Fitch Upgrades American Express to 'A+' on Fee-Based Revenue and Premium Focus

Fitch Ratings has upgraded American Express Company's (NYSE: AXP) long-term issuer default rating to 'A+' from 'A', assigning a stable outlook. The credit agency attributed the upgrade to the financial giant's strong position with affluent consumers, a resilient earnings model based on fees, and solid balance sheet fundamentals.

Rationale for the Upgrade

The rating action highlights the structural advantages of American Express's unique closed-loop payments network, which Fitch noted allows the company to capture broader payment economics than its card-issuing peers. The agency also raised the viability ratings for both the parent company and its primary banking subsidiary, American Express National Bank, to 'a+'.

Fitch's analysis pointed to several key strengths supporting the upgrade:

• Strong Revenue Growth: The company has delivered an 11% compound annual revenue growth rate since 2022.
• Fee-Driven Model: Nearly three-quarters of its revenue is derived from card fees, merchant discounts, and processing services, insulating it from interest rate volatility.
• Superior Asset Quality: Net charge-offs have consistently remained at the low end of its peer group, even amid loan portfolio expansion.

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Financial Performance and Outlook

American Express’s business model has generated industry-leading operating profitability and a formidable capacity for capital generation, underscored by a return on equity exceeding 30%. Fitch also noted the company's rigorous risk management standards.

While American Express recently transitioned to oversight as a Category II bank holding company, Fitch expressed confidence in its financial resilience. The agency expects the company's flexible cost structure and strong liquidity buffers will allow it to absorb any normalization in consumer credit trends effectively.