American Express refreshed its U.S. Platinum card last year, raised the fee, and loaded the card with new benefits. One year on, both lines are growing — but the cost line is growing faster than the fee line. Net card fees rose 15 percent to $2,862 million in the second quarter, an increase of $382 million. Card Member services expense — the cost of actually delivering those benefits — rose 50 percent to $1,949 million, an increase of $648 million. The gap is where the refresh either pays for itself or does not, and this quarter the incremental benefit cost outran the incremental fee by $266 million. Underneath a headline of 14.7 percent pretax growth, the operating engine grew 4 percent; the rest came from releasing credit reserves.
1. Balance Sheet: Cash Rotates Into Card Balances
1-1. Principal asset and funding items
| Item | Jun 30, 2025 ($M) | Jun 30, 2026 ($M) | Change % |
|---|---|---|---|
| Cash and cash equivalents | 57,937 | 45,243 | -21.9 |
| Card balances | 201,873 | 218,054 | +8.0 |
| Total Card balances and Other loans | 211,976 | 229,481 | +8.3 |
| Credit loss reserves | 5,960 | 5,866 | -1.6 |
| Total assets | 295,556 | 308,203 | +4.3 |
| Customer deposits | 149,386 | 156,973 | +5.1 |
| Long-term debt | 58,202 | 57,017 | -2.0 |
| Total shareholders' equity | 32,311 | 34,280 | +6.1 |
Total assets and shareholders' equity are from the company's XBRL submission to the SEC; the remaining lines appear in Table 1 and Table 7 of the filing.
The dominant balance sheet movement is a rotation, not growth. Total assets grew only 4.3 percent. Inside that, cash fell from 19.6 percent of assets to 14.7 percent, while card balances rose from 68.3 percent to 70.8 percent. Amex spent down a cash pile and put the money into lending. The payoff shows up in net interest yield — net interest income divided by average card and other balances — which widened to 8.1 percent from 7.9 percent.
Reserve coverage is the item to watch. Credit loss reserves fell 1.6 percent to $5,866 million while card balances grew 8.0 percent. Coverage therefore dropped to 2.7 percent of card balances from 3.0 percent. Had Amex held last year's actual coverage ratio of 2.95 percent, reserves would sit about $572 million higher. Delinquencies genuinely improved, so the lower coverage is defensible. But the cushion is thinner than a year ago.
1-2. Funding structure
Total customer deposits and debt reached $216.0 billion, up from $210.3 billion at December 31, 2025 (Table 18 of the filing). Deposits did most of the work, rising to $157.0 billion from $152.5 billion, with long-term debt roughly flat at $57.0 billion and short-term borrowings at $2.0 billion. Amex issued $6.1 billion of unsecured debt in the first half against a full-year plan of $4.0–8.0 billion unsecured and $1.0–3.0 billion secured.
Funding got cheaper. The average rate paid on U.S. interest-bearing deposits fell to 3.3 percent from 3.8 percent, with savings accounts down to 3.1 percent from 3.6 percent. That is why total interest expense fell 6 percent even as deposits grew. Roughly 92 percent of AENB's deposits are FDIC-insured, and its direct deposit program alone holds about 4.3 million accounts — a stable, retail-heavy funding base. Unsecured ratings for American Express Company are A2 / A- / A with stable outlooks at all three agencies (Table 19).
1-3. Capital
Shareholders' equity of $34,280 million supports $308,203 million of assets, an equity-to-assets ratio of 11.1 percent. The Common Equity Tier 1 ratio — the regulator's core measure of loss-absorbing capital against risk-weighted assets — was 10.4 percent, down from 10.6 percent a year ago. CET1 capital of $27,779 million sits against $268,321 million of risk-weighted assets. Management's stated target range is 10 to 11 percent, so the ratio is now in the lower half of that band while the loan book grows 8 percent and most of quarterly earnings goes out the door. The filing quantifies the payout precisely: the $2,887 million of buybacks and dividends in the quarter was approximately 93 percent of net income available to common shareholders, and the $5,202 million returned in the half was approximately 86 percent.
Liquidity is not the constraint. The average Liquidity Coverage Ratio was 197 percent against a 100 percent minimum, and the Net Stable Funding Ratio was 121 percent. Amex became a Category II firm in the second quarter of 2026, a step up in regulatory standards; both ratios currently benefit from an 85 percent transition adjustment disclosed in the filing. Its stress capital buffer stays at the 2.5 percent minimum through September 30, 2027.
2. Income Statement: The Gap Between Reported and Operating
| Item | Q2 2025 ($M) | Q2 2026 ($M) | Change | 6M 2025 ($M) | 6M 2026 ($M) | Change |
|---|---|---|---|---|---|---|
| Total revenues net of interest expense | 17,856 | 19,637 | +10.0% | 34,823 | 38,544 | +10.7% |
| Provisions for credit losses | 1,405 | 1,084 | -22.9% | 2,555 | 2,336 | -8.6% |
| Total expenses | 12,901 | 14,482 | +12.3% | 25,388 | 28,359 | +11.7% |
| Pretax income | 3,550 | 4,071 | +14.7% | 6,880 | 7,849 | +14.1% |
| Income tax provision | 665 | 961 | +44.5% | 1,411 | 1,767 | +25.2% |
| Net income | 2,885 | 3,110 | +7.8% | 5,469 | 6,082 | +11.2% |
| Diluted EPS ($) | 4.08 | 4.53 | +11.0% | 7.71 | 8.81 | +14.3% |
| Pretax margin | 19.9% | 20.7% | — | 19.8% | 20.4% | — |
Source: consolidated results table in the filing's MD&A margins and change percentages are our calculation.
2-1. Core results
Three separate things move between the revenue line and the earnings-per-share line, and they pull in different directions.
Credit provisions did most of the heavy lifting. Provisions fell $321 million. Pretax income rose $521 million. So 62 percent of the pretax gain came from the provision line alone. Revenue minus expenses — the operating spread before credit costs — went from $4,955 million to $5,155 million, a gain of just 4.0 percent. A company growing revenue 10 percent produced 4 percent operating growth.
One caveat on the revenue comparison: Amex bought out its partner's stake in the Swiss joint venture Swisscard on January 12, 2026, and now consolidates it line by line. Part of the reported growth in service fees, marketing and operating expenses is therefore acquired rather than organic; the filing does not size the contribution separately.
The provision swing itself is worth unpacking. Amex released $190 million of card reserves this quarter versus building $198 million a year ago. Across all reserve lines, the build-to-release swing was $414 million, partly offset by $92 million of higher net write-offs. Reserve releases are real earnings, but they are a stock, not a flow. They cannot be repeated indefinitely.
Tax flatters the comparison in the other direction. The effective tax rate jumped to 23.6 percent from 18.7 percent, because the prior year carried discrete tax benefits from resolving old tax items. Net income grew only 8 percent as a result. Had last year been taxed at this year's 23.6 percent rate, prior-period net income would have been about $2,712 million, and growth would read 14.7 percent. The reported 8 percent understates the underlying trend just as clearly as the 14.7 percent pretax figure overstates it.
Buybacks add the last three points. Diluted EPS rose 11 percent against 8 percent net income growth. Average diluted shares fell to 679 million from 699 million, down 2.9 percent. Roughly three percentage points of EPS growth is share count, not profit.
2-2. Where the expenses actually sit
| Expense line | Q2 2025 ($M) | Q2 2026 ($M) | Change % |
|---|---|---|---|
| Card Member rewards | 4,618 | 5,051 | +9.4 |
| Business development | 1,589 | 1,755 | +10.4 |
| Card Member services | 1,301 | 1,949 | +49.8 |
| Marketing | 1,555 | 1,650 | +6.1 |
| Salaries and employee benefits | 2,152 | 2,344 | +8.9 |
| Other, net | 1,686 | 1,733 | +2.8 |
| Total expenses | 12,901 | 14,482 | +12.3 |
Source: expense detail table in the filing's MD&A groupings below are our calculation.
Split the cost base in two and the picture sharpens. The first three lines — rewards, business development and Card Member services, which Amex itself groups as variable customer engagement expenses — totalled $8,755 million, up 16.6 percent. They now absorb 44.6 percent of revenue, against 42.0 percent a year ago. The remaining lines — marketing, salaries and other — grew just 6.2 percent and fell to 29.2 percent of revenue from 30.2 percent.
So the fixed cost base is levering nicely. Operating leverage — the idea that costs should grow slower than revenue so margins widen — is working on salaries, marketing and overhead. It is the variable engagement costs that are running ahead of revenue and cancelling the benefit out. This is a deliberate strategic spend, not a control failure. But it is the reason 10 percent revenue growth converts to 4 percent operating growth.
One line inside "Other, net" deserves a flag despite its flat 2.8 percent growth: the filing says the quarterly increase was driven by higher legal reserves and technology costs, offset by gains on Amex Ventures investments and a gain on the sale of a small business cobrand portfolio. In other words, the flat headline nets a recurring cost increase against non-recurring gains.
Card Member services expense now equals 68.1 percent of net card fees, up from 52.5 percent a year ago. The filing attributes the rise to "higher usage of Card Member benefits and the new U.S. Platinum benefits."
2-3. Fee growth is mostly price, not volume
Net card fees rose 15 percent. Decompose it: average fee per card, which the filing computes on an annualized basis, rose 12 percent to $131, while proprietary cards-in-force grew 3 percent to 87.6 million. On that arithmetic, roughly four-fifths of the growth is pricing. Amex frames it differently, attributing net card fee growth to "high levels of new card acquisitions, strong Card Member retention and our ongoing cycle of product refreshes." The acquisition data sit closer to our reading: proprietary new cards acquired were 3.0 million in the quarter versus 3.1 million a year ago, and 6.1 million versus 6.4 million for the half.
A second yield squeeze sits in the largest revenue line. Billed business grew 9.5 percent but discount revenue grew 8.6 percent, because the average merchant discount rate slipped to 2.23 percent from 2.25 percent on spend mix shifts by geography and merchant category. Small in any one quarter, but it compounds.
3. Cash Flow: Funding Growth From the Existing Balance Sheet
| Item (6M, $B) | 2025 | 2026 | Change |
|---|---|---|---|
| Operating activities | 9.1 | 9.2 | +0.1 |
| Investing activities | (6.3) | (11.8) | -5.5 |
| Financing activities | 14.3 | 0.1 | -14.2 |
| Effect of FX on cash | 0.2 | 0.1 | -0.1 |
| Net change in cash | 17.3 | (2.5) | -19.8 |
Source: Table 22 of the filing. The company reports these lines rounded to $0.1 billion, so the components do not sum exactly to the net change.
Free cash flow is not a meaningful measure for a lender, since loan growth flows through investing activities as a use of cash. The bank-adjusted equivalent is operating cash flow less capital expenditure. Operating cash was $9.2 billion and capital expenditure — purchases of premises and equipment in the consolidated statement of cash flows — was $2,047 million, leaving about $7.2 billion of distributable cash. Amex returned $5.2 billion to shareholders in the half, roughly 73 percent of that figure.
The striking line is financing. It collapsed from an inflow of $14.3 billion to $0.1 billion. Last year Amex raised deposits and debt aggressively and stockpiled cash. This year it is funding an $11.8 billion investing outflow out of operating cash and the cash it already held. Hence the $2.5 billion decline in cash. The filing lists four drivers of that outflow: higher card balances and other loans, net purchases of investment securities, new headquarters construction, and the Swisscard buyout, partly offset by proceeds from selling a small business cobrand portfolio. Card balance growth is the largest of them, and the rotation is the same one visible in section 1.
Capital expenditure nearly doubled, to $2,047 million from $1,049 million.