AMERICAN EXPRESS CO 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) EXECUTIVE OVERVIEW BUSINESS INTRODUCTION We are a globally integrated payments company with four reportable operating segments: U.S. Consumer Services (USCS), Commercial Services (CS), International Card Services (ICS) and Global Merchant and Network Services (GMNS). Corporate functions and certain other businesses and operations are included in Corporate & Other. Our range of products and services includes: • Credit card, charge card, 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 • Network services • Other fee services, including fraud prevention services and the design and operation of customer loyalty programs • Expense management products and services • Travel and lifestyle services Our various products and services are offered globally to diverse customer groups, including consumers, small businesses, mid-sized companies and large corporations. These products and services are offered 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. The following types of revenue are generated from our various products and services: • Discount revenue, our largest revenue source, represents the amount we earn and retain from the merchant payable for facilitating transactions between Card Members and merchants on payment products issued by American Express. 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 conducts business, the merchant’s overall American Express-related transaction volume, the method of payment, the settlement terms with the merchant, the method of submission of transactions and, in certain instances, the geographic scope for the card acceptance agreement between the merchant and us (e.g., local 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 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; • Service fees and other revenue, primarily represent service fees earned from merchants and other customers, travel commissions and fees, Card Member delinquency fees, foreign currency-related fees charged to Card Members, and income (losses) from our investments in which we have significant influence; and • Processed revenue, primarily represents revenues related to network partnership agreements, comprising royalties, fees and amounts earned for facilitating transactions on cards issued by network partners. Refer to the “Glossary of Selected Terminology” below for the definitions of certain key terms and related information appearing within this Form 10-K. NON-GAAP MEASURES We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included within this report constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies. 42 Table of Contents TABLE 1: SUMMARY OF FINANCIAL PERFORMANCE Years Ended December 31, Change Change (Millions, except percentages, per share amounts and where indicated) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Selected Income Statement Data Total revenues net of interest expense $ 60,515 $ 52,862 $ 42,380 $ 7,653 14 % $ 10,482 25 % Provisions for credit losses 4,923 2,182 (1,419) 2,741 # 3,601 # Total expenses 45,079 41,095 33,110 3,984 10 7,985 24 Pretax income 10,513 9,585 10,689 928 10 (1,104) (10) Income tax provision 2,139 2,071 2,629 68 3 (558) (21) Net income 8,374 7,514 8,060 860 11 (546) (7) Earnings per common share — diluted (a) $ 11.21 $ 9.85 $ 10.02 $ 1.36 14 % $ (0.17) (2) % Selected Balance Sheet Data Cash and cash equivalents $ 46,596 $ 33,914 $ 22,028 $ 12,682 37 % $ 11,886 54 % Card Member receivables 60,411 57,613 53,645 2,798 5 3,968 7 Card Member loans 125,995 107,964 88,562 18,031 17 19,402 22 Customer deposits 129,144 110,239 84,382 18,905 17 25,857 31 Long-term debt $ 47,866 $ 42,573 $ 38,675 $ 5,293 12 % $ 3,898 10 % Common Share Statistics (b) Cash dividends declared per common share $ 2.40 $ 2.08 $ 1.72 $ 0.32 15 % $ 0.36 21 % Average common shares outstanding: Basic 735 751 789 (16) (2) % (38) (5) % Diluted 736 752 790 (16) (2) % (38) (5) % Selected Metrics and Ratios Network volumes (Billions) $ 1,680.1 $ 1,552.8 $ 1,284.2 $ 127 8 % $ 269 21 % Billed business (Billions) $ 1,459.6 $ 1,338.3 $ 1,089.8 $ 121 9 % $ 249 23 % Card Member loans and receivables Net write-off rate — principal, interest and fees (c) 2.0 % 1.0 % 0.8 % Net write-off rate — principal only - consumer and small business (c)(d) 1.8 % 0.9 % 0.7 % 30+ days past due as a % of total - consumer and small business (e) 1.3 % 1.1 % 0.7 % Effective tax rate 20.3 % 21.6 % 24.6 % Return on average equity (f) 31.5 % 32.3 % 33.7 % Common Equity Tier 1 10.5 % 10.3 % 10.5 % # Denotes a variance of 100 percent or more (a) Represents net income, less (i) earnings allocated to participating share awards of $64 million, $57 million and $56 million for the years ended December 31, 2023, 2022 and 2021, respectively, (ii) dividends on preferred shares of $58 million, $57 million and $71 million for the years ended December 31, 2023, 2022 and 2021, 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. (b) Our common stock trades principally on The New York Stock Exchange under the trading symbol AXP. (c) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, as our practice is to include uncollectible interest and/or fees as part of our total provision for credit losses, a net write-off rate including principal, interest and/or fees is also presented. (d) A net write-off rate based on principal losses only is not available for corporate receivables due to system constraints. (e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. Refer to Table 12 for 90+ days past billing metrics for corporate receivables. (f) Return on average equity (ROE) is calculated by dividing (i) net income for the period by (ii) average shareholders’ equity for the period. 43 Table of Contents BUSINESS ENVIRONMENT Our results for the year reflect the engagement and loyalty of our customers, the success of the investments we have made to refresh and expand our product offerings and our focus on effective risk management and expense discipline. The successful execution of our growth strategy, along with the strength of our premium customer base and differentiated business model, drove net income of $8.4 billion, or $11.21 per share, compared with net income of $7.5 billion, or $9.85 per share, a year ago. Billed business, the most significant driver of our financial results, increased 9 percent year-over-year. Billed business growth was particularly strong in the first quarter, in part reflecting the negative impacts of the Omicron variant in the prior year, with a softer spend environment towards the end of the year. Goods & Services (G&S) spend increased 6 percent year-over-year. T&E spend grew by 19 percent on a full-year basis, reflecting ongoing demand from our premium customers, while airline spend growth slowed sequentially in the fourth quarter. USCS billed business grew by 10 percent year-over-year, with the largest portion of this growth coming from our Millennial and Gen-Z Card Members. ICS billed business grew by 17 percent year-over-year, driven by continued growth in spend across all regions and customer types outside the United States. CS billed business grew by 3 percent on a year-over-year basis, reflecting the continued modest growth from U.S. SME Card Members and decelerating growth for U.S. large and global corporate clients. Total revenues net of interest expense increased 14 percent year-over-year, reflecting growth in all our revenue lines. The growth in billed business drove a 9 percent increase in Discount revenue, our largest revenue line. Net card fees increased 20 percent year-over-year, reflecting the high levels of new card acquisition and Card Member retention, as well as our cycle of product refreshes. Service fees and other revenues increased 11 percent year-over-year, driven in part by higher travel-related revenues. Net interest income increased 33 percent versus the prior year, primarily reflecting growth in our revolving loan balances, which moderated over the course of the year, as well as net yield expansion versus the prior year. Total loans and Card Member receivables increased 13 percent year-over-year, as our Card Members continue to spend and rebuild balances. Provisions for credit losses increased, primarily driven by higher net write-offs and a higher net reserve build in the current year, reflecting the growth in total loans and higher delinquencies. Net write-off and delinquency rates remained best-in-class, supported by our premium global customer base, our strong focus on risk management and disciplined growth strategy. 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 primarily due to the growth in billed business and higher usage of travel-related benefits. Marketing expense decreased 4 percent year-over-year, primarily driven by lower levels of spend on customer acquisition. Operating expenses increased 8 percent year-over-year, primarily driven by higher compensation expense and technology costs to support business growth. We remain focused on driving marketing and operating expense efficiencies, while continuing to increase investments in our growth strategy. During the year, we maintained our capital ratios within our current target range of 10 to 11 percent and returned $5.3 billion of capital to our shareholders in the form of share repurchases and common stock dividends. We plan to continue to return to shareholders the excess capital we generate while managing our CET1 capital ratio within our target range and supporting balance sheet growth. We also expect to increase the regular quarterly dividend on common shares outstanding by 17 percent beginning with the first quarter 2024 dividend declaration. Our robust capital, funding and liquidity positions provide us with significant flexibility to maintain a strong balance sheet. On January 16, 2024, we announced that we signed an agreement to sell fraud prevention solutions provider Accertify Inc., a wholly owned subsidiary we acquired in 2010, and whose operations are reported within the GMNS segment. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2024. Upon closing, we expect to recognize a sizeable pre-tax gain, which will be recorded as a reduction to Other expense and is expected to be substantially reinvested back into our business. Our performance continues to give us confidence in our business model and while we recognize the uncertainty of the geopolitical and macroeconomic environment, we remain committed to executing on our strategy to deliver sustainable and profitable long-term growth. See “Supervision and Regulation” under “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 potential impacts of macroeconomic, geopolitical and competitive conditions and certain litigation and regulatory matters on our business. 44 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS The discussions in the “Consolidated Results of Operations” and “Business Segment Results of Operations” provide commentary on the variances for the year ended December 31, 2023 compared to the year ended December 31, 2022, as presented in the accompanying tables. For a discussion of the financial condition and results of operations for 2022 compared to 2021, 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, 2022, filed with the SEC on February 10, 2023. TABLE 2: TOTAL REVENUES NET OF INTEREST EXPENSE SUMMARY Years Ended December 31, Change Change (Millions, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Discount revenue $ 33,416 $ 30,739 $ 24,563 $ 2,677 9 % $ 6,176 25 % Net card fees 7,255 6,070 5,195 1,185 20 875 17 Service fees and other revenue 5,005 4,521 3,316 484 11 1,205 36 Processed revenue 1,705 1,637 1,556 68 4 81 5 Total non-interest revenues 47,381 42,967 34,630 4,414 10 8,337 24 Total interest income 19,983 12,658 9,033 7,325 58 3,625 40 Total interest expense 6,849 2,763 1,283 4,086 # 1,480 # Net interest income 13,134 9,895 7,750 3,239 33 2,145 28 Total revenues net of interest expense $ 60,515 $ 52,862 $ 42,380 $ 7,653 14 % $ 10,482 25 % # Denotes a variance of 100 percent or more TOTAL REVENUES NET OF INTEREST EXPENSE Discount revenue increased, primarily driven by an increase in billed business of 9 percent. See Tables 5 and 6 for more details on billed business performance. Net card fees increased, primarily driven by growth in our premium card portfolios. See Table 5 for more details on proprietary cards-in-force and average fee per card. Service fees and other revenue increased, primarily driven by foreign exchange related revenues associated with Card Member cross-currency spending and growth in delinquency fees. Processed revenue increased, primarily driven by an increase in network partner volumes, partially offset by a decrease in volumes associated with the decommission of one of our alternative payment solutions. See Tables 5 and 6 for more details on processed volume performance. Interest income increased, primarily driven by higher interest rates and growth in revolving loan balances. Interest expense increased, primarily driven by higher interest rates paid on customer deposits. 45 Table of Contents TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY Years Ended December 31, Change Change (Millions, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Card Member loans Net write-offs $ 2,486 $ 1,066 $ 879 $ 1,420 # % $ 187 21 % Reserve build (release) (a) 1,353 448 (2,034) 905 # 2,482 # Total 3,839 1,514 (1,155) 2,325 # 2,669 # Card Member receivables Net write-offs 937 462 129 475 # 333 # Reserve (release) build (a) (57) 165 (202) (222) # 367 # Total 880 627 (73) 253 40 700 # Other Net write-offs — Other loans (b) 107 22 21 85 # 1 5 Net write-offs — Other receivables (c) 25 15 33 10 67 (18) (55) Reserve build (release) — Other loans (a)(b) 67 7 (185) 60 # 192 # Reserve build (release) — Other receivables (a)(c) 5 (3) (60) 8 # 57 95 Total 204 41 (191) 163 # 232 # Total provisions for credit losses $ 4,923 $ 2,182 $ (1,419) $ 2,741 # % $ 3,601 # % # Denotes a variance of 100 percent or more (a) Refer to the “Glossary of Selected Terminology” below for a definition of reserve build (release). (b) Relates to Other loans of $7.1 billion, $5.4 billion and $2.9 billion less reserves of $126 million, $59 million and $52 million, as of December 31, 2023, 2022 and 2021, respectively. (c) Relates to Other receivables included in Other assets on the Consolidated Balance Sheets of $3.7 billion, $3.1 billion and $2.7 billion, less reserves of $27 million, $22 million and $25 million as of December 31, 2023, 2022 and 2021, respectively. PROVISIONS FOR CREDIT LOSSES Card Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was primarily driven by an increase in loans outstanding, higher delinquencies and deterioration in the macroeconomic outlook at that time, partially offset by a reduction in COVID-19 pandemic-driven reserves. Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding. Other provisions for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in non-card loans outstanding. The reserve build in the prior year was primarily driven by an increase in non-card loans outstanding, partially offset by improved credit performance. 46 Table of Contents TABLE 4: EXPENSES SUMMARY Years Ended December 31, Change Change (Millions, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Card Member rewards $ 15,367 $ 14,002 $ 11,007 $ 1,365 10 % $ 2,995 27 % Business development 5,657 4,943 3,762 714 14 1,181 31 Card Member services 3,968 2,959 1,993 1,009 34 966 48 Marketing 5,213 5,458 5,291 (245) (4) 167 3 Salaries and employee benefits 8,067 7,252 6,240 815 11 1,012 16 Other, net 6,807 6,481 4,817 326 5 1,664 35 Total expenses $ 45,079 $ 41,095 $ 33,110 $ 3,984 10 % $ 7,985 24 % EXPENSES Card Member rewards expense increased, primarily driven by increases in Membership Rewards and cash back rewards expenses, collectively, of $680 million and cobrand rewards expense of $685 million, all 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 higher levels of rewards, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products. The Membership Rewards Ultimate Redemption Rate (URR) for current program participants was 96 percent (rounded down) at both December 31, 2023 and 2022. Business development expense increased, primarily due to increased partner payments driven by higher contractual rates and network volumes. Card Member services expense increased, primarily due to higher usage of travel-related benefits. Marketing expense decreased, primarily reflecting lower levels of spending on customer acquisitions. Salaries and employee benefits expense increased, primarily driven by higher compensation costs reflecting the continued investment in our colleagues to support business growth and changes in the value of deferred compensation. Other, net expenses increased, primarily driven by higher technology costs, foreign exchange losses related to the devaluation of the Argentine peso, a reserve associated with a merchant exposure for Card Member purchases and the FDIC special assessment described in “Supervision and Regulation — Other Banking Regulations” under “Business”, all of which were partially offset by lower net losses on Amex Ventures investments and lower professional services expenses. INCOME TAXES The effective tax rate was 20.3 percent and 21.6 percent for 2023 and 2022, respectively. The reduction in the effective tax rate primarily reflected changes in the geographic mix of income. The tax rates in both years reflected discrete tax benefits related to the resolution of prior-year tax items. 47 Table of Contents TABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION Change Change Years Ended December 31, 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Network volumes (billions) $ 1,680.1 $ 1,552.8 $ 1,284.2 8 % 21 % Billed business $ 1,459.6 $ 1,338.3 $ 1,089.8 9 23 Processed volumes $ 220.5 $ 214.5 $ 194.4 3 10 Cards-in-force (millions) 141.2 133.3 121.7 6 10 Proprietary cards-in-force 80.2 76.7 71.4 5 7 Basic cards-in-force (millions) 118.7 111.5 100.7 6 11 Proprietary basic cards-in-force 61.7 59.1 54.7 4 8 Average proprietary basic Card Member spending (dollars) $ 24,059 $ 23,496 $ 20,392 2 15 Average fee per card (dollars) (a) $ 92 $ 82 $ 74 12 % 11 % Discount revenue as a % of Billed business 2.29% 2.30% 2.25% (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. TABLE 6: NETWORK VOLUMES-RELATED STATISTICAL INFORMATION 2023 2022 Year over Year Percentage Increase (Decrease) Percentage Increase (Decrease) Assuming No Changes in FX Rates (a) Year over Year Percentage Increase (Decrease) Percentage Increase (Decrease) Assuming No Changes in FX Rates (a) Network volumes 8 % 9 % 21 % 24 % Total billed business 9 9 23 25 U.S. Consumer Services 10 24 Commercial Services 3 3 21 22 International Card Services 17 18 23 36 Processed volumes 3 6 10 18 Merchant industry billed business metrics G&S spend (72% and 75% of billed business for 2023 and 2022, respectively) 6 6 13 16 T&E spend (28% and 25% of billed business for 2023 and 2022, respectively) 19 19 64 67 Airline spend (7% and 6% of billed business for 2023 and 2022, respectively) 23 % 24 % 119 % 125 % (a) The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of conversion 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). 48 Table of Contents TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION As of or for the Years Ended December 31, Change Change (Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Card Member loans and receivables: Net write-off rate — principal, interest and fees (a) 2.0 % 1.0 % 0.8 % Net write-off rate — principal only - consumer and small business (a)(b) 1.8 % 0.9 % 0.7 % 30+ days past due as a % of total - consumer and small business (c) 1.3 % 1.1 % 0.7 % Card Member loans: Card Member loans (billions) $ 126.0 $ 108.0 $ 88.6 17 % 22 % Credit loss reserves: Beginning balance $ 3,747 $ 3,305 $ 5,344 13 (38) Provisions — principal, interest and fees 3,839 1,514 (1,155) # # Net write-offs — principal less recoveries (2,043) (837) (672) # 25 Net write-offs — interest and fees less recoveries (443) (229) (207) 93 11 Other (d) 18 (6) (5) # (20) Ending balance $ 5,118 $ 3,747 $ 3,305 37 13 % of loans 4.1 % 3.5 % 3.7 % % of past due 297 % 348 % 555 % Average loans (billions) $ 114.8 $ 95.4 $ 76.1 20 25 Net write-off rate — principal, interest and fees (a) 2.2 % 1.1 % 1.2 % Net write-off rate — principal only (a) 1.8 % 0.9 % 0.9 % 30+ days past due as a % of total 1.4 % 1.0 % 0.7 % Card Member receivables: Card Member receivables (billions) $ 60.4 $ 57.6 $ 53.6 5 7 Credit loss reserves: Beginning balance $ 229 $ 64 $ 267 # (76) Provisions — principal and fees 880 627 (73) 40 # Net write-offs — principal and fees less recoveries (e) (937) (462) (129) # # Other (d) 2 — (1) — # Ending balance $ 174 $ 229 $ 64 (24) % # % % of receivables 0.3 % 0.4 % 0.1 % Net write-off rate — principal and fees (a)(e) 1.6 % 0.8 % 0.3 % Net write-off rate — principal only - consumer and small business (a)(b) 1.8 % 0.9 % 0.3 % 30+ days past due as a % of total - consumer and small business (c) 1.1 % 1.3 % 0.6 % # Denotes a variance of 100 percent or more (a) We present a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, 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. (b) A net write-off rate based on principal losses only is not available for corporate receivables due to system constraints. (c) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. Refer to Table 12 for 90+ days past billing metrics for corporate receivables. (d) Other includes foreign currency translation adjustments. (e) 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 write-off in the year ended December 31, 2020 in the ICS segment. 49 Table of Contents TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS Years Ended December 31, (Millions, except percentages and where indicated) 2023 2022 2021 Net interest income $ 13,134 $ 9,895 $ 7,750 Exclude: Interest expense not attributable to our Card Member loan portfolio (a) 2,943 1,268 738 Interest income not attributable to our Card Member loan portfolio (b) (2,896) (1,023) (379) Adjusted net interest income (c) $ 13,181 $ 10,140 $ 8,109 Average Card Member loans (billions) $ 114.8 $ 95.4 $ 76.0 Net interest income divided by average Card Member loans (c) 11.4 % 10.4 % 10.2 % Net interest yield on average Card Member loans (c) 11.5 % 10.6 % 10.7 % (a) Primarily represents interest expense attributable to maintaining our corporate liquidity pool and funding Card Member receivables. (b) Primarily represents interest income attributable to Other loans, interest-bearing deposits and the fixed income investment portfolios. (c) Adjusted net interest income and net interest yield on average Card Member loans are non-GAAP measures. Refer to the “Glossary of Selected Terminology” below for the definitions of these terms. We believe adjusted net interest income is useful to investors because it represents the interest expense and interest income attributable to our Card Member loan portfolio and is a component of net interest yield on average Card Member loans, which provides a measure of profitability of our Card Member loan portfolio. Net interest yield on average Card Member loans reflects adjusted net interest income divided by average Card Member loans, computed on an annualized basis. Net interest income divided by average Card Member loans, computed on an annualized basis, a GAAP measure, includes elements of total interest income and total interest expense that are not attributable to the Card Member loan portfolio, and thus is not representative of net interest yield on average Card Member loans. 50 Table of Contents BUSINESS SEGMENT RESULTS OF OPERATIONS We consider a combination of factors when evaluating the composition of our reportable operating segments, including the results reviewed by the chief operating decision maker, economic characteristics, products and services offered, classes of customers, product distribution channels, geographic considerations (primarily United States versus outside the United States) and regulatory considerations. Refer to Note 24 to the “Consolidated Financial Statements” and “Business” for additional discussion of products and services that comprise each segment. Effective as of the second quarter of 2023, our U.S. travel and lifestyle services (TLS) results, which were previously reported within the USCS segment, are now reported within both USCS and CS segments, allocated based on customer usage. Results of the reportable operating segments generally treat each segment as a stand-alone business. The management reporting process that derives these results allocates revenue and expense using various methodologies as described below. TOTAL REVENUES NET OF INTEREST EXPENSE We allocate discount revenue and certain other revenues among segments using a transfer pricing methodology. Within the USCS, CS and ICS segments, discount revenue generally reflects the issuer component of the overall discount revenue generated by each segment’s Card Members; within the GMNS segment, discount revenue generally reflects the network and acquirer component of the overall discount revenue being allocated. Net card fees, processed revenue and certain other revenues are directly attributable to the segment in which they are reported. Interest and fees on loans and certain investment income is directly attributable to the segment in which it is reported. Interest expense represents an allocated funding cost based on a combination of segment funding requirements and internal funding rates. PROVISIONS FOR CREDIT LOSSES The provisions for credit losses are directly attributable to the segment in which they are reported. EXPENSES Card Member rewards and Card Member services expenses are included in each segment based on the actual expenses incurred. Business development and Marketing expenses are included in each segment based on the actual expenses incurred. Global brand advertising is primarily allocated to the segments based on the relative levels of revenue. Salaries and employee benefits and other expenses reflect both costs incurred directly within each segment, as well as allocated expenses. The allocated expenses include service costs, which primarily reflect salaries and benefits associated with our technology and customer servicing groups, and overhead expenses. Service costs are allocated based on activities directly attributable to the segment, and overhead expenses are allocated based on the relative levels of revenue and Card Member loans and receivables. As a proportion of Salaries and employee benefits and other expenses, allocated costs remain relatively consistent from period to period. Increases in expenses year-over-year driven by allocated costs primarily reflect the changes in salaries and employee benefit costs and other costs related to our technology or servicing organizations and the growth in business volume within our operating segments. 51 Table of Contents U.S. CONSUMER SERVICES TABLE 9: USCS SELECTED INCOME STATEMENT DATA Years Ended December 31, Change Change (Millions, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues Non-interest revenues $ 18,464 $ 16,440 $ 12,989 $ 2,024 12 % $ 3,451 27 % Interest income 12,336 8,457 6,328 3,879 46 2,129 34 Interest expense 2,684 983 395 1,701 # 588 # Net interest income 9,652 7,474 5,933 2,178 29 1,541 26 Total revenues net of interest expense 28,116 23,914 18,922 4,202 18 4,992 26 Provisions for credit losses 2,855 1,021 (919) 1,834 # 1,940 # Total revenues net of interest expense after provisions for credit losses 25,261 22,893 19,841 2,368 10 3,052 15 Expenses Card Member rewards, business development, Card Member services and marketing 15,393 13,535 10,665 1,858 14 2,870 27 Salaries and employee benefits and other operating expenses 4,435 3,958 3,218 477 12 740 23 Total expenses 19,828 17,493 13,883 2,335 13 3,610 26 Pretax segment income $ 5,433 $ 5,400 $ 5,958 $ 33 1 % $ (558) (9) % # Denotes a variance of 100 percent or more USCS issues a wide range of proprietary consumer cards and provides services to U.S. consumers, including travel and lifestyle services as well as banking and non-card financing products. TOTAL REVENUES NET OF INTEREST EXPENSE Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees. Discount revenue increased 10 percent, primarily driven by an increase in U.S. consumer billed business. See Tables 5, 6 and 10 for more details on billed business performance. Net card fees increased 21 percent, primarily driven by growth in our premium card portfolios. Service fees and other revenue increased 5 percent, primarily driven by higher travel commissions and fees from our consumer travel business and growth in delinquency fees, partially offset by the change in the allocation of TLS revenues described above. Interest income increased, primarily driven by higher interest rates and growth in revolving loan balances. Interest expense increased, primarily driven by a higher cost of funds. PROVISIONS FOR CREDIT LOSSES Card Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was driven by an increase in loans outstanding, higher delinquencies and changes in macroeconomic forecasts at that time, partially offset by the release of COVID-19 pandemic-driven reserves. Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies and a decrease in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding. 52 Table of Contents EXPENSES Total expenses increased, primarily driven by higher Card Member rewards expense, Business development expense, and Card Member services expense. Card Member rewards expense increased, primarily driven by higher billed business. The increase was also driven by a larger proportion of spend in categories that earn higher levels of rewards, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products. Business development expense increased, primarily due to increased partner payments driven by higher contractual rates and billed business. Card Member services expense increased, primarily due to higher usage of travel-related benefits. Marketing expense decreased, reflecting lower levels of spending on customer acquisitions. Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, partially offset by the change in the allocation of TLS servicing costs described above. 53 Table of Contents TABLE 10: USCS SELECTED STATISTICAL INFORMATION As of or for the Years Ended December 31, Change Change (Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Billed business (billions) $ 610.8 $ 553.0 $ 444.2 10 % 24 % Proprietary cards-in-force 43.8 41.7 39.0 5 7 Proprietary basic cards-in-force 30.7 29.2 27.3 5 7 Average proprietary basic Card Member spending (dollars) $ 20,303 $ 19,514 $ 16,498 4 18 Total segment assets (billions) $ 107.2 $ 94.4 $ 76.5 14 23 Card Member loans: Total loans (billions) $ 83.2 $ 72.7 $ 59.8 14 22 Average loans (billions) $ 76.0 $ 63.7 $ 52.0 19 23 Net write-off rate — principal, interest and fees (a) 2.2 % 1.1 % 1.1 % Net write-off rate — principal only (a) 1.7 % 0.9 % 0.8 % 30+ days past due as a % of total 1.4 % 1.0 % 0.7 % Calculation of Net Interest Yield on Average Card Member Loans: Net interest income $ 9,652 $ 7,474 $ 5,933 Exclude: Interest expense not attributable to our Card Member loan portfolio (b) 192 139 158 Interest income not attributable to our Card Member loan portfolio (c) (386) (228) (110) Adjusted net interest income (d) $ 9,458 $ 7,385 $ 5,981 Average Card Member loans (billions) $ 76.0 $ 63.7 $ 52.0 Net interest income divided by average Card Member loans (d) 12.7 % 11.7 % 11.4 % Net interest yield on average Card Member loans (d) 12.4 % 11.6 % 11.5 % Card Member receivables: Total receivables (billions) $ 14.8 $ 14.3 $ 14.7 3 % (3) % Net write-off rate — principal and fees (a) 1.3 % 0.6 % 0.1 % Net write-off rate — principal only (a) 1.2 % 0.6 % — % 30+ days past due as a % of total 0.8 % 0.9 % 0.4 % (a) Refer to Table 7 footnote (a). (b) Refer to Table 8 footnote (a). (c) Refer to Table 8 footnote (b). (d) Refer to Table 8 footnote (c). 54 Table of Contents COMMERCIAL SERVICES TABLE 11: CS SELECTED INCOME STATEMENT DATA Years Ended December 31, Change Change (Millions, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues Non-interest revenues $ 12,931 $ 12,196 $ 9,833 $ 735 6 % $ 2,363 24 % Interest income 3,328 2,070 1,408 1,258 61 662 47 Interest expense 1,483 697 330 786 # 367 # Net interest income 1,845 1,373 1,078 472 34 295 27 Total revenues net of interest expense 14,776 13,569 10,911 1,207 9 2,658 24 Provisions for credit losses 1,313 565 (420) 748 # 985 # Total revenues net of interest expense after provisions for credit losses 13,463 13,004 11,331 459 4 1,673 15 Expenses Card Member rewards, business development, Card Member services and marketing 7,422 7,238 5,762 184 3 1,476 26 Salaries and employee benefits and other operating expenses 3,180 2,886 2,633 294 10 253 10 Total expenses 10,602 10,124 8,395 478 5 1,729 21 Pretax segment income $ 2,861 $ 2,880 $ 2,936 $ (19) (1) % $ (56) (2) % # Denotes a variance of 100 percent or more CS issues a wide range of proprietary corporate and small business cards and provides services to U.S. businesses, including payment and expense management, banking and non-card financing products. CS also issues proprietary corporate cards and provides services to select global corporate clients. TOTAL REVENUES NET OF INTEREST EXPENSE Non-interest revenues increased, primarily driven by higher Discount revenue and Service fees and other revenue. Discount revenue increased 4 percent, primarily driven by an increase in commercial billed business. See Tables 5, 6 and 12 for more details on billed business performance. Net card fees increased 18 percent, primarily driven by growth in our premium card portfolios. Service fees and other revenue increased 53 percent, largely driven by the change in the allocation of TLS revenues described above, as well as growth in delinquency fees. Interest income increased, primarily driven by higher interest rates and growth in revolving loan balances. Interest expense increased, primarily driven by a higher cost of funds. PROVISIONS FOR CREDIT LOSSES Card Member loans provision for credit losses increased, primarily due to higher net write-offs and a higher reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding and higher delinquencies. The reserve build in the prior year was driven by an increase in loans outstanding, higher delinquencies and changes in macroeconomic forecasts at that time, partially offset by the release of COVID-19 pandemic-driven reserves. Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies and a decrease in receivables outstanding. The reserve build in the prior year was primarily driven by higher delinquencies and an increase in receivables outstanding. 55 Table of Contents EXPENSES Total expenses increased, primarily driven by higher Operating expenses and Card Member services expense. Card Member rewards expense increased, primarily driven by a larger proportion of spend in categories that earn higher levels of rewards, as well as higher billed business, partially offset by lower redemption costs and changes in expected redemption behaviors associated with certain products. Business development expense increased, primarily due to increased partner payments, primarily driven by higher billed business. Card Member services expense increased, primarily due to higher usage of travel-related benefits. Marketing expense decreased, reflecting lower levels of spending on customer acquisitions. Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, which includes an allocation of TLS servicing costs as described above. 56 Table of Contents TABLE 12: CS SELECTED STATISTICAL INFORMATION As of or for the Years Ended December 31, Change Change (Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Billed business (billions) $ 516.0 $ 499.5 $ 411.6 3 % 21 % Proprietary cards-in-force 15.4 14.9 13.4 3 11 Average Card Member spending (dollars) $ 33,745 $ 35,202 $ 32,042 (4) 10 Total segment assets (billions) $ 55.4 $ 51.4 $ 44.5 8 16 Card Member loans: Total loans (billions) $ 25.8 $ 21.4 $ 17.0 21 26 Average loans (billions) $ 23.9 $ 19.3 $ 14.4 24 34 Net write-off rate — principal, interest and fees (a) 2.0 % 0.8 % 0.8 % Net write-off rate — principal only (a) 1.7 % 0.7 % 0.6 % 30+ days past due as a % of total 1.4 % 0.9 % 0.5 % Calculation of Net Interest Yield on Average Card Member Loans: Net interest income $ 1,845 $ 1,373 $ 1,078 Exclude: Interest expense not attributable to our Card Member loan portfolio (b) 711 430 251 Interest income not attributable to our Card Member loan portfolio (c) (204) (89) (76) Adjusted net interest income (d) $ 2,352 $ 1,714 $ 1,253 Average Card Member loans (billions) $ 23.9 $ 19.3 $ 14.4 Net interest income divided by average Card Member loans (d) 7.7 % 7.1 % 7.5 % Net interest yield on average Card Member loans (d) 9.9 % 8.9 % 8.7 % Card Member receivables: Total receivables (billions) $ 26.2 $ 26.9 $ 24.6 (3) % 9 % Net write-off rate — principal and fees (e) 1.5 % 0.7 % 0.2 % Net write-off rate — principal only (a) - small business 2.1 % 0.9 % 0.2 % 30+ days past due as a % of total - small business 1.5 % 1.6 % 0.8 % 90+ days past billing as a % of total (e) - corporate 0.4 % 0.6 % 0.3 % (a) Refer to Table 7 footnote (a). (b) Refer to Table 8 footnote (a). (c) Refer to Table 8 footnote (b). (d) Refer to Table 8 footnote (c). (e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables 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. 57 Table of Contents INTERNATIONAL CARD SERVICES TABLE 13: ICS SELECTED INCOME STATEMENT DATA Years Ended December 31, Change Change (Millions, except percentages) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues Non-interest revenues $ 9,472 $ 8,262 $ 6,761 $ 1,210 15 % $ 1,501 22 % Interest income 2,076 1,453 1,116 623 43 337 30 Interest expense 1,118 654 442 464 71 212 48 Net interest income 958 799 674 159 20 125 19 Total revenues net of interest expense 10,430 9,061 7,435 1,369 15 1,626 22 Provisions for credit losses 727 584 (43) 143 24 627 # Total revenues net of interest expense after provisions for credit losses 9,703 8,477 7,478 1,226 14 999 13 Expenses Card Member rewards, business development, Card Member services and marketing 5,669 4,962 3,995 707 14 967 24 Salaries and employee benefits and other operating expenses 3,061 2,937 2,554 124 4 383 15 Total expenses 8,730 7,899 6,549 831 11 1,350 21 Pretax segment income $ 973 $ 578 $ 929 $ 395 68 % $ (351) (38) % # Denotes a variance of 100 percent or more ICS issues a wide range of proprietary consumer, small business and corporate cards outside the United States. ICS also provides services to our international customers, including travel and lifestyle services, and manages certain international joint ventures and our loyalty coalition businesses. TOTAL REVENUES NET OF INTEREST EXPENSE Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Net card fees. Discount revenue increased 17 percent, primarily reflecting an increase in billed business. See Tables 5, 6 and 14 for more details on billed business performance. Net card fees increased 17 percent, primarily driven by growth in our premium card portfolios. Service fees and other revenue increased 9 percent, primarily driven by foreign exchange related revenues associated with Card Member cross-currency spending and growth in delinquency fees. Interest income increased, primarily driven by growth in revolving loan balances and higher interest rates. Interest expense increased, primarily driven by a higher cost of funds. PROVISIONS FOR CREDIT LOSSES Card Member loans provision for credit losses increased, primarily due to higher net write-offs, partially offset by a lower reserve build in the current year. The reserve build in the current year was primarily driven by an increase in loans outstanding, partially offset by the performance of portfolios in certain international markets. The reserve build in the prior year was primarily driven by an increase in loans outstanding and higher delinquencies. Card Member receivables provision for credit losses increased, primarily due to higher net write-offs, partially offset by a reserve release in the current year versus a reserve build in the prior year. The reserve release in the current year was primarily driven by lower delinquencies, partially offset by an increase in receivables outstanding. The reserve build in the prior year was primarily driven by an increase in receivables outstanding and higher delinquencies. 58 Table of Contents EXPENSES Total expenses increased, primarily driven by higher Card Member rewards expense and Card Member services expense. Card Member rewards expense increased, primarily driven by higher billed business. Business development expense decreased, primarily driven by a prior-year charge related to revenue allocated to a joint venture partner, partially offset by an increase in partner payment expenses driven by higher billed business. Card Member services expense increased, primarily driven by higher usage of travel-related benefits. Marketing expense decreased, reflecting lower levels of spending on customer acquisitions. Salaries and employee benefits and other expenses increased, primarily due to an increase in allocated service costs, partially offset by lower compensation costs. 59 Table of Contents TABLE 14: ICS SELECTED STATISTICAL INFORMATION As of or for the Years Ended December 31, Change Change (Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Billed business (billions) $ 329.5 $ 281.6 $ 228.2 17 % 23 % Proprietary cards-in-force 21.0 20.1 19.0 4 6 Proprietary basic cards-in-force 15.6 14.9 13.9 5 7 Average proprietary basic Card Member spending (dollars) $ 21,550 $ 19,519 $ 16,689 10 17 Total segment assets (billions) $ 42.2 $ 36.9 $ 32.6 14 13 Card Member loans - consumer and small business: Total loans (billions) $ 17.0 $ 13.8 $ 11.6 23 19 Average loans (billions) $ 15.0 $ 12.3 $ 9.6 22 28 Net write-off rate — principal, interest and fees (a) 2.5 % 1.4 % 2.1 % Net write-off rate — principal only (a) 2.1 % 1.2 % 1.6 % 30+ days past due as a % of total 1.3 % 1.2 % 0.8 % Calculation of Net Interest Yield on Average Card Member Loans: Net interest income $ 958 $ 799 $ 674 Exclude: Interest expense not attributable to our Card Member loan portfolio (b) 475 270 211 Interest income not attributable to our Card Member loan portfolio (c) (62) (28) (11) Adjusted net interest income (d) $ 1,371 $ 1,041 $ 874 Average Card Member loans (billions) $ 15.0 $ 12.4 $ 9.6 Net interest income divided by average Card Member loans (d) 6.4 % 6.5 % 7.0 % Net interest yield on average Card Member loans (d) 9.2 % 8.4 % 9.1 % Card Member receivables: Total receivables (billions) $ 19.4 $ 16.4 $ 14.3 18 % 15 % Net write-off rate — principal and fees (e)(f) 2.1 % 1.3 % 0.6 % Net write-off rate — principal only (a) - consumer and small business 2.2 % 1.4 % 0.8 % 30+ days past due as a % of total - consumer and small business 1.0 % 1.3 % 0.7 % 90+ days past billing as a % of total (e) - corporate 0.5 % 0.5 % 0.3 % (a) Refer to Table 7 footnote (a). (b) Refer to Table 8 footnote (a). (c) Refer to Table 8 footnote (b). (d) Refer to Table 8 footnote (c). (e) For corporate receivables, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member receivable balance is classified as 90 days past billing. Corporate receivables 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) Refer to Table 7 footnote (e). 60 Table of Contents GLOBAL MERCHANT AND NETWORK SERVICES TABLE 15: GMNS SELECTED INCOME STATEMENT AND OTHER DATA Years Ended December 31, Change Change (Millions, except percentages and where indicated) 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Revenues Non-interest revenues $ 6,620 $ 6,123 $ 5,021 $ 497 8 % $ 1,102 22 % Interest income 57 23 16 34 # 7 44 Interest expense (719) (329) (92) (390) # (237) # Net interest income 776 352 108 424 # 244 # Total revenues net of interest expense 7,396 6,475 5,129 921 14 1,346 26 Provisions for credit losses 27 7 (37) 20 # 44 # Total revenues net of interest expense after provisions for credit losses 7,369 6,468 5,166 901 14 1,302 25 Expenses Business development, Card Member services and marketing 1,655 1,611 1,547 44 3 64 4 Salaries and employee benefits and other operating expenses 2,058 1,903 1,745 155 8 158 9 Total expenses 3,713 3,514 3,292 199 6 222 7 Pretax segment income 3,656 2,954 1,874 702 24 1,080 58 Network volumes (billions) 1,680.1 1,552.8 1,284.2 $ 127 8 $ 269 21 Total segment assets (billions) $ 23.7 $ 20.0 $ 15.4 19 % 30 % # Denotes a variance of 100 percent or more 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 (including our network partnership agreements in China), merchant acquirers and a prepaid reloadable and gift card program manager, licensing the American Express brand and extending the reach of the global network. TOTAL REVENUES NET OF INTEREST EXPENSE Non-interest revenues increased across all revenue categories, primarily driven by higher Discount revenue and Service fees and other revenues. Discount revenue increased 7 percent, primarily driven by an increase in billed business. See Tables 5 and 6 for more details on billed business performance. Service fees and other revenue increased 14 percent, primarily due to higher foreign exchange related revenues associated with Card Member cross-currency spending. Processed revenue increased 6 percent, primarily driven by higher processed volumes. 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, largely driven by higher interest rates. EXPENSES Total expenses increased, primarily driven by higher Operating expenses. Business development expense increased, primarily due to increased partner payments driven by higher network volumes. Marketing expense increased, primarily driven by higher levels of spending on merchant engagement and other growth initiatives. Salaries and employee benefits and other expenses increased, primarily due to a reserve associated with a merchant exposure for Card Member purchases, an increase in allocated service costs and higher compensation costs. 61 Table of Contents CORPORATE & OTHER Corporate functions and certain other businesses are included in Corporate & Other. Corporate & Other pretax loss was $2.4 billion and $2.2 billion in 2023 and 2022, respectively. The increase in the pretax loss was primarily driven by changes in the value of deferred compensation, higher current and incentive compensation costs and a contribution to the American Express Foundation, all of which were partially offset by lower net losses on Amex Ventures investments. CONSOLIDATED CAPITAL RESOURCES AND LIQUIDITY Our balance sheet management objectives are to maintain: • A solid and flexible equity capital profile; • A broad, deep and diverse set of funding sources to finance our assets and meet operating requirements; and • Liquidity programs that enable us to continuously meet expected future financing obligations and business requirements for at least a twelve-month period under a variety of adverse circumstances. We continue to see volatility in the capital markets due to a variety of factors and manage our balance sheet to reflect evolving circumstances. CAPITAL STRATEGY We believe capital allocated to growing businesses with a return on risk-adjusted equity in excess of our costs will generate shareholder value. Our objective is to retain sufficient levels of capital generated through net income and other sources, such as the exercise of stock options by colleagues, to maintain a strong balance sheet, provide flexibility to support future business growth and distribute excess capital to shareholders through dividends and share repurchases. See “Dividends and Share Repurchases” below. The level and composition of our consolidated capital position are determined through our Internal Capital Adequacy Assessment Process, which takes into account our business activities, as well as marketplace conditions and requirements or expectations of credit rating agencies, regulators and shareholders, among others. As a bank holding company, we are subject to regulatory requirements administered by the U.S. federal bank regulatory agencies. The Federal Reserve has established specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure to maintain minimum regulatory capital levels at American Express or our U.S. 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 our minimum regulatory requirements, specifically within a 10 to 11 percent target range for American Express Company’s Common Equity Tier 1 (CET1) risk-based capital ratio. We maintain certain flexibility to shift capital across our businesses as appropriate. For example, we may infuse additional capital into subsidiaries to maintain capital at targeted levels in consideration of debt ratings and regulatory requirements. These infused amounts can affect the capital and liquidity positions at the American Express parent company level or at our subsidiaries. We report our capital ratios using the Basel III capital definitions and the Basel III standardized approach for calculating risk-weighted assets. On July 27, 2023, the U.S. federal bank regulatory agencies issued a notice of proposed rulemaking that would significantly revise U.S. regulatory capital requirements for large banking organizations, including American Express Company and AENB. See “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for more information. 62 Table of Contents The following table presents our regulatory risk-based capital and leverage ratios and those of AENB, as of December 31, 2023: TABLE 16: REGULATORY RISK-BASED CAPITAL AND LEVERAGE RATIOS Effective Minimum (a) Ratios as of December 31, 2023 Risk-Based Capital Common Equity Tier 1 7.0 % American Express Company 10.5 % American Express National Bank 11.6 Tier 1 8.5 American Express Company 11.3 American Express National Bank 11.6 Total 10.5 American Express Company 13.1 American Express National Bank 13.3 Tier 1 Leverage 4.0 % American Express Company 9.9 American Express National Bank 9.5 % (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 AENB. Refer to “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” and Note 22 to the “Consolidated Financial Statements” for additional information. The following table presents American Express Company’s regulatory risk-based capital and risk-weighted assets as of December 31, 2023: TABLE 17: REGULATORY RISK-BASED CAPITAL COMPONENTS AND RISK-WEIGHTED ASSETS American Express Company ($ in Billions) December 31, 2023 Risk-Based Capital Common Equity Tier 1 $ 23.2 Tier 1 Capital 24.8 Tier 2 Capital 4.0 Total Capital 28.8 Risk-Weighted Assets 219.7 Average Total Assets to calculate the Tier 1 Leverage Ratio $ 249.6 The following are definitions for our regulatory risk-based capital ratios and leverage ratio, which are calculated as per standard regulatory guidance: Risk-Weighted Assets — Assets are weighted for risk according to a formula used by the Federal Reserve to conform to capital adequacy guidelines. On- and off-balance sheet items are weighted for risk, with off-balance sheet items converted to balance sheet equivalents, using risk conversion factors, before being allocated a risk-adjusted weight. Off-balance sheet exposures comprise a minimal part of the total risk-weighted assets. Common Equity Tier 1 Risk-Based Capital Ratio — Calculated as 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 Current Expected Credit Loss (CECL) final rules, as described below. 63 Table of Contents Tier 1 Risk-Based Capital Ratio — Calculated as Tier 1 capital, divided by risk-weighted assets. 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. See Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares. Total Risk-Based Capital Ratio — Calculated as the sum of Tier 1 capital and Tier 2 capital, divided by risk-weighted assets. Tier 2 capital is the sum of the allowance for credit losses adjusted for the CECL final rules (limited to 1.25 percent of risk-weighted assets), and $1,250 million of eligible subordinated notes, adjusted for capital held by insurance subsidiaries. The $1,250 million of eligible subordinated notes includes the $500 million subordinated debt issued in July 2023 and the $750 million subordinated debt issued in May 2022. Tier 1 Leverage Ratio — Calculated by dividing Tier 1 capital by our average total consolidated assets for the most recent quarter. We elected to delay the recognition of $0.7 billion of reduction in regulatory capital from the adoption of the CECL methodology for two years, followed by a three-year phase-in period at 25 percent once per year beginning January 1, 2022, pursuant to rules issued by federal banking regulators (the CECL final rules). As of January 1, 2024, we have phased in 75 percent of such amount. Refer to “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for additional details. We continue to include accumulated other comprehensive income (loss) in regulatory capital. We were not subject to the Federal Reserve’s supervisory stress tests in 2023 and will be participating in the Federal Reserve’s supervisory stress tests in 2024. We submitted our annual capital plan to the Federal Reserve in April 2023. On July 27, 2023, the Federal Reserve confirmed our SCB of 2.5 percent, which resulted in a minimum CET1 ratio of 7 percent, effective October 1, 2023 to September 30, 2024. DIVIDENDS AND SHARE REPURCHASES We return capital to common shareholders through dividends and share repurchases. The share repurchases reduce common shares outstanding and generally more than offset the issuance of new shares as part of employee compensation plans. During the year ended December 31, 2023, we returned $5.3 billion to our shareholders in the form of common stock dividends of $1.8 billion and share repurchases of $3.5 billion. We repurchased 21.6 million common shares at an average price of $161.21 in 2023. These dividend and share repurchase amounts collectively represent approximately 62 percent of total capital generated during the year. We plan to increase the regular quarterly dividend on our common shares outstanding by 17 percent, from 60 cents to 70 cents per share, beginning with the first quarter 2024 dividend declaration. In addition, during the year ended December 31, 2023, we paid $58 million in dividends on non-cumulative perpetual preferred shares outstanding. Refer to Note 16 to the “Consolidated Financial Statements” for additional information on our preferred shares. Our decisions on capital distributions depend on various factors, including: our capital levels and regulatory capital requirements; 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 supervisory stress test process. We may conduct share repurchases through a variety of methods, including open market purchases, plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, privately negotiated transactions 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. 64 Table of Contents FUNDING STRATEGY 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. We have in place a funding policy covering American Express Company and all of our subsidiaries. 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 deposits, unsecured debt and asset securitizations, and access to secured borrowing facilities and a committed bank credit facility. In particular, we are focused on continuing to grow our direct retail deposit program as a funding source. 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 had the following customer deposits and consolidated debt outstanding as of December 31: TABLE 18: SUMMARY OF CUSTOMER DEPOSITS AND CONSOLIDATED DEBT (Billions) 2023 2022 Customer deposits $ 129.1 $ 110.2 Short-term borrowings 1.3 1.3 Long-term debt 47.9 42.6 Total customer deposits and debt $ 178.3 $ 154.1 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 2024 includes, among other sources, approximately $4.0 billion to $8.0 billion of unsecured term debt issuance and approximately $2.0 billion to $6.0 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 loans and receivables, and the performance of loans and receivables previously sold in securitization transactions. Many of these factors are beyond our control. Our equity capital and funding strategies are designed, among other things, to maintain appropriate and stable unsecured debt ratings from the major credit rating agencies: Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding strategy. Our asset securitization activities are rated separately. 65 Table of Contents TABLE 19: UNSECURED DEBT RATINGS American Express Entity Moody’s S&P Fitch American Express Company Long Term A2 BBB+ A Short Term N/R A-2 F1 Outlook Stable Stable Stable American Express Travel Related Services Company, Inc. Long Term A2 A- A Short Term P-1 A-2 F1 Outlook Stable Stable Stable American Express National Bank Long Term A3 A- A Short Term P-1 A-2 F1 Outlook Stable Stable Stable American Express Credit Corporation Long Term A2 A- A Short Term N/R N/R N/R Outlook Stable Stable Stable These ratings are not a recommendation to buy or hold any of our securities and they may be revised or revoked at any time at the sole discretion of the rating organization. Downgrades in the ratings of our unsecured debt or asset securitization program securities could result in higher funding costs, as well as higher fees related to borrowings under our unused credit facilities. Declines in credit ratings could also reduce our borrowing capacity in the unsecured debt and asset securitization capital markets. We believe our funding mix, including the proportion of U.S. retail deposits insured by the FDIC to total funding, should reduce the impact that credit rating downgrades would have on our funding capacity and costs. On August 29, 2023, the U.S. federal bank regulatory agencies issued a notice of proposed rulemaking that would require covered bank holding companies such as American Express Company to issue and maintain minimum amounts of eligible external long-term debt and certain insured depository institutions such as AENB to issue and maintain minimum amounts of eligible internal long-term debt. See “Supervision and Regulation — Capital and Liquidity Regulation” under “Business” for more information. DEPOSIT PROGRAMS We offer deposits within our U.S. bank subsidiary, AENB. These funds are currently insured up to an amount that is at least $250,000 per account holder through the FDIC; as of December 31, 2023, approximately 92 percent of these deposits were insured. Our ability to obtain deposit funding and offer competitive interest rates is dependent on, among other factors, the capital level of AENB. Direct retail deposits offered by AENB is our primary deposit product channel, which makes FDIC-insured high-yield savings account, certificates of deposit (CDs), business checking and consumer rewards checking account products available directly to customers. As of December 31, 2023, our direct retail deposit program had approximately 2.4 million accounts. AENB also sources deposits through third-party distribution channels as needed to meet our overall funding objectives. CDs carry stated maturities while high-yield savings account, checking account and third-party sweep deposit products do not. We manage the duration of our maturing obligations, including CDs, to reduce concentration and refinancing risk. As of December 31, 2023, we had $129.1 billion in deposits. Refer to Note 7 to the “Consolidated Financial Statements” for a further description of these deposits and scheduled maturities of certificates of deposits. The following table sets forth the average interest rate we paid on different types of deposits during the years ended December 31, 2023, 2022 and 2021. Changes in the average interest rate we paid on our deposits were primarily due to the impact of higher market interest rates offered for retail deposits. TABLE 20: AVERAGE INTEREST RATES PAID ON DEPOSITS Year ended December 31, 2023 2022 2021 (Millions, except percentages) Average Balance Interest Expense Average Interest Rate Average Balance Interest Expense Average Interest Rate Average Balance Interest Expense Average Interest Rate Savings and transaction accounts $ 86,102 $ 3,357 3.9 % $ 71,458 $ 967 1.4 % $ 65,694 $ 275 0.4 % Certificates of deposit: Direct 4,407 159 3.6 1,708 33 1.9 1,930 37 1.9 Third-party (brokered) 13,945 518 3.7 7,649 221 2.9 4,163 102 2.4 Sweep accounts — Third-party (brokered) 15,676 824 5.3 15,039 301 2.0 13,081 41 0.3 Total U.S. retail interest-bearing deposits $ 120,130 $ 4,858 4.0 % $ 95,854 $ 1,522 1.6 % $ 84,868 $ 455 0.5 % 66 Table of Contents 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. We had no commercial paper outstanding at any point during 2023. 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, 2023, we had $47.9 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 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. The proceeds from issuance are distributed to us, through our wholly owned subsidiaries, as consideration for the transferred assets. Refer to Note 5 to the “Consolidated Financial Statements” for a further description of our asset securitizations. TABLE 21: DEBT ISSUANCES (Billions) 2023 American Express Company: Fixed Rate Senior Notes (coupon of 4.90%) $ 1.2 Floating Rate Senior Notes (compounded SOFR (a) plus weighted-average spread of 103 basis points) 0.9 Fixed-to-Floating Rate Senior Notes (weighted-average coupon of 5.54% during the fixed rate period and compounded SOFR (a) plus weighted-average spread of 137 basis points during the floating rate period) 7.4 Fixed-to-Floating Rate Subordinated Notes (coupon of 5.63% during the fixed rate period and compounded SOFR (a) plus spread of 193 basis points during the floating rate period) 0.5 American Express Credit Account Master Trust: Fixed Rate Class A Certificates (weighted-average coupon of 5.02%) 3.5 Total $ 13.5 (a) Secured overnight financing rate (SOFR). 67 Table of Contents LIQUIDITY MANAGEMENT Our liquidity objective is to maintain access to a diverse set of on- and off-balance sheet liquidity sources. We seek to maintain liquidity sources in amounts sufficient to meet our expected future financial obligations and business requirements for liquidity for a period of at least twelve months under a variety of adverse circumstances. These include, but are not limited to, an event where we are unable to raise new funds under our regular funding programs during a substantial weakening in economic conditions. Our liquidity management strategy includes a number of elements, including, but not limited to: • Maintaining diversified funding sources (refer to “Funding Strategy” above for more details); • Maintaining unencumbered liquid assets and off-balance sheet liquidity sources; • Projecting cash inflows and outflows under a variety of economic and market scenarios; and • Establishing clear objectives for liquidity risk management, including compliance with regulatory requirements. We seek to maintain access to a diverse set of on-balance sheet and off-balance sheet liquidity sources, including cash and other liquid assets, secured borrowing facilities and a committed bank credit facility. Through our U.S. bank subsidiary, AENB, we also hold collateral eligible for use at the Federal Reserve’s discount window. The amount and type of liquidity resources we maintain can vary over time, based upon the results of stress scenarios required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as additional stress scenarios required under our liquidity risk policy. These stress scenarios possess distinct characteristics, varying by cash flow assumptions, time horizon and qualifying liquidity sources, among other factors. Scenarios under our liquidity risk policy include market-wide, firm-specific and combined liquidity stresses. Additionally, we anticipate becoming a Category III firm in 2024 and thus being subject to the regulatory requirements under LCR and NSFR rules. We consider other factors in determining the amount and type of liquidity we maintain, such as economic and financial market conditions, seasonality in business operations, growth in our businesses, potential acquisitions or dispositions, the cost and availability of alternative liquidity sources and credit rating agency guidelines and requirements. We believe that we currently maintain sufficient liquidity to meet all internal and regulatory liquidity requirements. As of December 31, 2023 and 2022, we had $46.6 billion and $33.9 billion in Cash and cash equivalents, respectively. Refer to “Cash Flows” below for a discussion of the major drivers impacting cash flows for the year ended December 31, 2023. The investment income we receive on liquidity resources has historically been less than the interest expense on the sources of funding for these balances. From time to time, including during 2023, interest income may exceed the interest expense associated with the liquidity portfolio. Depending on the interest rate environment, our funding composition and the amount of liquidity resources we maintain, the level of future net interest income or expense associated with our liquidity resources will vary. 68 Table of Contents Securitized Borrowing Capacity As of December 31, 2023, we maintained our committed, revolving, secured borrowing facility, with a maturity date of July 15, 2026, 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 15, 2026, which gives us the right to sell up to $3.0 billion face amount of eligible AAA certificates from the American Express Credit Account Master Trust (the Lending Trust). These facilities enhance our contingent funding resources and are also used in the ordinary course of business to fund working capital needs. As of December 31, 2023, no amounts were drawn on the Charge Trust facility or the Lending Trust facility. Committed Bank Credit Facility As of December 31, 2023, we maintained a committed syndicated bank credit facility of $4.0 billion. During the quarter ended December 31, 2023, we extended this facility by two years to mature on October 20, 2026, and increased the maximum borrowing capacity from $3.5 billion to $4.0 billion. The availability of the 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. It does not contain a material adverse change clause, which might otherwise preclude borrowing under the facility, nor is it dependent on our credit rating. As of December 31, 2023, we were in compliance with the covenants contained in the credit facility and no amount was drawn on the facility. This facility enhances our contingent funding resources and is also used in the ordinary course of business to fund working capital needs. Any undrawn portion of this facility could serve as a backstop for the amount of commercial paper outstanding. Other Sources of Liquidity In addition to cash and other liquid assets and the secured borrowing facilities and committed bank credit facility described above, as an insured depository institution, AENB may borrow from the Federal Reserve Bank of San Francisco through the discount window against the U.S. credit card loans and charge card receivables that it pledged. As of December 31, 2023, AENB had available borrowing capacity of $60.4 billion based on the amount and collateral valuation of receivables that were pledged to the Federal Reserve Bank of San Francisco. Whether specific assets will be considered qualifying collateral and the amount that may be borrowed against the collateral remain at the discretion of the Federal Reserve. Following its regular annual review, the Federal Reserve updated the collateral margins for amounts pledged by its member banks, effective November 1, 2023, which reduced AENB’s available borrowing capacity through the discount window. Due to regulatory restrictions, liquidity generated by AENB can generally be used only to fund obligations within AENB, and transfers to the parent company or non-bank affiliates may be subject to prior regulatory approval. 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.” 69 Table of Contents CASH FLOWS The following table summarizes our cash flow activity, followed by a discussion of the major drivers impacting operating, investing and financing cash flows for the year ended December 31, 2023 compared to the year ended December 31, 2022: TABLE 22: CASH FLOWS (Billions) 2023 2022 2021 Total cash provided by (used in): Operating activities $ 18.5 $ 21.1 $ 14.6 Investing activities (24.4) (33.7) (10.5) Financing activities 18.4 24.5 (14.9) Effect of foreign currency exchange rates on cash and cash equivalents 0.2 — (0.1) Net increase (decrease) in cash and cash equivalents $ 12.7 $ 11.9 $ (10.9) 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, 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 2023, 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 driven by higher book overdrafts due to timing differences arising in the ordinary course of business, higher accounts payable to merchants and an increase in the Membership Rewards liability related to growth in billed business. In 2022, the net cash provided by operating activities was primarily driven by cash generated from net income for the period and higher net operating liabilities, resulting from higher accounts payable to merchants and an increase in the Membership Rewards liability related to growth in billed business. 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. In 2023, 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 investment securities. In 2022, the net cash used in investing activities was primarily driven by higher Card Member loan and receivable balances, resulting from higher Card Member spending and net purchases of investment securities. 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. In both 2023 and 2022, the net cash provided by financing activities was primarily driven by growth in customer deposits and net proceeds from debt, partially offset by share repurchases and dividend payments. 70 Table of Contents RISK MANAGEMENT GOVERNANCE Risk management is overseen by our Board of Directors through three Board committees: the Risk Committee, the Audit and Compliance Committee, and the Compensation and Benefits Committee. Each committee consists entirely of independent directors and provides regular reports to the full Board regarding matters reviewed at their committee. The committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance Officer, the Chief Audit Executive and other senior management with regard to our risk management processes, risk profile and performance, controls, talent and capabilities. The Board monitors the “tone at the top,” our risk culture, and oversees emerging and strategic risks. We use our comprehensive Enterprise Risk Management (ERM) program to identify, aggregate, monitor, measure, report and manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer. The Risk Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Risk Officer and receives regular updates from the Chief Risk Officer on key risks and exposures. The Risk Committee of our Board of Directors provides oversight of our ERM framework, processes and methodologies. The Risk Committee approves our ERM policy. The ERM policy defines and governs risk governance, risk oversight and risk appetite, including credit risk (at both the individual and institutional levels), operational risk (e.g., operations and process, legal, conduct, third-party, information technology, information security, data management, privacy and people risks), compliance risk, reputational risk, market risk, funding and liquidity risk, model risk, strategic and business risk, country risk and emerging risks (e.g., climate risk). Risk appetite defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios. In addition, it establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for monitoring performance (including limits and escalation triggers) and assessing control programs. On an ongoing basis, the Risk Committee reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including significant risk exposures, risk trends in our portfolios and major risk concentrations. The Risk Committee also provides oversight of our compliance with Regulatory capital and liquidity standards, and our Internal Capital Adequacy Assessment Process, including the CCAR submissions. The Audit and Compliance Committee of our Board of Directors reviews and approves compliance policies, which include our Compliance Risk Tolerance Statement. In addition, the Audit and Compliance Committee reviews the effectiveness of our Corporate-wide Compliance Risk Management Program. More broadly, this committee is responsible for assisting the Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of our internal audit services function, and the integrity of our systems of internal controls. The Audit and Compliance Committee provides oversight of our Internal Audit Group. The Audit and Compliance Committee reviews and concurs with the appointment, replacement, performance and compensation of our Chief Audit Executive, who reports to the Audit and Compliance Committee, and approves Internal Audit’s annual audit plan, charter, policies, budget and staffing levels, and overall risk assessment methodology. The Audit and Compliance Committee also receives regular updates on the audit plan’s status and results, including significant reports issued by Internal Audit and the status of our corrective actions. The Compensation and Benefits Committee of our Board of Directors works with the Chief Risk Officer to ensure our overall compensation programs, as well as those covering our risk-taking employees, appropriately balance risk with business incentives and that business performance is achieved without taking imprudent or excessive risk. Our Chief Risk Officer is actively involved in setting risk goals for the Company. Our Chief Risk Officer also reviews the risk profiles of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the Compensation and Benefits Committee and attests whether performance goals and results have been achieved without taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to decide on our bonus pools and the compensation of senior executives. 71 Table of Contents There are several internal management committees, including the Enterprise Risk Management Committee (ERMC), chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks and is responsible for risk governance, risk oversight and risk appetite. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies company-wide. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, and provides guidance on the steps to monitor, control and report major risks. In addition, the Asset Liability Committee, chaired by our Chief Financial Officer, is responsible for managing our capital, funding and liquidity, investment, market risk and asset/liability activities in accordance with our policies and in compliance with applicable regulatory requirements. As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk taking. The Chief Executive Officer, business unit presidents and the Chief Financial Officer are part of the first line of defense. The second line comprises independent functions overseeing risk-taking activities of the first line. The Chief Risk Officer, the Chief Compliance Officer, the Chief Operational Risk Officer and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The global risk oversight team oversees the policies, strategies, frameworks, models, processes and capabilities deployed by the first line teams and provides challenges and independent assessments on how the first line of defense is managing risks. Our Internal Audit Group constitutes the third line of defense and provides independent assessments and effective challenge of the first and second lines of defense. CREDIT RISK MANAGEMENT PROCESS We define credit risk 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: individual and institutional. Each has distinct risk management capabilities, strategies, and tools. Business units that create individual or institutional credit risk exposures of significant importance are supported by dedicated risk management teams, each led by a Chief Credit Officer. Individual Credit Risk Individual credit risk arises from consumer and small business charge cards, credit cards, and term loans. These portfolios consist of millions of customers across multiple geographies, industries and levels of net worth. We benefit from the high-quality profile of our customers, which is driven by our brand, premium customer servicing, product features and risk management capabilities, which span underwriting, customer management and collections. The risk in these portfolios is generally correlated to broad economic trends, such as unemployment rates and gross domestic product (GDP) growth. The business unit leaders and their Chief Credit Officers take the lead in managing the credit risk process. These Chief Credit Officers are guided by the Individual Credit Risk Committee (ICRC), which is responsible for implementation and enforcement of the Individual Credit Risk Management Policy. The ICRC ensures compliance with ERMC guidelines and procedures and escalates to the ERMC as appropriate. Credit risk management is supported by sophisticated proprietary scoring and decision-making models that use up-to-date information on prospects and customers, such as spending and payment history and data feeds from credit bureaus. We have developed data-driven economic decision logic for customer interactions to better serve our customers. Institutional Credit Risk Institutional credit risk arises principally within our CS, ICS and GMNS businesses, as well as investment and liquidity management activities. Unlike individual credit risk, institutional credit risk is characterized by a lower loss frequency but higher severity. It is affected both by general economic conditions and by client-specific events. The absence of large losses in any given year or over several years is not necessarily representative of the level of risk of institutional portfolios, given the infrequency of loss events in such portfolios. 72 Table of Contents Similar to individual credit risk, business units taking institutional credit risks are supported by Chief Credit Officers. These officers are guided by the Institutional Risk Management Committee (IRMC), which is responsible for implementation and enforcement of the Institutional Credit Risk Management Policy and for providing guidance to the credit officers of each business unit with substantial institutional credit risk exposures. The committee, along with the business unit Chief Credit Officers, makes investment decisions in core risk capabilities, ensures proper implementation of the underwriting standards and contractual rights for risk mitigation, monitors risk exposures, and determines risk mitigation actions. The IRMC formally reviews large institutional risk exposures to ensure compliance with ERMC guidelines and procedures and escalates them to the ERMC as appropriate. At the same time, the IRMC provides guidance to the business unit risk management teams to optimize risk-adjusted returns on capital. A centralized risk rating unit provides risk assessment of our institutional obligors. Exposure to the Airline and Travel Industry We have multiple important cobrand, rewards, merchant acceptance and corporate payments arrangements with airlines. The ERM program evaluates the risks posed by our airline partners and the overall airline strategy company-wide through comprehensive business analysis of global airlines, and the travel industry more broadly, including cruise lines, travel agencies and tour operators. Our largest airline partner is Delta, and this relationship includes an exclusive cobrand credit card partnership and other arrangements including Membership Rewards redemption, merchant acceptance, travel and corporate payments. See “ We face intense competition for partner relationships, which could result in a loss or renegotiation of these arrangements that could have a material adverse impact on our business and results of operations ” and “ Arrangements with our business partners represent a significant portion of our business. We are exposed to risks associated with our business partners, including reputational issues, business slowdowns, bankruptcies, liquidations, restructurings and consolidations, and the possible obligation to make payments to our partners ” under “Risk Factors” for additional information. Debt Exposure As part of our ongoing risk management process, we monitor our financial exposure to both sovereign and non-sovereign customers and counterparties, and measure and manage concentrations of risk by geographic regions, as well as by economic sectors and industries. A primary focus area for monitoring is credit deterioration due to weaknesses in economic and fiscal profiles. We evaluate countries based on the market assessment of the riskiness of their sovereign debt and our assessment of the economic and financial outlook and closely monitor those deemed high risk. As of December 31, 2023, we considered our gross credit exposures to government entities, financial institutions and corporations in those countries deemed high risk to be individually and collectively not material. OPERATIONAL RISK MANAGEMENT PROCESS We consider operational risk to be the risk of loss due to, among other things, inadequate or failed processes, people or information systems, or impacts from the external environment, including failures to comply with laws and regulations as well as impacts from relationships with third parties. Operational risk is inherent in all business activities and can impact an organization through direct or indirect financial loss, brand damage, customer dissatisfaction, or legal and regulatory penalties. To appropriately measure and manage operational risk, we have implemented a comprehensive operational risk framework that is defined in the Operational Risk Management Policy approved by the 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. It also oversees the preventive, responsive and mitigation efforts by Operational Excellence teams in the business units and staff groups. We use the operational risk framework to identify, measure, monitor and report inherent and emerging operational risks. The framework includes programs established for risk management activities related to processes and the launch of new products and services. The framework also defines guidelines and risk management requirements for the (a) identification of operational risk events, (b) related control enhancements and (c) reporting of key trends and escalation of risks. Outcomes from the operational risk framework are discussed and escalated to various risk management committees and incorporated within our accountability framework for executive compensation. 73 Table of Contents Information Security and Cybersecurity We define information security and cybersecurity risk as the risk that the confidentiality, integrity or availability of American Express information and information systems are impacted by unauthorized or unintended access, use, disclosure, modification or destruction. Our Technology Risk and Information Security (TRIS) program, which is our enterprise information security and cybersecurity program, is designed to (i) ensure the security, confidentiality, integrity and availability of our information and information systems; (ii) protect against any anticipated threats or hazards to the security, confidentiality, integrity or availability of such information; and (iii) protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to us, our colleagues or our customers. The program is built upon a foundation of advanced security technology, employs a highly trained team of experts, and is designed to operate in alignment with global regulatory requirements. The TRIS program includes controls designed to identify, protect, detect, respond to and recover from information security and cybersecurity incidents. We continue to assess the risks and changes in the cyber environment, invest in enhancements to our cybersecurity capabilities and engage in industry and government forums to promote advancements in our cybersecurity capabilities as well as the broader financial services cybersecurity ecosystem. See “Cybersecurity” and “ A major information or cybersecurity incident or an increase in fraudulent activity could lead to reputational damage to our brand and material legal, regulatory and financial exposure, and could reduce the use and acceptance of our products and services ” under “Risk Factors” for additional information. Information Technology 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 our 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. Privacy We define privacy risk as the risk of financial loss, reputational damage, or regulatory or legal action resulting from decisions related to the violation of applicable laws, rules, regulations, contractual obligations, or the non-adherence to privacy policies, disclosures, or standards that apply to the processing of personal data. The Global Privacy Policy, which establishes the privacy framework and defines the American Express Data Protection & Privacy Principles, governs the way we collect, use, store, share, transmit, delete or otherwise process our customer and colleague personal data globally. Chaired by the Chief Privacy Officer, the Privacy Risk Management Committee, a sub-committee of the ORMC, provides oversight and governance for our privacy program. Data Management and Governance 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. 74 Table of Contents Third Party Risk We define third party risk as the risk that relationships with third parties (including their significant subcontractors) create unexpected outcomes and deviations from expectations or stated obligations. The Third Party Management Policy is approved by the Risk Committee of our Board and the ERMC. It sets forth the procurement, risk management, and contracting framework for managing third-party relationships commensurate with their risk and complexity. Our Third Party Lifecycle Management program sets guidelines for identifying, measuring, monitoring, and reporting the risk associated with third parties through the life cycle of the relationships, which includes planning, due diligence and third-party selection, contracting, ongoing monitoring and termination. Conduct Risk We define conduct risk as the risk that colleagues, intentionally or unintentionally, fail to fulfill their responsibilities to American Express, our customers, colleagues or stakeholders in a manner consistent with our Code of Conduct, policies and values as well as applicable laws and regulations. Conduct issues also have the potential to increase several other risk types, including reputational risk, which may undermine the integrity and trust upon which our brand is built. The Conduct Risk Management Policy is approved by the ERMC. It establishes the governance framework for conduct risk across the Company. The policy requires annual risk assessments, implementation of detective and preventive controls, colleague training and timely escalations of conduct issues. It also provides guidance on consequence management for any substantiated cases of misconduct. The Conduct Risk Committee oversees conduct risk related topics and escalates such matters to the ERMC, as appropriate. COMPLIANCE RISK MANAGEMENT PROCESS We define compliance risk as the risk of legal or reputational harm, fines, monetary penalties and payment of damages or other forms of sanction as a result of non-compliance with applicable laws and/or regulations, internal policies and procedures and related practices, or ethical standards. We view our ability to effectively mitigate compliance risk as an important aspect of our business model. Our Global Compliance and Ethics organization is responsible for establishing and maintaining our corporate-wide Compliance Risk Management Program. Pursuant to this program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed. The Compliance Risk Management Committee (CRMC), chaired by the Chief Compliance Officer, is responsible for identifying, evaluating, managing, and escalating compliance risks. The CRMC has a dual reporting relationship directly to both the ERMC and the Audit and Compliance Committee. We have a comprehensive Anti-Money Laundering program that monitors and reports suspicious activity to the appropriate government authorities. The program includes an independent risk assessment of the rules used by the Anti-Money Laundering team. In addition, the Internal Audit Group reviews the processes for practices consistent with regulatory guidance. REPUTATIONAL RISK MANAGEMENT PROCESS We define reputational risk as the risk that negative stakeholder reaction to our products, services, client and partner relationships, business activities and policies, management and workplace culture, or our response to unexpected events, could cause sustained critical media coverage, a decline in revenue or investment, talent attrition, litigation, or government or regulatory scrutiny. We view protecting our reputation for excellent customer service, trust, security and high integrity as core to our vision of providing the world’s best customer experience and fundamental to our long-term success. Our business leaders are responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged as needed. The ERMC is responsible for ensuring reputational risk considerations are included in the scope of appropriate subordinate risk policies and committees and properly reflected in all decisions escalated to the ERMC. 75 Table of Contents MARKET RISK MANAGEMENT PROCESS We define market risk as the risk to earnings or asset and liability values resulting from movements in market prices. Our market risk exposures include (i) interest rate risk due to changes in the relationship between the interest rates on our assets (such as loans, receivables and investment securities) and the interest rates on our liabilities (such as debt and deposits) and (ii) foreign exchange risk related to transactions, funding, investments and earnings in currencies other than the U.S. dollar. Our risk policies establish the framework that guides and governs market risk management, including quantitative limits and escalation triggers. These policies are approved by the ERMC, Asset Liability Committee or Market Risk Management Committee. Market risk is managed by the Market Risk Management Committee. The Market Risk Oversight Officer provides an independent risk assessment and oversight over the policies and exposure management for market risk and Asset Liability Management activities, as well as overseeing compliance with associated regulatory requirements. Market risk management is also guided and governed by policies covering the use of derivative financial instruments, funding, liquidity and investments. Interest Rate Risk We analyze a variety of interest rate scenarios to inform us of the potential impacts from interest rate changes on earnings and the value of assets, liabilities and the economic value of equity. Our interest rate exposure can vary over time as a result of, among other things, the proportion of our total funding provided by variable and fixed-rate debt and deposits compared to our Card Member loans and receivables. Interest rate swaps are used from time to time to effectively convert debt issuances to variable-rate from fixed-rate, or vice versa. Refer to Note 13 to the “Consolidated Financial Statements” for further discussion of our derivative financial instruments. To measure the sensitivity of net interest income to interest rate changes, we first project net interest income over the following twelve-month time horizon considering forecasted business growth and anticipated future market interest rates. The impact from rate changes is then measured by instantaneously increasing or decreasing the anticipated future interest rates by the amounts set forth in Table 23 below. Our current net interest income sensitivity analysis shows higher interest rates would have a detrimental impact on our net interest income. Our estimated repricing risk assumes that our interest-rate sensitive assets and liabilities that reprice within the twelve-month horizon generally reprice by the same magnitude, subject to applicable interest rate caps or floors, as benchmark rates change. It is further assumed that, within our interest-rate sensitive liabilities, certain deposits reprice at lower magnitudes than benchmark rate movements, and the magnitude of this repricing in turn could depend on, among other factors, the direction of rate movements. These assumptions are consistent with historical deposit repricing experience in the industry and within our own portfolio. Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to changes in market interest rates. TABLE 23: SENSITIVITY ANALYSIS OF INTEREST RATE CHANGES ON ANNUAL NET INTEREST INCOME AS OF DECEMBER 31, 2023 (Millions) Instantaneous Parallel Rate Shocks (a) +200bps +100bps -100bps -200bps $ (276) $ (105) $ 74 $ 142 (a) Negative values represent a reduction in net interest income. We use economic value of equity to inform us of the potential impacts from interest rate changes on the net present value of our assets and liabilities under a variety of interest rate scenarios. Economic value of equity is calculated based on our existing assets, liabilities and derivatives, and does not incorporate projected changes in our balance sheet. Key assumptions used in this calculation include the term structure of interest rates, as well as deposit repricing and liquidation profiles used to inform duration and cash flow schedules. The economic value of equity is calculated under multiple interest rate scenarios, including baseline and immediate upward and immediate downward interest rate shocks, to assess its sensitivity to changes in interest rates. Our current sensitivity profile demonstrates that our economic value of equity generally decreases in a declining interest rate scenario and increases in an increasing interest rate scenario. The level of this sensitivity is managed within board-approved policy limits. Foreign Exchange Risk Foreign exchange exposures arise in four principal ways: (1) Card Member spending in currencies that are not the billing currency, (2) cross-currency transactions and balances from our funding activities, (3) cross-currency investing activities, such as in the equity of foreign subsidiaries, and (4) revenues generated and expenses incurred in foreign currencies, which impact earnings. These foreign exchange risks are managed primarily by entering into foreign exchange spot transactions or hedged with foreign exchange forward contracts when the hedge costs are economically justified and in notional amounts designed to offset pretax impacts from currency movements in the period in which they occur. As of December 31, 2023, foreign currency derivative instruments with total notional amounts of approximately $39 billion were outstanding. 76 Table of Contents With respect to Card Member spending and cross-currency transactions, including related foreign exchange forward contracts outstanding, the impact of a hypothetical 10 percent strengthening of the U.S. dollar would have been immaterial to projected earnings as of December 31, 2023. With respect to translation exposure of foreign subsidiary equity balances, including related foreign exchange forward contracts outstanding, a hypothetical 10 percent strengthening of the U.S. dollar would result in an immaterial reduction in other comprehensive income and equity as of December 31, 2023. With respect to anticipated earnings denominated in foreign currencies for the next twelve months, the adverse impact on pretax income of a hypothetical 10 percent strengthening of the U.S. dollar would be approximately $242 million as of December 31, 2023. The actual impact of interest rate and foreign exchange rate changes will depend on, among other factors, the timing of rate changes, the extent to which different rates do not move in the same direction or in the same direction to the same degree, changes in the cost, volume and mix of our hedging activities and changes in the volume and mix of our businesses. FUNDING & LIQUIDITY RISK MANAGEMENT PROCESS We define funding and liquidity risk 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. 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 under a variety of adverse circumstances. These include, but are not limited to, an event where 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. Funding and liquidity risk is managed at an aggregate consolidated level as well as at certain subsidiaries in order to ensure that sufficient and accessible liquidity resources are maintained. The Funding and Liquidity Committee reviews forecasts of our aggregate and subsidiary cash positions and financing requirements, approves funding plans designed to satisfy those requirements under normal and stressed conditions, establishes guidelines to identify the amount of liquidity resources required and monitors positions and determines any actions to be taken. Our liquidity risk management processes are designed in alignment with regulatory guidelines. As discussed in more detail under “Supervision and Regulation — Enhanced Prudential Standards” and “— Capital and Liquidity Regulation” under “Business,” we anticipate becoming a Category III firm in 2024 under U.S. federal bank regulatory agencies’ rules that tailor the application of enhanced prudential standards, which would result in heightened capital, liquidity and prudential requirements, including more stringent liquidity risk management requirements. MODEL RISK MANAGEMENT PROCESS 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. The Enterprise-Wide Model Risk Policy establishes the comprehensive framework for governing model risk. This policy is approved by the ERMC. The comprehensive risk management and governance framework includes 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. 77 Table of Contents STRATEGIC AND BUSINESS RISK MANAGEMENT PROCESS We define strategic and business risk as the risk related to our inability to achieve our business objectives due to poor strategic decisions, including decisions related to mergers, acquisitions, and divestitures, poor implementation of strategic decisions or declining demand for our products and services. Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with company policies. We seek to manage strategic and business risks through risk controls embedded in these processes as well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by committees and business leaders. Mergers, acquisitions and divestitures can only be approved following Executive Committee due diligence, a comprehensive risk assessment by operational, market, credit and oversight leaders provided to the Chief Risk Officer and approval by either the Chief Risk Officer or appropriate risk committees. All new and material changes to products and services are reviewed and approved by the New Products Committee and appropriate credit or risk committees. COUNTRY RISK MANAGEMENT PROCESS We define country risk 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 Environmental, social and governance (ESG) risks, with an emphasis on climate-related risk, are currently identified as an “emerging risk” within our risk governance framework. 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 risks such as increased severity of extreme weather events (e.g., cyclones, hurricanes, floods) and chronic physical risks 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 on 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 or 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. 78 Table of Contents CRITICAL ACCOUNTING ESTIMATES Refer to Note 1 to the “Consolidated Financial Statements” for a summary of our significant accounting policies. Certain of our accounting policies requiring significant management assumptions and judgments are as follows: RESERVES FOR CARD MEMBER CREDIT LOSSES 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 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. These quantitative and qualitative components entail a significant amount of judgment. The primary areas of judgment used in measuring the quantitative components of our reserves relate to the determination of the appropriate R&S Period, the modeling of the probability of and exposure at default, and the methodology to incorporate current and future economic conditions. We use these models and assumptions, combined with historical loss experience, to determine the reserve rates that are applied to the outstanding loan or receivable balances to produce our reserves for expected credit losses for the R&S Period. The qualitative component is intended to capture expected losses that may not have been fully captured in the quantitative component. Through an established governance structure, we consider certain external and internal factors, including emerging portfolio characteristics and trends, which consequentially may increase or decrease the reserves for Card Member credit losses. The R&S Period, which is approximately three years, represents the maximum time-period beyond the balance sheet date over which we can reasonably estimate expected credit losses, using all available portfolio information, current economic conditions and forecasts of future economic conditions. Card Member loan products do not have a contractual term and balances can revolve if minimum required payments are made, causing some balances to remain outstanding beyond the R&S Period. To determine expected credit losses beyond the R&S Period, we immediately revert to long-term average loss rates. 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 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. A significant area of judgment relates to how we apply future Card Member payments to the reporting period balances when determining the exposure at default. The nature of revolving loan products inherently includes a relationship between future payments and spend behavior, which creates complexity in the application of how future payments are either partially or entirely attributable to the existing balance at the end of the reporting period. Using historical customer behavior and other factors, we have assumed that future payments are first allocated to interest and fees associated with the reporting period balance and future spend. We then allocate a portion of the payment to the estimated higher minimum payment amount due because of any future spend. Any remaining portion of the future payment is then allocated to the remaining reporting period balance. CECL requires that the R&S Period include an assumption about current and future economic conditions. 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. 79 Table of Contents Macroeconomic Sensitivity To demonstrate the sensitivity of estimated credit losses to the macroeconomic scenarios, we compared our modeled estimates under a baseline scenario to that under a pessimistic downside scenario. As of December 31, 2023, for every 10 percentage points change in weighting from the baseline scenario to the pessimistic downside scenario, the estimated credit losses increased by approximately $160 million. The modeled estimates under these scenarios were influenced by the duration, severity and timing of changes in economic variables within each scenario and these macroeconomic scenarios, under different conditions or using different assumptions, could result in significantly different estimated credit losses. 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 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. 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. To the extent our expected credit loss models are not indicative of future performance, actual losses could differ significantly from our judgments and expectations, resulting in either higher or lower future provisions for credit losses in any period. 80 Table of Contents LIABILITY FOR MEMBERSHIP REWARDS The Membership Rewards program is our largest card-based rewards program. Card Members can earn points for purchases charged on their enrolled card products. A significant portion of our cards, by their terms, allow Card Members to earn bonus points for purchases at merchants in particular industry categories. Membership Rewards points are redeemable for a broad variety of rewards, including, but not limited to, travel, shopping, gift cards, and covering eligible charges. Points typically do not expire, and there is no limit on the number of points a Card Member may earn. Membership Rewards expense is driven by charge volume on enrolled cards, customer participation in the program and contractual arrangements with redemption partners. We record a Membership Rewards liability that represents 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 weighted average cost (WAC) per point, which are applied to the points of current enrollees. Refer to Note 9 to the “Consolidated Financial Statements” for additional information. The URR assumption is used to estimate the number of points earned by current enrollees that will ultimately be redeemed in future periods. We use statistical and actuarial models to estimate the URR of points earned to date by current Card Members based on redemption trends, card product type, enrollment tenure, card spend levels and credit attributes. The WAC per point assumption is used to estimate future redemption costs and is primarily based on redemption choices made by Card Members, reward offerings by partners, and Membership Rewards program changes. The WAC per point assumption is derived from 12 months of redemptions and is adjusted as appropriate for certain changes in redemption costs that are not representative of future cost expectations and expected developments in redemption patterns. We periodically evaluate our liability estimation process and assumptions based on changes in cost per point redeemed, partner contract changes and developments in redemption patterns, which may be impacted by product refreshes, changes in redemption options and mix of proprietary cards-in-force. The process of estimating the Membership Rewards liability includes a high degree of judgment. Actual redemptions and associated redemption costs could differ significantly from our estimates, resulting in either higher or lower Membership Rewards expense. Changes in the Membership Rewards URR and WAC per point have the effect of either increasing or decreasing the liability through the current period Membership Rewards expense by an amount estimated to cover the cost of all points previously earned but not yet redeemed by current enrollees as of the end of the reporting period. As of December 31, 2023, an increase in the estimated URR of current enrollees of 25 basis points would increase the Membership Rewards liability and corresponding rewards expense by approximately $179 million. Similarly, an increase in the WAC per point of 1 basis point would increase the Membership Rewards liability and corresponding rewards expense by approximately $201 million. GOODWILL RECOVERABILITY Goodwill represents the excess of acquisition cost of an acquired business over the fair value of assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at the reporting unit level annually or when events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value. Our methodology for conducting this goodwill impairment testing contains both a qualitative and quantitative assessment. We have the option to initially perform an assessment of qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting unit and other company and reporting unit-specific events. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then perform the impairment evaluation using a more detailed quantitative assessment. We could also directly perform this quantitative assessment for any reporting unit, bypassing the qualitative assessment. 81 Table of Contents Our methodology for conducting the quantitative goodwill impairment testing is fundamentally based on the measurement of fair value for our reporting units, which inherently entails the use of significant management judgment. For valuation, we use a combination of the income approach (discounted cash flows) and market approach (market multiples) in estimating the fair value of our reporting units. When preparing discounted cash flow models under the income approach, we estimate future cash flows using the reporting unit’s internal multi-year forecast, and a terminal value calculated using a growth rate that we believe is appropriate in light of current and expected future economic conditions. To discount these cash flows we use our expected cost of equity, determined using a capital asset pricing model. When using the market method under the market approach, we apply comparable publicly traded companies’ multiples (e.g., earnings, revenues) to our reporting units’ operating results. The judgment in estimating forecasted cash flows, discount rates and market comparables is significant, and imprecision could materially affect the fair value of our reporting units. We could be exposed to an increased risk of goodwill impairment if future operating results or macroeconomic conditions differ significantly from management’s current assumptions. INCOME TAXES We are subject to the income tax laws of the United States, its states and municipalities and those of the foreign jurisdictions in which we operate. These tax laws are complex, and the manner in which they apply to the taxpayer’s facts is sometimes open to interpretation. In establishing a provision for income tax expense, we must make judgments about the application of inherently complex tax laws. Unrecognized Tax Benefits We establish a liability for unrecognized tax benefits, which are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized in the financial statements. In establishing a liability for an unrecognized tax benefit, assumptions may be made in determining whether, and the extent to which, a tax position should be sustained. A tax position is recognized only when it is more likely than not to be sustained upon examination by the relevant taxing authority, based on its technical merits. The amount of tax benefit recognized is the largest benefit that we believe is more likely than not to be realized on ultimate settlement. As new information becomes available, we evaluate our tax positions and adjust our unrecognized tax benefits, as appropriate . Tax benefits ultimately realized can differ from amounts previously recognized due to uncertainties, with any such differences generally impacting the provision for income tax. Deferred Tax Asset Realization Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the years in which the differences are expected to reverse. Since deferred taxes measure the future tax effects of items recognized in the Consolidated Financial Statements, certain estimates and assumptions are required to determine whether it is more likely than not that all or some portion of the benefit of a deferred tax asset will not be realized. In making this assessment, we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies. These assessments are performed quarterly, taking into account any new information. Changes in facts or circumstances can lead to changes in the ultimate realization of deferred tax assets due to uncertainties. 82 Table of Contents OTHER MATTERS RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS Refer to the Recently Adopted and Issued Accounting Standards section of Note 1 to the “Consolidated Financial Statements.” GLOSSARY OF SELECTED TERMINOLOGY Adjusted net interest income — A non-GAAP measure that represents net interest income attributable to our Card Member loans (which includes, on a GAAP basis, interest that is deemed uncollectible), excluding the impact of interest expense and interest income not attributable to our Card Member loans. Airline spend — Represents spend at airlines as a merchant, which is included within T&E spend. Allocated service costs — Represents salaries and benefits associated with our technology and customer servicing groups, allocated based on activities directly attributable to our reportable operating segments, as well as overhead expenses, which are allocated to our reportable operating segments based on their relative levels of revenue and Card Member loans and receivables. Asset securitizations — Asset securitization involves the transfer and sale of loans or receivables to a special-purpose entity created for the securitization activity, typically a trust. The trust, in turn, issues securities, commonly referred to as asset-backed securities that are secured by the transferred loans and receivables. The trust uses the proceeds from the sale of such securities to pay the purchase price for the transferred loans or receivables. The securitized loans and receivables of our Lending Trust and Charge Trust (collectively, the Trusts) are reported as assets and the securities issued by the Trusts are reported as liabilities on our Consolidated Balance Sheets. Billed business (Card Member spending) — Represents transaction volumes (including cash advances) on payment products issued by American Express. 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 “Consolidated Capital Resources and Liquidity — Capital Strategy” above 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, except for retail cobrand cards issued by network partners that had no out-of-store spending activity during the prior twelve months. Basic cards-in-force excludes supplemental cards issued on consumer accounts. Cards-in-force is useful in understanding the size of our Card Member base. 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. Each transaction on a charge card with no pre-set spending limit is authorized based on its likely economics reflecting a Card Member’s most recent credit information and spend patterns. 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. 83 Table of Contents Cobrand cards — Represents cards issued under cobrand agreements with selected commercial partners. Pursuant to the cobrand agreements, we make payments to our cobrand partners, which can be significant, based primarily on the amount of Card Member spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. The partner is then liable for providing rewards to the Card Member under the cobrand partner’s own loyalty program. Credit cards — Represents cards that have a range of revolving payment terms, structured payment features (e.g. Plan It), grace periods, and rate and fee structures. Discount revenue — Represents the amount we earn and retain from the merchant payable for facilitating transactions between Card Members and merchants on payment products issued by American Express. Goods & Services (G&S) spend — Includes spend in merchant categories other than T&E-related merchant categories, which includes B2B spending by small and mid-sized enterprise customers in our CS and ICS segments. Interest expense — Includes interest incurred primarily to fund Card Member loans and receivables, general corporate purposes and liquidity needs. Interest expense is divided principally into two categories: (i) deposits, which primarily relates to interest expense on deposits taken from customers and institutions, and (ii) debt, which primarily relates to interest expense on our long-term financing and short-term borrowings, (e.g., commercial paper, federal funds purchased, bank overdrafts and other short-term borrowings), as well as the realized impact of derivatives hedging interest rate risk on our long-term debt. Interest income — Includes (i) interest on loans, (ii) interest and dividends on investment securities and (iii) interest income on deposits with banks and other. Interest on loans — Assessed using the average daily balance method for Card Member loans. Unless the loan is classified as non-accrual, interest is recognized based upon the principal amount outstanding in accordance with the terms of the applicable account agreement until the outstanding balance is paid or written off. Interest and dividends on investment securities — Primarily relates to our performing fixed-income securities. Interest income is recognized using the effective interest method, which adjusts the yield for security premiums and discounts, fees and other payments, so a constant rate of return is recognized on the outstanding balance of the related investment security throughout its term. Amounts are recognized until securities are in default or when it is likely that future interest payments will not be made as scheduled. Interest income on deposits with banks and other — Primarily relates to the placement of cash in excess of near-term funding requirements in interest-bearing time deposits, overnight sweep accounts, and other interest-bearing demand and call accounts. Loyalty coalitions — Programs that enable consumers to earn rewards points and use them to save on purchases from a variety of participating merchants through multi-category rewards platforms. Merchants in these programs generally fund the consumer offers and are responsible to us for the cost of rewards points; we earn revenue from operating the loyalty platform and by providing marketing support. Net card fees — Represents the card membership fees earned during the period recognized as revenue over the covered card membership period (typically one year), net of the provision for projected refunds for Card Membership cancellation and deferred acquisition costs. Net interest yield on average Card Member loans — A non-GAAP measure that is computed by dividing adjusted net interest income by average Card Member loans, computed on an annualized basis. Reserves and net write-offs related to uncollectible interest are recorded through provision for credit losses and are thus not included in the net interest yield calculation. Net write-off rate — principal only — Represents the amount of proprietary consumer or small business Card Member loans or receivables written off, consisting of principal (resulting from authorized transactions), less recoveries, as a percentage of the average loan or receivable balance during the period. Net write-off rate — principal, interest and fees — Includes, in the calculation of the net write-off rate, amounts for interest and fees in addition to principal for Card Member loans, and fees in addition to principal for Card Member receivables. Network volumes — Represents the total of billed business and processed volumes. Operating expenses — Represents salaries and employee benefits, professional services, data processing and equipment, and other expenses. 84 Table of Contents Processed revenue — Represents revenues related to network partnership agreements, comprising royalties, fees and amounts earned for facilitating transactions on cards issued by network partners. Processed revenue also includes fees earned on alternative payment solutions facilitated by American Express. 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. 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. T&E spend — Represents spend on travel and entertainment, which primarily includes airline, cruise, lodging and dining merchant categories. 85 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address our current expectations regarding business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “potential,” “continue” and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, include, but are not limited to, the following: • our ability to grow earnings per share in the future, which will depend in part on revenue growth, credit performance and the effective tax rate remaining consistent with current expectations and our ability to continue investing at high levels in areas that can drive sustainable growth (including our brand, value propositions, customers, colleagues, marketing, technology and coverage), 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: macroeconomic conditions, such as recession risks, changes in interest rates, effects of inflation, labor shortages and strikes or higher rates of unemployment, supply chain issues, energy costs and fiscal and monetary policies; geopolitical instability, including the ongoing Ukraine and Israel wars and tensions involving China and the United States; the impact of any future contingencies, including, but not limited to, legal costs and settlements, the imposition of fines or monetary penalties, increases in Card Member remediation, investment gains or losses, restructurings, impairments and changes in reserves; issues impacting brand perceptions and our reputation; impacts related to new or renegotiated cobrand and other partner agreements and joint ventures; and the impact of regulation and litigation, which could affect the profitability of our business activities, limit our ability to pursue business opportunities, require changes to business practices or alter our relationships with Card Members, partners and merchants; • our ability to grow revenues net of interest expense and the sustainability of our future growth, which could be impacted by, among other things, the factors identified above and in the subsequent paragraphs, as well as the following: spending volumes and the spending environment not being consistent with expectations, including T&E spend growing slower than expected, further slowing in spend by U.S. small and mid-sized enterprise or U.S. large and global corporate customers, or a general slowdown or increase in volatility in consumer and business spending volumes; changes in foreign currency exchange rates; an inability to address competitive pressures, innovate and expand our products and services, leverage the advantages of our differentiated business model, attract customers across generations and age cohorts, including Millennial and Gen Z customers and implement strategies and business initiatives, including within the premium consumer space, commercial payments and the global merchant network; the effects of the end of the moratorium on student loan repayments; the impact of the decommissioning of one of our alternative payment solutions; and merchant discount rates changing by a greater or lesser amount than expected; • net card fees not performing consistently with 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; the pace of Card Member acquisition activity and demand for our fee-based products; and our inability to address competitive pressures, develop attractive premium value propositions and implement our strategy of refreshing card products, enhancing benefits and services and continuing to innovate with respect to our products; • net interest income, the effects of changes in interest rates and the growth of loans and Card Member receivables outstanding, and the portion of which that is interest bearing, being higher or lower than expectations, which could be impacted by, among other things, the behavior and financial strength of Card Members and their actual spending, borrowing and paydown patterns; our ability to effectively manage risk and enhance Card Member value propositions; changes in benchmark interest rates, including where such changes affect our assets or liabilities differently than expected; 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; the yield on Card Member loans not remaining consistent with current expectations; our deposit levels or the interest rates we offer on deposits changing from current expectations; 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; • future credit performance, the level of future delinquency, reserve and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; the ability and willingness of Card Members to pay amounts owed to us; changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve rates); the credit profiles of new customers acquired; the enrollment in, and effectiveness of, financial relief programs and the performance of accounts as they exit from such programs; collections capabilities and recoveries of previously written-off loans and receivables; and governmental actions providing forms of relief with respect to certain loans and fees and the termination of such actions; • 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 86 Table of Contents 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; • 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 decisions regarding the timing of spending on marketing and the effectiveness of management’s investment optimization process; management’s identification and assessment of attractive investment opportunities; management’s ability to develop attractive premium value propositions and drive customer demand; the receptivity of Card Members and prospective customers to advertising and customer acquisition initiatives; our ability to realize marketing efficiencies and balance expense control and investments in the business; • our ability to control operating expenses, including relative to future revenue growth, 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; a persistent inflationary environment; our ability to realize operational efficiencies, including through automation; 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 and the willingness of Card Members to self-service and address issues through digital channels; restructuring activity; supply chain issues; fraud costs; compliance expenses and consulting, legal and other professional services fees, including as a result of litigation or internal and regulatory reviews; regulatory assessments; the level of M&A activity and related expenses, including the completion of our sale of Accertify Inc.; information or cybersecurity incidents; the payment of fines, penalties, disgorgement, restitution, non-income tax assessments and litigation-related settlements; the performance of Amex Ventures and other of our investments; impairments of goodwill or other assets; and the impact of changes in foreign currency exchange rates on costs, such as due to the devaluation of foreign currencies; • our tax rate not remaining consistent with expectations, which could be impacted by, among other things, further changes in tax laws and regulation (or related legislative or regulatory inaction), the timing and manner of the implementation of tax guidelines by jurisdictions, our geographic mix of income, unfavorable tax audits and other unanticipated tax items; • changes affecting our plans regarding the return of capital to shareholders, including increasing the level of our dividend, which will depend on factors such as our capital levels and regulatory capital ratios; changes in the stress testing and capital planning process and new rulemakings and guidance from the Federal Reserve and other banking regulators, including changes to regulatory capital requirements, such as final rules resulting from the U.S. federal bank regulatory agencies’ capital rule proposal; our results of operations and financial condition; our credit ratings and rating agency considerations; required Company approvals; and the economic environment and market conditions in any given period; • changes affecting the expected timing for closing the sale of Accertify Inc., the amount of the potential gain we recognize upon the closing and the portion of such gain management determines to reinvest back into our business, which will depend on regulatory and other approvals, consultation requirements, the execution of ancillary agreements, the cost and availability of financing for the purchaser to fund the transaction and the potential loss of key customers, vendors and other business partners and management’s decisions regarding future operations, strategies and business initiatives; • 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 with respect to new products, services and technologies, competition from new and non-traditional competitors and the success of marketing, promotion and rewards programs; • 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 new benefits and value propositions that appeal to Card Members and new customers, offer attractive services and rewards programs and build greater customer loyalty, which will depend in part on identifying and funding investment opportunities, addressing changing customer behaviors, new product innovation and development, Card Member acquisition efforts and enrollment processes, including through digital channels, continuing to realize the benefits from strategic partnerships and evolving our 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 use 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 and new products to potential customers, our ability to enhance and expand our payment and lending solutions, and build out a multi-product digital ecosystem to integrate our broad product set, which is dependent on our continued investment in capabilities, features, functionalities, platforms and technologies; • our ability to expand merchant coverage globally and our success, as well as the success of OptBlue merchant processors and network partners, in signing merchants to accept American Express, which will depend on, among other factors, the value propositions offered to merchants and merchant acquirers for card acceptance, the awareness and willingness of Card 87 Table of Contents Members to use American Express cards at merchants, scaling marketing and expanding programs to increase card usage, identifying new-to-plastic industries and businesses as they form, working with commercial buyers and suppliers to establish B2B acceptance, increasing coverage in priority international cities and countries and key industry verticals, and executing on our plans in China and for continued technological developments, including capabilities that allow for greater digital integration and modernization of our authorization platform; • our ability to successfully invest in and compete with respect to technological developments and digital payment and travel solutions, which will depend in part 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 and machine learning and increasing automation 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, benefits and partner integrations; • our ability to grow internationally, which could be impacted by regulation and business practices, such as those capping interchange or other fees, mandating network access or data localization, favoring local competitors or prohibiting or limiting foreign ownership of certain businesses; our inability to tailor products and services to make them attractive to local customers; competitors with more scale, local experience and established relationships with relevant customers, regulators and industry participants; the success of our network partners in acquiring Card Members and/or merchants; political or economic instability or regional hostilities, including as a result of the Ukraine and Israel wars; • 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; our access to capital and funding costs; the valuation of our assets; and our credit ratings or those of our subsidiaries; • 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, our 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 preferences and 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 or conduct business in certain jurisdictions; require changes to business practices or governance, or alter our relationships with Card Members, partners, merchants and other third parties, including our ability to continue certain cobrand relationships in the EU; exert further pressure on merchant discount rates and our network business; alter the competitive landscape; result in increased costs related to regulatory oversight and compliance, litigation-related settlements, judgments or expenses, restitution to Card Members or the imposition of fines or monetary penalties; materially affect capital or liquidity requirements, results of operations or ability to pay dividends; or result in harm to the American Express brand; • changes in the financial condition and creditworthiness of our business partners, such as bankruptcies, restructurings or consolidations, including of cobrand partners, merchants that represent a significant portion of our business, network partners or financial institutions that we rely on for routine funding and liquidity, which could materially affect our financial condition or results of operations; and • factors beyond our control such as global economic and business conditions, consumer and business spending generally, unemployment rates, geopolitical conditions, including further escalations or widening of ongoing military conflicts, adverse developments affecting third parties, including other financial institutions, merchants or vendors, as well as severe weather conditions, natural disasters, power loss, disruptions in telecommunications, health pandemics, 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, deposit levels 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” and our other reports filed with the SEC. 88 Table of Contents ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Refer to “Risk Management” under “MD&A” for quantitative and qualitative disclosures about market risk.