What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-11 compared with 2021-02-12 · 446 added, 476 removed, 900 unchanged (51% of the section changed)

6 unchanged sentences

Our range of products and services includes:

• Credit card, charge card and other payment and financing products

• Credit card, charge card, banking and other payment and financing products

• Merchant acquisition and processing, servicing and settlement, and point-of-sale marketing and information products and services for merchants

4 unchanged sentences

Our various products and services are sold globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations.

These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.

Business travel-related services are offered through our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).

These products and services are sold through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams, and direct response advertising.

We have a significant ownership position in, and extensive commercial arrangements with, American Express Global Business Travel (GBT).

The commercial arrangements with GBT include, among other things, a long-term trademark license agreement pursuant to which GBT uses the American Express brand, GBT’s support of certain of our partnerships, joint negotiation with travel suppliers and a strategic relationship between GBT and our GCS business.

During the fourth quarter of 2021, our economic interest in GBT was reduced to approximately 41 percent from 50 percent as a result of GBT’s acquisition of Egencia;

our voting rights remain at 50 percent.

Also during the fourth quarter of 2021, GBT entered into a business combination agreement with Apollo Strategic Growth Capital (APSG).

Upon consummation of the business combination, which is subject to the satisfaction of customary closing conditions, including approval by APSG’s shareholders and certain regulatory approvals, the terms of certain of our commercial arrangements with GBT will be amended and GBT will become a public company.

The following types of revenue are generated from our various products and services:

• Discount revenue, our largest revenue source, primarily represents the amount we earn on transactions occurring at merchants that have entered into a card acceptance agreement with us, or a Global Network Services (GNS) partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members.

The amount of fees charged for accepting our cards as payment for goods or services, or merchant discount, varies with, among other factors, the industry in which the merchant does business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the related card acceptance agreement between the merchant and us (e.g., domestic or global) and the transaction amount.

The amount of fees charged for accepting our cards as payment, or merchant discount, varies with, among other factors, the industry in which the merchant does business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the related card acceptance agreement between the merchant and us (e.g., domestic or global) and the transaction amount.

In some instances, an additional flat transaction fee is assessed as part of the merchant discount, and additional fees may be charged such as a variable fee for “non-swiped” card transactions or for transactions using cards issued outside the United States at merchants located in the United States;

• Interest on loans, principally represents interest income earned on outstanding balances;

• Interest income, principally represents interest earned on outstanding loan balances;

• Net card fees, represent revenue earned from annual card membership fees, which vary based on the type of card and the number of cards for each account;

• Other fees and commissions, primarily represent Card Member delinquency fees, foreign currency conversion fees charged to Card Members, loyalty coalition-related fees, service fees earned from merchants, travel commissions and fees, and Membership Rewards program fees;

• Other revenue, primarily represents revenues arising from contracts with partners of our GNS business (including commissions and signing fees less issuer rate payments), cross-border Card Member spending, ancillary merchant-related fees, earnings (losses) from equity method investments (including the GBT JV), insurance premiums earned from Card Members, and prepaid card and Travelers Cheque-related revenue.

• Other revenue, primarily represents revenues arising from contracts with our GNS partners (including commissions and signing fees less issuer rate payments), cross-border Card Member spending, ancillary merchant-related fees, earnings (losses) from equity method investments (including GBT), insurance premiums, and prepaid card and Travelers Cheque-related revenue.

Effective for the first quarter of 2021, we changed the way we describe our volume metrics, replacing billed business, proprietary billed business and GNS billed business with network volumes, billed business and processed volumes, respectively.

Within processed volumes we now include transactions associated with certain alternative payment solutions that were not previously reported in our volume metrics.

Prior period amounts have been recast to conform with current period presentation.

Refer to the “Glossary of Selected Terminology” for definitions of each updated term.

NON-GAAP MEASURES

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BUSINESS ENVIRONMENT

The COVID-19 pandemic has brought unprecedented challenges to businesses and economies around the world.

Our 2020 financial results were significantly down year-over-year, reflecting the impact of the deterioration in the global economy due to the pandemic and the related containment measures.

There remains a high degree of uncertainty relating to the ongoing spread and severity of the virus and new variants, as well as the availability, distribution and use of effective treatments and vaccines.

To the extent that the global economy continues to be negatively impacted by the pandemic, our results will be affected, with credit trends and spending volumes being the key drivers of our financial performance.

Throughout 2020, we focused and made substantial progress on our four priorities to manage through this period of uncertainty:

supporting our colleagues and winning as a team;

protecting our customers and our brand;

structuring the company for growth in the future;

and remaining financially strong.

Since the first quarter of 2020, our colleague base has successfully operated in a mostly remote working environment and we have sought to ensure that our colleagues have the flexibility and resources they needed to stay safe, healthy and productive.

To support our customers and merchants, we offered financial and other assistance, added product benefits to reflect today’s environment, and provided the high level of customer service they expect and rely on.

We experienced lower voluntary attrition rates on our proprietary products compared to the prior year.

In addition, our Card Members continued to recognize our commitment to service excellence, ranking us number one in the J.D.

Credit Card Satisfaction Study for the tenth time.

We worked with our strategic partners on initiatives to support our communities and launched our largest ever Shop Small campaign to help support small merchants.

In addition, we remained committed to strengthening inclusion and diversity, and committed to an action plan to promote racial, ethnic and gender equity for our colleagues, customers and communities.

Reflective of the impacts of the pandemic and the broader macroeconomic environment, our billed business for the year was down 19 percent compared to the prior year, with a low in mid-April followed by a gradual recovery over the remainder of the year.

Proprietary billed business, which accounted for 86 percent of our total billings and drives most of our financial results, was also down by 19 percent.

Since mid-April, we have seen steady improvement in our overall billed business, with different recovery trends in T&E and non-T&E spend.

Non-T&E spend, which has historically accounted for a large portion of our billed business, recovered to pre-pandemic levels in the second half of the year resulting in a full year decline of 1 percent compared to the prior year.

T&E spend continued to be significantly impacted throughout the course of the year, although we saw a modest improvement from the lows of mid-April primarily driven by proprietary consumer T&E spend, resulting in a year-over-year decline of 61 percent.

Revenues net of interest expense decreased 17 percent compared to the prior year, consistent with the trend in billings.

Discount revenue, our largest revenue line, decreased 22 percent, which was a larger contraction than the decline in billed business for the year due to a decrease in the average discount rate.

The average discount rate decrease was driven by a shift in spend mix to non-T&E categories.

Other fees and commissions and Other revenues declined year-over-year, primarily driven by a reduction in travel-related revenues.

Card fee revenues, which are recognized over a twelve-month period and therefore are slower to react to economic shifts, continued to grow as compared to the prior year.

While Card Member retention remained high throughout the year, net card fee growth decelerated as we slowed new card acquisitions to manage through the peak of uncertainty during the crisis.

Net interest income declined by 7 percent year-over-year, primarily driven by lower average loans.

As a result of the spend-centric nature of our business model, Card Member loans and receivables declined 16 percent and 24 percent year-over-year, respectively, due to lower billed business volumes.

Provisions for credit losses increased, primarily due to a higher reserve build reflecting the deterioration of the global macroeconomic outlook, including unemployment and gross domestic product (GDP), partially offset by improved credit performance and lower loan and receivable volumes.

In order to provide support to our customers impacted by the pandemic, we created a short-term Customer Pandemic Relief program and enhanced our longer-term financial relief programs.

The total balance of loans and receivables that were in a delinquent status or in one of our financial relief programs peaked in the second quarter and then declined sequentially through the remainder of the year.

In addition, our write-offs and delinquencies were down year-over-year reflecting our strong risk management practices, the record levels of government stimulus and the broad availability of forbearance programs.

Card Member rewards, Card Member services and business development expenses are generally correlated to billings or are variable based on usage, and were lower this year due to the decline in billing volumes and lower usage of travel-related benefits.

During the year, we remained focused on controlling operating expenses, while investing in marketing initiatives to support our customers, such as enhancements that we made to value propositions for many of our card products and our largest ever Shop Small campaign.

Throughout the year, our liquidity levels and capital position remained strong, with capital ratios that are well above our targets and regulatory requirements.

These robust liquidity and capital levels provide us with significant flexibility to maintain the strength of our balance sheet through this uncertain period.

Looking forward, we remain committed to capital distributions through dividend payments and resuming share repurchases up to our maximum capacity authorized by the Federal Reserve in the first quarter of 2021.

Our progress in managing through the pandemic over the last year confirms the resilience of our differentiated business model, which includes a loyal and diverse customer base, a valued brand, our global merchant network, and our integrated payments platform.

All of this, supported by our resilient colleagues around the world, provides us with a solid foundation as we move into 2021, which we see as a transition year.

We will still be managing through the effects of the pandemic, but with an increased focus on maximizing investments in areas that will enable us to rebuild growth momentum.

See “Supervision and Regulation” in “Business” for information on legislative and regulatory changes that could have a material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” for information on additional potential impacts of the COVID-19 pandemic and the potential impacts of economic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business.

Our results for the year reflect the strong growth momentum we have seen in our business throughout 2021, and our strategy of investing in our customers, brand and talent is helping in our effort to drive share, scale and relevance.

Spending on our network reached record levels and credit metrics remained around historic lows.

Net income more than doubled versus the prior year to $8.1 billion and exceeded 2019 levels;

contributing to this increase in Net income in the current year was a $2.5 billion credit reserve release and sizeable net gains on equity investments.

Year-over-year comparisons reflect the adverse impacts on our business in 2020 due to the COVID-19 pandemic.

As certain of the pandemic-related restrictions were lifted and macroeconomic conditions improved, and through the successful execution of our investment strategy, we saw a steady recovery in our business, with certain key areas growing beyond pre-pandemic (2019) levels in 2021.

Worldwide network volumes for the year increased 24 percent compared to the prior year and reached 2019 levels.

Billed business, which represented 85 percent of our total network volumes and drives most of our financial results, increased 25 percent and continued to show different paces of recovery for G&S and T&E spend.

G&S spend, which accounts for the majority of our billed business, grew by 19 percent on a year-over-year basis, and was 18 percent above 2019 levels.

This growth was primarily driven by ongoing strong performance in online and card-not-present spending even as offline spending fully recovered and resumed growth compared to 2019 levels.

Global T&E spend grew 59 percent versus the prior year, reflecting a steady recovery throughout the year, which resulted in fourth quarter T&E volumes reaching 82 percent of 2019 levels.

The year-over-year growth in billed business was led by the U.S., where spend increased 26 percent versus the prior year and exceeded 2019 levels by 6 percent, primarily driven by U.S.

consumers and small and mid-sized enterprises.

Total revenues net of interest expense increased 17 percent year-over-year, reflecting double digit growth in all our non-interest revenue lines.

Discount revenue, our largest revenue line, increased 26 percent year-over-year, driven primarily by growth in Card Member spending.

Other fees and commissions and Other revenues increased year-over-year, primarily driven by higher travel-related revenues.

Net card fees grew consistently throughout 2021 and were up 11 percent year over year, as new card acquisitions increased, and Card Member retention remained high, demonstrating the impact of investments we have made in our premium value propositions.

Net interest income declined 3 percent versus the prior year, primarily due to a decrease in net interest yields driven by higher paydown rates on revolving loan balances.

Card Member loans increased 21 percent, which was lower than the growth in billed business due to higher paydown rates driven in part by the continued liquidity and financial strength of our customer base.

Provisions for credit losses decreased and resulted in a net benefit, primarily due to a $2.5 billion reserve release in the current year versus a reserve build in the prior year and lower net write-offs in the current year.

The reserve release in the current year was driven by improved portfolio quality and macroeconomic outlook, partially offset by an increase in the outstanding balance of loans and receivables.

We do not expect to see reserve releases of this magnitude in 2022.

Card Member rewards, Card Member services and business development expenses are generally correlated to volumes or are variable based on usage, and increased year-over-year due to growth in spend and higher usage of travel-related benefits.

Additionally, our higher rewards expense versus last year was partially driven by an increase to our Membership Rewards liability to reflect a higher mix of redemptions in travel-related categories.

During the year we increased marketing investments to build growth momentum and accelerate new card acquisitions.

Our ongoing investments in differentiated value propositions and expansion of our digital capabilities are helping to drive increased Card Member engagement and strong retention rates.

Our operating expenses for 2021 were in line with 2020;

however, the current year included sizeable net gains associated with the Amex Ventures equity investments that we do not expect to occur with the same magnitude in 2022.

We expect to continue to invest strategically in marketing, value propositions on our products, technology and our colleagues.

During the year, we returned $9 billion of capital to our shareholders through common share repurchases and divided payments, which resulted in us ending the year with our Common Equity Tier 1 (CET1) capital ratio back within our target range of 10 to 11 percent.

We plan to continue to manage our CET1 capital ratio within our target range.

We also expect to increase our dividend payment by approximately 20 percent in the first quarter of 2022, subject to approval by our Board of Directors.

The growth momentum we generated throughout this year has strengthened our resolve to continue to focus on our strategic imperatives – expand our leadership in the premium consumer space, build on our strong position in commercial payments, strengthen our global merchant network, and make American Express an essential part of our customers’ digital lives.

We believe that continuing our strategy of investing at high levels in our customers, brand and talent will position us well as we seek to deliver sustainable and profitable long-term growth.

See “Supervision and Regulation” in “Business” for information on legislative and regulatory changes that could have a material adverse effect on our results of operations and financial condition and “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for information on additional impacts of the COVID-19 pandemic and the potential impacts of economic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business.

CONSOLIDATED RESULTS OF OPERATIONS

Refer to the "Glossary of Selected Terminology" for the definitions of certain key terms and related information appearing within this section.

Refer to the “Glossary of Selected Terminology” for the definitions of certain key terms used in this section.

The discussions in the “Financial Highlights”, “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the year ended December 31, 2021 compared to the year ended December 31, 2020, as presented in the accompanying tables.

These discussions should be read in conjunction with the discussion under "Business Environment," which contains further information on the COVID-19 pandemic and the related impacts on our consolidated results of operations.

These discussions should be read in conjunction with the discussion under “Business Environment,” which contains further information on the COVID-19 pandemic and the related impacts on our results.

For a discussion of the financial condition and results of operations for 2020 compared to 2019, please refer to Part II, Item 7.

“Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 12, 2021.

As a result of the adoption of CECL on January 1, 2020, there is a lack of comparability in both the reserves and provisions for credit losses for the periods presented.

Results for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods.

Refer to Note 3 to the "Consolidated Financial Statements" for further information.

SUMMARY OF FINANCIAL PERFORMANCE

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Total revenues net of interest expense $ 42,380 $ 36,087 $ 43,556 $ 6,293 17 % $ (7,469) (17) %

Provisions for credit losses 4,730 3,573 3,352 1,157 32 221 7

Provisions for credit losses (a)

(1,419) 4,730 3,573 (6,149) # 1,157 32

Expenses 33,110 27,061 31,554 6,049 22 (4,493) (14)

2 unchanged sentences

Net income 8,060 3,135 6,759 4,925 # (3,624) (54)

Earnings per common share — diluted (a)

Earnings per common share — diluted (b)

$ 10.02 $ 3.77 $ 7.99 $ 6.25 # $ (4.22) (53) %

Return on average equity (b)

Return on average equity (c)

33.7 % 14.2 % 29.6 %

Effective tax rate (ETR) 27.0 % 19.8 % 14.8 %

Adjustments to ETR (c)

Adjusted ETR (c)

(a) Represents net income, less (i) earnings allocated to participating share awards of $20 million, $47 million and $54 million for the years ended December 31, 2020, 2019 and 2018, respectively, and (ii) dividends on preferred shares of $79 million, $81 million and $80 million for the years ended December 31, 2020, 2019 and 2018, respectively.

(b) Return on average equity (ROE) is computed by dividing (i) one-year period of net income ($3.1 billion, $6.8 billion and $6.9 billion for 2020, 2019 and 2018, respectively) by (ii) one-year average of total shareholders’ equity ($22.0 billion, $22.8 billion and $20.7 billion for 2020, 2019 and 2018, respectively).

The 2018 adjusted ETR excludes a benefit of $496 million relating to changes in the tax method of accounting for certain expenses, the resolution of certain prior years’ tax audits, and a final adjustment to our 2017 provisional tax charge related to the Tax Cuts and Jobs Act enacted on December 22, 2017 (Tax Act).

Effective tax rate 24.6 % 27.0 % 19.8 %

# Denotes a variance of 100 percent or more.

(a) Results for reporting periods beginning on and after January 1, 2020 are presented using the Current Expected Credit Loss (CECL) methodology, while information as of and for the year ended December 31, 2019 continues to be reported in accordance with the incurred loss methodology then in effect.

Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.

(b) Represents net income, less (i) earnings allocated to participating share awards of $56 million, $20 million and $47 million for the years ended December 31, 2021, 2020 and 2019, respectively, (ii) dividends on preferred shares of $71 million, $79 million and $81 million for the years ended December 31, 2021, 2020 and 2019, respectively, and (iii) equity-related adjustments of $16 million related to the redemption of preferred shares for the year ended December 31, 2021.

Refer to Note 16 and Note 21 to the “Consolidated Financial Statements” for further details on preferred shares and earnings per common share (EPS), respectively.

(c) Return on average equity (ROE) is calculated for the relevant periods by dividing the (i) preceding twelve months of net income ($8.1 billion, $3.1 billion and $6.8 billion for 2021, 2020 and 2019, respectively) by (ii) one-year monthly average of total shareholders’ equity ($23.9 billion, $22.0 billion and $22.8 billion for 2021, 2020 and 2019, respectively).

TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY

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Discount revenue $ 25,727 $ 20,401 $ 26,167 $ 5,326 26 % $ (5,766) (22) %

Net card fees 4,664 4,042 3,441 622 15 601 17

Net card fees (a)

5,195 4,664 4,042 531 11 622 15

Other fees and commissions 2,392 2,163 3,297 229 11 (1,134) (34)

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Total revenues net of interest expense $ 42,380 $ 36,087 $ 43,556 $ 6,293 17 % $ (7,469) (17) %

(a) Effective April 1, 2021, we prospectively changed the recognition of certain costs paid to a third party previously recognized in Net card fees.

Refer to Note 1 to the “Consolidated Financial Statements” for further details.

TOTAL REVENUES NET OF INTEREST EXPENSE

Discount revenue decreased, primarily due to a decrease in worldwide billed business of 19 percent.

billed business decreased 16 percent and non-U.S.

billed business decreased 23 percent due to the impacts of the COVID-19 pandemic during 2020.

Additional billed business highlights for the full year 2020 as compared to full year 2019:

• Worldwide non-T&E billed business decreased 1 percent and T&E billed business decreased 61 percent.

• Proprietary consumer billed business decreased by 17 percent, primarily driven by declines in T&E, and offline non-T&E spend, which were partially offset by increased online and card-not-present spend at non-T&E merchants.

• Proprietary commercial billed business decreased by 21 percent, primarily driven by year-over-year decreases in T&E spend by large and global corporate card customers, with less pronounced billed business declines from small and mid-sized enterprises, where T&E volumes made up a lower proportion of spend.

See Tables 5 and 6 for more details on billed business performance.

The decrease in discount revenue was also driven by a decrease in the average discount rate primarily due to a shift in spend mix to non-T&E categories.

The average discount rate was 2.28 percent for 2020 and 2.37 percent for 2019.

Net card fees increased, primarily driven by our premium card product portfolios.

Card fees, which are recognized over a twelve-month period, are slower to react to economic shifts, such as those arising from the impacts of the COVID-19 pandemic.

Other fees and commissions decreased, primarily due to the impacts of travel restrictions related to the COVID-19 pandemic, which resulted in lower foreign exchange conversion revenue related to decreased cross-border Card Member spending and lower travel commissions and fees from our consumer travel business, as well as a decline in late fees due to lower delinquencies.

Other revenues decreased, primarily driven by a net loss in the current year, as compared to net income in the prior year, from the GBT JV and lower revenue earned on cross-border Card Member spending due to the impacts of the COVID-19 pandemic, including travel restrictions.

Interest income decreased, primarily driven by a reduction in benchmark interest rates and lower average Card Member loan volumes.

Interest expense decreased, primarily driven by lower interest rates paid on deposits and a reduction in outstanding debt.

Discount revenue increased, primarily driven by an increase in worldwide network volumes of 24 percent, reflecting, in part, the recovery from the adverse impacts of the COVID-19 pandemic in the prior year.

network volumes increased 27 percent and non-U.S.

network volumes increased 17 percent.

See Tables 5 and 6 for more details on volume performance.

The increase in discount revenue was also driven by an increase in the average discount rate, primarily due to a change in the mix of spending driven by increased levels of T&E-related volumes, as compared to the prior year.

The average discount rate was 2.30 percent and 2.28 percent for 2021 and 2020, respectively.

Net card fees increased, primarily driven by growth in our premium card portfolios.

Other fees and commissions increased, primarily due to higher travel commissions and fees from our consumer travel business and higher foreign exchange conversion revenue related to cross-border Card Member spending, both of which reflect the partial recovery of travel-related revenues in the current year.

Other revenues increased, primarily driven by a non-cash gain related to an increase in GBT's total equity book value arising from GBT's acquisition of Egencia and a lower net loss in the current year from GBT as compared to the prior year.

Interest income decreased, primarily due to a decline in the interest yield on average Card Member loans driven by higher paydown rates on revolving loan balances.

Interest expense decreased, primarily driven by lower interest rates paid on deposits and a reduction in average debt.

PROVISIONS FOR CREDIT LOSSES SUMMARY

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Net write-offs $ 129 $ 881 $ 900 $ (752) (85) % $ (19) (2) %

Reserve build 134 63 78 71 113 (15) (19)

Reserve (release) build (a)

(202) 134 63 (336) # 71 #

Total (73) 1,015 963 (1,088) # 52 5

1 unchanged sentence

Net write-offs 879 2,170 2,235 (1,291) (59) (65) (3)

Reserve build 1,283 227 423 1,056 # (196) (46)

Reserve (release) build (a)

(2,034) 1,283 227 (3,317) # 1,056 #

Total (1,155) 3,453 2,462 (4,608) # 991 40

Net write-offs - Other loans (a)

Net write-offs — Other loans (b)

21 111 98 (90) (81) 13 13

Net write-offs - Other receivables (b)

Net write-offs — Other receivables (c)

33 27 20 6 22 7 35

Reserve build - Other loans (a)

Reserve (release) build — Other loans (a)(b)

(185) 66 28 (251) # 38 #

Reserve build (release) - Other receivables (b)

Reserve (release) build — Other receivables (a)(c)

(60) 58 2 (118) # 56 #

Total (191) 262 148 (453) # 114 77

Total provisions for credit losses $ 4,730 $ 3,573 $ 3,352 $ 1,157 32 % $ 221 7 %

# Denotes a variance greater than 100 percent

(a) Relates to Other loans of $2.9 billion, $4.8 billion, and $3.8 billion less reserves of $238 million, $152 million, and $124 million, as of December 31, 2020, 2019 and 2018, respectively.

(b) Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $3 billion, $3.1 billion, and $2.9 billion, less reserves of $85 million, $27 million, $25 million as of December 31, 2020, 2019, and 2018, respectively.

Total provisions for credit losses (d)

$ (1,419) $ 4,730 $ 3,573 $ (6,149) # $ 1,157 32 %

# Denotes a variance of 100 percent or more

(a) Refer to the “Glossary of Selected Terminology” for a definition of reserve (release) build.

(b) Relates to Other loans of $2.9 billion, $2.9 billion and $4.8 billion less reserves of $52 million, $238 million and $152 million, as of December 31, 2021, 2020 and 2019, respectively.

(c) Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $2.7 billion, $3.0 billion and $3.1 billion, less reserves of $25 million, $85 million and $27 million as of December 31, 2021, 2020 and 2019, respectively.

(d) Results for reporting periods beginning on and after January 1, 2020 are presented using the CECL methodology, while information as of and for the year ended December 31, 2019 continues to be reported in accordance with the incurred loss methodology then in effect.

Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.

PROVISIONS FOR CREDIT LOSSES

Card Member loans and receivables provision for credit losses increased, primarily driven by a higher reserve build reflecting the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in the outstanding balance of Card Member loans and receivables.

Other provision for credit losses increased, primarily driven by a higher reserve build and higher net write-offs.

Refer to Note 1 to the "Consolidated Financial Statements" for further information about CECL, including the January 1, 2020 implementation impact on reserves.

Card Member receivables and loans provisions for credit losses decreased and resulted in a net benefit, primarily driven by reserve releases in the current year versus reserve builds in the prior year and lower net write-offs in the current year.

The reserve releases in the current year were due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections, partially offset by increases in the outstanding balances of receivables and loans.

The reserve builds in the prior year were due to the deterioration of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by declines in the outstanding balances of receivables and loans and lower delinquencies.

Other provision for credit losses decreased and resulted in a net benefit, primarily due to a reserve release in the current year versus a reserve build in the prior year and lower net write-offs in the current year.

The reserve release in the current year was due to improved portfolio quality and macroeconomic outlook.

The reserve build in the prior year was due to deteriorating portfolio quality and the previously mentioned deterioration of the global macroeconomic outlook, partially offset by a decline in the outstanding balance of other loans.

Refer to Note 3 to the “Consolidated Financial Statements” for the range of key variables in the macroeconomic scenarios utilized for the computation of our reserves for credit losses.

EXPENSES SUMMARY

5 unchanged sentences

Card Member services 1,993 1,230 2,223 763 62 (993) (45)

Total marketing, business development, rewards and Card Member services 16,018 19,787 17,950 (3,769) (19) 1,837 10

Total marketing, business development, and Card Member rewards and services 22,053 16,018 19,787 6,035 38 (3,769) (19)

Salaries and employee benefits 6,240 5,718 5,911 522 9 (193) (3)

1 unchanged sentence

Total expenses $ 33,110 $ 27,061 $ 31,554 $ 6,049 22 % $ (4,493) (14) %

In January 2020, we re-launched our Delta cobrand products following the renewal extending our cobrand relationship with Delta Air Lines on March 31, 2019.

The contract renewal included new pricing terms, some of which became effective upon contract signing and others that were tied to the product re-launch.

These pricing changes, as well as changes in the expense classification of certain benefits associated with the re-launch, resulted in an increase to Marketing and business development and decreases to both Card Member rewards and Card Member services expenses, as compared to the prior year.

Marketing and business development expense decreased, primarily due to a temporary reduction in proactive marketing for Card Member acquisitions, as well as decreases in corporate client incentives and network partner payments due to lower billed business, all of which were a result of the impacts of the COVID-19 pandemic, partially offset by incremental investments in limited time enhancements to our Card Member value proposition to maintain customer engagement and the Delta changes described above.

Card Member rewards expense decreased, primarily driven by decreases in Membership Rewards and cash back rewards expenses of $1,579 million and cobrand rewards expense of $819 million, both of which were primarily driven by lower billed business as a result of the impacts of the COVID-19 pandemic.

In addition, changes in redemption mix due to a decline in higher cost travel redemptions since the onset of the COVID-19 pandemic contributed to a decrease in the Membership Rewards weighted average cost (WAC) per reward point and expense.

Cobrand rewards expense also reflected the impact of the Delta changes described above.

The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded up) at both December 31, 2020 and 2019.

Card Member services expense decreased, primarily due to lower usage of travel-related benefits as a result of the impacts of the COVID-19 pandemic, as well as the Delta changes described above.

Salaries and employee benefits expense decreased, primarily driven by lower incentive compensation expenses, partially offset by increased payroll costs due to a higher full year average headcount as compared to the prior year.

Other expenses decreased, primarily driven by a prior year litigation-related charge, lower employee-related operating costs and lower professional services expense, partially offset by a prior year non-income tax-related benefit.

The effective tax rate for 2020 was 27.0 percent.

The effective tax rate for 2019 was 19.8 percent.

The increase in the effective tax rate in the current period primarily reflected discrete tax charges related to the realizability of certain foreign deferred tax assets, resulting from cumulative losses in certain non-U.S.

legal entities that were exacerbated by the impacts of the COVID-19 pandemic.

The tax rates in both periods reflect the level of pretax income in relation to recurring permanent tax benefits and the geographic mix of business.

Marketing and business development expense increased, primarily due to increases in marketing investments to continue building growth momentum and higher partner payments driven by higher spending volumes.

Card Member rewards expense increased, primarily driven by increases in Membership Rewards and cash back rewards expenses of $2.2 billion and cobrand rewards expense of $769 million, both of which were primarily driven by higher billed business.

The increase in Membership Rewards expense was also driven by a larger proportion of spend in categories that earn incremental rewards and a higher mix of redemptions in travel-related categories, as compared to the prior year.

The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded down) at December 31, 2021 and 96 percent (rounded up) at December 31, 2020.

Card Member services expense increased, primarily due to higher usage of travel-related benefits in the current year, as compared to the prior year during which travel was more negatively impacted by the COVID-19 pandemic.

Salaries and employee benefits expense increased, primarily driven by higher compensation.

Other expenses decreased, primarily driven by higher net gains in the current year on Amex Ventures equity investments, the impact of the implementation of the Proportional Amortization Method (PAM) related to investments in qualified affordable housing projects and a net reserve release in the current year versus a reserve build in the prior year associated with merchant exposure for Card Member purchases, all of which were partially offset by an increase in professional services expense.

Refer to Note 1 to the “Consolidated Financial Statements” for further information on PAM.

The effective tax rate was 24.6 percent and 27.0 percent for 2021 and 2020, respectively.

The reduction in the effective tax rate primarily reflected discrete tax charges in the prior year related to the realizability of certain foreign deferred tax assets.

The tax rates in both years reflected the level of pretax income in relation to recurring permanent tax benefits and the geographic mix of business.

The current year's effective tax rate also reflected the implementation of PAM related to investments in qualified affordable housing projects.

Refer to Note 1 to the “Consolidated Financial Statements” for further information on PAM.

SELECTED CARD-RELATED STATISTICAL INFORMATION

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Years Ended December 31, 2021 2020 2019 2021 vs.

Billed business:

Network volumes:

$ 897.0 $ 708.1 $ 840.7 27 % (16) %

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Total $ 1,284.2 $ 1,037.8 $ 1,265.7 24 (18)

Proprietary $ 870.7 $ 1,070.5 $ 1,002.6 (19) 7

GNS 139.9 170.3 181.4 (18) (6)

Billed business $ 1,089.8 $ 870.7 $ 1,070.5 25 (19)

Processed volumes 194.4 167.1 195.2 16 (14)

Total $ 1,284.2 $ 1,037.8 $ 1,265.7 24 (18)

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$ 74 $ 67 $ 58 10 % 16 %

(a) Average fee per card is computed based on proprietary net card fees divided by average proprietary total cards-in-force.

BILLED BUSINESS-RELATED STATISTICAL INFORMATION

Percentage Increase

(a) Average fee per card is computed on an annualized basis based on proprietary Net card fees divided by average proprietary total cards-in-force.

NETWORK VOLUMES-RELATED STATISTICAL INFORMATION

Year over Year Percentage Increase

(Decrease) Percentage Increase (Decrease) Assuming No Changes in FX Rates (a)

Percentage Increase

Year over Year Percentage Increase

(Decrease) Percentage Increase (Decrease)

Assuming No Changes in FX Rates (a)

Proprietary consumer (17) % (17) % 8 % 9 %

Proprietary commercial (21) (21) 6 6

Total Proprietary (19) (19) 7 8

GNS (18) (17) (6) (2)

Worldwide Total (19) (18) 5 6

T&E-related volume (14% and 30% of Worldwide Total for 2020 and 2019, respectively) (b)

Network volumes 24 % 23 % (18) % (19) %

Total billed business 25 24 (19) (19)

Consumer billed business 29 28 (17) (18)

Commercial billed business 21 20 (21) (21)

Processed volumes 16 14 (14) (15)

Network volumes 27 (16)

Total billed business 26 (16)

Consumer billed business 32 (15)

Commercial billed business 21 (18)

Outside the U.S.

Network volumes 17 14 (22) (24)

Total billed business 21 17 (26) (28)

Consumer billed business 23 19 (21) (24)

Commercial billed business 18 14 (32) (34)

Asia Pacific, Australia & New Zealand network volumes 12 9 (15) (18)

Latin America, Canada & Caribbean network volumes 23 22 (32) (27)

Europe, the Middle East & Africa network volumes 25 19 (29) (33)

Merchant Industry Metrics

Worldwide billed business

G&S-related (81% and 86% of worldwide billed business for 2021 and 2020, respectively)

19 18 (1) (1)

Non-T&E-related volume (86% and 70% of Worldwide Total for 2020 and 2019, respectively) (b)

Airline-related volume (3% and 8% of Worldwide Total for 2020 and 2019, respectively) (b)

T&E-related (19% and 14% of worldwide billed business for 2021 and 2020, respectively)

59 58 (60) (60)

Proprietary consumer (15) 7

Proprietary commercial (18) 5

Total Proprietary (16) 6

T&E-related volume (13% and 25% of U.S.

Total for 2020 and 2019, respectively) (b)

Non-T&E-related volume (87% and 75% of U.S.

Total for 2020 and 2019, respectively) (b)

Airline-related volume (2% and 7% of U.S.

Total for 2020 and 2019, respectively) (b)

Outside the U.S.

Proprietary consumer (21) (21) 10 14

Proprietary commercial (32) (31) 7 11

Total Proprietary (26) (25) 9 13

Outside the U.S.

Total (23) (22) 2 6

Asia Pacific, Australia and New Zealand

Airline-related (3% and 3% of worldwide billed business for 2021 and 2020, respectively)

63 61 % (76) (76) %

Latin America & Canada (32) (26) 4 10

Europe, the Middle East & Africa (30) % (31) % 1 % 5 %

billed business

G&S-related (82% and 87% of U.S.

billed business for 2021 and 2020, respectively)

T&E-related (18% and 13% of U.S.

billed business for 2021 and 2020, respectively)

Airline-related (3% and 2% of U.S.

billed business for 2021 and 2020, respectively)

(a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S.

dollars (i.e., assumes the foreign exchange rates used to determine results for the current year apply to the corresponding prior-year period against which such results are being compared).

(b) Based on billed business from merchants we acquire or merchants acquired by third parties on our behalf (e.g., OptBlue merchants).

SELECTED CREDIT-RELATED STATISTICAL INFORMATION

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Net write-offs — interest and fees less recoveries (207) (375) (375) (45) —

(5) 34 22 # 55

Ending balance $ 3,305 $ 5,344 $ 2,383 (38) #

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Provisions — principal and fees

Net write-offs - principal and fees less recoveries (881) (900) (859) (2) 5

(73) 1,015 963 # 5

Net write-offs — principal and fees less recoveries (d)

(129) (881) (900) (85) (2)

(1) 7 (17) # #

Ending balance $ 64 $ 267 $ 619 (76) % (57) %

% of receivables 0.1 % 0.6 % 1.1 %

Net write-off rate — principal and fees (c)(d)

Net write-off rate — principal and fees (c)(d)(e)

0.3 % 2.0 % 1.6 %

# Denotes a variance greater than 100 percent

# Denotes a variance of 100 percent or more

(a) Includes an increase of $1,643 million and decrease of $493 million to the beginning reserve balances for Card Member loans and receivables, respectively, as of January 1, 2020, related to the adoption of the CECL methodology.

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In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented.

(d) Refer to Tables 10 and 13 for Net write-off rate - principal only and 30+ days past due metrics for GCSG and Global Small Business Services (GSBS) receivables, respectively.

(d) The net write-off rate for the year ended December 31, 2021 includes a $37 million partial recovery in Card Member receivables related to a corporate client bankruptcy, which had resulted in a $53 million write-off in the year ended December 31, 2020 in the GCS segment.

(e) Refer to Tables 10 and 13 for Net write-off rate — principal only and 30+ days past due metrics for GCSG and Global Small Business Services (GSBS) receivables, respectively.

A net write-off rate based on principal losses only for Global Corporate Payments (GCP), which reflects global, large and middle market corporate accounts, is not available due to system constraints.

NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS

Effective for the first quarter of 2020, we made certain enhancements to our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.

These enhancements resulted in a change to the interest expense not attributable to our Card Member loan portfolio and therefore also on our Net Interest Yield on Average Card Member loans.

Prior period amounts have been revised to conform to the current period presentation.

Years Ended December 31,

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“Business” for additional discussion of products and services that comprise each segment.

Effective for the first quarter of 2020, we made certain enhancements to our transfer pricing methodology related to the sharing of revenues among our card issuing, network and merchant businesses, and our methodology related to the allocation of certain funding costs primarily related to our Card Member loan and Card Member receivable portfolios.

These enhancements resulted in certain changes to Non-interest revenues and Interest expense within Total revenues net of interest expense and Operating expenses within Total expenses across our reportable operating segments.

The enhancements related to the allocation of certain funding costs also resulted in a change to our Net interest income divided by Average Card Member loans metric and Net Interest Yield on Average Card Member loans, a non-GAAP measure, within our reportable operating segments.

For all of the above-referenced changes, prior period amounts have been revised to conform to the current period presentation.

As a result of organizational changes announced during the second quarter of 2021, our loyalty coalition businesses results, which were previously reported within the GMNS segment, are now reported within the GCSG segment.

Prior period segment results have been revised to conform with current period presentation.

Results of the reportable operating segments generally treat each segment as a stand-alone business.

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The allocated expenses include service costs allocated based on activities directly attributable to the segment, and overhead expenses allocated based on the relative levels of revenue and Card Member loans and receivables.

An income tax provision (benefit) is allocated to each reportable operating segment based on the effective tax rates applicable to the various businesses that comprise the segment.

GLOBAL CONSUMER SERVICES GROUP

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Total revenues net of interest expense 24,831 21,777 24,861 3,054 14 (3,084) (12)

Provisions for credit losses 3,148 2,635 2,431 513 19 204 8

Provisions for credit losses (a)

(945) 3,150 2,636 (4,095) # 514 19

Total revenues net of interest expense after provisions for credit losses 25,776 18,627 22,225 7,149 38 (3,598) (16)

Marketing, business development, rewards and Card Member services 9,668 12,043 10,796 (2,375) (20) 1,247 12

Marketing, business development, and Card Member rewards and services 13,898 9,841 12,201 4,057 41 (2,360) (19)

Salaries and employee benefits and other operating expenses 5,052 5,099 5,179 (47) (1) (80) (2)

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Pretax segment income $ 6,826 $ 3,687 $ 4,845 $ 3,139 85 % $ (1,158) (24) %

Income tax provision 906 933 805 (27) (3) 128 16

Segment income $ 2,701 $ 3,807 $ 3,615 $ (1,106) (29) % $ 192 5 %

Effective tax rate 25.1 % 19.7 % 18.2 %

# Denotes a variance of 100 percent or more

(a) Results for reporting periods beginning on and after January 1, 2020 are presented using the CECL methodology, while information as of and for the year ended December 31, 2019 continues to be reported in accordance with the incurred loss methodology then in effect.

Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.

GCSG primarily issues a wide range of proprietary consumer cards globally.

GCSG also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages certain international joint ventures and our partnership agreements in China.

GCSG also provides services to consumers, including travel and lifestyle services and non-card financing products, and manages certain international joint ventures, our partnership agreements in China and our loyalty coalition businesses operated in certain countries.

TOTAL REVENUES NET OF INTEREST EXPENSE

Non-interest revenues decreased, primarily driven by lower discount revenue and other fees and commissions, partially offset by higher net card fees.

Discount revenue decreased 20 percent, reflecting a decrease in proprietary consumer billed business of 17 percent.

See Tables 5, 6 and 10 for more details on billed business performance.

Other fees and commissions decreased 40 percent, primarily due to the impacts of travel restrictions related to the COVID-19 pandemic, which resulted in lower travel commissions and fees from our consumer travel business and lower foreign exchange conversion revenue related to decreased cross-border spending, as well as a decline in late fees due to lower delinquencies.

Net card fees increased 16 percent, driven by a year-over-year increase in the average fee per card of our premium card products.

Net interest income decreased, primarily due to lower average Card Member loan volumes and a reduction in benchmark interest rates, partially offset by a lower cost of funds.

Non-interest revenues increased, primarily driven by higher Discount revenue, Net card fees and Other fees and commissions.

Discount revenue increased 31 percent, primarily driven by an increase in consumer billed business of 29 percent reflecting, in part, recovery from the adverse impacts of the COVID-19 pandemic in the prior year.

See Tables 5, 6 and 10 for more details on volume performance.

Net card fees increased 12 percent, primarily driven by growth in our premium card portfolios.

Other fees and commissions increased 11 percent, primarily due to higher travel commissions and fees from our consumer travel business and higher foreign exchange conversion revenue related to increased cross-border Card Member spending, both of which reflect the partial recovery of travel-related revenues in the current year.

Net interest income decreased, primarily due to a decline in interest income driven by lower revolving Card Member loan balances, partially offset by lower cost of funds.

PROVISIONS FOR CREDIT LOSSES

Provisions for credit losses increased, primarily driven by a higher reserve build in Card Member loans, partially offset by lower net write-offs in both the Card Member loans and receivables portfolios.

The higher reserve build primarily reflected the deterioration of the global macroeconomic outlook, including unemployment and GDP, partially offset by improved credit performance and a decline in the outstanding balance of loans and receivables.

Marketing, business development, rewards and Card Member services expenses decreased due to reductions in Card Member rewards and Card Member services expenses, partially offset by increased Marketing and business development costs.

The decrease in Card Member rewards expense was primarily driven by a decrease in billed business and a change in redemption mix due to a decline in higher cost travel redemptions since the onset of the COVID-19 pandemic.

The decrease in Card Member services expense was primarily driven by lower usage of travel-related benefits.

Those decreases were partially offset by increased Marketing and business development expense, primarily due to incremental investments in limited time enhancements to our Card Member value proposition to maintain customer engagement, partially offset by a temporary reduction in proactive marketing for Card Member acquisitions.

Provisions for credit losses decreased and resulted in a net benefit, primarily driven by reserve releases in the current year versus reserve builds in the prior year and lower net write-offs in the current year.

The reserve builds in the prior year were due to the deterioration of the global macroeconomic outlook as a result of the COVID-19 pandemic, partially offset by decreases in the outstanding balances of receivables and loans.

Marketing, business development, and Card Member rewards and services expenses increased across all expense categories.

The increase in Card Member rewards expense was primarily driven by higher billed business as well as a larger proportion of spend in categories that earn incremental rewards and a higher mix of redemptions in travel-related categories, as compared to the prior year.

The increase in Marketing and business development expense was primarily due to increases in marketing investments to continue building growth momentum as well as higher spending volumes.

The increase in Card Member services expense was primarily due to higher usage of travel-related benefits in the current year, as compared to the prior year during which travel was more negatively impacted by the COVID-19 pandemic.

GCSG SELECTED STATISTICAL INFORMATION

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(Millions, except percentages and where indicated) 2021 2020 2019 2021 vs.

Proprietary billed business:

Billed business:

$ 444.2 $ 337.6 $ 398.8 32 % (15) %

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7.7 6.8 8.6 13 (21)

Total receivables $ 18.7 $ 22.8 $ 21.5 (18) % 6 %

Total $ 22.4 $ 18.7 $ 22.8 20 % (18) %

Net write-off rate — principal only (a)

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Total revenues net of interest expense 12,500 10,619 13,108 1,881 18 (2,489) (19)

Provisions for credit losses 1,493 918 900 575 63 18 2

Provisions for credit losses (a)

(438) 1,493 918 (1,931) # 575 63

Total revenues net of interest expense after provisions for credit losses 12,938 9,126 12,190 3,812 42 (3,064) (25)

Marketing, business development, rewards and Card Member services 4,991 6,237 5,844 (1,246) (20) 393 7

Marketing, business development, and Card Member rewards and services 6,592 4,991 6,237 1,601 32 (1,246) (20)

Salaries and employee benefits and other operating expenses 3,418 3,199 3,261 219 7 (62) (2)

1 unchanged sentence

Pretax segment income $ 2,928 $ 936 $ 2,692 $ 1,992 # $ (1,756) (65) %

Income tax provision 200 501 452 (301) (60) 49 11

Segment income $ 736 $ 2,191 $ 2,012 $ (1,455) (66) % $ 179 9 %

Effective tax rate 21.4 % 18.6 % 18.3 %

GCS primarily issues a wide range of proprietary corporate and small business cards.

In addition, GCS provides payment, expense management and commercial financing products.

# Denotes a variance of 100 percent or more

Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.

GCS primarily issues a wide range of proprietary corporate and small business cards globally.

GCS also provides payment, expense management and financing solutions to businesses.

TOTAL REVENUES NET OF INTEREST EXPENSE

Non-interest revenues decreased, primarily driven by lower discount revenue and other fees and commissions.

Discount revenue decreased, primarily due to a decrease in commercial billed business of 21 percent.

See Tables 5, 6 and 13 for more details on billed business performance.

Other fees and commissions decreased, primarily due to a decline in late fees due to lower delinquencies, as well as lower foreign exchange conversion revenue related to decreased cross-border spending, primarily driven by the impacts of travel restrictions related to the COVID-19 pandemic.

Net interest income increased, primarily driven by a lower cost of funds, partially offset by a reduction in benchmark interest rates.

Non-interest revenues increased, primarily driven by higher Discount revenue and Net card fees.

Discount revenue increased 21 percent, primarily driven by an increase in commercial billed business of 21 percent reflecting, in part, the recovery from the adverse impacts of the COVID-19 pandemic in the prior year.

See Tables 5, 6 and 13 for more details on volume performance.

Net card fees increased 9 percent, primarily driven by growth in our premium card portfolios.

Net interest income increased, primarily due to lower cost of funds, partially offset by lower average revolving Card Member loan balances.

PROVISIONS FOR CREDIT LOSSES

Provisions for credit losses increased, primarily driven by a higher reserve build and higher net write-offs.

Marketing, business development, rewards and Card Member services expenses decreased, primarily due to reductions in Card Member rewards expense and Marketing and business development expense.

The decrease in Card Member rewards expense was primarily driven by a decrease in billed business.

The decrease in Marketing and business development expense was primarily due to a decrease in corporate client incentives and a temporary reduction in proactive marketing for Card Member acquisitions, partially offset by incremental investments in limited time enhancements to our Card Member value proposition to maintain customer engagement.

The reserve releases in the current year were due to improved portfolio quality and macroeconomic outlook, in large part driven by improvement in unemployment rate projections.

For Card Member receivables and loans provisions for credit losses, the reserve releases were partially offset by increases in the outstanding balances of receivables and loans.

Marketing, business development, and Card Member rewards and services expenses increased across all expense categories.

The increase in Marketing and business development expense was primarily due to increases in marketing investments to continue building growth momentum.

Salaries and employee benefits and other operating expenses increased, primarily due to higher compensation and the Company's partial repayment of a prior year insurance claim associated with insured losses from a corporate client bankruptcy that were partially recovered during the current year.

GCS SELECTED STATISTICAL INFORMATION

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(Millions, except percentages and where indicated) 2021 2020 2019 2021 vs.

Proprietary billed business (billions)

Billed business (billions)

$ 490.9 $ 406.5 $ 513.3 21 % (21) %

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$ 31.3 $ 25.0 $ 34.6 25 (28)

Net write-off rate - principal and fees (a)(e)

Net write-off rate — principal and fees (e)(f)

0.2 % 2.1 % 1.4 %

4 unchanged sentences

0.3 % 0.6 % 0.8 %

Net write-off rate - principal and fees (a)(e)

Net write-off rate — principal and fees (e)(f)

— % 1.9 % 0.8 %

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GCP delinquency data for periods other than 90+ days past billing and the net write-off rate based on principal losses only are not available due to system constraints.

(f) The net write-off rate for the year ended December 31, 2021 includes a $37 million partial recovery in Card Member receivables related to a corporate client bankruptcy, which had resulted in a $53 million write-off in the year ended December 31, 2020.

GLOBAL MERCHANT AND NETWORK SERVICES

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Total revenues net of interest expense 5,072 4,243 5,758 829 20 (1,515) (26)

Provisions for credit losses 88 20 22 68 # (2) (9)

Provisions for credit losses (a)

(37) 87 19 (124) # 68 #

Total revenues net of interest expense after provisions for credit losses 5,109 4,156 5,739 953 23 (1,583) (28)

Marketing, business development, rewards and Card Member services 1,303 1,422 1,243 (119) (8) 179 14

Marketing, business development, and Card Member rewards and services 1,478 1,130 1,263 348 31 (133) (11)

Salaries and employee benefits and other operating expenses 1,682 1,711 1,791 (29) (2) (80) (4)

1 unchanged sentence

Pretax segment income 1,949 1,315 2,685 634 48 (1,370) (51)

Income tax provision 434 650 633 (216) (33) 17 3

Segment income $ 954 $ 2,132 $ 1,910 $ (1,178) (55) $ 222 12

Effective tax rate 31.3 % 23.4 % 24.9 %

Total segment assets (billions)

$ 15.2 $ 14.0 $ 17.2 $ 1.2 9 % $ (3) (19) %

# Denotes a variance greater than 100 percent

# Denotes a variance of 100 percent or more

Refer to Note 1 and Note 3 to the “Consolidated Financial Statements” for further information.

GMNS operates a global payments network that processes and settles card transactions, acquires merchants and provides multi-channel marketing programs and capabilities, services and data analytics, leveraging our global integrated network.

GMNS manages our partnership relationships with third-party card issuers, merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network.

GMNS also manages loyalty coalition businesses.

TOTAL REVENUES NET OF INTEREST EXPENSE

Non-interest revenues decreased, primarily driven by lower discount revenue due to lower worldwide billed business and a decline in the average discount rate, primarily due to a shift in spend mix to non-T&E categories, as well as a decrease in other fees and commissions, due to lower foreign exchange conversion revenue related to decreased cross-border spending as a result of the impacts of the COVID-19 pandemic.

For a detailed discussion on billed business and the average discount rate, please refer to the “Consolidated Results of Operations.”

Net interest income decreased, primarily driven by a lower interest expense credit relating to internal transfer pricing, which results in a net benefit for GMNS due to its merchant payables.

Marketing, business development, and rewards and Card Member services expenses decreased, primarily driven by lower Marketing and business development expense, including decreased network partner payments due to lower spend volumes as a result of the impacts of the COVID-19 pandemic.

Salaries and employee benefits and other operating expenses decreased, primarily reflecting lower incentive compensation expense and lower professional services expense.

Non-interest revenues increased, primarily driven by higher Discount revenue due to increases in worldwide network volumes reflecting, in part, the recovery from the adverse impacts of the COVID-19 pandemic in the prior year.

The average discount rate increased, primarily due to a change in the mix of spending driven by increased levels of T&E volumes, as compared to the prior year.

See Tables 5 and 6 for more details on volume performance.

GMNS receives an interest expense credit relating to internal transfer pricing due to its merchant payables.

Net interest income increased, primarily due to a higher interest expense credit, primarily driven by an increase in average merchant payables related to year-over-year network volume growth.

Marketing, business development, and Card Member rewards and services expenses increased, primarily driven by higher Marketing and business development expense, as a result of increased spend on initiatives to support merchant engagement and increased network issuer expense, reflecting higher processed volumes from certain GNS partners.

Salaries and employee benefits and other operating expenses decreased, primarily driven by a net reserve release in the current year versus a net reserve build in the prior year associated with merchant exposure for Card Member purchases, partially offset by higher compensation.

CORPORATE & OTHER

Corporate functions and certain other businesses are included in Corporate & Other.

Corporate & Other net loss was $1.3 billion and $1.4 billion in 2020 and 2019, respectively.

The decrease in the net loss in 2020 compared to 2019 was primarily driven by a prior year litigation-related charge, a higher gain in the current year related to our strategic investments and lower incentive compensation in the current year, partially offset by a net loss in the current year as compared to net income in the prior year, related to the GBT JV.

Corporate & Other pretax loss was $1.0 billion and $1.6 billion in 2021 and 2020, respectively.

The decrease in the pretax loss was primarily driven by higher net gains in the current year on Amex Ventures equity investments, a non-cash gain related to an increase in GBT's total equity book value arising from GBT's acquisition of Egencia and a lower net loss in the current year from GBT as compared to the prior year, partially offset by higher compensation.

CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY

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

• Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period in the event we are unable to continue to raise new funds under our traditional funding programs during a substantial weakening in economic conditions.

We are closely monitoring the changing macroeconomic environment and actively managing our balance sheet to reflect evolving circumstances.

Our objective is to remain financially strong against a backdrop of an uncertain operating environment and outlook.

• Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period in the event we are unable to continue to raise new funds under our regular funding programs during a substantial weakening in economic conditions.

The global macroeconomic outlook continues to remain uncertain due to a variety of factors, including the Omicron variant, labor shortages, supply chain disruptions and inflation.

We monitor the changing macroeconomic environment and manage our balance sheet to reflect evolving circumstances.

CAPITAL STRATEGY

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bank subsidiary, American Express National Bank (AENB), could affect our status as a financial holding company and cause the banking regulators with oversight of American Express or AENB to take actions that could limit our business operations.

We seek to maintain capital levels and ratios in excess of the minimum regulatory requirements, specifically within a 10 to 11 percent target range for American Express' Common Equity Tier 1 risk-based capital ratio.

We maintain certain flexibility to shift capital across our businesses as appropriate.

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American Express National Bank 10.5 %

(a) Represents Basel III minimum requirements and applicable regulatory buffers as defined by the federal banking regulators, which includes the stress capital buffer (SCB) for American Express Company and the capital conservation buffer for American Express National Bank.

Refer to “Capital and Liquidity Regulation” under “Supervision and Regulation” and Note 22 to our “Consolidated Financial Statements” for additional information.

The following table presents American Express Company's regulatory risk-based capital and risk-weighted assets, which are calculated in accordance with standard regulatory guidance as described below:

The following table presents American Express Company's regulatory risk-based capital and risk-weighted assets as of December 31, 2021:

REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS

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Average Total Assets to calculate the Tier 1 Leverage Ratio $ 183.5

The following are definitions for our regulatory risk-based capital ratios and leverage ratio, which are calculated as per standard regulatory guidance:

Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital adequacy guidelines.

1 unchanged sentence

Off-balance sheet exposures comprise a minimal part of the total risk-weighted assets.

Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as Common Equity Tier 1 capital (CET1), divided by risk-weighted assets.

CET1 is the sum of common shareholders’ equity, adjusted for ineligible goodwill and intangible assets, certain deferred tax assets, as well as certain other comprehensive income items as follows:

net unrealized gains/losses on securities, foreign currency translation adjustments and net unrealized pension and other postretirement benefit/losses, all net of tax.

CET1 is also adjusted for the CECL final rules, as described below.

Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as CET1 capital, divided by risk-weighted assets.

CET1 capital is common shareholders’ equity, adjusted for ineligible goodwill and intangible assets and certain deferred tax assets.

CET1 capital is also adjusted for the CECL final rules, as described below.

Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital divided by risk-weighted assets.

Tier 1 capital is the sum of CET1, our perpetual preferred stock and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held by insurance subsidiaries.

Tier 1 capital is the sum of CET1 capital, preferred shares and third-party non-controlling interests in consolidated subsidiaries, adjusted for capital held by insurance subsidiaries.

The minimum requirement for the Tier 1 risk-based capital ratio is 1.5 percent higher than the minimum for the CET1 risk-based capital ratio.

We have $1.6 billion of preferred shares outstanding to help address a portion of the Tier 1 capital requirements in excess of common equity requirements.

We issue preferred shares to help address a portion of the Tier 1 capital requirements in excess of common equity requirements.

See “Preferred Shares” below for further information.

Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets.

Tier 2 capital is the sum of the reserve for loan and receivable credit losses adjusted for the CECL final rules (limited to 1.25 percent of risk-weighted assets), and $360 million of eligible subordinated notes, adjusted for capital held by insurance

subsidiaries.

Tier 2 capital is the sum of the reserve for loan and receivable credit losses adjusted for the CECL final rules (limited to 1.25 percent of risk-weighted assets), and $240 million of eligible subordinated notes, adjusted for capital held by insurance subsidiaries.

The $240 million of eligible subordinated notes reflect a 60 percent, or $360 million, reduction of Tier 2 capital credit for the $600 million subordinated debt issued in December 2014.

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We elected to delay the impact of the adoption of the CECL methodology on regulatory capital for two years followed by a three-year phase-in period pursuant to rules issued by federal banking regulators (the CECL final rules).

As of December 31, 2020, our reported regulatory capital excluded the $0.9 billion impact to retained earnings upon the adoption of the CECL methodology and 25 percent of the impact of the $1.5 billion increase in reserves for credit losses from January 1, 2020 to December 31, 2020.

We will begin phasing in the cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022.

As of December 31, 2021, our reported regulatory capital excluded the $0.9 billion impact to retained earnings upon the adoption of the CECL methodology and 25 percent of the $0.9 billion decrease in reserves for credit losses from January 1, 2020 to December 31, 2021.

We have begun phasing in the $0.7 billion cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022.

Refer to “Capital and Liquidity Regulation” under Part 1, Item 1.

“Business - Supervision and Regulation” for additional details.

As a Category IV firm, we were not subject to the Federal Reserve's supervisory stress tests in 2021 and will be participating in the Federal Reserve's supervisory stress tests in 2022.

We are required to submit to the Federal Reserve our annual capital plan, on or before April 5 of each year.

On June 24, 2021, the Federal Reserve confirmed our SCB of 2.5 percent and resulting CET1 capital ratio requirement of 7 percent, which remain unchanged from the levels announced in August 2020.

DIVIDENDS AND SHARE REPURCHASES

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These dividend and share repurchase amounts collectively represent approximately 109 percent of total capital generated during the year.

We plan to increase the regular quarterly dividend on our common shares outstanding by approximately 20 percent, from 43 cents to 52 cents per share beginning with the first quarter of 2022, subject to approval by our Board of Directors.

In addition, during the year ended December 31, 2021, we paid $71 million in dividends on non-cumulative perpetual preferred shares outstanding.

For additional information on our preferred shares, refer to Note 16 to the “Consolidated Financial Statements.”

Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.

During the first six months of 2021, the Federal Reserve placed restrictions on common stock dividends and common share repurchases for bank holding companies like us that participate in the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR).

These capital distribution restrictions ceased to apply on July 1, 2021.

Our capital distributions have since returned to being governed by the SCB framework and based on managing our CET1 risk-based capital ratio within a 10 to 11 percent target range.

We may conduct share repurchases through a variety of methods, including open market purchases, 10b5-1 plans, privately negotiated transactions (including employee benefit plans) or other purchases, including block trades, accelerated share repurchase programs or any combination of such methods as market conditions warrant and at prices we deem appropriate.

Our decisions on capital distributions depend on various factors, including:

our capital levels and regulatory capital requirements;

actual and forecasted business results;

regulatory guidance or restrictions, actual and forecasted business results;

economic and market conditions;

revisions to, or revocation of, the Federal Reserve’s authorization of our capital plan;

and the Comprehensive Capital Analysis and Review (CCAR) process.

Due to the uncertain business environment, we suspended share repurchases in March 2020 to maintain financial strength.

Subsequently, the Federal Reserve announced that it would prohibit share repurchases in the third and fourth quarters of 2020 for all banking organizations participating in CCAR and would allow them to pay common stock dividends provided (a) they do not increase the amount of the dividend and (b) they do not exceed the average of a firm's net income for the four preceding calendar quarters.

Based upon the results of its second round of 2020 stress testing, the Federal Reserve announced on December 18, 2020, certain modifications to its capital distribution restrictions that would apply for the first quarter of 2021.

Refer to "Stress Testing and Capital Planning" under Part 1, Item 1.

"Business - Supervision and Regulation" for additional details.

We plan to resume share repurchases under our previously disclosed share repurchase program in the first quarter of 2021, up to our maximum capacity of approximately $440 million authorized by the Federal Reserve.

Share purchases under publicly announced programs are made pursuant to open market purchases or privately negotiated transactions (including employee benefit plans) as market conditions warrant and at prices we deem appropriate.

and the supervisory stress test process.

PREFERRED SHARES

We issue preferred shares to finance a portion of the Tier 1 capital requirements in excess of common equity requirements.

On August 3, 2021, we issued $1.6 billion of 3.550% Fixed Rate Reset Noncumulative Preferred Shares, Series D.

With the proceeds from that issuance, we redeemed in full the $850 million of 4.900% Fixed Rate/Floating Rate Noncumulative Preferred Shares, Series C on September 15, 2021 and the $750 million of 5.200% Fixed Rate/Floating Rate Noncumulative Preferred Shares, Series B on November 15, 2021.

Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares.

FUNDING STRATEGY

Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to meet our maturing obligations, cost-effectively finance asset growth in our global businesses, as well as to maintain a strong liquidity profile.

The diversity of funding sources by type of instrument, by maturity and by investor base, among other factors, mitigates the impact of disruptions in any one type of instrument, maturity or investor.

The mix of our funding in any period will seek to achieve cost efficiency consistent with both maintaining diversified sources and achieving our liquidity objectives.

We seek to diversify our funding sources by maintaining scale and relevance in unsecured debt, asset securitizations and deposits.

Our direct retail deposits have become a larger proportion of our funding over time and we expect that will continue.

Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to finance our global businesses and to maintain a strong liquidity profile.

Our funding strategy and activities are integrated into our asset-liability management activities.

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Our global proprietary card-issuing businesses generate significant assets in both domestic and international Card Member lending and receivable activities.

Our financing needs are in large part a consequence of our proprietary card-issuing businesses, and the maintenance of a liquidity position to meet regulatory requirements and support all of our business activities, such as merchant payments.

We generally pay merchants for card transactions prior to reimbursement by Card Members and therefore

fund the merchant payments during the period Card Member loans and receivables are outstanding.

We also have additional financing needs associated with general corporate purposes.

Our funding plan to meet these financing needs is in turn driven by, among other factors, our liquidity position, size and mix of business asset growth, choice of funding sources, and our maturing obligations.

Due to the impact of COVID-19, we experienced significant reductions in our business volumes and decline in the balances of our Card Member loans and receivables.

The decline in Card Member loans and receivables balances resulted in substantial liquidity levels, which were further strengthened by the strong growth in our direct retail deposits in 2020.

Our financing needs are in large part a consequence of our proprietary card-issuing businesses, where we generally pay merchants for card transactions prior to reimbursement by Card Members and therefore fund the merchant payments during the period Card Member loans and receivables are outstanding.

In addition, we maintain a liquidity position to meet regulatory requirements and support our business activities.

We aim to satisfy these financing needs with a diverse set of funding sources.

The diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, mitigates the impact of disruptions in any one type of instrument, tenor or investor.

We seek to achieve diversity and cost efficiency in our funding sources by maintaining scale and market relevance in unsecured debt, asset securitizations and deposits, and access to secured borrowing facilities and a committed bank credit facility.

Our direct retail deposits have become a larger proportion of our funding over time.

We expect the balance of these deposits to continue to grow.

Our funding plan is primarily driven by the size and mix of business asset growth, our liquidity position, and choice of funding sources, as well as cash requirements generated by the redemptions of deposits by our customers, the maturities of debt outstanding and related interest payments.

In executing our funding plan, we aim to maintain a balanced debt maturity profile with an appropriate mix of short-term and long-term refinancing requirements.

FUNDING PROGRAMS AND ACTIVITIES

We meet our funding needs through a variety of sources, including direct and third-party distributed deposits and debt instruments, such as senior unsecured debt, asset securitizations, borrowings through secured borrowing facilities and a committed bank credit facility.

We had the following consolidated debt and customer deposits outstanding as of December 31:

SUMMARY OF CONSOLIDATED DEBT AND CUSTOMER DEPOSITS

We had the following customer deposits and consolidated debt outstanding as of December 31:

SUMMARY OF CUSTOMER DEPOSITS AND CONSOLIDATED DEBT

(Billions) 2021 2020

Customer deposits $ 84.4 $ 86.9

Short-term borrowings 2.2 1.9

Long-term debt 38.7 43.0

Total debt 44.9 64.2

Customer deposits 86.9 73.3

Total debt and customer deposits $ 125.3 $ 131.8

We may redeem from time to time certain debt securities prior to the original contractual maturity dates in accordance with the optional redemption provisions of those debt securities.

Our funding plan for the full year 2021 includes, among other sources, a limited amount of unsecured and secured term debt issuance.

Our funding plan for the full year 2022 includes, among other sources, approximately $8.0 billion to $12.0 billion of unsecured term debt issuance and approximately $6.0 billion to $10.0 billion of secured term debt issuance.

Actual funding activities can vary from our plans due to various factors, such as future business growth, the impact of global economic, political and other events on market capacity and funding needs, demand for securities offered by us, regulatory changes, ability to securitize and sell receivables, and the performance of receivables previously sold in securitization transactions.

Many of these factors are beyond our control.

In order to simplify our funding and reporting structure, in October 2021 we terminated the commercial paper program at American Express Credit Corporation (Credco) and Credco's committed syndicated bank credit facility, the undrawn amounts from which could serve as a backstop for the amount of commercial paper outstanding.

Concurrently, we established a new commercial paper program at American Express Travel Related Services Company, Inc.

(TRS) and a new credit facility with American Express Company and TRS as co-borrowers and co-obligors, as described further below.

We also completed an exchange offer on November 30, 2021, in which American Express Company issued $1.7 billion of new senior notes with a 3.300% coupon and May 3, 2027 maturity in exchange for the same amount of outstanding senior notes with the same coupon and maturity issued by Credco.

Following completion of the exchange offer, $339 million of Credco's 3.300% senior notes with May 3, 2027 maturity remain outstanding.

Due to the limited amount of publicly issued debt outstanding, Credco deregistered from ongoing SEC reporting beginning January 1, 2022.

Credco will continue to finance certain Card Member receivables and loans using intercompany borrowing as its primary funding source.

Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies:

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Credit Agency American Express Entity Short-Term Ratings Long-Term Ratings Outlook

Fitch All rated entities F1 A Negative

Fitch American Express Credit Corporation N/A A Stable

Fitch All other rated entities F1 A Stable

Moody’s American Express Travel Related Services Company, Inc.

N/A A2 Negative

Moody's American Express Credit Corporation Prime-1 A2 Negative

Moody’s American Express National Bank Prime-1 A3 Negative

Moody's American Express Company N/A A3 Negative

Prime-1 A2 Stable

Moody's American Express Credit Corporation N/A A2 Stable

Moody’s American Express National Bank Prime-1 A3 Stable

Moody's American Express Company N/A A2 Stable

S&P American Express Travel Related Services Company, Inc.

N/A A- Stable

S&P American Express Credit Corporation and American Express National Bank A-2 A- Stable

A-2 A- Stable

S&P American Express Credit Corporation N/A A- Stable

S&P American Express National Bank A-2 A- Stable

S&P American Express Company A-2 BBB+ Stable

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retail deposits insured by the Federal Deposit Insurance Corporation (FDIC) to total funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs.

SHORT-TERM FUNDING PROGRAMS

Short-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less, as well as interest-bearing overdrafts with banks.

Our short-term funding programs are used primarily to fund working capital needs, such as managing seasonal variations in receivables balances.

The amount of short-term borrowings issued in the future will depend on our funding strategy, our needs and market conditions.

As of December 31, 2020, we had nil in commercial paper outstanding and we had an average of $628 million in commercial paper outstanding during 2020.

Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.

DEPOSIT PROGRAMS

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Direct retail deposits offered by AENB is our primary deposit product channel, which makes FDIC-insured high-yield savings account and certificates of deposit (CDs) products available directly to consumers.

AENB also sources deposits through third-party distribution channels as needed to meet our overall funding objectives.

AENB also offers checking account products and sources deposits through third-party distribution channels as needed to meet our overall funding objectives.

As of December 31, 2021, we had $84.4 billion in deposits.

Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits.

Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits and scheduled maturities of certificates of deposits.

SHORT-TERM FUNDING PROGRAMS

Short-term borrowings, such as commercial paper, are defined as any debt with an original maturity of twelve months or less, as well as interest-bearing overdrafts with banks.

Our short-term funding programs are used primarily to fund working capital needs, such as managing seasonal variations in receivables balances.

The amount of short-term borrowings issued in the future will depend on our funding strategy, our needs and market conditions.

As of December 31, 2021, we had nil commercial paper outstanding and an average of nil in commercial paper outstanding during 2021.

Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.

LONG-TERM DEBT AND ASSET SECURITIZATION PROGRAMS

As of December 31, 2021, we had $38.7 billion in long-term debt outstanding, including unsecured debt and asset-backed securities.

Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings.

We periodically securitize Card Member loans and receivables arising from our card business, as the securitization market provides us with cost-effective funding.

During 2021, we issued $5.8 billion of unsecured debt and asset-backed securities with maturities ranging from 2 to 5 years.

Refer to Note 8 to the “Consolidated Financial Statements” for a further description of these borrowings and scheduled maturities of long-term debt obligations.

We periodically securitize Card Member loans and receivables arising from our U.S.

card business, as the securitization market provides us with cost-effective funding.

Securitization of Card Member loans and receivables is accomplished through the transfer of those assets to a trust, which in turn issues securities collateralized by the transferred assets to third-party investors.

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Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset securitizations.

On February 1, 2020, we removed U.S.

consumer and small business Card Member receivables from the American Express Issuance Trust II (the Charge Trust) and substantially replaced them with U.S.

corporate Card Member receivables.

On April 20, 2020, we added approximately $1.7 billion of additional U.S.

corporate Card Member receivables to the Charge Trust.

Given the significant reductions in our business volumes and our resulting substantial cash and liquidity position, we did not issue any unsecured or secured term debt during 2020.

DEBT ISSUANCES

(Billions) 2021

American Express Company:

Fixed Rate Senior Notes (weighted-average coupon rate of 1.27%) $ 1.9

Floating Rate Senior Notes (compounded SOFR (a) plus weighted-average spread of 42 basis points)

American Express Credit Account Master Trust:

Fixed Rate Class A Certificates (weighted-average coupon of 0.90%)

(a) Secured overnight financing rate (SOFR).

In addition, American Express Company issued $1.7 billion of 3.300% new senior notes in exchange for the same amount of outstanding senior notes issued by Credco, as described above.

LIQUIDITY MANAGEMENT

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Government Treasury obligations).

The increase of $21.7 billion from $32.9 billion as of December 31, 2019 was primarily driven by the decline in the balances of our Card Member loans and receivables and the growth in our direct retail deposits.

The net interest expense to maintain these liquidity resources depends on the amount of liquidity resources we maintain and the difference between our cost of funding these amounts and their investment yields.

As the amount of our liquidity resources has substantially increased, the level of future net interest expense to maintain these resources is expected to be significant, as the investment income is less than the cost of funding.

The decrease of $30.0 billion from $54.6 billion as of December 31, 2020 was primarily driven by the increase in the balances of our Card Member loans and receivables, debt maturities, share repurchases and a reduction in customer deposits, partially offset by the issuance of unsecured and secured debt securities.

The investment income we receive on liquidity resources is less than the interest expense on the sources of funding for these balances.

In 2021, the net interest costs to maintain these resources were substantial.

The level of future net interest costs depends on the amount of liquidity resources we maintain and the difference between our cost of funding these amounts and their investment yields.

Securitized Borrowing Capacity

As of December 31, 2020, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2022, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the Charge Trust.

As the balance of Card Member receivables in the Charge Trust fluctuates over time in line with business volumes, our capacity to draw on the Charge Trust facility may be reduced when volumes decline.

As of December 31, 2021, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2024, which gives us the right to sell up to $3.0 billion face amount of eligible AAA notes from the American Express Issuance Trust II (the Charge Trust).

We also maintained our committed, revolving, secured borrowing facility, with a maturity date of September 16, 2024, which gives us the right to sell up to $2.0 billion face amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust).

Both facilities are used in the ordinary course of business to fund working capital needs, as well as to further enhance our contingent funding resources.

As of December 31, 2020, no amounts were drawn on the Charge Trust facility or the Lending Trust facility.

As of December 31, 2021, $2.0 billion was drawn on the Charge Trust facility, which was subsequently repaid on January 18, 2022.

No amounts were drawn on the Lending Trust facility.

Federal Reserve Discount Window

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Committed Bank Credit Facility

In addition to the secured borrowing facilities described above, we maintained a committed syndicated bank credit facility as of December 31, 2020 of $3.5 billion, with a maturity date of October 15, 2022.

The availability of this credit line is subject to compliance with certain covenants by American Express Credit Corporation (Credco), principally the maintenance by Credco of a 1.25 ratio of its combined earnings, certain capital contributions and fixed charges, to fixed charges.

As of December 31, 2020 and 2019, Credco was in compliance with each of these covenants.

As of December 31, 2020, no amounts were drawn on the committed credit facility.

In addition to the secured borrowing facilities described above, we maintained a committed syndicated bank credit facility of $3.5 billion as of December 31, 2021.

This facility was maintained by our wholly owned subsidiary Credco through September 30, 2021 and the availability of the credit line was subject to compliance with certain covenants by Credco, principally the maintenance by Credco of a 1.25 ratio of its combined earnings, certain capital contributions and fixed charges, to fixed charges.

Effective October 1, 2021, this facility was terminated, and we entered into a new committed syndicated bank credit facility for the same amount with a maturity date of October 15, 2024 with American Express Company and TRS as co-borrowers and co-obligors.

The availability of the new credit facility is subject to our maintenance of a minimum CET1 risk-based capital ratio of 4.5 percent, with certain restrictions in relation to either accessing the facility or distributing capital to common shareholders in the event our CET1 risk-based capital ratio falls between 4.5 percent and 6.5 percent.

As of December 31, 2021, we were in compliance with the covenants contained in the new credit facility and no amounts were drawn on the facility.

We may, from time to time, use this facility in the ordinary course of business to fund working capital needs.

Any undrawn portion of this facility could serve as backstop for the amount of commercial paper outstanding.

Our committed bank credit facility does not contain a material adverse change clause, which might otherwise preclude borrowing under the credit facility, nor is it dependent on our credit rating.

Any undrawn portion of this facility could serve as a backstop for the amount of commercial paper outstanding.

The new credit facility does not contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on our credit rating.

Off-balance Sheet Arrangements

We have certain off-balance sheet obligations that include guarantees, indemnifications and certain Card Member and partner arrangements that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, or liquidity and capital resources.

For more information on these obligations, refer to Note 12, Note 15 and Note 23 to the “Consolidated Financial Statements.”

The following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating, investing and financing cash flows for the year ended December 31, 2021 compared to the year ended December 31, 2020.

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Effect of foreign currency exchange rates on cash and cash equivalents (0.1) 0.4 0.2

Net increase (decrease) in cash and cash equivalents $ 8.5 $ (3.4) $ (5.5)

Net (decrease) increase in cash and cash equivalents $ (10.9) $ 8.5 $ (3.4)

Cash Flows from Operating Activities

Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, deferred taxes and stock-based compensation and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.

The decrease in net cash provided by operating activities was primarily driven by decreases in Net income and Accounts payable due to decreases in merchant payables reflecting the significant decline in billed business in the current year, and an increase in Other assets due to purchases of loyalty program points from certain of our cobrand partners.

These points are held as prepaid assets until they are used for rewards, promotions and incentives.

Our cash flows from operating activities primarily include net income adjusted for (i) non-cash items included in net income, such as provisions for credit losses, depreciation and amortization, stock-based compensation, deferred taxes and other non-cash items and (ii) changes in the balances of operating assets and liabilities, which can vary significantly in the normal course of business due to the amount and timing of payments.

In 2021, the net cash provided by operating activities was primarily driven by cash generated from net income for the period and higher net operating liabilities, primarily resulting from an increase in Membership Rewards liability and higher accounts payable to merchants related to growth in billed business.

In 2020, the net cash provided by operating activities was primarily driven by the cash generated from net income for the period, partially offset by lower accounts payable to merchants and purchases of loyalty program points from certain of our cobrand partners, which resulted in an increase in Other assets.

Cash Flows from Investing Activities

Our cash flows from investing activities primarily include changes in Card Member loans and receivables, as well as changes in our available-for-sale investment securities portfolio.

The increase in net cash provided by investing activities was primarily due to a decline in the outstanding balances of Card Member loans and receivables driven by a significant decline in Card Member spending during the period as a result of the continued impacts of the COVID-19 pandemic and the resulting containment measures, combined with pay down of outstanding balances by Card Members, partially offset by a net increase in the investment securities portfolio.

In 2021, the net cash used in investing activities was primarily driven by higher Card Member loan and receivable balances, resulting from higher Card Member spending, partially offset by net maturities of our investment securities.

In 2020, the net cash provided by investing activities was primarily driven by a decline in Card Member loan and receivable balances, partially offset by net purchases of investment securities.

The decline in Card Member loan and receivable balances was due to the ongoing pay down of outstanding balances by Card Members combined with significant declines in spending that occurred due to the COVID-19 pandemic.

Cash Flows from Financing Activities

Our cash flows from financing activities primarily include changes in customer deposits, long-term debt and short-term borrowings, as well as dividend payments and share repurchases.

The increase in net cash used in financing activities was primarily driven by higher net repayment of debt, partially offset by higher growth in customer deposits and the suspension of the share repurchase program.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We have identified both on- and off-balance sheet transactions, arrangements, obligations and other relationships that may have a material current or future effect on our financial condition, changes in financial condition, results of operations, or liquidity and capital resources.

CONTRACTUAL OBLIGATIONS

The table below identifies transactions that represent our contractually committed future obligations.

Purchase obligations include our agreements to purchase goods and services that are enforceable and legally binding and that specify significant terms, including:

fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

COMMITTED FUTURE OBLIGATIONS BY YEAR

Payments due by year (a)

(Millions) 2021 2022-2023 2024-2025 2026 and thereafter Total

Long-term debt $ 11,829 $ 21,324 $ 5,757 $ 4,132 $ 43,042

Certificates of deposit 3,828 3,698 483 — 8,009

Interest payments on long-term debt (b)

713 760 402 1,058 2,933

Lease obligations 141 273 232 1,024 1,670

Deemed repatriation tax (c)

— 14 582 416 1,012

Purchase obligations (d)

231 174 34 — 439

Other long-term liabilities (e) (f)

243 36 6 38 323

Total $ 16,985 $ 26,279 $ 7,496 $ 6,668 $ 57,428

(a) The table above excludes approximately $0.8 billion of tax reserves related to the uncertainty in income taxes as inherent complexities and the number of tax years currently open for examination in multiple jurisdictions do not permit reasonable estimates of payments, if any, to be made over a range of years.

Refer to Note 20 to the “Consolidated Financial Statements” for additional information.

(b) Estimated interest payments were calculated using the effective interest rates as of December 31, 2020, and includes the effect of existing interest rate swaps.

Actual cash flows may differ from estimated payments.

(c) Represents the remaining obligation under the Tax Act to pay a one-time transition tax on unrepatriated earnings and profits of certain foreign subsidiaries.

(d) The purchase obligation amounts represent either the early termination fees or non-cancelable minimum contractual obligations, as applicable, by period under contracts that were in effect as of December 31, 2020.

(e) As of December 31, 2020, there were no minimum required contributions, and no contributions are currently planned, for the U.S.

American Express Retirement Plan.

American Express Retirement Restoration Plan and non-U.S.

defined benefit pension and postretirement benefit plans, contributions in 2021 are anticipated to be approximately $47 million, and this amount has been included within other long-term liabilities.

Remaining obligations under defined benefit pension and postretirement benefit plans aggregating $659 million have not been included in the table above as the timing of such obligations is not determinable.

Additionally, other long-term liabilities do not include $9.8 billion of Membership Rewards liabilities, which are not considered long-term liabilities as Card Members in good standing can redeem points immediately, without restrictions, and because the timing of point redemption is not determinable.

(f) As of December 31, 2020, we had committed to provide funding related to certain tax credit investments resulting in a $208 million unfunded commitment included in other long-term liabilities.

In addition to this amount, there was a further $106 million of contractual off-balance sheet obligations that have not been included in the table above as the timing of such obligations is not determinable.

Refer to Note 6 to the “Consolidated Financial Statements” for additional information.

In addition to the contractual obligations noted in Table 20, we have financial commitments related to agreements with certain cobrand partners under which we are required to make a certain level of minimum payments over the life of the agreement, generally ranging from five to ten years.

Such commitments are designed to be satisfied by the payments we make to such cobrand partners primarily based on Card Members' spending and earning rewards on their cobrand cards and as we acquire new Card Members.

In the event these payments do not fully satisfy the commitment, we generally pay the cobrand partner up to the amount of the commitment in exchange for an equivalent value of reward points.

As of December 31, 2020, we had approximately $4 billion in such commitments outstanding and also had certain cobrand arrangements that include commitments based on variables, the values of which are not yet determinable and thus the amount is not quantifiable.

Refer to Note 12 to the "Consolidated Financial Statements" for further information.

We also have off-balance sheet arrangements that include guarantees, indemnifications and certain other off-balance sheet arrangements.

As of December 31, 2020, we had guarantees and indemnifications totaling approximately $1 billion related primarily to real estate and business dispositions in the ordinary course of business.

Refer to Note 15 to the “Consolidated Financial Statements” for further discussion regarding our guarantees.

CERTAIN OTHER OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2020, we had approximately $314 billion of unused credit available to Card Members as part of established lending product agreements.

Total unused credit available to Card Members does not represent potential future cash requirements, as a significant portion of this unused credit will likely not be drawn.

Our charge card products generally have no pre-set spending limit, and therefore are not reflected in unused credit available to Card Members.

We provide Card Member protection that covers losses associated with purchased goods and services.

We have an accrual of $58 million related to this exposure as of December 31, 2020.

To date, we have not experienced significant losses related to this exposure;

however, our historical experience may not be representative in the current environment given the economic and financial disruption cause by the COVID-19 pandemic and resulting containment measures.

See "Arrangements with our business partners represent a significant portion of our business.

We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners" under “Risk Factors” and Note 12 to the "Consolidated Financial Statements" for further information.

In 2021, the net cash used in financing activities was primarily driven by share repurchases, net debt repayments, decreases in customer deposits, dividends and redemption of preferred shares, partially offset by the proceeds from the issuance of preferred shares.

In 2020, the net cash used in financing activities was primarily driven by debt repayments, dividends and share repurchases, partially offset by growth in customer deposits.

RISK MANAGEMENT

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The Risk Committee approves our ERM policy.

The ERM policy governs risk governance, risk oversight and risk appetite for risks, including individual credit risk, institutional credit risk, operational risk, compliance risk, reputational risk, market risk, funding and liquidity risk, model risk, strategic and business risk, and country risk.

Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios.

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CREDIT RISK MANAGEMENT PROCESS

Credit risk is defined as loss due to obligor or counterparty default or changes in the credit quality of a counterparty or security.

Credit risk is defined as loss due to default or changes in the credit quality of a customer, obligor or security.

Our credit risks are divided into two broad categories:

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We benefit from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk management capabilities, which span underwriting, customer management and collections.

The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and GDP growth.

The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and gross domestic product (GDP) growth.

The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process.

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Operational risk is inherent in all business activities and can impact an organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory penalties.

To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the Risk Committee.

To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the ERMC.

The Operational Risk Management Committee (ORMC), chaired by the Chief Operational Risk Officer, coordinates with all control groups on effective risk assessments and controls and oversees the preventive, responsive and mitigation efforts by Operational Excellence teams in the business units and staff groups.

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We define information technology risk as the risk that events or circumstances could compromise the processing, stability, capacity, performance, or resilience of information technology and cause financial, reputational, and/or regulatory impacts.

We manage information technology risk through our policies, procedures, governance structure, and control framework to preserve the confidentiality, integrity, and availability of systems and processes across the Company.

See “The uninterrupted operation of our information systems is critical to our success and a significant disruption could have a material adverse effect on our business and results of operations” under “Risk Factors” for additional information.

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DATA MANAGEMENT AND GOVERNANCE

We define data management and governance risk as the risk of inadequate data governance and/or data management practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data within or throughout its lifecycle.

Our Enterprise Data Governance Policy establishes the framework and requirements for defining in-scope critical data and outlining the elements for managing data as a critical corporate asset.

We define data management and governance risk as the risk of financial, reputational, and/or regulatory impacts due to inadequate data governance and/or data management practices adversely impacting the accuracy, completeness, timeliness, comprehensiveness or usability of data throughout its lifecycle.

Our Enterprise Data Governance Policy establishes the framework for defining in-scope critical data and the requirements for managing such data effectively throughout its lifecycle as a critical corporate asset.

This policy is approved by the ERMC.

Chaired by the Chief Data Officer, our Enterprise Data Committee, a sub-committee of the ERMC, provides governance and oversight for our enterprise-wide data governance and management activities.

The committee is responsible for overseeing the standards and procedures, governance structure and oversight framework, which includes independent assessments and validations, monitoring and reporting of data governance and management-related issues and concerns.

COMPLIANCE RISK MANAGEMENT PROCESS

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Market risk is the risk to earnings or asset and liability values resulting from movements in market prices.

Our market risk exposures include interest rate risk and foreign exchange risk.

Interest rate risk is driven by the relationship between interest rates on assets (such as loans, receivables and investment securities) and interest rates on liabilities (such as debt and deposits).

Foreign exchange risk arises from transactions, funding, investments and earnings in currencies other than the U.S.

Our market risk exposures include (i) interest rate risk due to changes in the relationship between the interest rates on our assets (such as loans, receivables and investment securities) and the interest rates on our liabilities (such as debt and deposits) and (ii) foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S.

Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and escalation triggers.

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Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative financial instruments.

In 2020, the composition of our balance sheet shifted substantially.

There was a substantial net reduction in total fixed-rate assets within Card Member loans and Card Member receivables and an increase in certain floating-rate assets such as Cash and cash equivalents.

As of December 31, 2021, a hypothetical, immediate 100 basis point increase in market interest rates would have a detrimental impact of approximately $206 million on our annual net interest income.

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LIBOR Transition

Due to uncertainty surrounding the suitability and sustainability of LIBOR, central banks and global regulators have called for financial market participants to prepare for the discontinuance of LIBOR and the establishment of alternative reference rates.

We have financial instruments and commercial agreements that will be impacted by the discontinuance of LIBOR, including floating rate debt and equity instruments, derivatives, borrowings and other contracts.

We have established an enterprise-wide, cross-functional initiative to identify, assess and monitor risks associated with LIBOR, engage with the industry participants and regulators and to transition to new alternative reference rates.

As part of this initiative, we are updating our operational processes, IT systems and models for a timely transition.

We have an enterprise-wide, cross-functional initiative to identify, assess and monitor risks associated with the London interbank offered rate (LIBOR), engage with industry participants, customers and regulators and to transition to new alternative reference rates, such as the secured overnight financing rate.

As part of this initiative, we have amended and continue to amend contracts to replace references to USD LIBOR tenors that will cease to be quoted after June 2023 and have updated our operational processes, IT systems and models for a timely transition.

See “ The discontinuance of LIBOR may negatively impact our access to funding and the value of our financial instruments and commercial agreements ” under “Risk Factors” for additional information.

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FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS

Funding and liquidity risk is defined as our inability to meet our ongoing financial and business obligations as they become due at a reasonable cost.

Funding and liquidity risk is defined as our inability to meet our ongoing financial and business obligations at a reasonable cost as they become due.

Our Board-approved Liquidity Risk Policy establishes the framework that guides and governs liquidity risk management.

Funding and liquidity risk is managed by the Funding and Liquidity Committee.

In addition, the Market Risk Oversight Officer provides independent oversight of liquidity risk management.

We manage liquidity risk by maintaining access to a diverse set of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business requirements and expected future financing obligations for at least a twelve-month period in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions.

To manage this risk, we seek to maintain access to a diverse set of cash, readily-marketable securities and contingent sources of liquidity, such that we can continuously meet our business requirements and expected future financing obligations for at least a twelve-month period in the event we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions.

We consider the trade-offs between maintaining too much liquidity, which can be costly and limit financial flexibility, and having inadequate liquidity, which may result in financial distress during a liquidity event.

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MODEL RISK MANAGEMENT PROCESS

We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making, or damage to our reputation, from decisions based on incorrect or misused model outputs and reports.

We manage model risk through a comprehensive model governance framework, including policies and procedures for model development, independent model validation and change management capabilities that seek to minimize erroneous model methodology, outputs and misuse.

We also assess model performance on an ongoing basis.

We utilize artificial intelligence and machine Learning (AI/ML) approaches for a variety of business use cases.

We perform extensive reviews and testing to reduce the risk that these AI/ML techniques do not perform as intended.

We define model risk as the risk of adverse consequences, such as financial loss, poor business and strategic decision making, damage to our reputation or customer harm, from decisions based on incorrect or misused model outputs and outcomes.

Model risk is managed through a comprehensive risk management and governance framework, including policies and procedures for model development, independent model validation, model risk reporting and change management capabilities that seek to minimize erroneous model methodology, outputs, and misuse.

We also assess model performance and model- related issues on an ongoing basis and seek to address deficiencies in a timely manner.

In addition, we utilize artificial intelligence and machine learning (AI/ML) models for a variety of business use cases.

We perform extensive reviews and testing to reduce the risk that these AI/ML techniques result in adverse consequences.

STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESS

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COUNTRY RISK MANAGEMENT PROCESS

Country risk is defined as the risk that economic, social, and/or political conditions and events in a country might adversely impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate capital.

Country risk is defined as the risk that economic, social, and/or political conditions and events in a country present.

They might adversely impact us, primarily as a result of greater credit losses, increased operational or market risk or the inability to repatriate capital.

We manage country risk as part of the normal course of business.

Policies and procedures establish country risk escalation thresholds to control and limit exposure, driven by processes that enable the monitoring of conditions in countries where we have exposure.

CLIMATE-RELATED RISK

We define climate-related risk as:

(1) risks related to the transition to a low-carbon economy, which may include extensive changes pertaining to policy, legal, technology, market and reputational risks, and (2) risks related to the physical impacts of climate change, typically driven by acute physical risk such as increased severity of extreme weather events (e.g., cyclones, hurricanes, floods) and chronic physical risk which are longer-term shifts in climate patterns (e.g., sea level rise, chronic heat waves).

Such transition and physical risk events driven by climate change can have broad impact to our customers, operations, suppliers and business.

Climate-related risk is interconnected and overarching across all risk types as it may manifest as credit risk, operational risk, market risk, liquidity risk and other risk types.

We continue to enhance our focus on climate-related risk within our risk governance framework.

We are currently performing a risk identification process for climate-related risk to determine the meaningfulness and measurability of the risk.

Furthermore, Environmental, Social and Governance (ESG) issues with an emphasis on climate-related risk are currently identified as an “emerging risk” within our risk governance framework.

CRITICAL ACCOUNTING ESTIMATES

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Reserves for Card Member credit losses represent our best estimate of the expected credit losses in our outstanding portfolio of Card Member loans and receivables as of the balance sheet date.

The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience and current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.

The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period (R&S Period) beyond the balance sheet date.

In estimating expected credit losses, we use a combination of statistically based models and analysis of the results produced by these models to determine the quantitative and qualitative components of our total balance sheet reserves for credit losses.

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Card Member receivable products are contractually required to be paid in full;

therefore, we have assumed the balances will be either paid or written-off within the R&S Period.

therefore, we have assumed the balances will be either paid or written-off no later than 180 days past due.

Within the R&S Period, our models use past loss experience and current and future economic conditions to estimate the probability of default, exposure at default and expected recoveries to estimate net losses at default.

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CECL requires that the R&S Period include an assumption about current and future economic conditions.

We incorporate multiple macroeconomic scenarios obtained from an independent third party.

The estimated credit losses calculated from each macroeconomic scenario are reviewed and weighted to reflect management's judgment about uncertainty around the scenarios.

We incorporate multiple macroeconomic scenarios provided to us by an independent third party.

The estimated credit losses calculated from each macroeconomic scenario are reviewed each period and weighted to reflect management's judgment about uncertainty surrounding these scenarios.

These macroeconomic scenarios contain certain variables, including unemployment rates and real GDP, that are significant to our models.

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It is difficult to estimate how potential changes in specific factors might affect the estimated credit losses, and current results may not be indicative of the potential future impact of macroeconomic forecast changes.

In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on downside scenarios at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve component or the impact of management judgment for the qualitative reserve component, which may have a positive or negative effect on the results.

In addition, this sensitivity analysis relates only to the modeled credit loss estimates under two scenarios without considering management’s judgment on the relative weighting for those and other scenarios, including the weight that has been placed on the downside scenario at the balance sheet date, or any potential changes in other adjustments to the quantitative reserve component or the impact of management judgment for the qualitative reserve component, which may have a positive or negative effect on the results.

Thus, the results of this sensitivity analysis are hypothetical and are not intended to estimate or reflect our expectations of any changes in the overall reserves for credit losses due to changes in the macroeconomic environment.

The following table reflects the range of key variables in the macroeconomic scenarios utilized for the computation of Reserves for Card Member credit losses as of December 31, 2020:

December 31, 2020

Unemployment Rate

Fourth quarter of 2020 7%

First quarter of 2021 7% - 8%

Fourth quarter of 2021 7% - 11%

Fourth quarter of 2022 6% - 12%

GDP Growth (Contraction) (a)

Fourth quarter of 2020 3%

First quarter of 2021 4% - (5%)

Fourth quarter of 2021 6% - (2%)

Fourth quarter of 2022 4% - 3%

(a) Real GDP quarter over quarter percentage change seasonally adjusted to annualized rates.

Refer to "Business Environment" and Table 3 in MD&A and Note 1 and Note 3 to the "Consolidated Financial Statements" for a further description of the impact of CECL, both at implementation and for the year ended December 31, 2020.

Refer to Note 3 to the “Consolidated Financial Statements” for further information on the range of macroeconomic scenario key variables used, in conjunction with other inputs described above, to calculate reserves for Card Member credit losses.

The process of estimating these reserves requires a high degree of judgment.

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Membership Rewards expense is driven by charge volume on enrolled cards, customer participation in the program and contractual arrangements with redemption partners.

We record a Membership Rewards liability that represents the estimated cost of points earned that are expected to be redeemed by Card Members in the future.

We record a Membership Rewards liability that represents our best estimate of the cost of points earned that are expected to be redeemed by Card Members in the future.

The Membership Rewards liability is impacted over time by enrollment levels, attrition, the volume of points earned and redeemed, and the associated redemption costs.

We estimate the Membership Rewards liability by determining the URR and the WAC per point, which are applied to the points of current enrollees.

We estimate the Membership Rewards liability by determining the URR and the weighted average cost (WAC) per point, which are applied to the points of current enrollees.

Refer to Note 9 to the “Consolidated Financial Statements” for additional information.

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The judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could materially affect the fair value of our reporting units.

We could be exposed to an increased risk of further goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions.

We could be exposed to an increased risk of goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions.

We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate.

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OTHER MATTERS

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to the Recently Issued and Adopted Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”

RECENTLY ADOPTED ACCOUNTING STANDARDS

Refer to the Recently Adopted Accounting Standards section of Note 1 to the “Consolidated Financial Statements.”

GLOSSARY OF SELECTED TERMINOLOGY

Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and interest income not attributable to our Card Member loans.

Airline-related volume — Represents spend at airlines as a merchant.

Airline-related volume — Represents spend at airlines as a merchant, which is included within T&E-related volume.

Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity created for the securitization activity, typically a trust.

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The securitized loans and receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets.

Average discount rate — This calculation is generally designed to reflect the average pricing at all merchants accepting American Express cards and represents the percentage of proprietary and GNS billed business retained by us from merchants we acquire, or from merchants acquired by third parties on our behalf, net of amounts retained by such third parties.

The average discount rate, together with billed business, drive our discount revenue.

Billed business — Represents transaction volumes (including cash advances) on cards and other payment products issued by American Express (proprietary billed business) and cards issued under network partnership agreements with banks and other institutions, including joint ventures (GNS billed business).

In-store spending activity within GNS retail cobrand portfolios, from which we earn no revenue, is not included in billed business.

Average discount rate — This calculation is generally designed to reflect the average pricing at all merchants accepting American Express cards and represents the percentage of network volumes retained by us from spend at merchants we acquire, or from merchants acquired by third parties on our behalf, net of amounts retained by such third parties.

The average discount rate, together with network volumes, drive our discount revenue.

Billed business — Represents transaction volumes (including cash advances) on cards and other payment products issued by American Express.

Billed business is reported as inside the United States or outside the United States based on the location of the issuer.

Billed business, together with the average discount rate, drive our discount revenue.

Capital ratios — Represents the minimum standards established by regulatory agencies as a measure to determine whether the regulated entity has sufficient capital to absorb on- and off-balance sheet losses beyond current loss accrual estimates.

Refer to the Capital Strategy section under “Consolidated Capital Resources and Liquidity” for further related definitions under Basel III.

Card Member — The individual holder of an issued American Express-branded card.

Card Member loans — Represents revolve-eligible transactions on our card products, as well as any interest charges and associated card-related fees.

Card Member receivables — Represents transactions on our card products and card related fees that need to be paid in full on or before the Card Member's payment due date.

Cards-in-force — Represents the number of cards that are issued and outstanding by American Express (proprietary cards-in-force) and cards issued and outstanding under network partnership agreements with banks and other institutions, including joint ventures (GNS cards-in-force), except for GNS retail cobrand cards that had no out-of-store spending activity during the prior twelve months.

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Cards-in-force is useful in understanding the size of our Card Member base.

Card Member — The individual holder of an issued American Express-branded card.

Card Member loans — Represents the outstanding amount due from Card Members for charges made on their American Express credit cards, as well as any interest charges and card-related fees.

Card Member loans also include revolving balances on certain American Express charge card products.

Card Member receivables — Represents the outstanding amount due from Card Members for charges made on their American Express charge cards, as well as any card-related fees, other than revolving balances on certain American Express charge cards with Pay Over Time features.

Such revolving balances are included within Card Member loans.

Charge cards — Represents cards that generally carry no pre-set spending limits and are primarily designed as a method of payment and not as a means of financing purchases.

Charge Card Members generally must pay the full amount billed each month.

No finance charges are assessed on charge cards.

Each charge card transaction is authorized based on its likely economics reflecting a Card Member’s most recent credit information and spend patterns.

Some charge cards have additional Pay Over Time feature(s) that allow revolving of certain charges.

Charge Card Members must pay the full amount of balances billed each month, with the exception of balances that can be revolved under lending features offered on certain charge cards, such as Pay Over Time and Plan It, that allow Card Members to pay for eligible purchases with interest over time.

Cobrand cards — Cards issued under cobrand agreements with selected commercial partners.

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The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program.

Credit cards — Represents cards that have a range of revolving payment terms, grace periods, and rate and fee structures.

Credit cards — Represents cards that have a range of revolving payment terms, structured payment features (e.g.

Plan It), grace periods, and rate and fee structures.

Discount revenue — Primarily represents the amount earned on transactions occurring at merchants that have entered into a card acceptance agreement with us, a GNS partner or other third-party merchant acquirer, for facilitating transactions between the merchants and Card Members.

Goods and Services (G&S)-related volume — Includes spend in merchant categories other than T&E-related merchant categories, which includes B2B spending by small and medium size enterprise customers in our GCS segment.

Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs.

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Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables.

Operating expenses — Represents salaries and employee benefits, professional services, occupancy and equipment, and other expenses.

Network volumes — Represents the total of billed business and processed volumes.

Network volumes are reported as United States or outside the United States based on the location of the issuer.

Operating expenses — Represents salaries and employee benefits, professional services, data processing and equipment, and other expenses.

Processed volumes — Represents transaction volumes (including cash advances) on cards issued under network partnership agreements with banks and other institutions, including joint ventures, as well as alternative payment solutions facilitated by American Express.

Processed volume is reported as United States or outside the United States based on the location of the issuer.

Reserve build (release) — Represents the portion of the provisions for credit losses for the period related to increasing or decreasing reserves for credit losses as a result of, among other things, changes in volumes, macroeconomic outlook, portfolio composition and credit quality of portfolios.

Reserve build represents the amount by which the provision for credit losses exceeds net write-offs, while reserve release represents the amount by which net write-offs exceed the provision for credit losses.

Return on average equity — Calculated by dividing one-year period net income by one-year average total shareholders’ equity.

Return on average equity — Calculated by dividing the preceding twelve months of net income by one-year monthly average total shareholders’ equity.

T&E-related volume — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories.

Non-T&E-related volume includes spend in all other merchant categories.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following:

• our ability to rebuild growth momentum and improve our financial performance to pre-pandemic levels, which will depend in part on a recovery in consumer travel and therefore on how soon lockdowns ease, travel restrictions lift and the general public begins to feel comfortable traveling again;

discount revenue recovering broadly in-line with billed business;

credit performance and reserve levels;

identifying attractive investment opportunities that help rebuild growth momentum, product innovation and the pace at which we wind down our value injection efforts;

our ability to control operating expenses and generate operating expense leverage;

the effective tax rate remaining consistent with current expectations;

and our ability to resume our share repurchase program;

any of which could be impacted by, among other things, the factors identified in the subsequent paragraphs;

• our ability to grow billed business, revenues and EPS, which could be impacted by, among other things, uncertainty regarding the continued spread of COVID-19 (including new variants) and severity of the pandemic and the availability, distribution and use of effective treatments and vaccines;

a further deterioration in global economic and business conditions;

consumer and business spending not growing in line with expectations, including T&E spending not rebounding to 2019 levels by the end of 2021;

an inability or unwillingness of Card Members to pay amounts owed to us;

insufficient governmental stimulus and relief programs to address the ongoing impact of the pandemic;

prolonged measures to contain the spread of COVID-19 (including travel restrictions) or premature easing of such containment measures, both of which could further exacerbate the effects on business activity and our Card Members, partners and merchants;

health concerns associated with the pandemic continuing to affect consumer behavior, spending levels and preferences, and travel patterns and demand even after government restrictions are lifted and economies reopen;

our inability to effectively manage risk in an uncertain environment;

market volatility, changes in capital and credit market conditions and the availability and cost of capital;

• our ability to grow earnings per share in the future, which will depend in part on revenue growth, credit performance and the effective tax rate remaining consistent with current expectations and our ability to continue investing in customers, brand and talent, controlling operating expenses, effectively managing risk and executing our share repurchase program;

any of which could be impacted by, among other things, the factors identified in the subsequent paragraphs as well as the following:

the extent and duration of the effect of the pandemic on the economy, inflation, consumer confidence, consumer and business spending, and customer behaviors, such as with respect to travel, dining, shopping and in-person events;

the impact on consumers and businesses as forbearance and government support programs end;

the continued stress on businesses due to containment measures, operational changes, supply chain issues and staffing shortages;

issues impacting brand perceptions and our reputation;

the impact of any future contingencies, including, but not limited to, restructurings, investment gains, impairments, changes in reserves, legal costs, the imposition of fines or civil money penalties and increases in Card Member reimbursements;

impacts related to new or renegotiated cobrand and other partner agreements;

and the impact of regulation and litigation, which could affect the profitability of our business activities, limit our ability to pursue business opportunities, require changes to business practices or alter our relationships with partners, merchants and Card Members;

• our ability to grow revenues net of interest expense, which could be impacted by, among other things, uncertainty regarding the continued spread of COVID-19 (including new variants) and the availability, distribution and use of effective treatments and vaccines;

a deterioration in global economic and business conditions;

consumer and business spending not growing in line with expectations;

prolonged measures to contain the spread of COVID-19 (including travel restrictions), concern of the possible imposition of further containment measures or premature easing of such containment measures, any of which could further exacerbate the effects on business activity and our Card Members, partners and merchants;

health concerns associated with the pandemic continuing to affect customer behaviors, spending levels and preferences, and travel patterns and demand even after containment measures are lifted;

the amount and efficacy of investments in share, scale and relevance;

growth in Card Member loans and the yield on Card Member loans not remaining consistent with current expectations;

the average discount rate changing by a greater or lesser amount than expected;

an inability of business partners to meet their obligations to us and our customers due to slowdowns or disruptions in their businesses, bankruptcy or liquidation, or otherwise;

the impact of any future contingencies, including, but not limited to, restructurings, impairments, changes in reserves, legal costs, the imposition of fines or civil money penalties and increases in Card Member reimbursements;

• future credit performance and the amount and timing of future credit reserve builds and releases, which will depend in part on changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates) and delinquency and write-off rates;

and an inability to address competitive pressures and implement our strategies and business initiatives, including within the premium consumer space, commercial payments, the global merchant network and digital environment;

• future credit performance, the level of future delinquency and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates);

macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies;

the impact of the CECL methodology;

collections capabilities and recoveries of previously written-off loans and receivables;

the ability and willingness of Card Members to pay amounts owed to us, particularly as forbearance and government support programs end;

the enrollment in, and effectiveness of, hardship programs and troubled debt restructurings;

the availability of government stimulus programs for borrowers;

the performance of accounts as they graduate and exit from financial relief programs;

collections capabilities and recoveries of previously written-off loans and receivables;

and governmental actions that provide forms of relief with respect to certain loans and fees, such as limiting debt collections efforts and encouraging or requiring extensions, modifications or forbearance;

• net interest income and the growth rate of loans outstanding being higher or lower than current expectations, which will depend on the behavior of Card Members and their actual spending and borrowing patterns;

our ability to effectively manage risk and enhance Card Member value propositions;

changes in interest rates and our cost of funds;

changes in benchmark interest rates;

changes in capital and credit market conditions and the availability and cost of capital;

credit actions, including line size and other adjustments to credit availability;

and the effectiveness of our strategies to capture a greater share of existing Card Members’ spending and borrowings, reduce Card Member attrition and attract new customers;

• the actual amount we spend on marketing in the future, which will be based in part on continued changes in macroeconomic conditions and business performance;

and the effectiveness of our strategies to capture a greater share of existing Card Members’ spending and borrowings, and attract new, and retain existing, customers;

• the actual amount we spend on marketing in the future, which will be based in part on continued changes in the macroeconomic and competitive environment and business performance;

management’s identification and assessment of attractive investment opportunities and the receptivity of Card Members and prospective customers to advertising and customer acquisition initiatives;

the pace at which we wind down our value injections efforts;

our ability to balance expense control and investments in the business;

and management’s ability to realize efficiencies and optimize investment spending;

• the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by continued changes in macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of spend in bonus categories) and the redemption of rewards and offers (including travel redemptions);

the costs related to reward point

Card Members’ interest in the value propositions we offer;

further enhancements to product benefits to make them attractive to Card Members, potentially in a manner that is not cost-effective;

and new and renegotiated contractual obligations with business partners;

• our ability to control our operating expenses and the actual amount we spend on operating expenses in the future, which could be impacted by, among other things, management’s decision to increase or decrease spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities depending on overall business performance;

our ability to innovate efficient channels of customer interactions, such as chat supported by artificial intelligence;

• the actual amount to be spent on Card Member rewards and services and business development, and the relationship of these variable customer engagement costs to revenues, which could be impacted by continued changes in macroeconomic conditions and Card Member behavior as it relates to their spending patterns (including the level of spend in bonus categories), the redemption of rewards and offers (including travel redemptions) and usage of travel-related benefits;

the costs related to reward point redemptions;

further enhancements to product benefits to make them attractive to Card Members and prospective customers, potentially in a manner that is not cost-effective;

new and renegotiated contractual obligations with business partners;

and the pace and cost of the expansion of our global lounge collection;

• our ability to control operating expenses and the actual amount we spend on operating expenses in the future, which could be impacted by, among other things, salary and benefit expenses to attract and retain talent;

costs due to new hybrid working arrangements;

supply chain issues;

a persistent inflationary environment;

management’s decision to increase or decrease spending in such areas as technology, business and product development, sales force, premium servicing and digital capabilities depending on overall business performance;

our ability to innovate efficient channels of customer interactions;

restructuring activity;

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impairments of goodwill or other assets;

the impact of changes in foreign currency exchange rates on costs;

and higher-than-expected inflation;

• net card fees not growing consistent with current expectations, which could be impacted by, among other things, the further deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees;

and the impact of changes in foreign currency exchange rates on costs;

• net card fees not performing consistent with current expectations, which could be impacted by, among other things, a deterioration in macroeconomic conditions impacting the ability and desire of Card Members to pay card fees;

higher Card Member attrition rates;

Card Members continuing to be attracted to our premium card products and the pace of Card Member acquisition activity;

and our inability to address competitive pressures and implement our strategies and business initiatives, including introducing new and enhanced benefits and services that are designed for the current environment;

• a further decline of the average discount rate, including as a result of further changes in the mix of spending by location and industry (including the pace of recovery in T&E spending), merchant negotiations (including merchant incentives, concessions and volume-related pricing discounts), competition, pricing regulation (including regulation of competitors’ interchange rates) and other factors;

• our tax rate not remaining consistent with current expectations, which could be impacted by, among other things, our geographic mix of income, further changes in tax laws and regulation, unfavorable tax audits and other unanticipated tax items;

• changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may materially impact the prices charged to merchants that accept American Express cards, competition for new and existing cobrand relationships, competition from new and non-traditional competitors and the success of marketing, promotion and rewards programs;

• changes affecting our plans regarding the return of capital to shareholders, including resuming our share repurchases in the first quarter of 2021, which will depend on factors such as capital levels and regulatory capital ratios;

changes in the stress testing and capital planning process;

the pace of Card Member acquisition activity;

and our inability to address competitive pressures, develop attractive value propositions and implement our strategy of refreshing card products and enhanced benefits and services;

• the average discount rate not performing consistent with current expectations, including as a result of further changes in the mix of spending by location and industry (including the level of T&E spending), merchant negotiations (including merchant incentives, concessions and volume-related pricing discounts), competition, pricing regulation (including regulation of competitors’ interchange rates) and other factors;

• our tax rate not remaining consistent with current levels, which could be impacted by, among other things, further changes in tax laws and regulation, our geographic mix of income, unfavorable tax audits and other unanticipated tax items;

• changes in the substantial and increasing worldwide competition in the payments industry, including competitive pressure that may materially impact the prices charged to merchants that accept American Express cards, the desirability of our premium card products, competition for new and existing cobrand relationships, competition from new and non-traditional competitors and the success of marketing, promotion and rewards programs;

• changes affecting our plans regarding the return of capital to shareholders, including increasing the level of our dividend, subject to approval by our Board of Directors, which will depend on factors such as capital levels and regulatory capital ratios;

changes in the stress testing and capital planning process and new guidance from the Federal Reserve;

our results of operations and financial condition;

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and the economic environment and market conditions in any given period;

• our ability to increase Card Member acquisition activities, provide additional value to Card Members and refresh our premium products, which will be impacted in part by competition, brand perceptions and reputation, and our ability to develop and market value propositions that appeal to Card Members and new customers and offer attractive services and rewards programs, which will depend in part on ongoing investments in Card Member acquisition efforts, addressing changing customer behaviors, new product innovation and development, and enrollment processes, including through digital channels, and infrastructure to support new products, services and benefits;

• our ability to grow commercial payments, including through cash flow and supplier payment solutions, which will depend in part on competition, the willingness and ability of companies to use such solutions for procurement and other business expenditures, our ability to offer attractive value propositions to potential customers, our ability to enhance and expand our payment and lending solutions, and our ability to integrate Kabbage and re-launch its suite of products;

• our ability to innovate and strengthen our global network, which will depend in part on our ability to update our systems and platforms, the amount we invests in the network and our ability to make funds available for such investments, and technological developments, including capabilities that allow greater digital integration;

• the possibility that we will not execute on our plans to expand merchant coverage and improve perceptions of coverage, which will depend in part on the success of the company, OptBlue merchant acquirers and GNS partners in signing merchants to accept American Express, which could be impacted by our value propositions offered to merchants and merchant acquirers for card acceptance, as well as the awareness and willingness of Card Members to use American Express cards at merchants and whether Card Members experience welcome acceptance for American Express cards;

• our ability to introduce new and expanded digital capabilities, which will depend on our success in evolving our products and processes for the digital environment, developing new features in the Amex app and enhancing our digital channels, building partnerships and executing programs with other companies, effectively utilizing artificial intelligence to address servicing and other customer needs, and supporting the use of our products as a means of payment through online and mobile channels, all of which will be impacted by investment levels, new product innovation and development and infrastructure to support new products, services and benefits;

our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;

• our ability to expand our leadership in the premium consumer space, which will be impacted in part by competition, brand perceptions (including perceptions related to merchant coverage) and reputation, and our ability to develop and market value propositions that appeal to Card Members and new customers and offer attractive services and rewards programs, which will depend in part on ongoing investments, addressing changing customer behaviors, new product innovation and development, Card Member acquisition efforts and enrollment processes, including through digital channels, and infrastructure to support new products, services and benefits;

• our ability to build on our leadership in commercial payments, which will depend in part on competition, the willingness and ability of companies to credit and charge cards for procurement and other business expenditures as well as use our other products and services for financing needs, perceived or actual difficulties and costs related to setting up card-based B2B payment platforms, our ability to offer attractive value propositions to potential customers, our ability to enhance and expand our payment and lending solutions, and continue the rollout of the Kabbage platform to our small business customers;

• our ability to expand merchant coverage globally, which will depend in part on our success, as well as the success of OptBlue merchant acquirers and GNS partners in signing merchants to accept American Express, which could be impacted by our value propositions offered to merchants and merchant acquirers for card acceptance, as well as the awareness and willingness of Card Members to use American Express cards at merchants, our ability to increase coverage in priority international regions and execute on our plans in China, and technological developments, including capabilities that allow for greater digital integration;

• our ability to stay on the leading edge of technology and digital payment solutions, which will depend on our success in evolving our products and processes for the digital environment, developing new features in the Amex app and enhancing our digital channels, building partnerships and executing programs with other companies, effectively utilizing artificial intelligence to address servicing and other customer needs, and supporting the use of our products as a means of payment

through online and mobile channels, all of which will be impacted by investment levels, new product innovation and development and infrastructure to support new products, services and benefits;

• a failure in or breach of our operational or security systems, processes or infrastructure, or those of third parties, including as a result of cyberattacks, which could compromise the confidentiality, integrity, privacy and/or security of data, disrupt our operations, reduce the use and acceptance of American Express cards and lead to regulatory scrutiny, litigation, remediation and response costs, and reputational harm;

• changes in capital and credit market conditions, which may significantly affect our ability to meet our liquidity needs and expectations regarding capital ratios;

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• our deposit rates increasing faster or slower than current expectations and changes affecting our ability to grow retail direct deposits, including due to market demand, changes in benchmark interest rates, competition or regulatory restrictions on our ability to obtain deposit funding or offer competitive interest rates, which could affect our net interest yield and ability to fund our businesses;

• our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various factors such as future business growth, the impact of global economic, political and other events on market capacity, demand for securities we offer, regulatory changes, ability to securitize and sell receivables and the performance of receivables previously sold in securitization transactions;

• our funding plan being implemented in a manner inconsistent with current expectations, which will depend on various factors such as future business growth, the impact of global economic, political and other events on market capacity, demand for securities we offer, regulatory changes, ability to securitize and sell loans and receivables and the performance of loans and receivables previously sold in securitization transactions;

• our ability to implement our ESG strategies and initiatives, which depend in part on the amount and efficacy of our investments in product innovations, marketing campaigns, our supply chain and operations, and philanthropic, colleague and community programs;

customer behaviors;

and the cost and availability of solutions for a low carbon economy;

• legal and regulatory developments, which could affect the profitability of our business activities;

limit our ability to pursue business opportunities;

require changes to business practices or alter our relationships with Card Members, partners, merchants and other third parties, including our ability to continue certain cobrand and agent relationships in the EU;

exert further pressure on the average discount rate and GNS volumes;

limit our ability to pursue business opportunities or conduct business in certain jurisdictions;

exert further pressure on the average discount rate and GNS business;

result in increased costs related to regulatory oversight, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or civil money penalties;

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• changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, including of cobrand partners and merchants that represent a significant portion of our business, such as the airline industry, or partners in GNS or financial institutions that we rely on for routine funding and liquidity, which could materially affect our financial condition or results of operations;

• factors beyond our control such as resurgences of COVID-19 cases, whether and when populations achieve herd immunity, severe weather conditions, natural disasters, power loss, disruptions in telecommunications, terrorism and other catastrophic events, any of which could significantly affect demand for and spending on American Express cards, delinquency rates, loan and receivable balances and other aspects of our business and results of operations or disrupt our global network systems and ability to process transactions.

• factors beyond our control such as continued waves of COVID-19 cases, the severity and contagiousness of new variants, severe weather conditions, natural disasters, power loss, disruptions in telecommunications, terrorism and other catastrophic events, any of which could significantly affect demand for and spending on American Express cards, delinquency rates, loan and receivable balances and other aspects of our business and results of operations or disrupt our global network systems and ability to process transactions.

A further description of these uncertainties and other risks can be found in “Risk Factors” above and our other reports filed with the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis