Fitch Expects to Rate American Express' Subordinated Notes Issuance 'A'

NEW YORK--()--Fitch Ratings expects to rate American Express Company's (AXP, rated 'A+/F1' by Fitch) proposed subordinated debt issuance 'A'.

AXP expects the subordinated notes to qualify as Tier 2 capital under Basel III. At Sept. 30, 2014, AXP had $750 million in subordinated debentures outstanding (rated 'BBB' by Fitch). These debentures are not expected to meet the requirements of Tier 2 capital under Basel III and are currently being phased out of Tier 2 capital. At Sept. 30, 2014, the amount of subordinated debentures included in Tier 2 capital was $375 million. Fitch expects the new subordinated notes to replace the company's existing subordinated debentures in AXP's calculation of Tier 2 capital.

KEY RATING DRIVERS - Subordinated Notes

AXP's subordinated debt rating is one notch below the entity's Viability Rating (VR) of 'a+' in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profile. The subordinated note rating includes one notch for loss severity given the subordination of these securities in the capital structure, and zero notches for non-performance given contractual limitations on interest payment deferrals and no mandatory trigger events which could adversely impact performance.

Fitch does not expect to assign equity credit to these subordinated notes, which is in line with its methodology in assessing and rating bank subordinated and hybrid securities.

RATING SENSITIVITIES - Subordinated Notes

The subordinated debt ratings are directly linked to AXP's VR and would move in tandem with any changes in AXP's credit profile.

Fitch assigns the following expected rating:

American Express Company

--Subordinated debt at 'A(EXP)'.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' (January 2014)

--'Global Financial Institutions Rating Criteria' (January 2014);

--'Finance and Leasing Companies Criteria' (December 2012);

--'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles' (March 2014);

--'FinCo Deposit Sensitivity to Rising Rates' (January 2014);

--'Nonbank Financial Institution Interest Rate Sensitivity' (January 2014);

--'2Q14 Bank Capital Ratios' (August 2014);

--'2015 Outlook: U.S. Finance and Leasing Companies' (November 2014);

--'Fitch Fundamentals Index - U.S.' (October 2014).

Applicable Criteria and Related Research:

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696720

U.S. Bank HoldCos & OpCos: Evolving Risk Profiles

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=742096

FinCo Deposit Sensitivity to Rising Rates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726196

Nonbank Financial Institution Interest Rate Sensitivity

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723766

2015 Outlook: Finance and Leasing Companies (Stable Credit Profiles Amid Sector Headwinds)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=807208

Fitch Fundamentals Index - U.S. (3Q14)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=796368

2Q14 Bank Capital Ratios

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=764588

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=939735

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Contacts

Fitch Ratings
Primary Analyst
Brendan Sheehy
Director
+1-212-908-9138
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Meghan Neenan, CFA
Senior Director
+1-212-908-9121
or
Committee Chairperson
Nathan Flanders
Managing Director
+1-212-908-0827
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Brendan Sheehy
Director
+1-212-908-9138
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Meghan Neenan, CFA
Senior Director
+1-212-908-9121
or
Committee Chairperson
Nathan Flanders
Managing Director
+1-212-908-0827
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com