Thirty-Four Percent on EquityWide moat

American Express (AXP) — moat facet

American Express has earned about a third on its equity in every normal year since 2018, more than its balance sheet alone would explain.

The plainest evidence that the moat is worth something is the return American Express earns on its shareholders' money. Return on average equity was 33.5% in 2018 and 29.6% in 20191, 33.7% in 2021, 32.3% in 20222, 31.5% in 2023, 34.6% in 2024 and 33.9% in 20253. In the second quarter of 2026 it was 36.4%4.

Return measures, 2025 and Q2 2026 (%)33.9%ROE 202536.4%ROE Q2 202637.8%Return on commonequity Q2 202610%Assumed cost of equityAmerican Express Form 10-K FY2025; Q2 2026 statistical supplement
More than three times the assumed cost of equity.

Only two years in the decade fell below 25%, and both had a single cause. In 2017 a $2.6 billion charge from the Tax Act cut return on equity to 13.2%56; in 2020 the pandemic reserve build cut it to 14.2%7.

A card company's return on equity depends on how little equity it holds as well as on what it earns. Shareholders' equity was $33,474 million at the end of 2025 against total assets of $300,052 million8, and Amex manages its common equity tier 1 ratio to "a 10 to 11 percent target range"9. The rest is returned: $7.6 billion in 202510.

Even allowing for that, a third is a great deal to earn from lending alone. A bank earning about a third on equity with a tier 1 ratio in the target range is being paid for more than its balance sheet: for the merchant fees, the card fees and the spending that its closed loop captures.

Against an assumed cost of equity of about 10%, the spread is more than twenty points in every normal year. That spread is the moat in a single number, and it has not narrowed as the incentive ratio has risen, because card fees and net interest income have grown to cover the rewards bill.

The quarterly figures run a little higher still. Return on average common equity was 37.8% in the second quarter of 202611, a measure that excludes preferred shares. Either way, the business earns more than three times the assumed cost of its equity.

The return is the thing a reader should check each quarter. It was 36.4% in the second quarter of 202612; a full year below 25% without a tax charge or a recession would mean the rising cost of rewards and benefits had finally reached the bottom line.

Moat trajectory: Holding steady

ROE 33.9% in 2025 and 36.4% in Q2 2026, against an assumed ~10% cost of equity.

The number that tests this moat
Reported
Return on average equity, latest quarter
36.4% (Q2 2026), from 33.9% (2025)

What the franchise earns on shareholders' money; a full year below 25% without a one-off would mean the rewards bill had reached earnings.

Source: American Express Q2 2026 statistical supplement ↗
⚠ Threats to the moat
⚠ THREAT 01
Ten and a Half Percent Leaves Little Slack
American Express returns nearly all it earns and holds its capital ratio near 10.5%, so a bad year would be felt first in the buyback.
References
  1. ReportedReturn on average equity was 33.5% in 2018 and 29.6% in 2019, 33.7% in 2021, 32.3% in 2022, 31.5% in 2023, 34.6% in 2024 and 33.9% in 2025.
    American Express Form 10-K for fiscal 2019 - five-year selected financial data (2015-2019), the Delta renewal through 2029 and the three former segments. — FY2019 · publ. February 2020 · source ↗
  2. ReportedReturn on average equity was 33.5% in 2018 and 29.6% in 2019, 33.7% in 2021, 32.3% in 2022, 31.5% in 2023, 34.6% in 2024 and 33.9% in 2025.
    American Express Form 10-K for fiscal 2023 - income statements for 2021-2023 on the current presentation, segment results for 2022, discount revenue as a share of billed business. — FY2023 · publ. February 2024 · source ↗
  3. ReportedReturn on average equity was 33.5% in 2018 and 29.6% in 2019, 33.7% in 2021, 32.3% in 2022, 31.5% in 2023, 34.6% in 2024 and 33.9% in 2025.
    American Express Form 10-K for fiscal 2025 - capital, returns, funding, interest rate sensitivity, credit and share repurchases. — FY2025 · publ. 6 February 2026 · source ↗
  4. ReportedIn the second quarter of 2026 it was 36.4%.
    American Express second-quarter 2026 statistical supplement, Form 8-K exhibit 99.2 - segment results, card metrics, capital and credit - consolidated results, card metrics, capital and credit. — Q2 2026 · publ. 24 July 2026 · source ↗
  5. ReportedIn 2017 a $2.6 billion charge from the Tax Act cut return on equity to 13.2%; in 2020 the pandemic reserve build cut it to 14.2%.
    American Express Form 10-K for fiscal 2017 - the $2.6 billion Tax Act charge and pressure on the merchant discount rate. — FY2017 · publ. February 2018 · source ↗
  6. ReportedIn 2017 a $2.6 billion charge from the Tax Act cut return on equity to 13.2%; in 2020 the pandemic reserve build cut it to 14.2%.
    American Express Form 10-K for fiscal 2019 - five-year selected financial data (2015-2019), the Delta renewal through 2029 and the three former segments. — FY2019 · publ. February 2020 · source ↗
  7. ReportedIn 2017 a $2.6 billion charge from the Tax Act cut return on equity to 13.2%; in 2020 the pandemic reserve build cut it to 14.2%.
    American Express Form 10-K for fiscal 2020 - the pandemic year: revenue, net income, ROE and Delta and cobrand shares. — FY2020 · publ. February 2021 · source ↗
  8. ReportedShareholders' equity was $33,474 million at the end of 2025 against total assets of $300,052 million, and Amex manages its common equity tier 1 ratio to "a 10 to 11 percent target range".
    American Express fourth-quarter 2025 statistical supplement, Form 8-K exhibit 99.2 - card metrics, billed business by segment, balance sheet and the definition of variable customer engagement costs. — Q4 2025 · publ. 30 January 2026 · source ↗
  9. ReportedShareholders' equity was $33,474 million at the end of 2025 against total assets of $300,052 million, and Amex manages its common equity tier 1 ratio to "a 10 to 11 percent target range".
    American Express Form 10-K for fiscal 2025 - capital, returns, funding, interest rate sensitivity, credit and share repurchases. — FY2025 · publ. 6 February 2026 · source ↗
  10. ReportedThe rest is returned: $7.6 billion in 2025.
    American Express Form 10-K for fiscal 2025 - income statement, business description and management. — FY2025 · publ. 6 February 2026 · source ↗
  11. ReportedReturn on average common equity was 37.8% in the second quarter of 2026, a measure that excludes preferred shares.
    American Express second-quarter 2026 statistical supplement, Form 8-K exhibit 99.2 - segment results, card metrics, capital and credit - consolidated results, card metrics, capital and credit. — Q2 2026 · publ. 24 July 2026 · source ↗
  12. ReportedIt was 36.4% in the second quarter of 2026; a full year below 25% without a tax charge or a recession would mean the rising cost of rewards and benefits had finally reached the bottom line.
    American Express second-quarter 2026 statistical supplement, Form 8-K exhibit 99.2 - segment results, card metrics, capital and credit - consolidated results, card metrics, capital and credit. — Q2 2026 · publ. 24 July 2026 · source ↗
Sources
Generated September 28, 2026