American Express (0R3C) Risk Analysis

We are exposed to both individual credit risk, principally from consumer and small business Card Member loans and receivables, and institutional credit risk, principally from corporate Card Member loans and receivables, merchants, network partners, loyalty coalition partners and treasury and investment counterparties. Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. General economic factors, such as recession or slow economic growth, unemployment, inflation, structural changes in the economy and interest rates, may result in greater delinquencies that lead to greater credit losses. A customer's ability and willingness to repay us can be negatively impacted not only by economic, market, political and social conditions but also by a customer's other payment obligations (with these factors sometimes influencing one another, such as the end of the moratorium on student loan repayments), and increasing leverage can result in a higher risk that customers will default or become delinquent in their obligations to us. We rely principally on the customer's creditworthiness for repayment of loans or receivables and therefore often have no other recourse for collection. Our ability to assess creditworthiness may be impaired as a result of changes in our underwriting practices or if the criteria or models we use to manage our credit risk prove inaccurate in predicting future losses, which could have a negative impact on our results of operations. This may be exacerbated to the extent information we have historically relied upon to make credit decisions does not accurately portray a customer's creditworthiness, including as a result of the current interest rate and economic conditions. Further, our pricing strategies, particularly for new lending features and non-card lending products, may not offset the negative impact on profitability caused by increases in delinquencies and losses; thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us. Although we make estimates to provide for credit losses in our outstanding portfolio of loans and receivables, these estimates may not be accurate. In addition, the information we use in managing our credit risk may be inaccurate or incomplete. Rising indicators of credit losses, both with respect to our customers, such as delinquencies, and with respect to broader macroeconomic factors, such as current or future levels of unemployment, gross domestic product (GDP) and bankruptcies, may require us to increase our reserve for credit losses and result in future write-offs. Higher write-off rates and increases in our reserves for credit losses adversely affect our profitability and the performance of our securitizations, and may increase our cost of funds. Although we regularly review our credit exposure to specific clients and counterparties and to specific industries, countries and regions that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to foresee or detect, such as fraud. In addition, our ability to manage credit risk or collect amounts owed to us may be adversely affected by legal or regulatory changes (such as restrictions on collections or changes in bankruptcy laws, minimum payment regulations and re-age guidance), changes in customer behavior (such as the increased use of debt settlement companies) or decreases in the effectiveness of our collections operations. Increased credit risk, whether resulting from underestimating the credit losses inherent in our portfolio of loans and receivables, deteriorating economic or political conditions (particularly in the United States, as U.S. Card Members were responsible for approximately 79 percent of our total Card Member loans and receivables outstanding as of December 31, 2025), increases in the level of loan and receivable balances, changes in our mix of business or otherwise, could require us to increase our provisions for losses and could have a material adverse effect on our results of operations and financial condition.