department, state and foreign taxing authorities, the Financial Accounting Standards Board or others regarding the Tax Act, and any future changes or amendments to that legislation.changes.
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PART II.  OTHER INFORMATION
PART II.
OTHER INFORMATION

ITEM 1A.
ITEM 1A. RISK FACTORS

For a discussion of Credco’s risk factors, see Part I, Item 1A. “Risk Factors” of the 20172018 Form 10-K. There are no material changes from the risk factors set forth in the 20172018 Form 10-K. However, the risks and uncertainties that Credco faces are not limited to those set forth in the 20172018 Form 10-K. Additional risks and uncertainties not presently known to Credco or that it currently believes to be immaterial may also adversely affect Credco’s business.

ITEM 5.
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 Exchange Act, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted outside the United States by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.

American Express Global Business Travel (GBT) and certain entities that may be considered affiliates of GBT have informed American Express that during the quarter ended June 30, 2018,March 31, 2019, approximately 45four visas were obtained from Iranian embassies and consulates around the world in connection with certain travel arrangements on behalf of clients, and reservations were booked at one hotel that may be owned, directly or indirectly, or may otherwise be affiliated with, the Government of Iran.clients. GBT had negligible gross revenues and net profits attributable to these transactions and intends to continue to engage in these activities on a limited basis so long as such activities are permitted under U.S. law.
ITEM 6.
ITEM 6.   EXHIBITS

The list of exhibits required to be filed with this report are listed on page E-1 hereof, under “Exhibit Index,” which is incorporated herein by reference.

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SIGNATURES

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN EXPRESS CREDIT CORPORATION
(Registrant)


       
    
      Date: AugustMay 3, 20182019   By /s/ David L. Yowan
      David L. Yowan
      Chief Executive Officer
    
      Date: AugustMay 3, 20182019   By /s/ Leah A. Schweller
      Leah A. Schweller
      Chief Accounting Officer
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EXHIBIT INDEX

Pursuant to Item 601 of Regulation S-K


Exhibit No. Description How Filed
12.1Electronically filed herewith.
12.2Electronically filed herewith.
     
31.1  Electronically filed herewith.
     
31.2  Electronically filed herewith.
     
32.1  Electronically filed herewith.
     
32.2  Electronically filed herewith.
     
101.INS XBRL Instance Document Electronically filed herewith.
     
101.SCH XBRL Taxonomy Extension Schema Document Electronically filed herewith.
     
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Electronically filed herewith.
     
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Electronically filed herewith.
     
101.LAB XBRL Taxonomy Extension Label Linkbase Document Electronically filed herewith.
     
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Electronically filed herewith.
     
     
  
                               E-1
  
 
E-1