AMERICAN EXPRESS CO

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

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 expense increased, primarily driven by higher interest rates paid on customer deposits.

TABLE 3: PROVISIONS FOR CREDIT LOSSES SUMMARY

(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.

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.

TABLE 4: EXPENSES SUMMARY

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.

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.

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.

TABLE 5: SELECTED CARD-RELATED STATISTICAL INFORMATION

(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

(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).

TABLE 7: SELECTED CREDIT-RELATED STATISTICAL INFORMATION

(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.

TABLE 8: NET INTEREST YIELD ON AVERAGE CARD MEMBER LOANS

(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.