OREANDA-NEWS. Fitch Ratings has today upgraded American Express Company's (AXP) \\$750 million Legacy Tier 2 subordinated notes issued September 2006 to 'BBB+' from 'BBB'.

KEY RATING DRIVERS

The upgrade reflects Fitch's reduced view of non-performance risk associated with the instrument, resulting in AXP's subordinated debt rating being three notches below the entity's Viability Rating (VR) of 'a+'. The notching of hybrid instruments is applied in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profile. The subordinated note rating includes one notch for loss severity and two notches for non-performance given the ability to defer interest payments.

On Dec. 1, 2014, AXP issued \\$600 million of subordinated notes to qualify as Tier 2 capital under Basel III. The \\$750 million of Legacy Tier 2 subordinated debentures are not expected to meet the requirements of Tier 2 capital under Basel III and are currently being phased out of Tier 2 capital. At June 30, 2015, the amount of subordinated debentures included in Tier 2 capital was \\$187 million.

As a result of Fitch's view of reduced non-performance risk associated with the instrument, Fitch will no longer assign equity credit to this issuance, which was previously assigned 50% equity credit. Pro forma for the change in equity credit, Fitch estimates AXP's Fitch Core Capital to tangible assets ratio would have been 11.27% in 2Q15 compared to 11.52% using 50% equity credit, which is viewed as immaterial relative to AXP's 'A+/F1' ratings.

RATING SENSITIVITIES

The subordinated debt ratings are directly linked to AXP's VR and would move in tandem with any changes in AXP's credit profile.