American Express 2014 Annual Report Download - page 43

AMERICAN EXPRESS COMPANY
2014 FINANCIAL REVIEW
FUNDING STRATEGY
Our principal funding objective is to maintain broad and well-diversified funding sources to allow us to meet our maturing obligations, cost-
effectively finance current and future asset growthinourglobalbusinessesaswellastomaintain a strong liquidity profile. The diversity of
funding sources by type of instrument, by maturity and by investor base, among other factors, provides additional insulation from the impact
of disruptions in any one type of instrument, maturity or investor. The mix of our funding in any period will seek to achieve cost efficiency
consistent with both maintaining diversified sources and achieving our liquidity objectives. 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 proprietary card businesses are the primary asset-generating businesses, with significant assets in both domestic and international
Card Member receivable and lending activities. Our financing needs are in large part a consequence of our proprietary card-issuing
businesses and the maintenance of a liquidity position to support all of our business activities, such as merchant payments. We generally pay
merchants for card transactions prior to reimbursement by Card Members and therefore fund the merchant payments during the period
Card Member loans and receivables are outstanding. We also have additional financing needs associated with general corporate purposes,
including acquisition activities.
FUNDING PROGRAMS AND ACTIVITIES
The Company meets its funding needs through a variety of sources, including direct and third-party distributed deposits and debt
instruments, such as senior unsecured debentures, asset securitizations, borrowings through secured borrowing facilities and long-term
committed bank borrowing facilities in certain non-U.S. regions.
The Company had the following consolidated debt and customer deposits outstanding as of December 31:
TABLE 20: SUMMARY OF CONSOLIDATED DEBT AND CUSTOMER DEPOSITS
(Billions) 2014 2013
Short-term borrowings $3.5$5.0
Long-term debt 58.0 55.3
Total debt 61.5 60.3
Customer deposits 44.2 41.8
Total debt and customer deposits $105.7$102.1
Management does not currently expect to make any significant changes to our funding programs in order to satisfy Basel III’s liquidity
coverage ratio standard based upon its current understanding of the requirements, which may be subject to change as we receive additional
clarification and implementation guidance from regulators relating to the requirements and as the interpretation of the requirements evolve
over time.
Our funding plan for the full year 2015 includes, among other sources, approximately $3 billion to $9 billion of unsecured term debt
issuance and $3 billion to $9 billion of secured term debt issuance. Our funding plans are subject to various risks and uncertainties, such as
future business growth, the impact of global economic, political and other events on market capacity, demand for securities offered by us,
regulatory changes, ability to securitize and sell receivables, and the performance of receivables previously sold in securitization transactions.
Many of these risks and uncertainties 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), Fitch Ratings (Fitch) and Dominion
Bond Rating Services (DBRS). Such ratings help support our access to cost-effective unsecured funding as part of our overall funding
strategy. Our asset-backed securitization (ABS) activities are rated separately.
43