Kartik Ramachandran:

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Christophe Le Caillec, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve.

Christophe Le Caillec:

Thank you, Steve, and good morning, everyone. It's good to be here to talk about our second quarter results, which reflect another quarter of strong performance. Starting with our summary financials on Slide 2. Second quarter revenues were $16.3 billion and grew 9% year-over-year on an FX adjusted basis. Net income was $3 billion in the quarter, generating earnings per share of $4.15. Our second quarter results also reflect the sale of our Accertify business, which closed during the quarter. We recognized an after tax gain on the sale of $479 million, equating to $0.66 of EPS impact. Excluding this gain, EPS grew 21%, reflecting the power of the business to generate strong earnings growth even in a slower growth environment, as Steve noted. On Slide 3, Billed Business grew 6% versus last year on an FX adjusted basis, reflecting stable growth and in-line with the softer spend environment we've seen in the past few quarters. The stability in spend growth was also visible by category where we saw 6% growth in goods and services, 7% growth in travel and entertainment spending. We did see some slower growth in certain T&E categories versus the prior quarter, such as in airline and lodging. At the same time, growth in our largest T&E category, restaurants remained strong and goods and services strengthened a bit versus the prior quarter when excluding the impact of leap year. Stepping back, while spend growth in certain categories was slightly higher or lower versus the prior quarter, overall spend growth was stable and we continue to see strong growth in the number of transactions from our card members, which grew 9% this quarter. There are a few other key points to take away as we then break down our spending trends across our businesses. Starting with our largest segment on Slide 4. US consumer grew billings at 6% this quarter with balanced growth across both goods and services and T&E. Our premium customer base continues to demonstrate steady growth. We also saw growth across all generations. Millennial and Gen-Z customers grew their spending 13% and continue to drive our highest billed business within this segment. These younger card members continue to demonstrate strong engagement and we see that they transact over 25% more on average than our older customers. And in some categories like dining, they transact almost twice as much. Turning to commercial services on Slide 5. Overall growth came in at 2% this quarter. Spending growth from our US small and medium enterprise customers increased a bit sequentially versus last quarter but remained modest. Lastly on Slide 6, we see our highest growth again this quarter in international card services, up 13%. We continue to see double-digit growth in spending from international consumers and from international SME and large corporate customers and we are also seeing double-digit growth across all regions. Stepping back, we continue to see stable spend growth across customer segments, spend categories and our US and international geographies. And while we are not in a high growth spend environment, particularly in the US, our spending volumes are tracking in-line with our expectations and support our revenue expectations for the year. Moving on to loans and card member receivables, on Slide 7, we saw year-over-year growth of 11%, demonstrating strong growth, but continuing to moderate as expected. As we progress through 2024, we expect loan growth in particular to continue to moderate by a few percentage points, but it still grew in double-digits as we exit the year. Turning next to credit and provision on Slide 8, through 10, our credit performance remains very strong and is a direct result of our disciplined growth strategy which has been focused on growing our high credit quality premium customer base, including through the younger customers we attract to the franchise. This strategy, coupled with our robust risk management practices are an important aspect of our business models. Going forward, we expect our write-off rates to remain generally stable for the remainder of 2024. Turning now to the accounting of this credit performance on Slide 9. The quarter-over-quarter reserve build of $101 million is mostly driven by growth in our loan balances, largely offset by lower delinquencies. This reserve build combined with net write-offs drove $1.3 billion of provision expense in the second quarter. As you see on Slide 10, we ended the second quarter with $5.6 billion of reserves, representing 2.8% of our loans and card member receivables, a slight decrease compared to Q1. It's worth noting that there is a seasonality component to reserves, although we are also encouraged by the strength of the performance we see in the portfolio. Moving next to revenue on Slide 11. Total revenues were up 9% year-over-year, benefiting from the diversification across revenue streams, customer segments and geographies. Looking at the components of our revenue, our largest revenue line, discount revenue grew 5% year-over-year on an FX adjusted basis, as you can see on Slide 12. This growth is mostly driven by the spending trends we discussed earlier. Net card fee revenues were up 16% year-over-year on an FX adjusted basis. As you can see on Slide 13, we're now generating over $2 billion in quarterly card fee revenue as the differentiated value and experiences we offer on our products continues to resonate with our card members globally. This is an important metric for us because it also reflects the choice that our costs -- that our customers make each year to renew their membership. We're pleased with the growth and expect to exit the year with further momentum. In the quarter, we acquired 3.3 million new cards, demonstrating the demand we're seeing for our products and the investment we've made. Acquisition of our premium fee based products continued to account for around 70% of new accounts. And importantly, as we have increased the total number of cards acquired, we have maintained disciplined underwriting standards. Moving on to Slide 14, net interest income was up 20% year-over-year. This growth is driven by the increase in our revolving loan balances, which also contributes to the continued net yield expansion versus the prior year. As we've shared before, we continue to expect this growth to further moderate as we progress through the year. To sum up, revenues on Slide 15, the power of our diversified model continues to drive strong revenue momentum even in a slower growth environment, as our results in this quarter were fueled by growth in all our major revenue lines across each of our different business segments and across geographies. Moving to expenses on Slide 16, starting at the top of the page, variable customer engagement expenses came in at 42% of the total revenues for the second quarters. Looking forward, I expect variable customer engagement expenses as a ratio of revenues to be in-line with this level for the balance of the year. On the marketing line, we continue to invest at an elevated level at $1.5 billion in the second quarter. Given the strong performance in the core business, we now anticipate our full year marketing spend to be around $6 billion or 15% higher versus last year as we plan to invest at high levels to sustain our growth momentum. To put this in perspective, this is an incremental $800 million above what we spent in 2023. At the same time, we intend to deploy those investments in a disciplined way. As I discussed at Investor Day, our investment optimization engine is engineered to make profitability based decisions at the margin and there is a high bar for returns on these substantial incremental investments. Moving to the bottom of Slide 16, brings us to operating expenses. Operating expenses were $3 billion in the second quarter, down 13% versus last year due to the $531 pre-tax gain we recognized from the sale of our Accertify business. Excluding the gain, operating expenses were up 3% in the quarter, well below the pace of revenue growth even as we continue to invest in technology and our control management capabilities. Excluding the impact of the Accertify gain, we continue to expect operating expenses for the year to be fairly flat to 2023. This quarter's results demonstrate how the scale of the business and strong expense discipline enable us to generate significant efficiencies and those efficiencies are enabling us to invest at elevated levels while still generating significant levers to drive strong earnings growth. Turning next to capital on Slide 17. Our CET1 ratio was 10.8% at the end of the second quarter within our target range of 10% to 11%. We also returned $2.3 billion of capital to our shareholders, including $1.8 billion of share repurchase. This is the highest level in over two years. And the recent CCAR results further demonstrate the strength of our portfolio and the resilience of our business model. The stress test results show that under a severely adverse scenario, our portfolio remains profitable. In fact, we are the most profitable financial institution as a percentage of asset growth across all the banks subject to CCAR and have the lowest credit card loss rate under stress as well. These results in our stress capital buffer remaining at 2.5%, the lowest prescribed level. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. We do not expect any material near term changes to our capital management approach. This brings me to our 2024 guidance on Slide 18. Let me step back and make a few observations about the growth in the business and the way we see the balance of the year unfolding. First, we have a core business that is comfortably generating mid-teens EPS growth, even in a slower growth environment and before the gain from the Accertify sale. Second, the pace of earnings generation in the core business, combined with the strong demand we are seeing in the market for our products, is enabling us to invest around 15% more in marketing compared to last year. As a result, we are able to fund significantly more investments from our core business than our expectation at the start of the year without relying on the one-off gain from Accertify. With that, as Steve mentioned, we are raising our guidance for EPS for the year to a range of $13.30 to $13.80, and within that range, we now expect to drop all $0.66 of the Accertify gain to the bottom line. This is a departure from our usual practice of reinvesting a significant portion of one-off gains in growth initiatives. But we are confident in the ability of our business to support the year-over-year growth of around $800 million in marketing while delivering mid-teens EPS growth. Finally, we still expect to deliver revenue growth in the year in-line with our initial 9% to 11% range. With that, I turn the call back over to Kartik to open up the call for your questions.

Operator:

[Operator Instructions] Our first question is coming from Ryan Nash of Goldman Sachs. Please go ahead.

Stephen Squeri:

Good morning.

Ryan Nash:

Steve, can you maybe expand on what you're seeing in the US consumer and SMEs? In US consumer, we saw a little bit of a slowdown from 8% to 6%. Are you seeing a broader slowdown in the consumer? Maybe just talk about what you're seeing on a same store sales basis? And then on the SME side, you obviously saw a slight uptick. So maybe if you could just expand on those both. Thank you.

Operator:

Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.

Stephen Squeri:

Yeah. So I think, look, quarter-to-date, we're at about 10% both reported and FX. And for the quarter, we were at 8% and 9%. And so I think we're going to wind-up within that range. And I think depending upon how organic either rebounds or stays where it is, we'll determine where we wind-up within that range, but we're very comfortable with sort of the 9% to 11%. As far as investment, what we do is, we will look at the myriad of opportunities that we have to acquire more card holders and depending upon at any given point in time because our acquisition engine is a very dynamic engine and things change all the time. We will allocate those investments either US consumer small business or international. Traditionally, the US consumer business would get more of that investment, followed either by international and small business. But as I sit here today, it's hard to say exactly what percentages will be, but it will be focused on acquiring more cardholders. And the key about that is that when we acquire cardholders in the second half of the year, it's really not going to drive spending for us this year. It will -- what we're doing here is we're investing for the medium and the longer term and it will acquire cardholders that will spend for us, for us next year. So I think the takeaway from the point that Christoph made and the point that I made is the business is so -- we feel the business is strong right now that we're able to invest more and we have line of sight into those opportunities without compromising on credit.

Operator:

Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Stephen Squeri:

Yeah. So, not going to get into the details of the card. But what I would say is, one of the big advantages of the refreshes is it makes the marketing dollars work a lot harder, right. So what happens is, when you do a product refresh, whether it's Gold, whether it's Delta, whether it's Hilton or whether it's another Gold or Platinum card that we do internationally, what happens is you're able to provide more value to those cardholders that already have the product. You may be able to upgrade a Green to a Gold. And obviously, you're able to acquire even new cardholders with that. And what happens is as you go out and acquire new cardholders, you'll have buzz around the fact that we have a new card and it has obviously a different value proposition and you'll have the marketing that goes with it. And so, when you do a refresh and you have your marketing spend, that your marketing dollars work a little bit. The overall value proposition is a lot stronger and it works a little bit harder for you.

Operator:

Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.

Stephen Squeri:

Yeah. So a couple of points, I think $6 billion for the year in total marketing is not an area we've ever -- it's not an area we've ever been in before and an $800 million year-over-year increase is a pretty significant increase. I think that when we make a decision, Craig, to put more marketing dollars in, it's because we see the opportunity. And if you look at where we have been from a marketing spend for the first two quarters, that would show a trajectory of $6 billion. So we're really keeping all of our marketing spending consistent quarter-to-quarter because we do see the opportunity. And we see the opportunity within the credit box and within the dimensions of who we're looking for, for our cardholders. It's not due to a -- we're not making this investment because of a slowdown in billings. This was something that we had planned to do at the beginning of the year where billings were, where they weren't going to be. And as far as competitors pulling back, I don't see competitors pulling back at all. I think competitors right now -- the environment is just as competitive as it's ever been. Obviously, you make these investments because obviously you want to gain -- you want to gain more traction with your cardholders and you want to gain more share.

Operator:

Thank you. The next question is coming from Rick Shane of JPMorgan. Please go ahead.

Stephen Squeri:

Yeah. Let me take that question and I hope you fix your computer problem soon. The way to think about this is, we always -- so we entered the year thinking we want to invest and we want to invest more because we see the opportunities and they are compelling investments with attractive returns. The fact of the matter is that the core business, which I would define as like the business, excluding the Accertify gain is generating more earnings than we had anticipated. So you're right, we can afford to spend more and to fund it through the core business. But on top of that, we also raised a little bit our marketing dollars. Now it's not a significant amount. As we've said in the past, in a given week, we spent $120 million on average of marketing dollars. So $100 million or $200 million a bit more or a bit less, it's actually not that material. But the key thing here is that in terms of the funding, it's going to be funded all from the core business and because it's generating more earnings than we had anticipated at the beginning of the year.

Jeffrey Adelson:

Hey, good morning, Steve and Christophe.

Christophe Le Caillec:

Good morning.

Christophe Le Caillec:

Yeah. Hey, good morning, Jeff. So you're right, we have changed a little bit the way we think about credit write-offs for the balance of the year. And we are at the beginning of Q3 now, we had good visibility in terms of what's going to write-off in Q3 and Q4. So we can be more confident in terms of providing a direction here. And to your point, the direction we're providing now is that it's going to be like stable at about the level you saw in Q2 at around 2.1%. Now, I need to say this specifically to address your question on the reserve and how to think about it for the balance of the year. A big driver of the reserve is going to be the delinquency levels, right. Those card members that are showing signs of -- signals of stress early on. The delinquency improvement in the quarter, there is seasonality in that improvement, right. And so we expect that delinquency rate is just going to probably tick-up a bit in the balance of the year and that will drive a bit of incremental reserve together with the volume growth that we expect to see. But from a reserve rate standpoint, we are 2.8%. It's a good reference point for what to expect for the balance of year. It might increase a little bit. We'll see. It's hard to predict where CECL is just going to land exactly at the end of Q4, but it's a good guide in terms of what to expect for the balance of the year. I would expect 2.8%, maybe 2.9%, but we're going to be in that range. And to your point, credit losses, we expect stability from where we are now for the balance of the year.

Mark DeVries:

Yeah, thanks. As I think you pointed out, it is pretty unusual for you to let a gain like the Accertify gain fall to the bottom line. And I realize you don't give 2025 guidance, but Steve, just kind of wondering if you still expect to target that mid-teens EPS growth off this higher 2024 EPS level?

Operator:

Thank you. The next question is coming from Chris Kennedy of William Blair. Please go ahead.

Stephen Squeri:

Yeah. Look the overall goal is to be more engaged with both our small businesses and to be more engaged with our consumers. And I think, you know, digital banking is a bit of a journey for us. We now have multiple accounts and we're just going to continue to invest not only in capabilities, but continue to invest in making sure that our customers are using that. So there'll be more to come on that, but we're at the beginning of this journey and there's still a long way for us to go.

Terry Ma:

Hey, thanks. Good morning. Just want to get some more color on how your announced product refreshes are going in terms of just acquisitions, retentions and just overall receptiveness and whether or not you still feel pretty good about having net card fees exit the year higher than last year?

Terry Ma:

In terms of just overall how product refreshers are going? And whether or not, you still feel pretty good about having net card fee growth exit the year?

Stephen Squeri:

Yeah. I mean we're about halfway through on those product refreshes. Gold is the next big one to come. And it's really a little bit too early to tell how each one individually has done. But what you look at is 3.4 million cards, 3.3 million cards acquired and retention rates are still strong. And those are the things that you look at, but we'll be able to have more color as the year goes on.

Saul Martinez:

Hey, good morning, guys. So a question on your EPS guide, the mid-point of your guidance range implies an EPS in the second half that at the mid-point of the range suggests around 2.6% growth. I think at the higher end, it's roughly, it's a little under 7%. Now, obviously, the higher marketing explains the bulk of it, if not all of it. But just wanted to ask, is there anything else there that is relevant that we should be thinking about driving that deceleration and maybe different than what you had anticipated? Because obviously, on a core basis, your numbers tripping out of Accertify have been better than expected in the first half, yet core basis kept EPS guide unchanged. And on that second half outlook, I think you have said in the past, correct me if I'm wrong, that card deceleration ends the year closer to 20%. I think you -- I don't think you've given a specific number on this call other than to say you see some acceleration, but it's 20% still the bogey there? Thanks.

Operator:

Thank you. The next question is coming from Moshe Orenbuch of TD Cowen. Please go ahead.

Christophe Le Caillec:

Yeah . Thank you for your question, Moshe. There are a couple of things to keep in mind here. The first one is that, as I've said, we should expect the volume, the balances, the loans to growth rate to moderate a bit further in the balance of the year, although it will remain in double-digit. From a yield standpoint, we have a slide that shows the yield. We had a bit of a yield improvement on the back of, I would say a few things, year-over-year yield improvement on the back of their revolve rates are a bit higher and they keep ticking up a little bit. And the second thing is and as we covered during the Investor Day on the funding side, we still have this dynamic around a bigger share of our funding mix going to high yield savings accounts, which for us is an effective funding channel. And so that dynamic is still going to play out in the balance of the year. And so you should expect to see the NII growth rate kind of like moderate a bit in the balance of the year.

Mihir Bhatia:

Hi. Thank you for taking my questions. I wanted to go back just on -- just staying on spending and revenue. Is it fair to say that you're planning for this softer spending environment to continue for the next couple of quarters. So discount revenue growth will be at like current quarter levels is probably a fair way to think about it or are you thinking any change in that trajectory? And then just relatedly on spending, if I could just -- if you could just discuss what happened in large and global spend? It looked like it decelerated a fair amount. So is there anything to call-out there? I mean, I know it's a smaller business, but it's a fairly meaningful deceleration.

Kartik Ramachandran:

All right. Well, with that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Thank you. Donna?

Kartik Ramachandran:

Thank you, Daryl, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discuss. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO who will start with some remarks about the Company's progress and results, and then Christophe Le Caillec, Chief Financial Officer will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve.

Christophe Le Caillec:

Thank you, Steve, and good morning, everyone. It's good to be here to talk about the first quarter results, which reflect another quarter of strong results and are tracking in line with the guidance we gave for the full year. Starting with our summary financials on Slide 2. First quarter revenues were $15.8 billion and grew 11% year-over-year. This revenue momentum drove reported net income of $2.4 billion and earnings per share of $3.33. On Slide 3, billed business grew 7% versus last year in the first quarter on an FX-adjusted basis, in line with the overall spend environment we have seen in the past few quarters as we expected. Looking by category, we saw 6% growth in goods and services spending and 8% growth in travel and entertainment spending. There are a few other key points to take away as we then break down our spending trends across our businesses. Starting with our largest segment on Slide 4, U.S. Consumer grew billings at 8% this quarter, with growth across all generations and age cohorts. Millennial and Gen Z customers grew their spending 15% and continued to drive our highest billed business growth within this segment. In fact, we see that younger customers use their cards more overall and this is even more pronounced in certain spend categories. For example, customers aged 35 and under use their cards at restaurants over 70% more on average than other customers in this segment. Looking at Commercial Services on Slide 5, overall growth came in at 2% this quarter. Spending growth from our U.S. small and medium-sized enterprise customers remain modest, given unique dynamics seen by small businesses. Lastly, on Slide 6, you see our highest growth again this quarter in International Card Services, up 13%. We continue to see double-digit growth in spending from international consumers and from international SME and large corporate customers, as well as strong growth across our geographies. Overall, while we do continue to see a softer spend environment, our spending volumes are tracking in line with our expectations to support our revenue guidance for the full year and we are pleased with the continued strong engagement of our customers as the number of transactions from our card members continued to grow double-digits this quarter. Now moving on to loans and Card Member receivables on Slide 7. We saw year-over-year growth at 12%. As we progress through 2024, we continue to expect this growth to moderate, but to still grow modestly faster than billings. Turning next to credit and provision on Slide 8 through 10. First, and most importantly, we continue to see strong and best-in-class credit metrics. We attribute this performance to the high credit quality of our customer base, our robust risk management practices and our disciplined growth strategy. As we expected, our write-off and delinquency rates ticked up a bit, increasing very modestly quarter-over-quarter. Going forward, we expect to see these delinquency and write-off rates remain strong with some continued modest increase in 2024. Turning now to the accounting of this credit performance on Slide 9. The quarter-over-quarter growth in our loan balances combined with a modest increase in our Card Member loans and receivables delinquency rate resulted in a $148 million reserve build. This reserve build combined with net write-offs drove $1.3 billion of provision expense in the first quarter. As you see on Slide 10, we ended the first quarter with $5.6 billion in reserves, representing 2.9% of our total loans and Card Member receivables. We continue to expect this reserve rate to increase a bit as we move through 2024, similar to the modest increases we've seen over the past few quarters. Moving next to revenue on Slide 11. Total revenues were up 11% year-over-year in the first quarter. Our largest revenue line, discount revenue, grew 6% year-over-year in Q1 on an FX-adjusted basis as you can see on Slide 12. This growth is mostly driven by the spending trends we discussed earlier. Net card fees revenues were up 16% year-over-year in the first quarter on an FX-adjusted basis as you can see on Slide 13. We are pleased with this growth and continue to expect to exit the year with some further momentum reflecting our cycle of product refreshes. In the quarter, we acquired 3.4 million new cards, demonstrating the demand we are seeing for our products and the investments we've made. Importantly, acquisition of our premium fee-based products accounted for around 70% of new accounts and the spend revenue and credit profiles of our new card members continue to look strong. Moving on to Slide 14. You can see that net interest income was up 26% year-over-year in Q1. This growth is driven by the increase in our revolving loan balances and also by continued net yield expansion versus last year. We do expect this growth to continue to moderate as we move through the year. And I would remind you that, for our business model, we would not expect to see a meaningful impact from a lower interest rate environment this year. To sum up, revenues on Slide 15. The power of our diversified model continues to drive strong revenue growth momentum. I would note, as you think about the CFPB late fee rule, that late fees from our U.S. consumer segment make up a small portion, less than 1% of our overall revenue. While we have no specific plans to mitigate as of now, we are always looking at our pricing and policies in the ordinary course of business. Moving to expenses on Slide 16. Starting at the top of the page, variable customer engagement expenses came in at 40% of total revenues for the first quarter. As you look at these costs, I would note that Card Member rewards included a $196 million benefit as a result of enhancements to our remodels for estimating future membership rewards redemptions, some of which we reinvested for growth in our marketing line. Looking forward, I still expect our variable customer engagement expenses to grow slightly higher than our revenue on a full-year basis as we continue to focus on our premium products and drive engagement from our Card Members. On the marketing line, we increased investments to $1.5 billion in the first quarter. We continue to be pleased with the strong, high-quality customer acquisition and engagement we see as a result of these actions, and we are on track to increase marketing spend in 2024 versus last year. Moving to the bottom of Slide 16 brings us to operating expenses, which were $3.6 billion in the first quarter flat to last year's expense and in line with our expectations for the year. When you look at the components of our operating expenses, salaries and benefit grew modestly versus last year compared to the growth we've seen in this line over the past years. This reflect the discipline with which we manage our expenses and is a great example of how we're able to drive efficiency while continuing to grow our business. We continue to see OpEx as a key source of leverage and are focused on delivering low levels of growth as we have historically done. Turning next to capital on slide 17, we returned $1.6 billion of capital to our shareholders in the first quarter on the back of strong earnings generation. Our CET1 ratio was 10.6% at the end of the first quarter, within our target range of 10% to 11%. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. We do not expect any material near term changes to our capital management approach. That brings me to our 2024 guidance on Slide 18. We feel really good about our first quarter results, which are tracking in line with our expectations for the year. These results continue to reinforce that our strategy is working and we plan to continue to invest to support our momentum. As Steve discussed, for the full year 2024, we are reaffirming our guidance of having revenue growth of 9% to 11% and earnings per share between $12.65 and $13.15 and we remain committed to running the business for the long-term. As a reminder, this guidance and the items related to the full year 2024 that I just walked through do not include the potential impact from the sale of our certified business that we previously announced. We expect to realize a sizable gain on the sale and to reinvest a substantial portion of the gain back into our business, as we've done with similar transactions in the past. We still expect the deal to close in the second quarter and plan to provide more detail then. With that I'll turn the call back over to Kartik to open up the call for your questions.

Operator:

[Operator Instructions] Our first question comes from the line of Sanjay Sakhrani with KBW. Please proceed with your question.

Stephen Squeri:

Yeah. Let me start and then Christophe can jump in. But when you look at overall spending, our overall spending is 7%, but consumer spending is 8%. And I think consumer spending is relatively strong. And when you look at international, international consumer spending is up 14%. And overall, international is up 13%. Where you're seeing some softness is in SME. And so SME is up approximately 1%. And so I think as SME comes back, which we look as an opportunity down the road, as SME comes back, that will drive some stronger spending. And I think the good things that we see from an SME perspective is that we are still acquiring cards, credit looks really good. And even though organic has come down, organic transactions have gone up. So I think in aggregate, we see softness. And I think a lot of that softness is driven from a commercial perspective, but 8% consumer growth in the U.S. is not too bad.

Mihir Bhatia:

Hi. Thanks for taking my question. I wanted to ask about the membership rewards expense. It looks like there's a little bit of a change there with model enhancements and stuff. Can you just talk about that a little more? Did the estimate for the URR, the redemption rate change from the 96% at year-end? Like, should we think of this $196 million benefit as a one-time thing? Or is that going to be continuous?

Operator:

Thank you. Our next question comes from the line of Mark DeVries with Deutsche Bank. Please proceed with your question.

Stephen Squeri:

Yeah. I mean, so we invested more. And I think when you go back and you look at the first quarter of last year, we had 3.4 billion -- 3.4 million, excuse me, 3.4 billion would be a pretty sizable amount of cards to acquire in a quarter. 3.4 million cards acquired. And if you remember at that time, you had the SVB situation. And so there was a pullback. There was not only a pullback on our side, there was a little bit of a pullback in the industry. And I think there was some consumer trepidation as well. And so as the year went on, we started to build up, and it culminated this year with -- in the first quarter of 3.4 million cards. We invested more in marketing, as we said we were going to do. But I'd also like to highlight that a key driver of that acceleration is the product refreshes that we do. We've talked a lot how product refreshes really stimulate demand and how it makes our marketing dollars work a lot harder. And so we had the delta product refreshes. We had a product refresh in Japan. We had a Hilton small business card. We had a British Airways card. And we're on our way to those 40 product refreshes that we talked about. And what product refreshes do, they do stimulate demand, and it stimulates upgrades and so forth. So that's really what's behind the increase sequentially of cards quarter-over-quarter. But we are sort of back to where we were at this time last year.

Operator:

Thank you. Our next question comes from the line of Craig Maurer with FT Partners. Please proceed with your questions.

Kartik Ramachandran:

Please stand by. We are waiting for our operator.

Operator:

I'm here.

Operator:

American Express speaker line, are you guys there?

Operator:

I can hear you. [Technical Difficulty] Ladies and gentlemen please stand by. We'll continue with the next question in just a moment.

Operator:

Hi. I can hear you. Can you hear me? Hi. This is Rob. Can you hear me?

Stephen Squeri:

I can hear you. Daryl, do you hear them?

Kartik Ramachandran:

For folks attending the call, we are going to dial back in. So please stay on the line. Or if the call does drop, we ask you to dial back in. Thank you.

Kartik Ramachandran:

Yes, operator. Thank you. Please go ahead.

Stephen Squeri:

Yeah. We didn't hear it.

Stephen Squeri:

Morning.

Christophe Le Caillec:

Okay. Hey. Good morning, Craig. Under how we think about the balance of your so -- we -- as I say, we are going to stick to our EPS guidance, not going to change that range at this point in time. There are still a lot of things that need to play out in the balance of year end. We think that that guidance best represent what we expect at this point in time. Specifically about how to think about that URR benefit, as I said in my prepared remark, I would say that a significant portion of that benefit was reinvested on the marketing line. We knew -- we saw that benefit coming in the quarter, and we took advantage of that as well to dial up the marketing. So all-in-all, it doesn't have a meaningful impact on EPS for the full year. When it comes to their -- what we call their financial relief program and the modified loans, so this is an important program for us. We have -- within one of their best program in the industry, we have innovative. For instance, we have a short-term program. We are also, in that short-term program, enabling the card members to retain some spend capacity and usage of the product. So we really think that it's a differentiator to help the card members that are experiencing stress. So that program is working really well for us. It's very effective. And what I can say is that the enrollment in the program has moderated in Q1, and that the performance of the card members within this program is very, very strong. We have a ton of metrics. We -- one of the metrics we talked about in the past was we are looking at payment loyalty and how much the card members who are either in delinquent status or paying us versus paying our peers. And we like what we're saying, right? We're typically front of their wallet in terms of repayments, and it's definitely contributing to the strong credit metrics that you've seen. We think it's also consistent with our brand in terms of being there for our card members and having their back. So that program is working well. But just to be specific on your question, the enrollment in this program is moderating in Q1.

John Hecht:

Morning, guys. Most of my questions have been asked. So I guess I'm going to ask about the Visa and Mastercard settlement, a reduction in interchange rates, and then some steering mechanisms. And I know historically, given your premium brand and so forth, those actions haven't had any impact on the business. But we haven't talked about that for a while. So I'm wondering if you guys just have some updated thoughts about that.

Kartik Ramachandran:

Operator? [Technical Difficulty] screw around dialing.

Kartik Ramachandran:

Operator, we can hear you. Can you go ahead and ask for the next question, please?

Jeffrey Adelson:

Hey. Good morning, guys Can you hear me okay?

Jeffrey Adelson:

Okay. Good. Yeah, I just wanted to ask on the prior combination you did last quarter about the card refresh plans for this year, 40 card products. I think from a quick count on our end, it seems like you've done eight so far this year with Delta, Hilton and maybe a card on India. Is that right? And maybe you could just talk a little bit about trajectory over the rest of the year, cadence over the rest of the year and what the response has been to some of those refreshes so far. I think more notably, the delta, the big delta one you did earlier this year, would be interested to hear the response you've seen from customers so far on that. Thank you.

Operator:

Thank you. Our next question comes from the line of Rick Shane with JPMorgan. Please proceed with your question.

Stephen Squeri:

Well, I think it truly is a virtuous cycle. And I think you've got it right. It's important to obviously acquire cards. And then as you acquire a card, you really want to engage them and get those cardholders spending in as many areas as they can. And so you look at this ramp-up period over maybe a zero to 24 month period. And then at that point in time, what's important is that we are engaging with the customer as a customer who is embedded within the franchise. And part of our marketing dollars not only goes to acquiring new customers -- but we look at how people are spending, we look at how they're spending relative to other people like them, and that's where you'll see offers to either upgrade cards, line increases, other products that we have. And so it's that constant engagement, it's the analytics that go behind it. That really leads to the retention. What you cannot do is once you have somebody, you just can't let them be stagnant. And so -- and there's a lot of learnings out of our commercial business and out of our merchant business where we have tremendous account managers that work with our clients on a daily basis, weekly basis to help them grow their spend. Now obviously, with tens of millions of consumer card members, you can't do that necessarily personally all the time, but you can do that through communicating through the channels that we have. And another big part of our value proposition and our service proposition is when people do call into us our customer care professionals are able to look at their spending, look at how they're doing and offer them other opportunities to really to grow with us, either from a -- again from a lending perspective or from a card upgrade perspective. So I think it's really important what happens on that back office as that continues to fuel that virtuous cycle.

Bill Carcache:

Thanks. Good morning. Steve and Christophe. Although, you mentioned, Christophe, that the rewards benefit was one-off, are you seeing any evidence of customers deriving greater value from experiential and partner funded rewards. I'm just wondering if there's a possibility that pressure on the rewards rate could potentially abate in a sustained way as customers generate greater value in other ways?

Christophe Le Caillec:

And to build that a little bit on the rewards side, we are constantly trying to innovate on the MR side. On the number of partners engaged in the program, the ease of redemption as well one of their later innovation that is actually very successful in terms of how many card members are using it is the ability just to select the transaction on your statement, your digital statement and actually using more points to pay for that specific transactions. And we're seeing a lot of card members using that. So we're constantly trying to make it easier and better for our card members to redeem to make the product the MR program competitive and more and more economic as well for us. So it's definitely a pace of innovation that is a very dynamic place.

Donald Fandetti:

Yes. Christophe, your international billed business growth continues to be very strong. Do you build that into your guidance at this level for '24 revenue growth? And can you give us an update on how your acceptance initiatives are going?

Stephen Squeri:

So we're going to talk more about international at Investor Day. We'll have a separate segment on that. But we're also going to talk about how we continue to grow international coverage. And if you remember, a number of years ago, we talked about our international city strategy. We talked about industries we're going after. And so we'll provide some updates on that. But the top line is international acceptance continues to grow and continues to improve. And when you look at the international business growing at the rate it's growing and coverage continuing to grow, we see that as a long runway for future growth.

Gus Gala:

Hi, guys. Good morning. Thank you for taking my question. I wanted to dig in and ask, can we talk about the opportunities to lower cost of funding? And similar line of thought here. Can you talk a little bit about the pay overtime feature? Thanks.

Gus Gala:

Yes. Let's talk about the performance and the unit economics if we can.

Operator:

Thank you. Our next question comes from the line of Moshe Orenbuch with TD Cowen. Please proceed with your question.

Christophe Le Caillec:

All right. Let me start and I'm sure Steve will add up to this. So you're right. I mean the SME billed business has been in that 1%, 2% range for a year now. We think that this is macro driven and we have a ton of data that confirms that it's not specific to American Express, and the rest of the industry is experiencing similar trends. I will note, as I think, we said in the prepared remarks that on the acquisition side, it's going very strongly. So the demand for the product is there. Their quality of the applicant is there as well. And as we've said in the past, it's the -- I would say, the 10-year base that is moderating their spend. We'll see how it goes, those card members, the SME, as we've said in the past, have been going through a lot. They're certainly experiencing as well their compound effect of funding costs for several years now. And they are very careful in terms of how they're managing their cash flows and how they're spending. This being said, we are very focused at working with them, as I said, engaging with them. And we're confident that we have what it takes to win them back when they are ready to spend more.

Operator:

Thank you. Our final question will come from the line of Ryan Nash with Goldman Sachs. Please proceed with your question.

Stephen Squeri:

Good morning.

Ryan Nash:

So maybe to bring together some of the pieces of revenue growth. I think you were on the high end of the first quarter, and I think Christophe, you said the expectation that NII was going to slow. Maybe just talk a little bit about how you think about the trajectory of the revenue growth do we need to see spend stabilize to remain in the range? Or can we see the impact of refreshes and card acquisitions be enough to stabilize revenue growth within the range on a quarterly basis? Thank you.

Kartik Ramachandran:

With that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.

Kartik Ramachandran:

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discuss. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO who will start with some remarks about the Company's progress and results, and then Christophe Le Caillec, Chief Financial Officer will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve.

Christophe Le Caillec:

Thank you, Steve, and good morning, everyone. It's good to be here to talk about our 2023 results, which reflect another strong year of performance and to lay out our expectations for 2024. I will discuss both our quarterly and full-year results this morning. Since this year end and since looking at our business on an annual basis, it's more in sync with how we run the company. Starting with our summary financials on slide two. Full-year revenues reached an all-time high of $60.5 billion, up 15% on an FX adjusted basis. Our fourth quarter revenues were $15.8 billion and grew 11% year-over-year. This revenue momentum drove reported full-year net income of $8.4 billion, and earnings per share of $11.21. For the quarter, we reported net income of $1.9 billion, and earnings per share of $2.62. Let's now go to a more detailed look at the drivers of these results, beginning with billed business on slide three. We reached record levels of spending for both the full-year and the fourth quarter in 2023. Total billed business grew 9% versus last year on an FX adjusted basis. In the fourth quarter, billed business grew 6% as we continue to see more stable growth rates after lapping the prior year impact of Omicron back in the first quarter. This 6% growth rate does reflect a bit of softening versus last quarter, but I would point out that the number of transactions from our card members continues to grow double-digits year-over-year, a good indicator of the engagement of our customer base. Our growth was driven by 5% growth in business services spending, and although slower than last quarter, continued strong growth in travel and entertainment spending up 9% for the quarter. Restaurant spending remains our largest T&E category and reached $100 billion for the full-year for the first time, while airline spending growth slowed in the quarter. There are a few other key points to take away as we then break down our spending trends across our businesses, starting with our largest segment on slide four. U.S. consumer grew billings at 7% this quarter. We continue to see growth across all generations and age cohorts with millennials and Gen Z customers again driving our highest billed business growth within this segment. Their spending was up 15% this quarter. Looking at commercial services on slide five, overall growth came in at 1% this quarter, consistent with last quarter's growth rate. Spending growth from our U.S. small and medium-sized enterprise customers remained modest given unique dynamics seen by small businesses over the past few years. Specifically, in 2022, we saw a large increase in organic spending as businesses restocked their inventories following supply-chain issues during the pandemic. This caused a significant grow over challenged spending from this segment in the industry in 2023. Importantly, we continued to see strong levels of demand for new accounts, high levels of retention, and strong credit performance on our small-business products. Looking ahead, this positions us well for the future, a spending growth rebalance. And lastly, on slide six, you see our highest growth again this quarter in International Card Services. We continue to see double-digit growth across all regions and customer types. Spending from international consumers and from international SME and large corporate customers, each grew 13% in the fourth quarter. Overall, while we're seeing a softer spend environment, we are pleased with the continued strong engagement and loyalty of our card members across the globe. As we think about 2024, we are assuming a spend environment similar to what we've seen in the past few quarters. Now moving on to loans and card member receivables on slide seven. We saw a year-over-year growth of 13%. We expect this growth, which has been elevated versus pre-pandemic levels to continue to moderate as we progress through the 2024, but to still grow modestly faster than billings. Turning next to credit and provision on slide eight through 10. First and most importantly, we continue to see strong and best-in-class credit metrics. We attribute this performance to the high credit quality of our customer base, our robust risk management practices, and our disciplined growth strategy. As we had expected, our write-off and delinquency rates did continue to tick up this quarter, as you see on slide right. Going forward, we expect to see this delinquency and write-off rates remains strong with modest increases in 2024. Turning now to the accounting of this credit performance on slide nine. The modest increase in our card member loans and receivables delinquency rate combined with the quarter-over-quarter growth loan balances resulted in a $400 million reserve build. This reserve build combined with net write-offs drove $1.4 billion of provision expense in the fourth quarter. As you see on slide 10, we ended the fourth quarter with $5.4 billion of reserves, representing 2.8% of our total loans and card member receivables and continuing to reflect the premium nature of our card member base. This reserve rate remains about 10 basis points below the level we had pre-pandemic or day-one CECL. We continue to expect the reserve rate to increase a bit as we move through 2024, similar to the modest increases we've seen over the past few quarters. Moving next to revenue on slide 11. Total revenues were up 11% year-over-year in the fourth quarter and up 15% for the full-year on an FX adjusted basis. Our largest revenue line, discount revenue grew 5% year-over-year in Q4, and 9% for the full-year, as you can see on slide 12. This growth is mostly driven by the spending trends we discussed earlier. Net card fee revenues were up 17% year-over-year in the fourth quarter and 20% for the full-year, as you can see on slide 13. As we expected, growth continued to moderate a bit this quarter from the high levels we saw earlier this year, reflecting our cycle of product refreshes. In 2024, we expect to exit the year with some further momentum compared to the current growth supported by continued product innovation and our focus on premium value propositions. We currently have plans to refresh around 40 products globally next year. In the quarter, we acquired 2.9 million new cards, and the spend revenue and credit profiles of our new cardmembers continue to look strong. Moving on to slide 14. You can see that net interest income was up 30% year-over-year on an FX-adjusted basis in Q4, and 33% for the full-year. This growth is driven by the increase in our revolving loan balances and also by continued net yield expansion versus last year. When you think about 2024, you should expect to see net interest income growth moderate as balance growth moderates, with some continued tailwind from our tenured customers continuing to rebuild balances. And I would remind you that for our business model, we would not expect to see a meaningful impact from the lower interest-rate environment next year. To sum up, revenues on slide 15, the power of our diversified model continues to drive strong revenue momentum. Looking forward into 2024, we expect to see revenue growth between 9% and 11%. Moving to expenses on slide 16. Overall, total expenses were up 5% in the fourth quarter and 10% on a full-year basis, both growing significantly lower than revenue. This expense growth reflects the strong growth we're seeing in our business, the investments we've made, as well as our continued focus on expense discipline. Starting at the top of the page with variable customer engagement expenses. These costs came in at 40% of total revenues for the fourth quarter and 41% for the full-year. I would note that this cost came in a bit lower than our expectations, reflecting some of the natural hedges in our model. As T&E spend growth slowed a bit in the quarter, we saw lower rewards cuts than we had expected. For example, a lower mix of redemptions for airline's tickets and fewer points earned on airline spend. In 2024, I would expect our variable customer engagement expenses to grow slightly higher than our revenue, as we continue to focus on our premium products and drive engagement from our card members. On the marketing line, we invested around $1.2 billion in the fourth quarter and $5.2 billion for the full-year. This is a bit below last year and our expectations to have marketing spend at around $5.5 billion. Marketing expense came in lower than we expected for the quarter, reflecting lower demand given the softer T&E environment. However, we saw demand increase as we moved through the quarter and we continue to plan for increased marketing spend in 2024. We are confident that with our sophisticated acquisition engine will do so in an efficient way. Moving to the bottom of slide 16 brings us to operating expenses, which were $4.2 billion in the fourth quarter and $14.9 billion for the full year 2023. This was above our original expectations, driven by a few notable items in the quarter. First, as part of the normal course of business, we set up a reserve to cover expenses as we continuously look to enhance the organization's effectiveness. We also set up a reserve for exposure to a specific merchant, and like many others, we were impacted by the devaluation of the Argentine peso, which increased our OpEx in Q4 by $115 million. Looking forward, we continue to see OpEx as a key source of leverage, and our focus on delivering low levels of growth as we have historically done. In 2024, we expect operating expenses to be fairly flat to this year's expense. We will of course continue to assess opportunities as we move through the year, and our flexible model will allow us to dial up or down investments as needed. Taking everything into account in 2024, we expect total expense to grow mid to high-level digits for the full-year, as we expect to drive continued leverage through our operating expenses. Turning next to capital on slide 17. We've returned $5.3 billion of capital to our shareholders in 2023, including $1.4 billion in the fourth quarter on the back of strong earnings generation. We ended the year with our CET1 ratio at 10.5%, within our target range of 10% to 11%. In Q1 2024, as Steve discussed, we expect to increase our dividend by over 15% to $0.70 per quarter, consistent with our approach of growing our dividend in line with earnings, and our 20 to 25 target payout ratio. We plan to continue to return to shareholders the excess capital we generate, while supporting our balance sheet growth. We do not expect any material near-term changes to our capital management approach. That brings me to our long-term aspiration and 2024 guidance on slide 18. We continue to run our business with a focus on our aspiration of revenue growth in excess of 10%, and mid-teens EPS growth, and we believe that is the right aspiration. As Steve discussed for the full-year 2024, specifically, we are reducing our guidance of having revenue growth of 9% to 11%, and earnings per share of between $12.65 and $13.15. This guidance remains in line with our aspiration and also factors in a range of scenarios based on what we're seeing in our business today. We also recently announced an agreement to sell our Accertify business. Our guidance and the items related to 2024 that I just walked through, do not include the potential impact from this sale. We do expect to realize a sizable gain on the sale and to reinvest a substantial portion of the gain back into our business, as we've done with similar transactions in the past. We expect the deal to close in the second quarter and plan to provide more detail then. With that, I'll turn the call back over to Kartik to open the call for your questions.

Operator:

[Operator Instructions] Our first question comes from Don Fandetti of Wells Fargo. Please go ahead.

Christophe Le Caillec:

Yes. So we don't talk about monthly numbers so let alone about you know a few weeks into the month of January. So, I think best is to wait until the end of quarter, and we'll provide a lot more color and detail on the billing in January so far. As far as how we think about billed business in 2024, our planning assumption is that we should expect or we expecting billings to be consistent with what we've seen in the prior few quarters, you know, and we are ready to see in a society if there is some. But for now, that's the assumption we have baked in our plans and how we constructed this guidance. On the SME side, it's the same, assumption if you want. We are assuming either something similar to what we're seeing in Q3, Q4, and you know we are very focused on winning the recoveries with SMEs. As I've said in my remarks, these card members have been through a lot over the last two, three years, and we are focusing on providing the best experience, the best products. We are focusing on acquiring as many customers as we can and helping them grow their business. And we'll be ready when they're ready. Historically, this has been a volatile segment for us. You know, how dynamic these customer segments are and we play a critical role in that industry and we'll be ready when they're ready.

Ryan Nash:

Hey, good morning, guys.

Ryan Nash:

Maybe to build on Don's question. Can you maybe just dig a little bit deeper on some of the drivers of revenue growth, so discount revenues, card fees, and Christophe, I know you said that NII should decelerate then. Are we assuming any sort of re-acceleration as we move through the year, particularly in areas like U.S. Consumer or SME? Thank you.

Operator:

Thank you. The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.

Christophe Le Caillec:

Okay. So let me take loan growth first. The dynamic on loan growth has not changed, and for several quarters now it's also our philosophy and how we run the company. About 70% of their loan growth comes from tenured card members, and what we call tenured card members is card members who've been with us more than 12 months. And that's very much how we think about acquisition. We acquire card members. We develop relationships with them. Then we offer them -- you know, we cross-sell products, we increase alliance, we nurture those relationships, and we do that because we understand them better, we understand their spend patterns and they understand our products better as well. And that's the driver. There either we don't do much balanced transfers, if any at all, and we don't have promotional offers -- much promotional offers also. So it's very much growing with our tenured card members. And it's part of our strategy to contain if you on the credit risk and to control it. And when it comes to the credit profile of the new card members, we haven't changed our credit underwriting models, right? We still -- and we haven't changed as well our marketing channels and products. Well, we still skew towards positive selection in terms of credit profile. That has not changed and I need to say that there prospects that we bring in and become recent card members have very good credit profile.

Bill Carcache:

Thank you for taking my question, and good morning. I wanted to follow up on your comments about customer engagement spending outpacing revenue growth. Can you speak broadly to your ability to continue to drive customer engagement with elevated investment spending, while at the same time offsetting that margin pressure with operating expense leverage in other parts of the business? And I guess, you know, do you anticipate positive operating leverage on an aggregate basis with revenue growth outpacing the sum of that customer engagement and operating expense combined?

Operator:

Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.

Christophe Le Caillec:

Yes. So T&E, sequentially the growth rate came down. I need to point out though that is still up 9% year-over-year, so it's a pretty strong growth rate. In terms of airline spend, and if you heard, I'm sure the various airline, they all made comments about the bid of a softer demand. And since many of those customers are using an American Express card to pay for the airline ticket, we saw a similar trend. This being said, booking remains very strong on our TLS segment. I don't have the numbers in front of me, but I know there were strong. So I don't -- we'll see whether it's the beginning of a trend or whether it's a data point. But we keep you know seeing a lot of strength and you know the partnership we have with Delta is working very, very well. Originations of new cards are very strong. And here card members decided to redeem a bit less in Q4 with airline tickets than they did in the past and we've seen in the -- that choppiness as well in the past. I don't worry. It's one data point. And for 2024, we haven't either communicated on exactly what assumptions we're making by category, but either, I'm not too worried. We have a card member base that loves traveling, and I'm sure they're going to keep traveling.

Rick Shane:

Thanks for taking my questions this morning. Look, you guys have alluded to the fact that the reserve rate is going to go up or drift up in 2024. I'm curious if what's driving that. Presumably, it's a mix-shift between loans and card member receivables, but I'm wondering if, at any level, you're also suggesting that the reserve rate on the loan portfolio is going to go up as a reflection of either -- some sort of shift there. Is it just a pure mix-shift as the loan portfolio grows faster than the card member receivables?

Operator:

Thank you. The next question is coming from Saul Martinez of HSBC. Please go ahead.

Christophe Le Caillec:

Yes, so thank you for your question. So not a lot has changed on that front outside of the fact that we've been meeting with regulators, Steve met with regulators, I met with regulators as well. And what I can tell you is that they're listening, they're engaged, and I think they understand our comments. The ball is back in their camp now and they're incorporating all the comments they receive from the industry and I'm sure you've seen a lot of those comments as well. So they have a lot of work to do. Right now we're in waiting mode. And I think we're expecting the current estimate is we're expecting their -- or at least their next version of the rules by the end of 2024, we'll see. It took 10-years to get to their first draft, so we'll see when we get the next version. I'm not too concerned. I feel good about our starting point and our capital position. As you know, we generate about 30% return on equity, which means that we generate a ton of capital. And for now, we're not going to change our capital policy. The first thing we do is of course fund the balance sheet then we distribute dividends We feel very confident about the increase that we are planning to do this year. And the rest is going to go in share buyback so that we keep capital between 10% and 11% of our risk weighted asset. And that's what we've done for years, that's what we're going to keep doing. And we're going adapt to the Basel rule. You know we're running the company conservatively as well with a big buffer over the 7% rate that we have. And so nothing has changed much on that front, so more to come when we get the final rules.

Moshe Orenbuch:

Great. Thanks. And many of my questions have been asked and answered, but hoping to follow up on a comment that you have just made about the pay overtime business. Could you talk a little bit more about the characteristics of that? You mentioned that obviously, that's going to tenured charge card customers. So the quality is very strong. Just talk a little bit about the yield and how much you've seen in kind of growth from that product.

Operator:

Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Christophe Le Caillec:

So let me take the second question first. We are slightly liability sensitive, and the key assumptions for us -- but the common remains that you know in its totality, our total balance sheet and total funding stack level, the impact of rate cuts is going to be very small to our NII. The big unknown here is what's going to happen to the beta. We've been as an industry trending around 0.7 on the way up. We probably got a trend to 0.7 on the way down, but not immediately, and it's hard to say exactly at this point in time where are we going to be when the Fed starts cutting rates. We are making assumptions with that we think are conservatives, but we don't know for sure and we'll see where we are. So there is a bit of uncertainty here, but what is -- what you know for sure is that you should not expect a big impact on NII depending on the rate curve. Going back to your first question around revenue, I just -- I don't have a lot to say on top of what I said earlier and what I've said in my prepared remarks. I'm happy to be surprised on the upside if billed business is stronger and card fees, we have good visibility. NII, I think the trend is very established. And on billing, as I said, we are assuming at this point in time something consistent with what we've seen in the previous quarters and we'll see where we are at the end of the year. But if the economy re-bounce, if the growth is a bit stronger than what is expected by economists and our card members are optimistic and keep spending, you know, I'd be delighted to have a higher billed business to report.

Dominick Gabriele:

Hey, good morning, Steve and Christophe. Thanks so much for taking my question. Thanks so much for taking my question. I was just curious about the total card growth. We all know that you've seen some really excellent account acquisitions over the last number of years so I was just curious about total card growth versus proprietary cards-in-force growth, in particular this quarter. If there is any color you can provide on why that may diverge or what the strategy is between maybe having more proprietary cards as a percentage of total cards? Anything on that would be excellent. Thanks so much.

Dominick Gabriele:

Very much. I really appreciate that. Have a good day.

Operator:

Thank you. The next question is coming from Arren Cyganovich of Citi. Please go ahead.

Steve Squeri:

Yes. So as you know, we have committed to refreshing 40 products this year, as Christophe has said, and strategically, we look at refreshing all of our products on a sort of three to four year basis. And it's important because it's really important to make sure that we keep our products fresh. We're listening to our customers and putting in those enhancements and the extra value that they want and enable us to make sure from a generational perspective, we are modifying those products as trends change and as our customer needs change. As far as specifically for the Platinum card, we don't really pre-announce that, and so I think you just have to wait and see.

Craig Maurer:

Yes. Good morning. Thanks. And two quick questions. Considering the strength of Delta Air Lines over the last number of years, it's consistently the top airline. You've clearly, benefited a lot from that in terms of new card issuance and likely in spend as they've been able to hold fares better. As we see airlines spend slow, does that benefit diminish, and is it something you have to think about? And second, in terms of small business, no, we've been pretty flat now for a couple of quarters. Curious what you're seeing under the covers there is this. Are you still able to issue new cards, or -- and are you seeing any reluctance from small business to take additional products that might increase their cost beyond the baseline? I'm just trying to understand the move better small business owners. Thanks.

Christophe Le Caillec:

Yes. So the Delta product is still going very, very strong. The total billing growth on the Delta product for the full year was up 15%, and we are originating a lot of new cards as well. And my comment about there either softness in terms of Q4, hard to say whether it's the beginning of a trend or whether it's just a blip, time will tell, but it's still growing very, very strong and the engagement with the partner is very strong -- the partnership is going strong. So I don't see any softness there at all. And I will say as well that their credit quality of those new card members remained very strong. I made comments about, it's one of the fastest-growing segment on the loan side and it comes with very strong performance. People who travel a lot and who fly a lot tend to have strong credit quality, and we see that on the loan side, on the spend side, on the origination side. So I'm not worried about that at this stage.

Mihir Bhatia:

Hi. Thank you for squeezing me in here. I just wanted to go back a little bit and maybe just unpack the billings growth a little bit. Maybe can you just talk about how much of that is being driven by adding new card members versus winning wallet share? And then just related to that same topic was just how are you thinking about the environment for new card acquisition? Is this 3 million level that you have been out for the last couple of quarters, the right level to think about for the next year? I understand that is dynamic and you will change, but what have you assumed in your planning?

Kartik Ramachandran:

With that, we will bring the call to an end. Thank you for joining today's call, and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.

Kerri Bernstein:

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Christophe Le Caillec, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve.

Christophe Le Caillec:

Thank you, Steve, and good morning, everyone. I'm excited to have my first earnings call be one where we discuss our continued strong momentum which is reflected in our record revenue and EPS in the third quarter. I would like to take a minute at the outset to share my perspective on the company as someone who has been here for a long time and through various business environments. The company is very focused on driving high levels of profitable revenue growth. The key enabler of that growth has been the discipline we use to deploy our resources. As a result, the underlying quality of our business is very strong, and I have confidence in the sustainability of the growth drivers that we are seeing. We have accelerated the pace of our revenue and EPS growth since before the pandemic. That acceleration is a direct result of the strategy that underpins our growth plan, which Steve described. In the quarter, that strategy has driven $27 billion more in billings versus last quarter. The company is also generating almost $2 billion more in revenue and about $600 million more in net income compared to a year ago. This demonstrates the earnings power of our business model. Now let's take a look at the details of this quarter's performance. Starting with our summary financials on Slide 2. Third quarter revenues were $15.4 billion. They reach a record high for the sixth straight quarter and were up 13% year-over-year. This revenue momentum drove reported net income of $2.5 billion and earnings per share of $3.30, which grew 34% year-over-year. Let's now go to a more detailed look at the drivers of these results. In our spend-centric business model, that begins with a look at bill business starting on Slide 3. Total billed business grew $27 billion this quarter versus last year, up 7% on an FX adjusted basis as we continue to see the more stable growth rates that we expected. This growth was driven by 6% growth in goods and services spending, consistent with last quarter's growth rate and sustained double digit growth in travel and entertainment spending. This double-digit T&E growth has been driven by continued demand for travel and dining experiences with the restaurant spending, our largest category, up 13% this quarter. Total network volumes grew 6% year-over-year on an FX-adjusted basis. As you look at these results, I'd note that we exited a small product last quarter that was reported in our process volumes. This is reflected in the Q3 growth rate and expect to see the impact of the year-over-year growth rate continue for the next few quarters until we lap this exit. As a reminder, process volume includes volumes from cards where we play more of a network role and from alternative payment solutions that we facilitate. The revenue associated with these volumes makes up a small portion of our total revenue, which you can see on Slide 11. As we then break down our spending trends across our businesses, there are a few other key points to take away. Starting with our larger segment on Slide 4. US consumer grew billings strongly at 9% this quarter. Our focus on attracting, engaging, and retaining our premium Card Members is driving growth across all generations and age cohorts. Millennial and Gen Z customers continue to drive our highest billed business growth within this segment with their spending up 18% this quarter. Looking at commercial services on Slide 5, US SME growth came in at 2% this quarter, consistent with last quarter's growth rate. As Steve discussed on our Q2 call, organic growth in this segment has slowed given unique dynamics seen by small businesses over the past few years. Importantly, we do continue to see strong high-quality demand for new accounts within this segment. Looking forward, we focus on continuing to help SME clients run their businesses. Billings from our US large and global corporate customers were flat year-over-year. As we have said for many years, these customers are not a major growth driver for our business, but they remain an important foundation for the company's business model. And lastly, on Slide 6. You see our highest growth again this quarter in international card services. We saw strong growth across our geographies and customer types. Spending from international consumers and from international SME and large corporate customers, each grew 15%. Overall, strength in spending growth from our US consumers and Card Members outside of the US continues to see -- offset the softness with commercial services that we've been talking about for the past few quarters. Taking everything into account, our spending volumes are tracking to support our revenue guidance for the full year and our long-term aspirations for sustainable growth rates greater than what we were generating pre-pandemic. Now, moving on to loans and Card Member receivables on Slide 7. We saw year-over-year growth of 15% as well as good continued sequential growth. As our customers continue to rebuild balances, the interest-bearing portion of our loans and receivables balances continues to grow faster than the overall growth you see. Importantly, over 70% of our revolving loan growth in the US continues to come from our tenured customers. As you then turn to credit and provision on Slide 8 through 10, the high credit quality of our customer base continues to show in our best-in-class credit performance. As you can see on Slide 8, our Card Member loans and receivables, write-offs and delinquency rates both remain fairly flat to last quarter and below pre-pandemic levels. Going forward, as we've talked about for many quarters now, we continue to expect this delinquency and write-off rates to increase over time and they are likely to remain below pre-pandemic levels in the fourth quarter. Turning now to the accounting of this credit performance on Slide 9. The quarter-over-quarter growth in our loan balances, combined with a modest increase in our Card Member loans and receivables delinquency rate resulted in a $321 million reserve bill. This reserve bill, combined with net write-offs, drove $1.2 billion of provision expense in the third quarter. As you see on Slide 10, we ended the third quarter with $5 billion of reserves, representing 2.7% of our total loans and Card Member receivables. This reserve rate remained about 20 basis points below the level we had pre-pandemic or day one CECL. We continue to expect this reserve rate to increase a bit in the balance of year, similar to the modest increases we've seen over the past few quarters. Moving next to revenue on Slide 11. Total revenues were up $1.8 billion or 13% year-over-year in the third quarter. Our largest revenue line, discount revenue, grew 7% year-over-year in Q3, as you can see on Slide 12, driven by spending trends we discussed earlier. Net card fee revenues were up 19% year-over-year on an FX adjusted basis, as you can see on Slide 13. This growth remains very strong and is powered by the continued attractiveness to both new and existing customers of our fee-paying products due to the investment we've made in our premium value propositions. As we expected, growth moderated a bit this quarter from the high levels we saw earlier this year, reflecting our cycle of product refreshes. This quarter, we acquired 2.9 million new cards. Importantly, the acquisition levels you see on Slide 13 remain consistent with our long-term growth aspirations. The spend, revenue, and credit profiles of our new Card Members continue to look strong relative to what we saw pre-pandemic. Moving on to Slide 14. You can see that net interest income was up 33% year-over-year on an FX adjusted basis, driven mostly by the growth in our revolving loan balances. To sum up revenues on Slide 15, we're seeing broad based revenue momentum across our diversified revenue lines. For 2023, we expect revenue growth to be within the range we communicated in January at around 15% growth for the full year. Moving to expenses on Slide 16, variable customer engagement expenses came in at 40% of total revenues in the third quarter. Therefore, I now expect these costs to run at around 42% of total revenues in the full year -- on the full year basis. Looking forward, we view this cost as a key driver of our momentum as we continue to innovate our value propositions to deepen engagement with our premium Card Members and to attract new ones as Steve discussed earlier. On the marketing line, we invested $1.2 billion in the quarter. I still expect to have marketing spend of around $5.5 billion for the full year, fairly flat to our 2022 expense. We feel really good about the quality of our new card acquisitions, which I talked about earlier, and I continue to see great demand for our products across a wide range of attractive investment opportunities. Given this strong set of opportunities, I would expect to increase our marketing spend in the balance of this year and we're confident that our sophisticated acquisition engine will continue to do so in an efficient way. Moving to the bottom of Slide 16 brings us to operating expenses which were $3.7 billion in the third quarter as we invest in critical areas such as our talented colleague base and technology. Taking this into account, we now expect our full year operating expenses to be around $14.5 billion. Looking forward, we continue to view marketing and OpEx as a key source of leverage. Turning next to capital on Slide 17. We returned $1.7 billion of capital to our shareholders in the third quarter. This included common stock repurchase of $1.3 billion and $438 million in common stock dividends, all on the back of strong earnings generation. As you can see on Slide 17, we target a CET1 ratio between 10% to 11%. We ended the quarter with a CET1 ratio of 10.7%, which is well above our current regulatory minimum of 7%. As we think about the Basel III proposal, the RWA increase could consume the buffer above regulatory capital requirements if the proposal is adopted as written. Notably, we believe there are clear opportunities for improvements between the proposal and the final rule. In fact, the regulators themselves have posed questions about potential issues in applying these rules broadly and we are actively engaged in that dialogue. We plan to continue to return to shareholders the excess capital we generate while supporting our balance state growth. We do not expect any material near-term changes to our capital management approach. That brings me to our growth plan and 2023 guidance on Slide 18. As Steve and I discussed in our third quarter results -- our third quarter results, sorry, reflect a continuation of the strong momentum we've built over the last few years, evidenced by our performance across diversified revenue streams. For the full year, we expect revenue growth of around 15%, consistent with the revenue guidance range we provided at the beginning of the year. As I discussed before, we now expect variable Card Member engagement expenses to be around 42% of total revenues on a full year basis, modestly below our original expectation. On marketing, we still expect to spend around $5.5 billion for the full year. And lastly, we now expect our operating expenses to be around $14.5 billion this year, modestly above our original expectation as we invest in areas critical to our success. Taking everything together, our earnings per share guidance remains between $11.00 and $11.40. Looking forward, we remain committed to focusing on achieving our aspirations of sustainably delivering revenue growth in excess of 10% and meeting EPS growth in a steady-state macro environment. With that, we'll open up the call for your questions in a moment. A final point which relates to our investor relations teams here at American Express. Steve and I have decided to move Kerri Bernstein to the critical role of Corporate Treasurer. I'd like to thank Kerri for leading the IR function during a period of strong performance for the company. I'd then like to welcome Kartik Ramachandran, our new Head of Investor Relations. Kartik was most recently a key finance lead in our US consumer business and has had a number of finance positions over his 11 years with the company. Now, let me turn it back over to Kerri to open up the call for your questions.

Operator:

[Operator Instructions] Our first question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Steve Squeri:

Yeah, so thanks, Sanjay. Let me start with Delta first. I think, as Delta makes changes, we're in lockstep with them all the way. And, one of the great things about having Delta as a partner is they're a very customer-focused organization. And they made some changes. The team got some reaction and I think they made some other changes which I think will be -- and have been received in a very good fashion. But as far as spending or card acquisition, it has had zero impact. So we haven't seen anything from a card spending on Delta or from a card acquisition. In fact, Delta card spending year-over-year was up almost 20%. So we feel pretty good about that. As far as the US consumer, and let's just talk about the US consumer and international consumer, it's still strong. We had 9% US consumer spending, 6% growth on goods and services, 13% growth on T&E, and that continues to be very strong off a high base. And from an international perspective, we've seen 15% spending from an International Card Services perspective and strong both from a goods and services and a T&E perspective. And I think it's important that I'll remind everybody, our card base is a really small piece of the overall US economy. And one of the reasons we have such great credit metrics is we have a really high-quality Card Member. And so at this point in time, they have not been impacted by anything. But the other thing that I would say is, you probably had the same question at this time last year. And I probably gave you the same answer. And right now, look, we can only manage the business for what we're seeing in our business, which is still strong growth. And we use the Blue Chip economic forecast. And that calls for pretty much more of the same. So in a steady state macro environment, I feel really good about, delivering on our plan. As Christophe said, we are well positioned and as I said in my remarks, we're well positioned to continue to deliver on our growth plan.

Ryan Nash:

Hey, good morning, Steve. Good morning, Christophe.

Ryan Nash:

Look, as a follow up to Sanjay's question, obviously it was good to see the solid revenue growth, given the challenging economic backdrop. And you're still talking about double-digit revenue growth next year, but maybe just talk about some of the pieces or the drivers you expect to see given what's going on in billing's growth and are you leaning more into lending in order to drive this growth? And then just lastly, like, do we need to see billings to improve in order to be able to drive double digit revenue growth? Thank you.

Ryan Nash:

I know. Try to put in one in there.

Christophe Le Caillec:

And maybe, Ryan, I can add one point on the lending side. As Steve said, we have a premium customer base and we grow in lending of that premium customer base. 70% of the balances are coming from established Card Members that we know well. So, those Card Members we know revolve with competitors' products and historically we under-index on that. We capture a big share of their spend, a smaller share of that lending. And what we're doing here is just deepening the relationship with them and capturing a bigger share of their revolving needs.

Bob Napoli:

Thank you, and congratulations to everyone. Kerri, it's been great working with you and good luck. So question, Steve, on the SMB business. That's a really important business for you. It's only growing 2%. I think there are large opportunities there. But what is -- can you maybe give a little color on what's going on in SMB and your thoughts about SMB as we move into 2024?

Operator:

Thank you. The next question is coming from Rick Shane of JPMorgan. Please go ahead.

Christophe Le Caillec:

Yeah, yeah. So the trend -- there is like still a bit of normalization going on. So, if you look at our delinquency rates, they're fairly flat. If you squint a little bit, you're going to see a couple of basis points increase. And that's effectively what I meant when I said that you should expect that reserve rate to increase a little bit. There's still a little bit of normalization happening here, but as you know well, those delinquency rates and write-off rates are very strong relative to our historical performance and of course, relative to peers. So there's nothing that gives me concern in that comment. It's just to preempt a little bit what we are seeing.

Don Fandetti:

Hi, good morning. Christophe, on the Basel III endgame, has the message -- is the message still unchanged? I mean, it seems like that's a pretty big increase in RWAs and that maybe you might have to ultimately dial back the buybacks at some point. Just want to get your thoughts on that.

Operator:

Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.

Steve Squeri:

No. I think, it comes down to timing. And what happens is quarters happen to cut off on particular days, and that's just the way it is. But no, we're committed to the $5.5 billion overall approximately of marketing. You saw a slight sequential drop. I think we went under the 3 million for the first time in a while. And we look at account growth as, or cards acquired from an overall revenue perspective, but we still see tremendous opportunities out there, which is why we've sort of signaled here, more than signaled, we said we're going to raise our marketing expense for next year as well. So, no, we're not seeing anything at all. That gives us pause. And we will continue to acquire those cards as long as those opportunities are out there. So you will see a higher level of marketing spending in the next quarter.

Bill Carcache:

Thank you. Good morning, Steve and Christophe. Welcome to the call.

Christophe Le Caillec:

Good morning.

Steve Squeri:

Yeah, look as far as [Fed now] (ph), I think let's just go to the UK. UK's had open banking for 10 years or so and it's really had no impact on our business either positively or negatively. So I don't really see this as a -- as either a big threat or a big opportunity. And I think what I'd like to take you back, Bill, to is what product we're actually offering. We're offering a membership model product basically, which has lots of different components other than just commodity paying. And our product has so many more benefits from a security perspective, a fraud perspective, a dispute perspective than an open banking product would have. And so I really don't see this, a, as either an opportunity or as a threat to our business, either in the short term or in the long term. I will turn the other question over to Christophe.

Operator:

Thank you. The next question is coming from Dominick Gabriele with Oppenheimer. Please go ahead.

Christophe Le Caillec:

Yeah. So, yes, and our total VCE, I called out, was lower this quarter at 40%. So as you know, variable card member engagement and rewards is the biggest number there. It's a very large expense base. So we're constantly looking at when we do product refreshes, when we launch products, we're looking at ways to make sure that these value proposition works best and we price for this. And there's always changes, there's always changes as well in terms of how the Card Members choose to redeem their points from one quarter to another. As you know, we are also adding constantly new redemption partners that change the mix in terms of their weighted average cost per point. So there’s, at any point in time, a lot of variables that will impact that ratio. We are very focused on making sure that we have the right ratio versus revenue and we also have the right value proposition that would be compelling in the marketplace. So it's a little bit lower this quarter. I think we said 42% for the full year because we are seeing it's a bit better as well from a full year standpoint. It's still going to be an area of investments for us. It drives a lot of growth as well. That's one of the key reason why Card Members sign up for the cards and engage with it. And we're going to keep working on those value propositions and make sure that we have the right balance here.

Operator:

Thank you. The next question is coming from Arren Cyganovich of Citi. Please go ahead.

Christophe Le Caillec:

Yeah, yeah. So we're not going to give you a lot of details about 2024 on this call. We plan to do that at the beginning of next year when we speak about 2024 guidance. But what I can tell you is that the starting point for us of our credit performance and all our credit decisions is the quality of the products and the fact that it attracts premium Card Members. That's the starting point, right? We have a very talented risk organization. We have a very disciplined execution of our risk decision, but it starts with the quality of the product and that's the key differentiator vis-a-vis our peers and that's what we are focused on. And as you know, we've said this many times on this call, if anything, we are focused even more on the premiumness of the portfolio. We are -- the new Card Members, because you're talking about the vintages, the new Card Members we're bringing in, 70% of those consumer Card Members are joining the franchise on a fee-paying product. That's a big statement to join the franchise. And so, that's what we used to start projecting out. There's still, as I've said before, there's still a little bit of either COVID noise and normalization going on, but we are very pleased with our credit performance that we're seeing. And as you pointed out, the gap versus competitors, if anything, is increasing further.

Craig Mauer:

Yeah, good morning. Thanks for taking the questions and congrats, Kerri and Kartik on your new roles. The net interest yield on card member loans saw a nice improvement in the quarter of 50 basis points quarter-on-quarter and were -- you're now above Q4 ‘19 and while I understand what rates are doing, the increase was pretty substantial this quarter, so I was -- versus prior quarter. So I was wondering how we should expect that to trend. And secondly, given your visibility due to the accounting treatment of card fees, how should we expect that to trend over the coming quarters considering it's decelerated for several quarters in a row? Thank you.

Steve Squeri:

Right. And if you go back to the pandemic, we were growing in the 10% to 11%. And so when you look at the outsized -- what's called the outsized growth rates that we had in Q3 and Q4 of 2022, you did -- you had not acquired cards in really in 2020. And so when you got to that amortization in the third and fourth quarter of 2021, it was lower. So the growth rate was a little bit higher as we got in there. But look, we're pretty happy with 19% growth rate over numbers that continue to get bigger.

Mihir Bhatia:

Hi. Thanks for taking my questions, squeezing me in here. Again, congratulations to Christophe, Kerri, and Kartik. I wanted to maybe switch from talking about the card products that the whole call has been talking about a little bit, and maybe just talk a little bit about the non-card products. I think other loans and receivables is now up over $10 billion in total now. It's obviously been an area where you've spent a lot of time investing in. Maybe just talk a little bit about that, both on the consumer and commercial side. Where are you seeing some of the strongest growth? How do you expect that to trend? How much is that contributing to interest yields, and et cetera? Thanks.

Kerri Bernstein:

Okay. And with that, we will bring the call to an end. Thank you for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.

Kerri Bernstein:

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today’s (ph) discussion contains certain forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discussed. All of [Technical Difficulty] on our website at ir.americanexpress.com. We'll begin today with Steve Squeri; Chairman and CEO, who will start with some remarks about the company's progress and results. And then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Well, thank you, Steve and good morning, everyone. It's good to be here to talk about our second quarter results, which are tracking with the guidance we gave for the full year and reflects steady progress against our long-term growth aspirations. Starting with our summary financials on Slide 2. Our second quarter revenues were $15.1 billion, reaching a record high for the fifth straight quarter, up 13% year-over-year on an FX-adjusted basis. This revenue momentum drove reported net income of $2.2 billion and earnings per share of $2.89, up 12% year-over-year. This does represent a quarterly EPS record for the company and it also reflects the sequential strengthening we expected as we move through the year that I mentioned last quarter. Pretax pre-provision income was $3.9 billion, up 33% versus the same time period last year, reflecting the strong growth momentum in our underlying earnings. So now let's get into a more detailed look at our results, which in our spend-centric business model always begins with a look at volumes, which you see on Slides 3 through 7. In total, you see on Slide 3 that we did reach a new record level for spending on our network this quarter, with total network volumes and billed business up 9% and 8% year-over-year, respectively, on an FX-adjusted basis. Of course, I'd remind you that growth rates were particularly elevated last quarter as we lapped the impact of Omicron in the first quarter of the prior year. We are now seeing the more stable rates that we expect are more representative of the kind of growth rates we will see in the balance of the year. Goods and services spending grew 6% overall in the second quarter. We saw good growth in goods and services spending in U.S. consumer and International Card Services of 8% and 15%, respectively, while this growth rate in U.S. SME did continue to slow down a bit further from last quarter. In contrast, we saw very strong growth in Travel and Entertainment spending across geographies and customer types, up 14% overall driven by sustained demand for travel and dining experiences. Looking forward, I would expect this growth rate to remain in the double-digits through the rest of this year. Turning to our largest segment, U.S. consumer grew billing strongly at 10% this quarter. Millennial and Gen Z customers continue to drive our highest billed business growth within this segment. with their spending growing 21% year-over-year. You see our highest growth again this quarter in International Card Services with strong growth across both geographies and customer types. Spending from international consumers grew 16%, while spending from international SME and large corporate customers grew 19%. The strength in spending growth from our [Technical Difficulty] consumers and Card Members outside the U.S. offset the continued softness in U.S. SME spending growth that we have been talking about for the past few quarters. Looking at Commercial Services, U.S. SME growth came in at 2% this quarter. Looking forward, we will continue to monitor these spending trends. Our U.S. large and global corporate customers also grew billings 2% in the second quarter, as we've said for many years, these customers, while not a particular growth driver for our business to remain an important foundation for the company's business model. Taking all of this into account, spending volumes or tracking to support our revenue guidance for the year and our long-term aspirations for sustainable growth rates greater than what we were seeing pre-pandemic. Now moving on to loans and Card Member receivables on Slide 8. We saw good continued sequential growth, as well as year-over-year growth of 15%. Year-over-year growth moderated a bit this quarter as we expected, but remains elevated versus pre-pandemic levels. The interest-bearing portion of our loan and receivable balances continues to grow faster than the overall growth you see as our customers continue to rebuild balances. Importantly, the majority of this revolving loan growth in the U.S. continues to come from our high credit quality existing customers. We also included a disclosure this quarter showing that only 8% (ph) of our U.S. Card Member loans and receivables comes from customers with a FICO less than 660. As you then turn to credit and provision on Slides 9 through 11, this high credit quality of our customer base continues to show through in our best-in-class credit performance. Our Card Member loans and receivables write-off and delinquency rates remain below pre-pandemic levels. Delinquency rates remained flat quarter-over-quarter while write-off rates continue to move up a bit this quarter as we expected, as you can see on Slide 9. Going forward, as we've talked about for many quarters now, we continue to expect these delinquency and write-off rates to increase over time, but they are likely to remain below pre-pandemic levels in 2023. Turning now to the accounting for this credit performance on Slide 10. The quarter-over-quarter growth in our loan balances was the primary driver of our $327 million of reserve build. Although, there was also a small component from incorporating a slightly worse macroeconomic outlook this quarter relative to last quarter. This reserve build, combined with net write-offs, drove $1.2 billion of provision expense in the second quarter. As you see on Slide 11, we ended the second quarter with $4.7 billion of reserves representing 2.6% of our total loans and Card Member receivables. This reserve remains about 30 basis points below the levels we had pre-pandemic or Day 1 CECL. We continue to expect this reserve rate to increase a bit as we move through 2023, while also reflecting the continued premiumization of our portfolio. Moving next to revenue on Slide 12. Total revenues were up 13% year-over-year in the second quarter on an FX-adjusted basis. Our largest revenue line, discount revenue grew 8% during (ph) Q2, as you can see on Slide 13, driven by the spending trends we discussed earlier. Net card fee revenues were up 22% year-over-year in the second quarter on an FX adjusted basis as you can see on Slide 14. Growth remains quite strong, and continues to be driven largely by bringing new accounts onto our fee paying products. This quarter, we acquired 3 million new cards and the spend, revenue and credit profiles of these acquisitions continue to look strong relative to what we saw pre pandemic. Importantly, the acquisition trends you see on Slide 14 in this and recent quarters are consistent with our long-term growth aspirations. Moving on to Slide 15, you can see that net interest income was up 32% year-over-year, driven primarily by the growth in our revolving loan balances. To sum up on revenues on Slide 16, we're seeing broad-based revenue growth across our revenue lines. We're tracking with our expectations. So looking forward, we still expect to see revenue growth within our range of 15% to 17% for the full year of 2023. The revenue momentum we just discussed has been driven by the investments we've made. And those investments show up across the expense lines you see on Slide 17. Starting with variable customer engagement expenses, these costs came in at 42%, total revenues in the second quarter and are tracking with our expectation for them to run at around 43% of total revenues on a full year basis. On the marketing line, we invested $1.4 billion in the quarter, on track with our expectation to have full year marketing spend of around $5.5 billion. We remain focused on driving efficiencies so that our marketing dollars grow slower than revenues while continuing to drive the high quality [Technical Difficulty] Steve discussed earlier. Moving to the bottom of Slide 17, brings us to operating expenses which were $3.4 billion in the second quarter, also tracking with our expectation for operating expenses to be around $14 billion for the full year. This quarter, you see that, as we expected, we have far less growth in OpEx relative to our high level of revenue growth. And looking forward, we continue to see OpEx as a key source of leverage. Turning next to capital on Slide 18. We returned $1.6 billion of capital to our shareholders in the second quarter, including common stock purchases of $1.1 billion and $446 million in common stock dividends, all on the back of strong earnings generation. Now as you know, this is an off-cycle year for Amex as a CCAR bank. Let me briefly remind you of our capital management approach. We generally increased our dividend roughly in line with earnings and target a 20% to 25% payout ratio. And you saw us do that as we increased our dividend by 15% to $0.60 per share last quarter. We target a CET1 ratio between 10% and 11% and we ended the second quarter in the middle of that range at 10.6%. As we think about the potential finalization of Basel III, I'd remind you that our 10% to 11% CET1 target range is actually well above our current regulatory minimum of 7%. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth and we don't expect any material near-term changes to our capital management approach, driven by the evolution of these rules. So that then brings us to Slide 19 and the growth plan. To step back for a minute, I joined American Express 10 years ago in 2013 because I was excited about the long-term growth prospects for the company. Today, as I join you from my last earnings call, and actually even more excited about those growth prospects. Steve and I first introduced our new multiyear growth aspirations back in January of 2022. And I would point out to Christophe was in the room for every key decision we made as we developed that plan with the senior business leaders across Amex. Now in July of 2023, we have consistently achieved the aspirations we set out six quarters ago, thanks to the great efforts of our 77,000 colleagues across American Express. So we are reconfirming today, our 2023 full year revenue guidance of 15% to 17% growth with EPS in the range of $11 to $11.40. Our revenue momentum and customer acquisition trends are positioning us well for our growth aspirations (ph) this year in 2024 and beyond. So this momentum, combined with this being my 85th consecutive earnings call across three industries without a break makes this a good time for me to transition the CFO role to Christophe. With that, I'll ask Christophe to say a few words before Steve and I take your questions.

Kerri Bernstein:

Thank you, Christophe. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Donna?

Sanjay Sakhrani:

Thanks. Good morning and congratulations Jeff. You've had quite a run at American Express. It's been very helpful throughout your tenure and I'm sure you will be in your remaining position. Christophe, I look forward to working with you. My first question is on billed business growth. Obviously, there's so much noise over the last couple of years and even in this year. And I'm just -- Jeff, you talked about stabilization going forward and expecting that. Could you just talk about what gives you the confidence that you see that stabilization because we're still a little bit above trend in terms of that growth and then what you need in the back half to get to that growth guidance on revenues?

Stephen Squeri:

Yeah. And look, I mean, just look at consumer, right? I mean consumer in the U.S. is up at 10%. T&E is still very, very strong. We talked about travel bookings, travel bookings more than one month out are higher than they've been pre-pandemic. They are higher than they were at this time last year. They were higher than they were, obviously, in 2019. International is really coming back strong for us. And as we said, it's a fastest growing part of our business. And the other thing I'll point out is you just had -- you had a little hangover of noise from Omicron in this quarter because last year, you had a little bit of spending that was pushed from the first quarter to the second quarter. And if you look at -- if you go back and look sequentially last year was a huge increase sequentially quarter-over-quarter. So we feel really good about. I mean it's hard to apologize for record billings. And as Jeff said, it’s the billings we need to hit our growth plans. So we feel really good about it. And the other point I'll just reiterate again is that, look, we're in a low growth economy right now. We're still out there acquiring Card Members. Credit is really good. Our basis is changing in terms of more Millennials and Gen Z who will grow with us. And as the economy gets better, we expect the spending to pick up. So we feel really confident.

Ryan Nash:

Hey. Good morning, everyone.

Ryan Nash:

Jeff, it's been a pleasure working with you and best of luck in the future and Christophe, I'm looking forward to working with you in the future. Maybe to drill down into two areas that were highlighted on the call. First, commercial, obviously, we've seen a big slowdown there to 2% year-over-year growth. Steve, maybe just talk about what's driving the slowdown and what do we need to see for a reacceleration? And maybe just drill a little bit further on T&E in terms of your confidence. Like it seems like sequentially, it may have slowed a little bit, but I think the point that year-over-year growth rates are still strong. So can you maybe just talk about what you see as the key drivers of that remaining in double-digits? Thanks.

Operator:

Thank you. The next question is coming from Betsy Graseck of Morgan Stanley. Please go ahead.

Jeff Campbell:

Hi, Besty.

Jeff Campbell:

So I think it's an important question, Betsy. But if you really just look at this quarter, the thing I would point out is you do have some unusual noise in the service fees and other revenue line when you look at our Slide 12 in the slide deck. Because in the prior year, we had a complicated litigation settlement that drove some unusual movement in that line. What we're really saying is that we are in a low growth economy, but we -- it is consistent with the objectives reset if you maintain the volume growth that we have, and then combine it with the kind of consistent high growth in net card fees that you've seen right through the pandemic grew 21% this quarter. If you combine it with the fact that you still have customers rebuilding balances a little bit on the net interest income side. And you take the noise out on the service fee and other revenue side, you then easily get to a number that is very consistent in the back half of the year with what we've guided for the full year.

Operator:

Thank you. The next question is coming from Rick Shane of JPMorgan. Please go ahead.

Stephen Squeri:

We still feel really confident that we'll be within the 15% to 17%. And there's really not a lot more to say other than that. So yeah, you have a little -- as I said, you have a little bit of deceleration from a billings perspective. But it's a record quarter of billings, over $420 billion of billings. And so again, we feel very confident of the 15% to 17%, and we'll see where it winds up landing within that range, but the reason we give ranges.

Robert Napoli:

Thank you. Thank you very much and Jeff, thank you for your help, and good luck to you. Christophe, welcome, look forward to meeting you. I would like to ask about your views on credit normalization, kind of a trend in credit normalization. What -- as you look at your portfolio, what we should expect as we look at the aspirations for 2024. So the -- I mean, the back half of '23 is pretty baked, but just as we think about that going into 2024 and onward.

Operator:

Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.

Stephen Squeri:

So for the second question first, the answer is, no. It's really not big, Jeff, do you want to....

Stephen Squeri:

Yeah. As far as line of sight into SME, I mean, the way to think about it is organic is probably flat. You obviously have businesses that go out of business. And so you have a little bit of sort of same-stores that go away, but the acquisition is still relatively strong. So think about organic as having a neutral impact, think about attrition because attrition has a negative impact, but no different than what we've seen over the last few years and then acquisition in there. I think the biggest difference is really organic. And what you saw through the pandemic is, you saw a small businesses continue to add and add and add. And you got to remember, small businesses use a card to run their entire business. And so -- there was a lot of buying ahead from a goods and services perspective, from an inventory perspective. And so we're going to watch it really closely in terms of have they finally gotten to sort of full stock and what have you. And -- but I think that's the way to think about those three components

Lisa Ellis:

Hey. Thank you. Thanks for taking my questions. You guys highlighted that it is now six quarters since you introduced the structural increase in your long-term plan to double-digit revenue growth and mid-teens EPS growth. A lot has happened in the last six quarters. We're kind of finally returning to normal after the pandemic. So can you just highlight when you look at the underlying business drivers required to sustain that model on an ongoing basis, what is sort of doing better than you expected? Maybe where do you need to make some adjustments, et cetera.? Just kind of comment on how that strategy and your thoughts about that has evolved as you look forward now coming back into a more normalized economy? Thank you.

Operator:

Thank you. The next question is coming from Arren Cyganovich of Citi. Please go ahead.

Stephen Squeri:

We're not going to do a quarter-to-date update on build business. We're kind of 20 days in. So there's no real change. But in terms of marketing, the only thing that's important to know is that we said we'd spend about $5.5 billion on marketing. That's our plan to continue to do that. How it winds up sort of moving from quarter-to-quarter, I think we're probably $100 million from last year or something like this -- in this particular quarter. But that all depends on the programs we're running and the timing and everything else. And so a week here, a week there, can make all the difference in the world sometimes when you think about when you think about spending $1.5 billion, $1.4 billion in a quarter, it's like $100 million sort of a week. So the bottom line is, we are committed to go after all the great opportunities that are out there and we believe that we'll wind up spending about $5.5 billion from a marketing perspective. And just to remind everybody that the marketing spend for us is predominantly customer acquisition, right? And affiliate fees and incentives and things like that, it's not sort of TV and print and it's kind of advertising. That's what that marketing spend is. And that's why it can vary a little bit from quarter-to-quarter.

Dominick Gabriele:

Hey, great. Thanks so much for the question. So I was just wondering, when you think about your aspirational revenue target, has the thought process on the contribution to growth from net card fees to total revenue changed over time where it's potentially providing more of a boost towards that a 10% revenue goal versus the past versus discount revenue? Thanks, guys.

Jeff Campbell:

I just can't resist adding Dominick, for something that grew in double-digits all through the pandemic has had really high growth rates last year. It is going to continue to grow to be an ever bigger part of our revenue [indiscernible]. And I think that is a key strength of the company. It really ties customers and engages customers with us and the product and is a critical part of the overall model.

Operator:

Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.

Jeff Campbell:

Don, you were cutting out a little bit, but I think you're asking about the CET1 target and Basel III. And the point I was trying to make is you need to remember a few things here. Our 10% to 11% CET1 target is actually more driven by our own (ph) view and rating agency views versus the regulatory constraints. Because our regulatory minimum has long been only 7%. That's the first point. The second point to remember is, we have a return on equity of over 30%. So our ability to quickly replenish capital whenever we need to without, frankly, taking more than a brief pause from share repurchase is very high. Third, I know there's been a lot of attention paid to different iterations of Basel, the Basel III end game, particularly around ops risk. I guess I'd also just remind people, ops risk is only one component. There are other components that probably have some positive and probably have some negative impacts on us. So I guess my -- but we'll have to see whenever the final rules come out. We've been waiting for them for actually like much of my tenure here. But they may come out hopefully later this month. And the devil is in the details here. But I think my overarching message is we don't see it as a material event for this company. Because it's certainly a possible outcome that there's no change in our target and even a modest change in our target with a 30% plus ROE is not going to have any material impact on share repurchase, or the trajectory of our EPS growth that we've laid out in the growth plan.

Mihir Bhatia:

Thank you for taking my questions and good morning. First off, congratulations, Jeff. Thank you for all your help and welcome, Christophe. I look forward to getting to know and working with you. I wanted to switch gears a little bit and talk about the process revenues of the network partnerships, I think the old GNS business. It seems like, there's been a little bit of momentum in terms of signing some new partners recently. I believe this quarter, we actually saw the launch of the Square Card and processed volumes grew faster than bill business this quarter. So just wondering if you could talk about that business a little bit more. Has there been something -- has something changed internally? Are you focused more on that segment? What's driving that momentum? Thank you.

Kerri Bernstein:

Great. And with that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Donna, back to you.

Kerri Bernstein:

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results; and then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Well, thanks, Steve, and good morning, everyone. It's good to be here to talk about our first quarter results, which are tracking in line with the guidance we gave for the full year and reflect steady progress against our long-term growth aspirations. Starting with our summary financials on Slide 2, our first quarter revenues were $14.3 billion, reaching a record high for the fourth straight quarter, up 23% on an FX adjusted basis. This revenue momentum drove reported net income of $1.8 billion and earnings per share of $2.40. Given we had a sizable credit reserve release of pandemic-driven reserves in the first quarter of last year; we've also included pretax pre-provision income as the supplemental disclosure again this quarter. On this basis, pretax pre-provision income was $3.2 billion, up 20% versus the same time period last year, reflecting the growth momentum in our underlying earnings. So now let's get into a more detailed look at our results, which in our spend-centric business model always begins with a look at volumes, which you see on Slides 3 through 7. Total network volumes and billed business were both up 16% year-over-year in the first quarter on an FX adjusted basis. Given that most of our spending categories have fully recovered versus pre-pandemic levels, we saw the more stable growth rates we expected this quarter with first quarter billed business growth of 16%, just above last quarter's growth of 15%. As Steve noted earlier, we did see particularly strong growth in travel and entertainment spending in Q1 of 39%, driven by continued demand for travel and dining experiences. As expected, this growth rate was elevated early in the quarter as we lapped the impact of Omicron in January of the prior year. So I would expect to see growth moderate moving forward, but to remain high given the strong demand we are seeing across geographies, customer types and T&E categories. We also saw solid growth in goods and services spending for the quarter, up 9% year-over-year. I would note that we did see this growth rate slow sequentially in the U.S. for both SME and consumer as we went through the quarter. So we are continuing to monitor these spending trends. That said, overall billed business reached a record level in the month of March, and our largest segment, U.S. Consumer, grew billings 16% in the first quarter, accelerating a bit above last quarter's growth. Millennial and Gen Z customers again drove our highest billed business growth within this segment with their spending growing 28% year-over-year this quarter. Turning to Commercial Services. We saw a year-over-year growth of 10% overall. U.S. SME growth came in at just 6% this quarter, but was somewhat offset by really good growth in U.S. large and global corporates, up 34% year-over-year. And lastly, you see our highest growth in International Card Services. We are seeing the early benefits of the organizational changes we announced last year start to play out demonstrated by strong growth across geographies and customer types. Spending from international consumer and international SME and large corporate customers, who were among our fastest-growing pre-pandemic, grew 27% and 34% year-over-year, respectively. International Card Services travel and entertainment growth was especially robust at 58% for the quarter. This segment is still in a recovery mode given it started its pandemic recovery later than other segments. Overall, our spending volumes are currently tracking to support our revenue guidance for the year and our long-term aspirations for sustainable growth rates greater than what we were seeing pre-pandemic. Now moving on to Loans and Card Member receivables on Slide 8. We saw year-over-year growth of 25% in our loan balances as well as continued sequential growth. This growth continues to come mostly from our existing customers, who are rebuilding balances, and as a result, the interest-bearing portion of our loan balances is growing faster than the 25% growth we see in total loans. Specifically, over 70% of this growth in the U.S. is coming from our existing customers. We are pleased with this growth and with the overall lending economics we are generating. That said, looking forward, you may see the growth rate of our loan balances moderate a bit as we progress through 2023, but we would expect it to remain elevated versus pre-pandemic levels. If you then turn to credit and provision on Slides 9 through 11, the high credit quality of our customer base continues to show through in our best-in-class credit performance. Our card member loans and receivables write-off and delinquency rates remain below pre-pandemic levels, though they did continue to move up this quarter as we expected, which you can see on Slide 9. We view these consolidated write-off and delinquency rates as more comparable to pre-pandemic rates than the individual loans and receivable rates because, as we talked about last quarter, our charge products in many instances now have embedded lending functionality. Going forward, we continue to expect these delinquency and write-off rates to increase over time, but they are likely to remain below pre-pandemic levels in 2023. Turning now to the accounting for this credit performance on Slide 10, the expected increases in delinquency rates combined with the quarter-over-quarter growth in our loan balances resulted in a $320 million reserve build. This reserve build, combined with net write-offs, drove $1.1 billion of provision expense in the first quarter as we moved past much of the volatility in this line item that CECIL reserve builds the releases caused during the pandemic. As you see on Slide 11, we ended the first quarter with $4.4 billion of reserves representing 2.5% of our total loans and card member receivables. This reserve rate remains about 40 basis points and below the levels we had pre-pandemic or day one CECIL. We expect this reserve rate to continue to increase as we move through 2023, but to remain below pre-pandemic levels. Moving next to revenue on Slide 12, total revenues were up 22% year-over-year in the first quarter or 23% on an FX adjusted basis. Before I get into more details about our largest revenue drivers in the next few slides, I would note that service fees and other revenue was up 34% in the quarter, driven largely by the year-over-year increases in travel-related revenues that accompanied the tremendous demand we've seen for travel. As you can see on Slide 13, our largest [indiscernible] line discount revenue grew 17% year-over-year in Q1 on an FX adjusted basis, which similar to spending volumes, growth is just above last quarter’s growth rate. Net card fee revenues were up 23% year-over-year in the first quarter on an FX adjusted basis as you can see on Slide 14. Growth, which did moderate slightly this quarter as expected from the extremely high level we saw last quarter remains quite strong. This growth continues driven largely by bringing new accounts onto our fee paying products as a result of the investments we've made in our premium value propositions. This quarter, we acquired 3.4 million new cards demonstrating the demand we're seeing, especially for our premium fee-based products. Moving on to Slide 15, you can see that net interest income was up 36% year-over-year, on a FX adjusted basis accelerating versus last quarter, primarily due to the growth in our revolving loan balances. I'd also note that net yield on our card member loans increased 50 basis points sequentially reaching pre-pandemic levels this quarter as our customers increase their revolving balances. We have been able to increase our net yield while maintaining net right off rates below pre-pandemic levels, expanding our net credit margin. To sum up on revenues, on Slide 16, we're tracking well against our expectations and looking forward, we still expect to see revenue growth 15% to 17% for the full year of 2023. The revenue momentum we just discussed has been driven by the investments we've made. Those investments show up across the expense lines you see on Slide 17. Starting with variable customer engagement expenses, these costs came in at 43% of total revenues in the first quarter, tracking right with our expectation for them to run around 43% of total revenues on a full year basis. On the marketing line, we invested $1.3 billion in the quarter on track with our expectation to have marketing spend that is fairly flat to our full year 2022 expense, $5.5 billion. We remain focused on driving efficiencies so that our marketing dollars grow far slower than revenues as we did for many years prior to the pandemic. Moving to the bottom of Slide 17 brings us to operating expenses, which were $3.6 billion in the first quarter. There is usually some quarterly volatility in this number and this quarter, for example, we saw a $95 million impact from net mark-to-market losses on our Amex Ventures investment portfolio. But you can see based off our first quarter results that similar to marketing, we are tracking with our expectation for operating expenses to be around $14 billion for the full year. We continue to see operating expenses as a key source of leverage. And moving forward expect to have far less growth in OpEx relative to our high level of revenue growth. Turning next to capital on Slide 18, we ended the first quarter with our CET1 ratio at 10.6% with our target range of 10% to 11%. I would note that AOCI already flows through our regulatory capital today. So any unrealized gains or losses on our investment portfolio are fully reflected in the 10.6% that I just quoted. I would also point out that we hold only $4 billion of investment securities, most of which are short-dated U.S. treasuries. In the first quarter, we returned $600 million of capital to our shareholders. With our strong capital position, we have both the capacity and the intent to continue to return to shareholders the excess capital we regenerate, while supporting our balance sheet growth. I'd also note that our liquidity position remains extremely strong as we ended the quarter with $41 billion of cash; our highest ever balance, excluding the pandemic period. We also saw a 10% increase in our deposits this quarter, including the inflows in the weeks following recent volatility in the banking sector. On Slide 25 of the appendix, we have provided a bit more detail on deposits than we typically do, if you'd like to look at some of the numbers. That brings me then to our growth plan and 2023 guidance on Slide 19. For the full year 2023, we are reaffirming our guidance of having revenue growth of 15% to 17% and earnings per share between $11 and $11.40. At this level, year-over-year revenue growth, we expect to see a significant, sequential increase in the amount of revenues as we go through the year. In contrast, our marketing and operating expenses were already more in line with the run rate for the year in the first quarter. There is always some quarter-to-quarter volatility. So the simple math then gets you to the sequential growth in our underlying earnings consistent with our full-year EPS guidance. There is clearly uncertainty as it relates to the macroeconomic environment. But as Steve discussed, our customers have remained resilient thus far in the phase of the slower growth, higher inflation economic environment. Our outlook is based on the blue-chip macroeconomic consensus, which continues to expect slowing growth, though not a significant recession. In any environment, though we are focused on running the company for the long term. Looking forward, we remain committed to focusing on achieving our aspiration of sustainably delivering revenue growth in excess of 10% and mid-teens EPS growth as we get to a more steady state environment. And with that, I'll turn the call back over to Kerri to open up the call for your questions.

Operator:

[Operator Instructions] Our first question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Steve Squeri:

Yes, I think, that well, Jeff can elaborate a little bit more, but March was a record spending month for us. Overall, it was the highest month we ever had in the history of the company. So feel free to elaborate on that, Jeff. But millennials have been a big part of our growth story, and if you go back pre-pandemic, they represented about 20% of our billings. Now they represent 30% of our billings, and they are growing at, I mean, last quarter they grew at 30%, this quarter they grew at 28%. And we're acquiring 60% of our new cards acquired. I think from risk perspective, they play out much like low tenure plays out. And so we really have not seen anything different with millennials than we have seen with any of our other card acquisitions. And so, like anything you need to watch, you watch that, but right now we don't have any concerns with that. And the other thing that I will point out is that this whole concept of getting more millennials really started with our focus on generational relevance and making sure that our products and services were attractive across an entire cohort. And so that is really working for us as you've seen the composition of our base change. And so that gives me a lot of confidence as we move forward that we're making the right moves from a value proposition perspective and continuing to invest in the right benefits, and we are acquiring the right customers. And as I have said on these calls before we continue to raise the bar in the phase of an uncertain economic environment, we continue to read the bar on who we are acquiring. The last point that I will make, because I think, it's really relevant, and stay with me on this for a second. If you go back to 2018 and look at all the cards that we acquired in 2018 and looked at what the first quarter spending was in 2019, and you did the same thing in 2022 and looked at what the first quarter spending was in 2023, we are 50% higher, meaning, we are acquiring higher spending card members. And so I think the teams have done a phenomenal job of really sort of getting through the quarter [ph] and getting not only more card members, but getting card members that spend, getting card members that are paying fees and getting card members that will be with us for a long time. So that’s a – it’s a long sort of answer, but I think it’s really is relevant to what you were talking about in terms of millennials because I think that gives you a pretty good picture of just how we are looking at that segment and just how that segment is performing and how we believe it will continue to perform. So you want to talk about March, Jeff?

Operator:

Thank you. The next question is coming from Mihir Bhatia, Bank of America. Please go ahead.

Steve Squeri:

Well, on the consumer side, just look at sequentially, consumer in the fourth quarter grew 15%. We’re growing 16%. So there was really no slowdown there. When you look at U.S. SME, we grew 8%, and we’re growing 6% now. So, I think there was a little bit of a slowdown in U.S. SME. And remember, when you look at our consumer business, our consumer business, I don’t believe is really representative of the entire economy. Our consumer business is representative of a really high-end premium consumer base. Our small business, because of the volumes that we have, are probably a little bit more representative. And where you are – where you do see a slowdown in small business is Goods and Services. What I’ll remind people is small businesses are small businesses, because they’re small. And what happens is to a level of spending, and then unless you – unless that business is really going to grow, you can only spend for what you’re taking in. But I think what we’ve seen, and this is a continuing trend is, you’ve seen a slowdown in a lot of the advertising spending. But I will point out that, that’s not any different than what you’ve seen in – from a lot of corporations, I mean – and ours ourselves. I mean, if you look at it, our plan has been to spend the same amount of marketing that we spent last year this year, and that number is $5.5 billion. And when you look at that number, we try and get more and more efficient with that and we push our partners to become more and more efficient as well. And so you get to a point of scale where you just don’t spend anymore. And I think we’re seeing a little of that in small business as well. But look, 6% growth in the U.S. small business with the amount of volume that we have, right now we’re okay with that and it’s in line with us making our overall plan. What I would point out from a small business perspective is international is not like that. International is growing much, much faster than that, and international is back to our fastest growing segments. So, we’ll keep watching it, but really happy with the consumer. And right now, I think small business is kind of in line with where we have it going for the rest of our plan for the rest of the year.

Mark DeVries:

Yes, thanks. Just wanted to get into what drove the acceleration of growth in International Card Services. Jeff, I heard you alluded to the fact of seeing results from the reorg. But could you talk a little bit more specifically about kind of what you did in that business segment to really drive the improvement?

Jeff Campbell:

Yes. The only comment I’d add, Mark, is it is remarkable the breadth of the strength right now when you look across geographies. It’s Europe, it’s the UK, it’s where we are in Latin America, it’s Asia. It’s really broad-based. So, we feel really good about the progress.

Betsy Graseck:

Hi good morning.

Betsy Graseck:

Hi, I did want to just ask an overarching question on top-line growth drivers from here. And I know we have already spoken about a couple of different line items. I think U.S. and large corporate is still something we could unpack a little bit. But I would also like if you could just, from your vantage point, give us where you think the growth drivers are from here, which 1Q extremely strong? Thanks.

Steve Squeri:

Yes. So, I could just say what he said. But let me just take it up a level. And I think that one of the things that we do in looking for opportunities is we try and make sure we’re investing in those opportunities, which have the greatest return. And Jeff said this many, many times on these calls, we have more good opportunities to invest in than we have dollars to invest. And I think nothing is a better example of how good our opportunities – how much better our opportunities have been come than what I – and how I answered the first question for Sanjay in talking about how the cards that we’re acquiring now are 50% in this first quarter, anyway, 50% better than they were back in 2018. And the other thing that I would say, which I think is really important is when we looked at acquiring a customer and we report cards, but we look at acquiring revenue and when we look at a customer, revenue for us is a three-legged stool. We acquire card members and a majority 70% of the cards we're acquiring right now are paying fees. That's a huge differentiator for us. Then what we do, you pay that fee, you use the product and then as Jeff said, that discount revenue and at discount revenue is going to grow pretty much in line with where it was now. And then the third legged stool is interest income. And we've modified our products so that we have planted on it, we have pay over time, and so we're giving our customers lots and lots of choices in how they want to manage their financial lives with us and how they want to manage their credit card payments. And so we really focus a lot on revenue for our customers. And that's what gives us a lot of – that's what gives us a lot of confidence because when we acquire a customer it's not, okay, we're going to acquire [indiscernible] going to drive lending revenue. We're going to acquire this customer, and it's going to be fee. We literally look at that entire basket and as we look at the ROIs, all of that is taken into account.

Rick Shane:

Thanks guys for taking my question this morning. I'd like to discuss the accounting and strategy on fee waivers. When fees are waived, I'm assuming that the fees are recognized and there's an offsetting expense in terms of marketing. Are both the fees and expenses accreted in amortized quarterly? Is that the way we should think about it?

Operator:

Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.

Steve Squeri:

Good morning, Craig.

Craig Maurer:

Thanks. It's been fun getting the business up and running for FT Partners. And again, I appreciate you taking the question. So with thinking about credit, if we look at what drove the provisioning expense in the quarter, it looks like the allowance build was actually materially less than it was in fourth quarter despite the relatively similar provisioning – provision amount. So it seems like you were soaking up the losses that were driven by the rise in delinquent season in the back half of last year, but you only saw a very small increase in delinquencies in the quarter. So I guess the question is, are you comfortable with where allowance levels are now especially considering they're materially higher than where they were going into the pandemic?

Operator:

Thank you. The next question is coming from Dominick Gabriele of Oppenheimer. Please go ahead.

Steve Squeri:

Good morning.

Steve Squeri:

Well, I think, let's look at – look at – let's look at how much it represents, right? Large and global accounts represent about 6% of our overall spending and not so sure when you look at that segment that sort of credit spend – credit tightening is really going to drive their spending. That is predominantly a T&E – a T&E game. And most companies are trying to get their people out and trying to get them to go out and travel and that spending has been up 34%. We're still not back to where we were. What normally affects that for us is more layoffs and things like that, but even in the face of layoffs especially the tech segment or late starts that are going to occur in consulting and things like that, I think if we're in a unique situation right now where I just don't think credit tightening in that segment is really going to be – is really going to be an issue. I think there it's going to be more of a – of an earning story. And do they do layoffs? But again we're in such a crazy spot where most people aren't traveling anyway and people are encouraging to travel; I don't see that. I think when you look at small businesses – small businesses go in and out quite a bit and you could see with some credit tightening some small businesses having harder access to some – to some working capital. What I would say is one of the things that that we do have from a small business perspective is we are really with our launch of Blueprint and Kabbage and so forth. We have working capital loans, we have short-term loans, and so forth and we're not in the same position as a lot of these other smaller banks are. And so for those credit worthy small businesses we will continue to extend credit and it could be an opportunity for us actually, provided to credit is, the credit is good. So I think in general it can affect the small business economy and our ability maybe to grow, to get working capital. But I think it also provides us with an opportunity because we may not be the lender of first resort to these small business right now, and I think it could be an opportunity for us again judiciously, but an opportunity.

Moshe Orenbuch:

Great, thanks. Jeff, you had talked a little bit about the OpEx being kind of flattish over the course of the year, I think, I mean, historically that had kind of been seasonally low in the beginning of the year and seasonally high at the end. Is there something that's changed with respect to that?

Operator:

Thank you. The next question is coming from Bob Napoli of William Blair. Please go ahead.

Steve Squeri:

Well, look, they’ve been involved for a decade. And we – obviously, we partner with Amazon. We work very, very closely with Apple on Apple Pay and obviously, they’re a large merchant and a large partner. And it’s not just Apple and Amazon we look at. We look at all the fintechs and the startups and what have you. And I think – and that’s why we always say, when you look at competition, it’s just not the traditional banks. It’s the fintech. It’s the big tech players and so forth. And the reality is that the way that you have to compete not only against them, but compete against everybody else is, you have to give your customers what they want and you have to continually to develop better value propositions. And so yes, these are great companies. There are great banks out there. There are great – Amazon and Apple are phenomenal companies that know the consumer. We believe, we know the consumer as well, and they help us raise our game overall. But we’re not naïve enough to think that we can just go on sort of strolling down the street here thinking, who is ever going to compete and no one’s going to come after us. The way – we’re paranoid. We think everybody is coming after us. And it’s one of the reasons that we constantly focus on upgrading our products and services. And it’s one of the things that we talk about. We’re constantly adding value to our products. Yes, it would be probably easier to not do that, but we challenge the team constantly to develop better value propositions. And so we worry about everybody. And the only thing that we can do about it is continue to do what we’ve done for years, offer the best service, offer the best products and make sure that our customers are happy.

Don Fandetti:

Good morning, Jeff. I was wondering if you could talk the banking crisis. Do you expect that to impact your ability to buy back stock? And also, was there any impact from the Delta sharing adjustment? And will there be any this year?

Operator:

Thank you. Our final question will come from Lisa Ellis of MoffettNathanson. Please go ahead.

Steve Squeri:

Well, I think you still have quite a bit to go on T&E and especially as corporations start to bring back their T&E spending as well. And T&E spending is up in every single segment that we have. I mean, we talked about total T&E up 39%, consumer is up 30%, commercial is up 41%. It just keeps – it keeps growing. And we talked about international, up 59%. So, we still think we have more room to grow. And I talked about bookings with airlines, and airlines will also expand their capacity. And as they expand their capacity, we’ll continue to grow with them. So, I think there’s still more upside in airlines. And when there’s more upside in airlines, it becomes more upside in lodging. And people have gotten used to eating out. And the restaurant spending is – if you ask me about anything that surprises me, it would be restaurant spending continuing to be as strong as it is. But I think for us, a lot of that has to do with Resy. And the fact that we are able to probably even get a larger share of our card members’ restaurant spending as they book their reservations through Resy – and the other thing I’d point about Resy, Resy has been a really nice addition to our acquisition of new cardholders who have a propensity to want to – eat at restaurants and T&E. So, I think you’re still going to see very strong T&E throughout this year. It will certainly outpace our Goods and Services. And we’re getting back – we’re continuing to climb back. If you remember, pre-pandemic, we were around 70-30 in terms of our spending

Operator:

Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at (877) 660-6853 or (201) 612-7415, access code 13736900 after 1:00 p.m. Eastern Time on April 20 through April 27. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.

Kerri Bernstein:

Thank you, Donna and thank you all for joining today’s call. As a reminder, before we begin, today’s discussion contains forward-looking statements about the company’s future business and financial performance. These are based on management’s current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today’s presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter’s earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company’s progress and results and then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we will move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Well, thank you, Steve and good morning, everyone. It’s good to be here to talk about our ‘22 results, which reflects steady progress against our multiyear growth plan that we announced last January and also to talk about what our 2022 results mean for 2023. I will also spend some of our time this morning focusing on our full year trends since it is year-end and since looking at our business on an annual basis is more in sync with how we actually run the company. Starting with our summary financials on Slide 2, full year revenues reached an all-time high of $52.9 billion, up 27% on an FX-adjusted basis. Notably, our fourth quarter revenues of $14.1 billion also reached a record high for the third straight quarter and grew 19% on an FX adjusted basis. This revenue momentum drove reported full year net income of $7.5 billion and earnings per share of $9.85. For the quarter, we reported net income of $1.6 billion and earnings per share of $2.07, which did include a $234 million impact from our net losses in our Amex Ventures strategic investment portfolio. As I have said throughout the year, year-over-year comparisons of net income have been challenging due to the sizable credit reserve releases we had in 2021. Because of these prior year reserve releases, we have also included pre-tax pre-provision income as a supplemental disclosure again this quarter. On this basis, pre-tax, pre-provision income was $11.8 billion for the full year and $2.9 billion in the fourth quarter, up 27% and 23% respectively versus the prior year, reflecting the growth momentum in our underlying earnings. So now let’s get into a more detailed look at our results, beginning with volumes, starting on Slide 3, we saw good quarter-over-quarter growth in volumes. I would note that we reached record levels of spending on our network in both the fourth quarter and full year 2022. Total network volumes in billed business were up 16% and 15% year-over-year in the fourth quarter and 24% and 25% for the full year, all on an FX-adjusted basis. Now of course, growth rates for quarters earlier in the year included more of a recovery on the lower levels of volumes in 2021. And we are now to the point where we have lapped the majority of this recovery. We are pleased with this growth and the fact that it is being driven across customer types and geographies. On Slides 4 through 7, we have given you a variety of views across our U.S. consumer services, commercial services and International Card Services segments and the various customer types within each. There is a few key points I suggest you take away from these various perspectives. Starting with our largest segment, U.S. consumer billings grew 15% in the fourth quarter, reflecting the continued strength in spending trends from our premium U.S. consumers. Our focus on attracting, engaging and retaining younger cohorts of card members through our value propositions, drove the 30% growth in spending from our millennial and Gen Z customers on Slide 5, who you can now see make up 30% of spend within the segment. Turning to Commercial Services, you see that spending from our U.S. small and medium-sized enterprise customers represents the majority of our billings in the segment, supported by our strategic focus on expanding our range of products to help our SME clients run their businesses. We saw another quarter of solid growth in U.S. SME, though you can see that it was the slowest growing customer type this quarter, up 80% year-over-year. As you heard Steve talk about a bit last month at an investor conference, our SMEs have recently started to slow down spending in service categories such as digital advertising, so we continue to monitor spending trends. Moving to our U.S. large and global corporate customers, the one small customer type that has not come back to pre-pandemic spend levels, they did continue though their steady recovery this quarter with overall billings now 11% below pre-pandemic levels. And lastly, you see our highest growth in international card services as this segment is now in a steep recovery mode given it started its pandemic recovery later than other segments. Spending from international consumer and international SME and large corporate customers grew 23% and 32% year-over-year respectively in Q4. Across all customer types, T&E spending momentum remained particularly strong in the fourth quarter. While we also saw a nice sequential growth in the amount of goods and services spending versus last quarter, so there were a few pockets that slowed, such as the digital advertising spend in SME that I mentioned earlier. So what do all of these takeaways mean for 2023? At this point, on a dollar basis, most of our spending categories have fully recovered. So I would expect more stable growth rates this year across spending categories with the exception that year-over-year growth rates for T&E spending will likely be elevated in Q1 as we lap the impact of Omicron from the prior year. Importantly, all of the things that Steve just talked about that make up the strategy underlying our growth plan have created a foundation for sustainable growth rates greater than what we were seeing pre-pandemic. Now moving on to loans and Card Member receivables on Slide 8, we saw year-over-year growth of 24% in our loan balances as well as good sequential growth. This loan growth is now exceeding our spend growth as customers steadily rebuild their balances. Given the volumes, of course, have now lapped, there is deep phase of recovery, we do expect the growth rate of our loan balances to moderate as we progress through 2023, but to remain elevated versus pre-pandemic levels. The interest-bearing portion of our loan balances, which surpassed 2019 levels last quarter also continues to consistently rebuild with over 70% of year-over-year growth in the U.S. coming from our existing customers, which is about 10 percentage points more than what we saw in the years leading up to the pandemic. As you then turn to credit and provision on Slides 9 through 11, the high credit quality of our customer base continues to show through in our strong credit performance. Card Member loans and receivables write-off and delinquency rates remain below pre-pandemic levels. So they did continue to pick up this quarter as we expected, which you can see on Slide 9. Going forward, we expect delinquency and write-off rates to continue to move up over time, but to remain below pre-pandemic levels in 2023 for Card Member loans. Turning now to the accounting for this credit performance on Slide 10 and to this year-end and because the pandemic has clearly impacted the timing of quarterly reserve build and release adjustments across the industry, I think it’s helpful to look at our full year provision results. Full year 2022 provision expense was $2.2 billion, which included a $617 million reserve build, primarily driven by loan growth, the continued steady and expected increase in delinquency rates and changes in the macroeconomic outlook as the year progressed. The $2.2 billion number is of course still unusually low by historical standards relative to the size of our loan balances and card member receivables. Of the full year $617 million reserve build, we saw $492 million of it in the fourth quarter. Since earlier this year, we were still releasing a significant amount of the credit reserves we have built to capture the uncertainty of the pandemic. At this point, we no longer have any of these pandemic-driven reserves remaining on our balance sheet. Moving to reserves on Slide 11, you can see that we ended 2022 with $4 billion of reserves, representing 2.4% of our total loans in Card Member receivables. This reserve rate is about 50 basis points below the levels we had pre-pandemic or day 1 CECL reflecting the continued premiumization of our portfolio and the strong credit performance we have seen. We view this consolidated reserve rate as more comparable to day 1 CECL than the individual loans and receivables rates. Because as we talked a bit last quarter, our charge products in many instances now have some embedded lending functionality. We expect this reserve rate to increase a bit as we move through 2023, but to remain below pre-pandemic levels. Taking all of this into account, in 2023, you should expect to see provision expense move back towards more of a steady state relative to the size of our loan balances and Card Member receivables for the first time since we adopted CECL in early 2020. Given the combination of our strong loan growth and the unusually low level by historical standards of provision expense in 2022, I would expect a significant year-over-year increase in provision expense. Moving next to revenue on Slide 12, total revenues were up 17% year-over-year in the fourth quarter and up 25% for the full year. This is well above our original expectations, driven by the successful execution of our strategy and is part of which strengthens our confidence in our long-term aspirations. Before I get into more details about our largest revenue drivers in the next few slides, I would note that you see a 200 basis point spread between our FX-adjusted revenue growth and reported revenue growth for this quarter. While this is less of an impact from the strong dollar than what we saw in the prior quarter, it does remain a modest headwind. Our largest revenue line, discount revenue grew 16% year-over-year in Q4 and 27% for the full year on an FX-adjusted basis. As you can see on Slide 13, this growth is primarily driven by the momentum seen in our spending volumes throughout 2022. Net card fee revenues continued to accelerate throughout this year, up 25% year-over-year in the fourth quarter and 21% for the full year on an FX-adjusted basis, as you can see on Slide 14. In 2023, I expect net card fees to be our fastest growing revenue line. I would expect growth to moderate from the extremely high level we saw this quarter. This steady growth is powered by the continued attractiveness to both prospects and existing customers of our fee-paying products due to the investments we have made in our premium value propositions, as Steve discussed earlier, with acquisitions of U.S. Consumer Platinum and Gold Card members and U.S. business Platinum Card members, all reaching record highs in 2022. Moving on to Slide 15, you can see that net interest income was up 32% year-over-year in Q4 and 28% for the year on an FX-adjusted basis due to the recovery of our revolving loan balances. The rising interest rate environment has had a fairly neutral impact on our results in ‘22 as deposit betas lagged the rapid and steep benchmark rate increases during the year. However, when you think about 2023, deposit betas are now in line with more historical levels. So I would expect the year-over-year impact from rising rates to represent more of a headwind in 2023. To sum up on revenues, we are seeing strong results across the board and really good momentum. Looking forward into 2023, we expect to see revenue growth of 15% to 17%. Now all this revenue momentum we just discussed has been driven by the investments we have made in those investments show up across the expense lines you see on Slide 17. Starting with variable customer engagement expenses, these costs, as you see on Slide 17, came in at 42% total revenues for the fourth quarter and 41% for the full year. Based off the Q4 exit rates, combined with our continued focus on investing to innovate our products, I would expect variable customer engagement costs to approach 43% of total revenues in 2023. On the marketing line, we invested around $1.3 billion in the fourth quarter and $5.5 billion in the full year. As a reminder, our marketing dollars mostly represent the things we do to directly drive the great customer acquisition results we are seeing. As we look forward, we remain focused on driving efficiency so that our marketing dollars grow far slower than revenues as we did for many years prior to the pandemic. As a result in 2023, we expect to have marketing spend that is fairly flat to 2022. Moving to the bottom of Slide 17 brings us to operating expenses, which were $4.1 billion in the fourth quarter and $13.7 billion for full year ‘22. In understanding our OpEx results, it’s important to note the net mark-to-market impact to our Amex Ventures strategic investment portfolio that I mentioned earlier with reference to Q4. These gains and losses are reported in the OpEx line and totaled $302 million in losses for full year 2022, while in the prior year, we had a $767 million benefit in net gains. Even putting this aside, as Steve and I have discussed all year, our 2022 operating expenses do represent a step function increase compared to prior years as we have invested in key underpinnings to support our revenue growth and this inflation has had some impact on our expenses. Moving forward, similar to marketing, we are focused on gaining efficiencies and getting back to the low levels of growth in OpEx that we have historically seen. For 2023, we expect operating expenses to be around $14 billion and see these costs as a key source of leverage relative to the high level of revenue growth in our growth plan. Last, our effective tax rate for full year 2022 was around 22%. Our best estimate of the effective tax rate in 2023 is between 23% to 24%, absent any legislative changes. Turning next to capital, on Slide 18, we returned $4.9 billion in capital to our shareholders in 2022, including $1 billion in the fourth quarter with $639 million of common stock repurchases and $389 billion in common stock dividends, all on the back of strong earnings generation. We ended the year with our CET1 ratio at 10.3% within our target range of 10% to 11%. In Q1 ‘23, as Steve discussed, we do expect to increase our dividend by 15% to $0.60 per quarter, consistent with our approach of growing our dividend decline with earnings and our 20% to 25% target payout ratio. We will continue to return to shareholders the excess capital we generate while supporting our balance sheet growth going forward. That then brings me to our growth plan and 2023 guidance on Slide 19. 2022 was a strong year where we exceeded our full year guidance that we laid out in our growth plan last January for both the revenues and EPS. These results have strengthened our confidence in our 2023 guidance. First and most importantly, we expect the strategies that Steve laid out earlier to deliver continued high levels of revenue growth, leading to our revenue growth guidance for 2023 of 15% to 17% and setting us up well for 2024 and beyond. As you think about the drivers of EPS growth in 2023, first, we expect to return to the low levels of growth we have historically driven in our marketing and operating expenses producing some nice leverage. Going the other driver, the two notable headwinds that should be just 2023 challenges are around the year-over-year impacts of provision and of interest rates, as I discussed earlier. Combining all of these factors together, it leads to our EPS guidance of $11 to $11.40 for 2023. There is clearly uncertainty as it relates to the macroeconomic environment. But as Steve discussed, our 2023 guidance factors in the blue-chip macroeconomic consensus, which is for slowing growth though not a significant recession. I’d also say that our guidance is based on what we are actually seeing in terms of behavior from our customers around the globe. And of course, it reflects what we know today about the regulatory and competitive environment. We feel good about the momentum we see in our business and in any environment, remain committed to running the company with a focus on achieving our aspirations of sustainably delivering revenue growth in excess of 10% and mid-teens EPS growth in 2024 and beyond as we get to a more steady-state macro environment. And with that, I’ll turn the call back over to Kerri to open up the call for your questions.

Operator:

[Operator Instructions] Our first question is coming from Ryan Nash of Goldman Sachs. Please go ahead.

Steve Squeri:

Good morning, Ryan.

Ryan Nash:

So Steve, maybe just to focus on the revenue growth, so obviously, 15% to 17% is much better than the market was expecting, given macro concerns. And there is obviously been a little bit of an uptick in white collar unemployment. So could you maybe just talk high level about how you’re able to put up this type of revenue growth in a somewhat weakening environment? Maybe just talk through some of the things that are idiosyncratic to Amex that Jeff just referenced, at the end of the call that maybe the market isn’t appreciating that should be big drivers of revenue growth in the year ahead. Thanks.

Operator:

Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Jeff Campbell:

I think, Sanjay, the building blocks are pretty straightforward. And of course, as Steve just pointed out in our model, you always have to start expecting, right? That’s what drives our model, that lending. And I think probably the important words that I would pick out of some of the things Steve and I have just said, for most of our spending categories, if you think about what’s important in terms of dollars, we really have hit recovery point. And so as we look at the Q4 rate, I actually see those exit rates is approaching pretty stable levels for what we think given the tremendous success we’re having in bringing new customers into the franchise because as you know, Sanjay, that is a key aspect of what drives our growth. I actually see those rates being fairly stable going forward. So that’s what drives first really strong discount revenue growth. Our card fee growth, as Steve just mentioned, is super sustainable. I’d just remind everyone that is the front-line item that grew double digits right through all the ups and downs of the pandemic. And gosh, our latest figures that Steve just gave you, 70% of our card members on fee-paying products this quarter, we have a long ways to go to keep growing net card fees. And then, look, it’s the third leg of the stool. It’s only 19%, 20% of our revenues, but net interest income matters. And we are still in a rebuilding mode of balance. Certainly, that process has now begun in earnest, and that’s why you saw our loans grow a little faster than volumes this quarter. So I don’t expect to see quite as high a rate next year as you saw in Q4. But it’s still above in 2023, I would say the stable level and still above where we were pre pandemic because of that rebuilding process. So you put all that together with the comments that you’ve now heard both Steve and I make, which is, look, we got to run the business based on what we see with our customers who are premium consumers, select segments of small businesses and the largest companies in the world, and that’s where you get to the 15% to 17% revenue growth.

Betsy Graseck:

Hi, good morning.

Betsy Graseck:

So another kind of subtext on this theme. I wanted to understand a little bit about how I should be triangulating the revenue growth outlook, which is very clear with the comments around normalization of credit, should I be expecting that you’re underwriting to that pre-pandemic level of was it 2.3 on the slide, with marketing spend being flat and the proprietary net acquired accounts here coming down a little bit in the quarter. So when I see all that, I’m thinking that your bubble of account acquisitions is through, I suppose, and you don’t need that marketing dollars to drive that incremental rev growth at the same time as you’re underwriting to a group, a credit pool that’s similar to pre-pandemic so we should have that NCO trajectory move back up towards pre pandemic? Or is there something that I’m missing in pulling that all together? Thanks.

Jeff Campbell:

No.

Operator:

Thank you. The next question is coming from Mark DeVries of Barclays. Please go ahead.

Jeff Campbell:

Mark, one of the interesting things that I think surprises people is we have looked historically every way you could imagine, trying to find really direct correlations between GDP growth and for that matter between movements in the markets that affect people’s financial wealth. And the, I think, surprising things to many people is we can’t find any direct correlation between those two things. So when you look at our 15% to 17% guidance, it’s really – I go back to what Steve and I have both now said a couple of times, driven by – our best indicator is what we see with our customers around the globe and how they are behaving. And we certainly are aware of and thinking about various macroeconomic forecasts but you start with what behaviors are we actually seeing. And I’d also remind everyone that the U.S. remains by far our largest market. The U.S. economy shrank in the first two quarters of 2022, and we just posted revenue growth for the full year, 25%. So when I think about the 15% to 17% range, it’s really not a 15% is a weaker economy, 17%. Frankly, it’s – I wish we were more precise about forecasting, but it’s just a little bit of forecast error, I would say, based on the trends we’ve seen and the macroeconomic consensus, which is absolutely. The economy is supposed to slow when you look at that consensus, and that’s factored in here as well.

Mihir Bhatia:

Thank you.

Mihir Bhatia:

Good morning. I think you said 70% of existing loan lending growth came from existing members. Is there a similar metric you can share on the spending side? Just trying to understand as things normalize and we get into more of a normal cadence how maybe help us project a little bit on spending growth, how that can translate as we look at your last few quarters of strong acquisitions? Thanks.

Steve Squeri:

Yes. And the other thing that I would say is and I said this in my remarks, this virtuous cycle that we talk about, the more card members we bring in, the more merchant and partner offers that we can get. And so the engagement – the increased engagement from existing cardholders is a really important driver of growth. So that – the membership model is we just don’t bring our card members in and sort of watch them hope they grow. We bring our card members in and we want to work with them to grow. We do that from a small business perspective with our account development teams, making sure that they are taking advantage of all the benefits of the card, making sure that they are spending in categories that they can spend in, maximizing rewards and so forth. And we do that with our card base from an offer perspective through Amex offers through other direct offers from partners embedded offers within the model. And so a lot of our engagement not only from a customer service perspective is to making sure that our card members are taking advantage of all the aspects of the card that are out there. And so we really look to grow same-store sales, right. I mean so from existing card members, we are constantly looking to grow that share of their wallet. And again, that gets easier as the cycle gets bigger because more and more merchants want to reach more and more of our card members.

Brian Foran:

Hi, obviously, a very positive outlook. I don’t want to sound negative, but I think what we are all kind of dealing with is investors being like this is great? I will take it, but help me think about what are the risks? Where could it go wrong? So, maybe one question and one follow-up along the same theme, Jeff, when you were talking about the macro sensitivity, one question I hear sometimes is the note that the aspirational 2024 and beyond is a steady-state macro. And I get the investor question like, where is the dividing line? Like what would non-steady state macro look like where that guidance would then or aspiration within not apply? So, maybe you could touch on that, like what are the bounds in your mind for a steady-state macro?

Steve Squeri:

No. And I think just go back to the pandemic. So, look, we pulled back on acquiring card members because I don’t think anybody had any line of sight. I mean that the pandemic was worse than the financial crisis from a credit underwriting perspective. You never say never, but that’s sort of like the 100-year flood, right. And so my perspective is we will still acquire in that kind of scenario. And remember, everything we acquired today, we acquired through the cycle, but what we would do is move the credit criteria even further up. But what we would do again is we would engage with our card members. I think one of the most successful things that we did during the pandemic was retaining card hold, retaining those cardholders, whether it was through financial relief programs that got them through the hump for a couple of months or six months, whatever it was, or engaging them to spend in other areas and to stick with us. So, the reality is, is that if we were running this business quarter-to-quarter, which we don’t, you would pull back. But the reality is, as Jeff said, after every recession there is a recovery. And the last thing you want to do is retrench in such a way that you are not going to be able to take advantage of the recovery. And that retrenchment, looks – it looks like layoffs that don’t make sense and pulling back on marketing and trying to hit an EPS number for a quarter or for a year that is irrelevant. What’s relevant is for a 172-year-old company to continue to grow over the medium and long-term. And the way you do that is you invest judiciously and you invest smartly. And in times when things are bad, you invest in your infrastructure, you invest in your people because you are going to need great people through when a recession is over, and your infrastructure is going to need to do that. And where companies make mistakes is let go of great people, and also do not invest in those things, they are going to need six months to nine months from now when the recession is over. So, yes, we may have a moment in time, as Jeff said, it could be six months, it could be 6 years, but there will be a time when we don’t make that. And – but there will be a time where we exceed that. And that’s why we say our long-term aspiration is for 10%-plus growth in revenue, and we feel we are on a way to that.

Rick Shane:

Thanks for taking my question. Look, when we look at Slide 5, it’s really interesting in terms of the contribution and the significant growth from millennials and Gen Z. You guys have been really successful there. And we have seen that progress over time. I am curious, given that the millennial Gen Z growth in the last year was basically 5x, 4x to 5x other cohorts and the significant loan growth. If we looked at this distribution by age cohort, not for build business, but by portfolio in terms of borrowings, what the distribution would look like with millennials over-index versus the peers?

Steve Squeri:

Yes. And we tend to get a higher share of their wallet, but they have lower – they do have lower spending. And the great part about millennials and Gen Zs is that they are – and depending on where you are in millennial. I mean some millennials are 40 now. So, I mean, they are in a different thing. But the reality is the lifetime value of these cardholders is going to be significantly more than the lifetime value of acquiring a boomer or acquiring a Gen Xer right now. And that is – that’s very attractive as well. And if you look, again, Rick, on Page 5, you will see that, look, it’s 30% of the business growth. On the other hand, the boomer growth is only 6%. And some of those have been leery to go back travel still. So, we would also expect that to go up.

Dominick Gabriele:

Hey. Good morning.

Dominick Gabriele:

Great results. Good morning. I just want to change the topic a little bit. I just wanted your updated thoughts if you could just remind everybody about your ability to make account-by-account purchase limit authorization decisions given many of the accounts don’t actually have stated line sizes on the charge cards. So, I am just really wondering about severity of loss in the downturn versus the frequency is more based on unemployment, but your ability to really hone in on limiting the severity of loss given your underwriting techniques. Thanks so much guys.

Jeff Campbell:

Yes. The only thing I would add, I think that is a unique capability we have honed over many decades since we first started the charge card product. The other advantage of the charge card product, I would say, Dominick, is it does give us this population who is supposed to pay us in full every 30 days, which actually is almost like an early warning system from an overall risk management perspective of when there are problems that pop up in various parts of the world or various segments or various customer types. And we think that’s actually helpful to our overall results, and it’s the part of the many things that drives us historically and today to have by far, best-of-class credit metrics.

Moshe Orenbuch:

Great. Sorry to go back to the revenue guide. But Jeff, and I appreciate the 25% revenue growth for the full year, but the quarter was 17%. And between you and Steve, you both said that there was going to be a slowdown, it’s still strong, obviously, but a slowdown in card fee revenue growth and with the comments about margin, probably net interest income. So, I guess is there a part of the revenue base that you think is accelerating in ‘23?

Operator:

Thank you. The next question is coming from Bob Napoli of William Blair. Please go ahead.

Steve Squeri:

Yes. So, let me hit a couple of these topics and hopefully, I remember the mall that you went through. But look, I think international, we have seen which is really good and just look at the slides, you have seen really good growth from not only a consumer perspective, which is over 20%, but international SME and large corporations are growing at 32%. So – and remember, pre-pandemic, those are the fastest-growing parts of our business. So, we expect that to continue to grow, which obviously Japan is part of it and one of our top markets. From an acceptance perspective, we continue to grow acceptance internationally. We are really happy with the coverage gains that we have had, and we will continue to focus on that. We have talked about focusing on priority cities. We focused on all the categories, e-commerce, restaurants and lodging and tourist attractions, airlines, hotel and so forth to get those up. But again, with that we are getting 23% and 32% billings growth and our coverage is not where we want it to be yet, and we will continue to invest in that coverage. Look, as far as B2B goes, B2B continues to be a good story for us, but it’s just a small part – it’s a smaller part of the business. And we continue to invest in capabilities and we will continue to focus on B2B, but that will add not only to commercial spending, but that will also add to small business spending as well. And remember, 80% of the small business spending that we have is in the category of B2B spending. And so we will continue to hunt for that and try and automate more and more of those billings, and it makes it easy to get on the card.

Don Fandetti:

Hi Steve. Just curious if you have seen anything that sort of raised your concern level around competition in U.S. consumer or small business. I mean it seems to us like you might be pulling away a little bit from competitors. I am not sure if your metrics suggest that or not?

Operator:

Thank you. Our final question will come from Lisa Ellis of MoffettNathanson. Please go ahead.

Steve Squeri:

Yes. So, Lisa, I think it’s – look, pre-pandemic, we are pretty close to 20% anyway from an international perspective. And look, it’s a smaller base than Visa, Mastercard. And it’s a really high premium customer segment. And it’s a segment that travels – it’s a card base that travels quite a bit. So, pre-pandemic, we were growing in that 20% range. And that growth was due to a real focus on value proposition and a focus on merchant acceptance. I think what you are seeing right now, which is 26% growth, which is slightly outsized growth is still a recovery from the pandemic, right. I mean if you think about it, this 26% growth quarter-over-quarter, you still had a lot of lockdowns. People were not traveling last year at this time in international and so. Look, we are – our goal is to – our hope is to continue to grow this business as it was pre-pandemic at around that 20% level. But from my perspective, there is really nothing unusual here. We are sticking to our strategy, enhancing the value, continuing to add merchant acceptance and continuing to invest in this segment – these two segments of small business and international consumer card, which were fast-growing pre-pandemic, so nothing really unusual. And it probably normalizes a little bit as the year goes because people were getting out there and traveling and we got into the second and third quarters.

Operator:

Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415, access code 13734498 after 1:00 p.m. Eastern Time on January 27th through February 3rd. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.

Kerri Bernstein:

Thank you, Darryl, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Well, thank you, Steve, and good morning, everyone. Good to be here to talk about our third quarter results, which reflect another strong quarter and great progress against our multiyear growth plan. Starting with our summary financials on Slide 2. Most importantly, our third quarter revenues were $13.6 billion, reaching a record high in the second quarter in a row, up 27% on an FX-adjusted basis. Now I would point out that we continue to see a much stronger U.S. dollar relative to most of the major currencies in which we operate. So you do see a 300 basis point spread between our FX-adjusted revenue growth of 27% and our reported revenue growth of 24%, as we absorb some significant foreign exchange headwinds. Of course, the overall impact on our earnings still a headwind is less significant, because we do have some offsetting positive impacts on the expense side. Our revenue performance in the third quarter drove reported net income of $1.9 billion and earnings per share of $2.47, representing EPS growth of 9% year-over-year, a great result considering the sizable credit reserve releases we had in the third quarter last year. Because of these prior year reserve releases, we have also included pretax provision income as a supplemental disclosure again this quarter. On this basis, pretax provision income was $3.2 billion, up 43% versus the same time period last year, reflecting the growth momentum in our underlying earnings. Before getting into a more detailed look at results, let me spend just a minute briefly explaining how we've evolved our financial reporting for the organizational changes that Steve discussed earlier. You will see in the disclosures of the company earnings release that beginning this quarter, we have moved from three to four reportable operating segments. We first took global consumer services and split the U.S. into its own segment, creating U.S. Consumer Services. We then combine the international consumer business with the international portion of small and medium-sized enterprises and large corporate creating the new International Card Services segment. Commercial Services, that includes U.S. SME, U.S. large corporate and select global corporate clients. And lastly, our Global Merchant and Network Services segment remains largely unchanged, and as always, includes our global payments network and network partnerships. You will see in the appendix of our disclosures that we have recast prior periods to conform to these new operating segments. The new segments will also be reflected in our third quarter Form 10-Q. Now let's get into our results, beginning with overall volumes. Looking at Slides 3 and 4, you can see the continued strength in our Card Member spending behavior that Steve noted earlier. Total network volumes and build business were each up year-over-year at 23% and 24%, respectively, on an FX-adjusted basis in the third quarter. If you were to compare to 2019, third quarter build business grew 30%, accelerating above last quarter's growth rate of 28% relative to 2019. And importantly, despite the uncertainties in the current economic environment, our spending trends with performance relative to 2019 strengthened as we went through the quarter. We are really pleased with this growth. And the fact you see strong growth across all customer types and geographies, driven by both sustained growth in goods and services spending and continued T&E momentum. On Slides 5 through 8, we've given you a variety of views of this strong growth across our US consumer services, commercial services and international card services segments, and the various customer types within each. Starting with our largest segment, billings from our US consumer customers grew at 22% in the third quarter, reflecting the continued strength in spending trends from our premium US consumers. Millennial and Gen Z customers, again, drove our highest bill business growth within this segment, with their spending growing 39% year-over-year this quarter. Turning to Commercial Services. You see that spending from our US SME customers represents the majority of our billings in this segment and that spending from these customers continued its strong growth, up 17% in the third quarter. Our US large and global corporate customers, though a smaller part of billings in the segment, remain an important foundation for the entire company. And these customers continued their steady travel recovery this quarter, though overall billings are still 13% below pre-pandemic levels. We do continue to expect though that this group will fully recover over time. And lastly, international consumer and international SME large corporate customers within the new International Card Services segment were amongst our fastest-growing pre-pandemic, as Steve said, and are now in a steep recovery mode. You can see our high levels of growth in Q3 at 34% and 43% year-over-year, respectively. And if you were also to look at international consumer growth by age cohort, you would see, similar to the US, that the highest growth levels are from our millennial and Gen Z customers, who make up an even larger portion of overall billings than they do in the US. One other note on overall billings. The majority of our high level of growth this quarter was again driven by the number of transactions flowing through our network, with some modest impact from inflation. Overall then, we are pleased with the momentum we see across the board in our spending volumes, which is tracking in line with our expectations for both the year and for our long-term aspirations. Now moving to loan balances. On Slide 9, we saw year-over-year growth accelerate to 31% in our loan balances as well as good sequential growth. The interest-bearing portion of our loan balances also continues to consistently increase quarter-over-quarter, surpassing 2019 levels in the third quarter as customers steadily rebuild balances. As you then turn to credit and provisions, on Slides 10 through 12, the high credit quality of our customer base continues to show through in our strong credit performance. Write-off rates for Card Member loans remain well below pre-pandemic levels, flat to where they have been for the last three quarters, as you can see on Slide 10. As expected, you do now see that delinquency rates for loans have started to modestly pick up, but also remain well below pre-pandemic levels. Turning now to the accounting for this credit performance on Slide 11. As you know, there are two components to our provision expense

Operator:

[Operator Instructions] Our first question comes from the line of Ryan Nash with Goldman Sachs. Please proceed with your question.

Steve Squeri:

Good morning, Ryan.

Ryan Nash:

So maybe just start on the top line, Steve. Solid results, once again, although clearly, as you and Jeff articulated, FX was a headwind in the quarter. And I know you mentioned you're not seeing any changes. Jeff mentioned the strength over the quarter. Can you maybe just talk about what you're seeing from a spend perspective, maybe relative to what you saw 90 days ago? Any changes under the surface? And then, maybe just flesh out a little bit further your confidence in the ability to generate mid-teens top and bottom line growth into 2023? Thank you.

Jeff Campbell:

And Ryan, let me just add maybe a few other comments to try to dimension when Steve and I used a term like, well, we know how to pivot if we need to. I would remind everyone that GDP in the U.S. shrank in the first two quarters of this year, and we've been putting up revenue growth in the 24% to 30% range, steadily right through that. I'd remind you that I talked about our credit reserve is influenced by macroeconomic forecast. And so you can go look at what the Fed said in September. You can go look at what Moody's is saying. And they are predicting modest upticks in unemployment. And that's contemplated in everything Steve and I have said and in the guidance that we've provided. If you look at October, October is just a continuation of all that Steve just talked about thus far. So we feel good about the guidance we've given. We are acknowledging the environment we're in. But I don't want people to overplay our reaction to the fact that growth has been pretty slow in the U.S. because with our differentiated business model, as Steve just pointed out, performing very strongly in this environment.

Sanjay Sakhrani:

Thanks. Good morning.

Sanjay Sakhrani:

I guess I want to follow-up on that question. Steve, you talked about the recession playbook. Maybe we could just talk about your comments about operating the business for the long-term. And if we were to see a slowdown, how we should think about managing expenses. Marketing has been boosted quite a bit. You wouldn't want to grow as fast as you are right now in the backdrop. So maybe you can just talk about the flex there, how we should think about the aspirational targets in the backdrop of a recession or a mild one even. And then, Jeff, could you just hit the reserve rate? I know people tend to think about that reserve rate as a result -- as it relates to CECL day 1. Do you see yourself getting back to that level, given how low losses are right now? Thanks.

Jeff Campbell:

Before I get to credit reserve, Sanjay, I can't resist just adding though. You said, well, what would you do in a mild recession. I don't want to get into the cool debate here about semantics, but some could argue that from a growth perspective. We're in a mild recession and we just grew revenues 27% and to turn it to our credit reserves. Our credit reserve adjustments do include the latest economic forecast, which has unemployment ticking up a little bit next year, and that's included in all of our forward-looking comments. As you point out and maybe to help everyone, Sanjay, I think it's on Slide 12 in our deck today. Our day one credit reserve percentages of total loans were 4.6%. This quarter, they were all the way down at 3.2%. I will point out that if you look across the industry that is by far the lowest percentage. It's also the lowest percentage relative to day one. There's differential timing that all the different financial institutions have had over the last couple of years just due to the vagaries of the way the accounting works here. But as you sit here today, our reserve balance both on an absolute basis and relative to that day one basis is below the industry. And that makes sense, Sanjay, because we have, by far, the most premium book in the industry. We have, by far, the strongest credit metrics. And relative to pre-pandemic in that day one number, our credit profile is stronger today. All the talk you hear from Steve and I and Doug and others about our record success bringing more premium consumers into the franchise over the last couple of years has an impact on credit profile as well. So all else being equal, you would not expect our reserve percentage of loans to get back to where it was day one CECL because the average credit profile is stronger than it was day one CECL.

Mark DeVries:

Thanks. Could you discuss what's driving the accelerating new account growth off of already higher numbers? And how sustainable you view account growth anywhere near these levels to be -- any color you can provide on the ramp in spend you would normally observe from new accounts as they age? And then finally, did you see a surge in new account applications from Gen Z around your Jack Harlow concert?

Jeff Campbell:

The only two comments I would add are amongst the modest risk management adjustments we've made across the course of this year, as we have significantly actually raised our financial hurdles required for some of the new card members that we're bringing in and still just brought in a record level, which tells you something about the level of demand that we see right now due to all of the trades that Steve just talked about. I'd also point out, as I said in my earlier remarks, that, that average customer whose behavior we track every single month is coming in with much higher spend patterns, much better average credit quality and a much greater average fee component than what we were seeing pre-pandemic.

Operator:

Thank you. Our next question comes from the line of Betsy Graseck with Morgan Stanley. Please proceed with your question.

Steve Squeri:

Hi, Betsy.

Jeff Campbell:

So thank you for the question, Betsy. I will say, I think foreign exchange movements, very dramatic right now and more dramatic than they've been in many years. I think are a little difficult to communicate and hard for a lot of people to fully understand. So you've seen dramatic moves in many of the currencies that are most important to us, from the yen to the euro, to the pound. And so when you look at our revenue growth this quarter, that's why you saw a 300 basis points difference between the FX-adjusted revenue growth and the reported revenue growth 24%. Now on the bottom line, it is a much more muted impact, Betsy, because, of course, we also have a very large proportion of our colleagues outside the US to go with all that business that we do around the globe, the cost of rewards in all those countries is in the local currencies. So the impact on our earnings per share is pretty de minimis. I think we have a 10-K disclosure, where we talk about over the course of a full year movement maybe costing you $0.10. That's a quarter. So that's why I don't really call it out when I think about EPS. When you convert all that into our guidance, it's why we're very comfortable saying we're going to be above our EPS guidance range. We left our reported revenue growth number the same as it was previously. I would expect to be a couple of hundred basis points above that reported revenue guidance on an FX-adjusted basis. So I'll conclude by saying, in some ways, what we're saying is -- our revenue performance has exceeded our expectations of 90 days ago. That has sort of offset the foreign exchange headwinds, which are a little bit greater on the revenue side than what I would have expected 90 days ago. But at the bottom line, you don't really need to factor it in that much.

Bob Napoli:

Thank you, and good morning. I'd love to get a little update on SMB and online spending. I mean, the SMB obviously is a critical business for you and just obviously growing strongly. But any color you could give on SMB, any changes? And then, online spend has actually been pretty steady. I mean, a lot of, I guess, discussion around what is the right growth rate for online spend versus off-line over the long run I think is a little bit of a decel and maybe an off-line but steady and online. So just any color on SMB and your thoughts on the long-term growth of online spending.

Operator:

Thank you. Our next question comes from the line of Rick Shane with JPMorgan. Please proceed with your question.

Jeff Campbell:

Yeah. So I think, Rick, it's a good question, because you are good to point out that there's been a significant change as we have, from our perspective, added more functionality for all of our customers on what our traditional charge products. And many to most of those customers still use them as traditional charge products and leave it paying off every 30 days and some occasionally take advantage of their new functionality and being able to carry a balance if they want for a little bit. But when you think about the impact on the company, Steve used the term a couple of times today, our differentiated business model. If you look over time, our net interest income is about 19%, 20% of our overall revenues. And that's where it was many years ago. And frankly, that's where we'd expect it to be many years from now. Because as much as we see an opportunity to get a little bigger share of our both consumer and small business customers lending wallet, we grew fees 23% this quarter. And we are seeing tremendous growth in discount revenue. So we do get great growth and expect to continue to get great growth on the lending side, but I don't actually expect it to make a big difference in the overall mix of revenues that we have as a company or in the business model we have.

Operator:

Thank you. Our next question comes from the line of Dominick Gabriele with Oppenheimer. Please proceed with your question.

Jeff Campbell:

Let me just start, Dominick, with a few stats that I think are important and then Steve may want to add. I mean the biggest thing driving, of course, the 31% growth in loans, tremendous growth in spending, right? So we are in a recovery mode of spending and seeing tremendous progress there. And customers are also beginning to rebuild balances a little bit. So I think it's fair and natural. So yes, I think when you look at those who have reported thus far, you're seeing industry-leading growth in loans, but you're also seeing industry-leading growth and spending. I think that's very, very important to put those two together. So I think we feel good about the trends and expect them to continue. And I would expect long-term, just as we were before the pandemic, to grow a little faster than the industry on lending and to do it while still maintaining best-in-class credit.

Operator:

Thank you. Our next question comes from the line of Moshe Orenbuch with Credit Suisse. Please proceed with your question.

Jeff Campbell:

So I would expect most for the next couple of quarters to see the revolving or interest-bearing portion of those balances grow a little bit faster than the overall loan growth because we're not quite back to pre-pandemic levels of behavior. I think our expectation is, overtime, and I think it may take a while still you will eventually get back to pre-pandemic types of behavior. The other factor I would point to goes a little bit to Rick Shane's earlier question, which is you do have this evolution going on as we've added a little bit more functionality to some of our charge products. So those customers who have the traditional charge products, but have that pay overtime feature and to use it less than your traditional credit card or revolving customers. So that's putting a little bit of complexity in tracking our numbers here. But I think in terms of watching the macro trend, I would expect loan balances to grow a little bit faster than the industry. I would expect the next couple of quarters, the revolving portion to grow a little bit faster than the loan growth, and I would expect all of those things to really set down into steady-state levels about where they were pre-pandemic.

Don Fandetti:

Yes. On the international org change, does that signal maybe a faster pace of investment? I know it's always been a balancing act in international markets. And then also, is there anything new on the tech investment strategy, so you were ramping up hiring seems a little late in the game for that?

Operator:

Thank you. Our next question comes from the line of Bill Carcache with Wolfe Research. Please proceed with your question.

Steve Squeri:

Hi, Bill.

Jeff Campbell:

And the only thing I would add is that, just like that spend is coming from existing customers, the loan growth is predominantly coming from existing customers that we know well, who have a better average credit profile, and we feel good about our winning through the cycle models that tell us these are customers who we should have in any environment. And I think I'll come back to my earlier comments about our credit reserve levels are still below everyone else in the industry. They're below relative to day one CECL where others are, and that's appropriate given our strong credit profile. So we feel good about where we are.

Lisa Ellis:

Hey, good morning, guys. Thanks for squeezing me in. Just a follow-up --

Lisa Ellis:

Hi -- on that point. Given the continued strength in your business and the fact that you're still benefiting from a lot of these sort of lagging recovery tailwinds from the pandemic, can you just update us on your thoughts on taking advantage of the current valuation environment to pursue some tuck-in M&A or other more like chunkier organic investments, for example, things that you're perhaps going to -- looking at or leaning in on in terms of accelerating areas of your business? Thanks.

Operator:

Thank you. Our final question will come from the line of Mihir Bhatia with Bank of America. Please proceed with your question.

Steve Squeri:

Okay. I'm sorry, I'm here. It was really hard. I don't know if you're on a speakerphone or, it was really hard to hear you. Durbin, is that the question?

Steve Squeri:

Okay. That's very clear now. So look, in terms of the Durbin proposal, it's a proposal. I can't speculate how this is going to come out and whether -- it obviously is not going to impact us because we're a three-party system. So we don't really see that impacting us negatively, will it impact us positively or will it actually happen? We continue to look at it, and we'll see what happens there. Look, as far as the regulatory environment, it's a tough regulatory environment. And I think in a lot of ways, the objective is to protect consumers and to be transparent with consumers, and we applaud all of that. And so I think the CFPB is talking about late fees and things like that. And these are not material parts of our revenue streams. But I think transparency with consumers is really, really important, and we obviously want to see all that. But I don't think the regulatory environment is any tougher than it's been over the last few years, and we'll continue to operate in that environment. Obviously, it adds -- sometimes it adds a little bit of cost to comply with certain things, whether that means technological changes or what have you. But it's just like competition. It really -- it's always there. And you have to make sure that you're investing to meet the regulatory guidelines, and we'll continue to do that. But I don't see it as a big headwind for us or a headwind at all for us as we move forward.

Kerri Bernstein:

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains certain forward-looking statements about the company's future business and financial performance. These are based on management's current expectations, and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Well, thank you, Steve, and good morning, everyone. Good to be here to talk about our second quarter results, which reflect another strong quarter and great progress against our multiyear growth plan. Starting with our summary financials on Slide 2. Most importantly, our second quarter revenues were $13.4 billion, up 33% on an FX-adjusted basis, strengthening sequentially from last quarter's already strong 31% year-over-year growth rate. Our reported second quarter net income was $2 billion, with earnings per share of $2.57. Now as I said last quarter, given that year-over-year comparisons of net income have been challenging due to the volatility that the pandemic caused in credit reserve adjustments, we are including pretax pre-provision income as a supplemental disclosure again this quarter, which we believe gives you additional insight into the trends of our underlying earnings. On this basis, second quarter pretax pre-provision income was $3 billion, up 27% versus the same time period last year. So now let's get into a more detailed look at our results, beginning with volumes. Turning on Slide 3. You can see the continued momentum in spending from our strong customer base that Steve noted earlier. Billed business and total network volumes were up around 30% year-over-year on an FX-adjusted basis in the second quarter. We feel really good about both our year-over-year growth as well as our sequential growth. The second quarter saw us achieving our highest ever level of quarterly billed business. And if you were to compare to 2019, the first quarter grew 19%, while the second quarter growth rate accelerated even further to 28%. Importantly, our spending volumes strengthened as we went through the quarter, with the month of June also reaching a new monthly record high. And as we sit here today, this momentum has continued into early July. Now I would point out that when you think about year-over-year growth rates, volumes in 2021 were, of course, in a steep phase of recovery as the year progressed. So I do expect that our year-over-year growth rates will moderate as we progress through the rest of 2022. Our spending metrics are being driven by both sustained growth in goods and services spending and by an acceleration in T&E recovery in the second quarter. Starting first with goods and services spending on Slide 4. We saw a year-over-year growth of 18% in the second quarter. We are now multiple quarters into seeing the effects of the structural shift in online commerce spending patterns, which is accelerated by the pandemic, with our growth rates remaining steady. Specifically, online and card-not-present spending grew 15% in the second quarter. In contrast, total T&E spending, as you see on Slide 5, showed an acceleration in its recovery this quarter even more than we and many others would have expected, reaching 108% of 2019 levels. The high demand for travel will be a steep recovery across all customer types. This strength in both goods and services and T&E spending is also evident as we break spending trends down across our consumer and commercial businesses, with a few other key points that I'd suggest you take away. First, beginning on Slide 6, millennial and Gen Z customers continue to drive our highest global consumer billed business growth, with their spending up 48% year-over-year. I'd also call out that this quarter, all other age cohorts have now reached pre-pandemic levels of T&E spending, including baby boomers, who had been slower to recover. In our commercial business, on Slide 7, spending from our small- and medium-sized enterprise clients continues to drive our overall growth, with spending up 25% year-over-year. While a smaller part of our business, it is worth noting the significant acceleration in growth of 58% of the large and global corporate customers, significantly above last quarter's growth rate. This is a sign of a more meaningful business travel recovery. So overall, we are pleased that our strength in spending volumes has exceeded our original expectations for the year. And again this quarter, the majority of our high level of growth was driven by the number of transactions flowing through our network, with some modest additional impact from inflation. This positions us well for our long-term growth aspirations. Moving on now to receivable and loan balances on Slide 8. We saw a good sequential growth in our loan balances, which are now well above pre-pandemic levels this quarter. The interest-bearing portion of our loan balances also continues to consistently increase quarter-over-quarter, but remains a bit below 2019 levels, as paydown rates have remained elevated. As you then turn to credit and provision , on Slides 9 through 11, the high credit quality of our customer base continues to show through in our extremely strong credit performance. Card Member loans and receivables write-off and delinquency rates remain well below pre-pandemic levels. And though they did continue to tick up slightly overall this quarter, as we expected, they are trending a bit better than our expectations when we started the year. Turning then to the accounting for this credit performance on Slide 10. As you know, there are a couple of key drivers of provision expense. First, actionable credit performance, which, as we just discussed, is extremely strong; and second, changes in credit reserves under the CECL methodology. We built a small amount of reserves this quarter as our loan balances grew and the macroeconomic outlook that we flowed through our CECL models got slightly worse relative to the outlook back in Q1, both partially offset by improved portfolio quality. This reserve build, combined with our low net write-offs, drove $410 million of provision expense for the second quarter. As you see on Slide 11, we ended the second quarter with $3.2 billion of reserves, representing 3.1% of our loan balances and 0.2% of our Card Member receivable balances, respectively. This remains well below the reserve levels we had pre-pandemic. Going forward, we continue to expect delinquency and loss rates to move up slowly over time, but to remain well below pre-pandemic levels this year. I do expect to end the year with a higher level of reserves on our balance sheet than where we ended this quarter, given our expected loan growth. But the overall range and timing of reserve adjustments will be heavily influenced by how the macroeconomic outlook evolves between now and the end of the year. Moving next to revenue on Slide 12. Total revenues were up 31% year-over-year in the second quarter or 33% on an FX adjusted basis, as we continue to see a stronger U.S. dollar relative to most of the major currencies in which we operate. Overall, these results were above our original expectations. Before I get into more details about our largest revenue drivers in the next few slides, I would note that service fees and other revenue was up sharply at 79% growth year-over-year, largely driven by the uptick in travel-related revenues that accelerated this quarter, with cross-border spend in particular surpassing pre-pandemic levels. Our largest revenue line, discount revenue, grew 32% year-over-year in Q2 on an FX-adjusted basis, as you can see on Slide 13, driven by both our sustained growth in goods and services spending and the accelerated T&E recovery that you saw in our spending trends. Net card fee revenues were up 19% year-over-year in the second quarter on an FX-adjusted basis, with growth continuing to accelerate, as you can see on Slide 14, largely driven by the continued attractiveness to both prospects and existing customers of our fee-paying products as a result of the investments we've made in our premium value propositions. This quarter, we acquired 3.2 million new cards, with acquisitions of U.S. Consumer Platinum Card numbers again reaching a record high and increasing 20%, above last quarter's record levels, demonstrating the great demand we're seeing, especially for our premium fee-based products. Moving on to net interest income. On Slide 15, you can see that it was up 31% year-over-year on an FX-adjusted basis, accelerating above last quarter's growth rate due to the continued recovery of our revolving loan balances. Looking forward, while I would expect our loan balances to continue to recover at higher growth rates, the rising rate environment will likely cause our net interest income growth rate to slow given our sizable non-interest-bearing charge balances. To sum up on revenues on Slide 16. We're seeing continued strong results and sustained momentum across the board. So looking forward, we now expect to see revenue growth of 23% to 25% for the full year of 2022. So the revenue momentum we just discussed has been driven by the investments we've made in our brand, value propositions, customers, colleagues, technology and coverage. And those investments show up across the expense lines you see on Slide 17. Starting with variable customer engagement expenses, these costs came in as expected, at 42% of total revenues for the quarter, and are tracking with our expectations for variable customer engagement costs to run at around 42% of total revenues on a full year basis. On the marketing line, we invested $1.5 billion in the second quarter. We feel really good about the strong demand for new card acquisitions , as we showed on Slide 14. More importantly, we feel good about the spend, credit and revenue profiles of the customers we are bringing in to American Express membership, which continue to look strong relative to what we saw pre-pandemic. I would now expect to spend a little over $5 billion on marketing in 2022. Moving to the bottom of Slide 17 brings us to operating expenses, which were $3.3 billion in the second quarter. There's often some quarterly volatility in this number due to the varied timing of certain accruals and entries. This quarter, for example, we see the impact of the prior year including a sizable benefit from net mark-to-market gains in our Amex Ventures strategic investment portfolio. As I said last quarter, and as Steve discussed earlier, inflation, while driving some modest positive impact on volumes, it's also putting pressure on our operating expenses, particularly in our compensation costs. Taking everything into account, we now expect our full year operating expenses to be around $13 billion, as we invest in our talented colleague base, technology and other key underpinnings of our growth given our tremendously high levels of revenue growth. Turning next to capital on Slide 18. We returned $1 billion of capital to our shareholders in the second quarter, including common stock repurchases of $611 million and $394 million in common stock dividends on the back of strong earnings generation. Our CET1 ratio was 10.3% at the end of the second quarter, within our target range of 10% to 11%. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. Given the concerns about the macro economy and the market, it is worth noting that in the Fed's CCAR stress test results released last month, American Express was again one of the few firms that remained cumulatively profitable under the Fed's macroeconomic stress scenario and we had the highest profit margin as a percentage of assets of any participating bank. That brings me to our growth plan and 2022 guidance on Slide 19. Our performance year-to-date and our full year guidance reinforce several points that Steve and I have now both discussed. First and most importantly, we clearly have momentum across all of the areas critical for us to drive sustained high levels of revenue growth, including customer acquisition, engagement and retention, evidenced by our strong Q2 results. Inflation is additionally providing some modest benefit to our revenues. The combination of all of these things led us to increase our expectations for full year revenue growth to 23% to 25%, up from our original range of 18% to 20%. For now, though, our EPS guidance remains unchanged from between $9.25 and $9.65. Let me walk you through our thinking here. As I talked about earlier, we feel really good about the strong results generated by our marketing investments this year. And that's why we now expect to spend a little over $5 billion for the full year, modestly above our original expectations. Both Steve and I also talked about the fact that there are some pressures on our operating expenses, particularly around compensation and partially fueled by inflation. And therefore, we now expect our operating expenses to be around $13 billion this year. Lastly and most importantly, as we think about our EPS this year, as I talked about in the credit section, while our credit performance and metrics remain extremely healthy, we can't predict how the macroeconomic outlook will evolve. That makes it difficult sitting here today to predict a precise range of outcomes for any potential CECL reserve adjustments for the balance of the year. That said, should the macroeconomic outlook not change meaningfully between now and the end of the year, and therefore, not have a large impact on current reserves in the balance of the year, we would expect to be at or even a bit above the high end of our EPS guidance range. In any environment, we remain committed to executing against our growth plan and running the company with a focus on achieving our aspiration of delivering revenue growth in excess of 10% and mid-teens EPS growth on a sustainable basis in 2024 and beyond. With that, I'll turn the call back over to Kerri to open up the call for your questions.

Operator:

[Operator Instructions] Our first question comes from Ryan Nash of Goldman Sachs.

Stephen Squeri :

So I think everything that we're doing here is offensive. I mean you could argue that raising compensation is defensive. But I think you're going to -- you've seen compensation being raised across. So if I break out the categories, you're going to see OpEx up. And you see an OpEx up for 2 reasons. #1, we are investing a little bit more in -- from an operating perspective. But that investment -- the main investment from an operating perspective is you can't grow your billings 30%, and with the majority of those billings being grown by 30% by more transactions without having more people to be able to serve your customers, to be able to engage with them from a travel perspective. And you have to remember, one of the huge differentiating factors that we have in our business model is our ability to serve our customers when and where they need to be served. And as you get more and more transactions, as you get more and more customers, you do have this step function increase. And so a lot of our operating expense growth has been done -- has been to the addition of people, which is not maybe a popular topic right now that people are talking about, but we're adding people. We're not subtracting people from our business. And we're adding people to make sure that we can continue the level of service that we had. And I don't mind doing that, especially in a growth environment, which is what we're expecting. Well, look, you're also seeing wage increase, and you have to pay more to keep your best talent. And so we will do that. That is [indiscernible] not to do that, and we will continue to do that. From a marketing perspective, I've been doing this for a number of years now. And one of the things that you hear us say is we have lots and lots of good investment opportunities. And to let those investment opportunities go by the Board because, we thought we might have spent $5 billion, but maybe it will be $5.2 billion, whatever, that's shortsighted because we're running the company for the longer-term. So I would say that the investments that we're making -- and additional investments in technology are truly all longer -- all thinking about the long-term here. As far as revenue goes for next year, look, we're building up momentum. But I think when we came out and said we were going to grow 18% to 20% this year, there was probably some scepticism. And now we're coming out and saying we're going to go 23% to 25%, which is going to put the level of revenue at the end of this year obviously higher than what we thought. We have a plan to get us to -- in 2024 at 10% plus revenue growth on a sustainable basis, which means in 2023, we'll certainly exceed 10%. What that number will actually be? I don't know sitting here right now. I don't know. But I can tell you it will be on our growth trajectory. And as long as we have good revenue opportunities and as long as we can continue to grow this business, I will continue to invest. And that's where we are. And as Jeff said, we've decided not to -- and I think it's really important. We've decided not to raise our earning -- our EPS guidance because of the uncertainty with CECL, which, quite honestly, we don't have a lot of control over. And so for us to sit here today and say, hey, look, let's just raise it to then come back in the third quarter or the fourth quarter and say, hey, we had to drop it, it's just -- it's fool hearted. But the revenue, it's what we see. And so when we're asked questions about, what do you think about the economy and you see a slowdown? If I was thinking there was a slowdown in the next couple of quarters, I wouldn't be sitting here raising revenue to 23% to 25%. So that's how I think about it.

Sanjay Sakhrani :

T&E was a big driver of the upside. And I think, Jeff, you mentioned there's been further strength in July, which makes sense given we're moving into the heart of the summer months. Are you guys concerned this is sort of a pull forward, and you see a slowdown thereafter? And maybe that ties into what we saw in corporate T&E because that also moved up quite a bit. Where do you think the new normal shakes out?

Operator:

The next question is coming from Betsy Graseck of Morgan Stanley.

Stephen Squeri :

Look, we're -- our stated goal for our SME business is be the working capital provider for small businesses. And so I think that what we're trying to do is to be able to provide liquidity to them using cards. We've got some short-term working capital loans. We've got some shorter-term term loans and they're taking advantage of it. But I'll send you back to the pandemic. I mean when you look at our small business base, I think everybody was really concerned about how stressed this was because -- or how stressed this could be because of what the perception is the makeup of small businesses. And I've said this over and over again. When people think about small businesses, they think about restaurants and they think about small retail on Main Street and it's much more than that. And so I think that -- and you saw how we performed. I mean our credit metrics performed brilliantly through the pandemic. And we've always grown in the last few years a little bit -- well, pre-pandemic, we've always grown faster than the market. We have a very low share of our small businesses lending volume relative to their spending volume. I mean we probably have over 40% of their spending volume, but 40% of the spending level, but we have less than maybe 20% of the land. So there is opportunity, and we will go after this opportunity the same way we go after everything else, in a very measured, analytical and risk-adjusted way. And so we're not trying to grow crazily. We are just providing our customers with what they need. Having said that, I think you've seen our ability to pivot, and if need be, we will pivot again. But what I do really love about our small business base, not only that it continues to grow, but it is so diverse across so many different types of industries, and that's really, really, really important.

Bob Napoli :

Also congratulate you on a super strong numbers. Really great to see. I guess maybe a question on network coverage, one of your key areas of focus and incremental investment. And just maybe any update on how you're performing versus your plan on network expansion. Either kind of -- obviously, international seems like where you have the most opportunity from a network expansion. Any thoughts on or any metrics you can give on international and your thoughts on where your coverage should be internationally over the long term?

Operator:

The next question is coming from Mark DeVries of Barclays.

Stephen Squeri :

Yes. So we don't really get into all of that either in our release or talk about. But let me give you a couple of points. When we look at sort of how we're getting card member spending, we really look at share of wallet. Share of wallet is really important for us. And from millennials and Gen Zs, we're getting a higher share of their wallets off the bat. That's key. Because what happens is, with a lot of our boomers and so forth, and especially our boomers, they were used to an American Express that was accepted in a limited universe. Our Gen Z and our millennials are used to an American Express that's really accepted everywhere. And so we're able to penetrate their wallets more right out of the gate because, number one, they're more card savvy, and they tend to use no cash. And they're more value proposition savvy, and they tend to figure out how to utilize the card in the best way for them. And so we're getting a higher percentage of their wallet. As they grow, as their wallets grow, as they progress through life, our aim is to continue to keep that wallet share. And that's a big deal. Plus, as you acquire Gen Zs and millennials, they tend to have a longer runway for tenure with the card product. As far as the 48% growth and breaking it out sort of -- I mean, really what you're asking for is same-store sales versus new store sales. I don't really have that at the tip of my fingertips here.

Operator:

The next question is coming from Dominick Gabriele of Oppenheimer.

Stephen Squeri :

Well, I think the simple answer is they have more money. But when you look at sort of what's going on in the economy and the stock market going up and down, we we've never really been tied to that. I mean -- and I've been here for forever, right, 35 years or so. And I've never seen a correlation between that. What I have seen a correlation between is sort of unemployment and people losing their jobs and not being able to pay their bills. And so that's potentially an issue down the road. But we're in a very crazy sort of environment, and Jeff called this out in his own remarks. I mean, we've got high inflation and low unemployment. And it's actually hard to hire people right now. And so yes, you're seeing some layoffs and some companies talking about slowing down their hiring and things like that. But it's not broad based and it's not broad scale at this particular point in time. And so I think as far as I look at this -- the cohort that we have, which is a small segment, right, of the U.S. population, but a very powerful segment of the U.S. population, you would have to see a huge credit crunch driven by unemployment, I think, for this cohort to be hit. The other thing I would say is, when we pull apart our numbers, this spending is not inflation-driven. And that's not to say there's not inflation in these numbers. But you have to remember that coming out at the end of last year, when no one wanted to talk about it, we had inflation in those numbers last year. So whether you look at 8% or 9% sort of spending inflation out there in the environment, it's not an 8% -- 8% or 9% benefit to our business because you do have a grow over. But the most important thing for us is we're seeing an increase in transactions. And that's what's really driving our growth right now, is an increase in overall transactions in our business. And that's an important indicator for us. We look at not only transactions, but we look at transaction size. And then we look at that transaction size a little bit on a normalized basis as you take the effects of inflation out. And we've got real growth when you do that.

Operator:

The next question is coming from Bill Carcache of Wolfe Research.

Stephen Squeri :

Yes. I mean, this environment has been a highly competitive environment since the financial crisis. And it hasn't really changed. Yes, I mean people invest in more things. I mean we've all raised the price of poker here a little bit. But we figure our competitors will continue to invest. We figure that our competitors will copy what we're doing. And that's why it's important for us to stay ahead. And so has it intensified? I mean we just work under the assumption. it's a highly competitive environment, and it will remain a highly competitive environment. And you're really talking about the U.S. consumer segment, but you've got high competition in small business. You've got high competition in various markets. You've got high competition in corporate card. But what we strive to do is put the best products and services out there. And that's worked out pretty well for us. And so it requires a little bit more investment. It requires investment across the board. But in the long run, I think you just have to look at the results. And right now, we're acquiring more cards than we've ever acquired. But we've said this before. What's really important for us is that we're looking to acquire revenues and we're looking to acquire billed business. We talk in terms of cards. But those cards are generating new billed business and generating revenue for us, obviously, because we're raising our revenue guidance. As far as corporate, I'm not sure I really understand the question all that much. But we only have a corporate card. So -- and yes, companies are spending. But we're only at 60 -- our T&E is only at 60%. And Jeff, where are we overall on corporate card spending? I don't know.

Stephen Squeri :

So -- but we're not back yet. But you're seeing pockets of it and consultants are back out there on the road and bankers are back out there on the road. And I think people are having a lot more meetings. I know we had one in June, and it was hard to get conference room space for like 100 or 150 people. And even looking to book for next year for the same type of meeting, boy, people are out there booking 1 year, 1.5 years in advance. And I think that's good for the lodging business. It's good for the airline business. It's good for us. So that's kind of where it is.

Lisa Ellis :

Steve and Jeff, you've commented earlier on some of the near-term investments that you're making given the strong growth in top line you're seeing in wages and marketing, et cetera. Can you also comment a bit perhaps on some of the longer-term investments that you're leaning in on, kind of taking advantage of the strong growth in the business to be able to lean in and position Amex even better for the next sort of 3 to 5 years?

Operator:

The next question is coming from Moshe Orenbuch of Credit Suisse.

Jeff Campbell :

Well, let me maybe start, Moshe, by just reminding everyone of the highly analytical process we have for determining who we bring into membership in the franchise. And it's based on searching for that premium customer, whether they are a consumer or a small business. It's based on the vast amounts of data and history we have. And it's based on having very high financial cutoffs for who we allow into the franchise or not. And when you look at the outcome of that process right now, we are on average bringing in new customers who have higher credit qualities than we saw pre-pandemic in 2019, who are showing much higher spending profiles and who are also carrying balances at a greater rate. So we feel really good about the people we're bringing into the franchise. And as you've heard Steve and I and Doug and others talk about, we also always when we bring people in, model their results assuming there will be a recession. I don't know when there will be a recession, but there will be. And so we build a through-the-cycle view of the economics right into our upfront calculation of whether we think it's a good idea or not to bring a given customer into the franchise at a given level of marketing spend.

Jeff Campbell :

Steve, the other thing I would add, and I'm going to quote you, is we run the company for the long term. We make these decisions on a through-the-cycle basis. There will be a recession at some point. I don't know when. But the thing about recessions is, they're always followed by a recovery. And we're running the company to achieve the highest possible sustainable level of long-term growth. And we think that the process we have and the analytics we have for bringing people into the franchise are very consistent with that.

Christopher Donat :

I wanted to dig -- try to dig a little deeper on the travel and entertainment recovery and the Slide 23 you had and revisit the question of a possible pull forward. I heard the commentary around bookings, and so that seems good for visibility for airlines and lodging. What I'm wondering about is, should there be any reason to be concerned around restaurant spending, which has been really strong? And is restaurant spending highly correlated with lodging and airlines so maybe we don't need to worry about it? Or just if you're seeing anything that could be a cause for concern and maybe a future pullback in restaurants...?

Operator:

The next question is coming from Rick Shane of JPMorgan.

Jeff Campbell :

Well, maybe I'll start, Steve. So first, we have moved over the last couple of years, Rick, to add to the majority of our charge products a pay over time capability. For existing Card Members, that phases in in a variety of ways. For new Card Members, that capability is on as it is as they get the card. So I do think that has some impact on our results. There also is a demographic feature, as I talked about earlier. If you look at who we're bringing into the franchise now, and there is a skew towards the millennials and Gen Zs, they are higher spending, higher credit quality. And there is a propensity to carry balances that is a little higher than what we see in the older demographic.

Operator:

The next question is coming from Mihir Bhatia of Bank of America.

Jeff Campbell :

Well, I can't resist my start by pointing out that, yes, Steve and I talked a lot about the heavy investments that we're making this year. We're also growing our pretax pre-provision profit by 27% this quarter, in line with the 31% revenue growth. Look, as Steve said earlier, we'll have to see. I think we feel really good about the revenue momentum we have. And so just mathematically, given our long-term sustainable goals and a steady-state environment for 2024 and beyond, I expect to be above that -- easily above the 10% level on revenue growth next year. How much? Don't know. We'll have to see. And that provides a pretty darn good platform for good earnings growth. All that said, it's only July 22. We haven't given you guide -- specific guidance for next year. And the wildcard from a GAAP EPS perspective in all this is the volatility that you've seen so much of in the last 10 quarters in the CECL credit reserves because we have good, I think, visibility and beliefs about the trajectory of our own business. But the consensus macroeconomic forecast and how it evolves is going to have a big influence on what we book for credit reserves.

Operator:

Our final question will come from Don Fandetti of Wells Fargo.

Stephen Squeri :

The short answer is yes. We don't -- we're not sharing all the statistics, but small businesses continue. When you look at our small business base, probably over 80% of their spending is B2B spending versus T&E spending. And we continue to see acompay go up for us. Our partnerships continue to yield more value. We're seeing -- what Jeff talked about it, we're about 80% of where we were from a corporate card perspective, but yet only 60% from a travel perspective. So that's driven by more B2B. But it's not -- when you look at that automation of B2B, some of it is automation of existing business, especially in the small businesses. Some of it is growth. But it still continues to be a long-term play. But you're seeing more suppliers take it. And we'll continue to work towards getting more acceptance and leveraging our flexible model here to be able to work with suppliers and our small businesses and our corporations to drive more acceptance and to drive more spend.

Operator:

Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415, access code of 13729997 after 1:00 p.m. Eastern Time on July 22 through midnight, July 30. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.

Vivian Zhou:

Thank you, Alan, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on filed with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials, as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results; and then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we will move to Q&A on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Thank you, Steve, and good morning, everyone. It's great to be here to talk about our first quarter results, which reflect a solid start to 2022 and are tracking in line with the guidance we gave for the full year and with our aspiration to build growth momentum beyond 2022. Starting with our summary financials on slide 2. Most importantly, our first quarter revenues were $11.7 billion, up 31% on an FX-adjusted basis, consistent with the momentum we have built and our longer-term growth aspirations. Our reported first quarter net income was $2.1 billion with earnings per share of $2.73. As you know, year-over-year comparisons of net income have been challenging for the industry over the past two years due to the volatility that the pandemic has caused in credit reserve adjustments. For that reason, we thought it would be a helpful supplemental disclosure this quarter to include our pre-tax pre-provision income. That number was $2.7 billion in the first quarter, up 16% versus the comparable number in 2021, reflecting growth in our core earnings. So now let's get into a little more detailed look at our results, starting with volumes. As you can see in our slides, we have mostly gone back to reporting our volumes on a year-over-year basis, moving away from the comparisons to 2019 that we have done in recent quarters. We think that returning to a focus on year-over-year comparison gives you a better view of the momentum we have built and the momentum we are seeking to maintain as we look towards our longer term growth objectives. Starting on slide 3. Total network volumes and build business were both up over 30% year-over-year in the first quarter on an FX adjusted basis, strengthening further from the strong growth rates seen in the past few quarters. And as Steve highlighted, intra-quarter, while Omicron slowed growth in January and early February, we then saw a strong acceleration in March, with that month achieving our highest ever level of monthly build business. And I would point out that the majority of this high level of growth was driven by the momentum we have built and the number of transactions flowing through our network with only a modest impact from inflation. Now as I talked about at our Investor Day last month and as slide 4 reiterates, the majority of our build business is spending on goods and services from our consumer and small and medium sized enterprise customers. And as you can see on slide 5, business service spending remained robust in the first quarter with year-over-year growth reaching 21%, slightly above the 2021 exit rate. This momentum is from strong growth in online and card not present spending that continued in the first quarter even as offline spending growth strengthened, demonstrating the effect of the structural shift in online commerce that we've seen accelerated by the pandemic. And while T&E spending is a smaller portion of our total billings, you see on slide 6 that it is now strongly supporting our growth momentum, with overall T&E spending growing 121% year-over-year. T&E spending did show a dip in January and early February due to the Omicron variant, but spending rebounded tremendously, reflecting pent-up travel demand and essentially reached 2019 levels for the first time since the start of the pandemic in the month of March. And this kind of T&E spending growth has continued right into early April. When you then break these spending trends down across our consumer and commercial businesses, as we begin to do on slide 7, there are a few other key points I'd suggest you take fully. First, our millennial and Gen Z customers continue to drive our highest consumer growth with their spending up 56% year-over-year and spending growth from all other age cohorts increasing as well in the quarter. Also of note, global consumer T&E volumes overall were back above 2019 levels as of the first quarter, led by the growth in the US. Second, our commercial businesses strategic focus on helping SME clients run their businesses continues to drive strong growth in overall SME spending, up 30% in the first quarter with acceleration in growth across both the US and international. While a smaller part of our overall growth is in this segment, I would point out that our large and global corporate clients have begun to show signs of business travel recovery, especially in the latter part of the quarter with a year-over-year growth rate for the quarter of 42%. So overall, we are pleased with the growth momentum we see across the board in our spending volumes, which is tracking in line with our expectations for both the year and for our long-term expectations. As you then move to receivable and loan balances on slide 9, you see that our growth momentum has brought our ending loan balances roughly back to pre-pandemic levels in this quarter. As I said at Investor Day, the interest-bearing portion of our loan balances also continues to increase quarter-over-quarter, but is still below 2019 levels as pay down rates remain elevated due to the liquidity and strength amongst our customer base. This liquidity and strength is also, of course, evident as you turn to credit and provision on slides 10 through 12, as we continue to see extremely strong credit performance. Card Member loans and receivables write-off and delinquency rates remain well below pre-pandemic levels and in line with our expectations, but they did tick up a bit this quarter. As you then turn to the accounting for this credit performance, you will see that this quarter, we released a large part of the remaining credit reserves we built to capture the significant uncertainty of the pandemic, which lacked a comparable precedent. As we have seen a sustained recovery from the pandemic-driven economic shutdowns, we have been able to reduce pandemic-driven reserves. While there clearly is still plenty of uncertainty today related to the current geopolitical and inflationary environment, we believe that our CECL models are better able to capture our expected credit risk related to these uncertainties to determine the appropriate level of reserves required. Our strong credit performance combined with the adjustment to our reserves drove a $33 million provision expense benefit for the first quarter as the low write-offs were fully offset by the net reserve release as shown on slide 11. As you see on slide 12, we ended the first quarter with $3.1 billion of reserves, representing 3.3% of our loan balances and 0.1% of our card member receivable balances, respectively. This is well below the reserve levels we had pre-pandemic, given the strong credit performance we've seen. Going forward, as loan balances, especially the interest-bearing portion of loan balances, build more meaningfully, we expect delinquency and loss rates to continue to slowly move up over time, but remain below pre-pandemic levels this year. We would also expect to end the year with a higher level of reserves on our balance sheet than where we ended this quarter, although there could be some quarterly volatility in reserve adjustments throughout the year. As we move to revenue on slide 13, I do need to explain some changes we've made to our revenue reporting before moving on to results. As a reminder, we began reporting processed volumes in the first quarter of last year to better differentiate between volume and cards we issue versus those who are we play more of a network role. For added transparency, we now have moved all of the revenues associated with these volumes out of discount revenue, other fees and commissions, other revenue and combined them into a newly created line called Processed Revenue, which you can then match up against our processed volumes. We have also consolidated the remaining balances from other fees and commissions and other revenue into one line named Service Fees and Other Revenue with the largest components of this line item being service fees earned from merchants like those generated by our loyalty coalition business; and foreign currency-related revenues, such as FX conversion fees. This revenue line was up strong with 42% growth year-over-year in the first quarter, as you will see on the next slide. This growth was primarily driven by the uptick we have seen in travel-related revenues. And as I said at Investor Day, we expect this to be a pandemic recovery tailwind throughout this year. You will see we have recast prior periods in the disclosures that accompany our earnings release. A description of these reporting changes and definitions for key terms will also be included in our Form 10-Q. With these changes out of the way, let's move to our actual revenue performance beginning on slide 14. Total revenues were up 29% year-over-year in the first quarter with broad-based revenue growth across all lines. Our largest revenue line, discount revenue grew 38% year-over-year in Q1 on an FX adjusted basis, as you can see on slide 15. This growth was driven by both our sustained growth in goods and services spending and continued recovery of T&E spending. Net card fee revenues were up 16% year-over-year in the first quarter on an FX-adjusted basis, with growth reaccelerating versus the 10% to 11% growth rate seen in 2021 as you can see on slide 16. As I said at Investor Day, this growth is largely driven by bringing new accounts onto our fee-paying products as a result of the investments we've made in our premium value propositions and the continued attractive of those value propositions to both prospects and existing customers. This quarter, we acquired 3 million new cards with acquisitions of US consumer and US business Platinum Card members reaching record high, as Steve noted earlier, demonstrating great demand for our products, especially our premium fee-based products. Moving on to net interest income. On slide 17, you will see that it surpassed 2019 levels for the first time this quarter, mainly driven by lower interest expense, in part due to our increased mix of deposits, which is generally our lowest cost funding source, particularly in today's rising rate environment. First quarter year-over-year net interest income growth of 20%, while very strong, remains slower than the growth in our lending AR, as revolving loan balances continue to rebuild and so we expect net interest income to be a pandemic recovery tailwind to our revenue growth in 2022. To sum up, on revenues on slide 18, we're tracking well against our expectations. And looking forward, we still expect to see revenue growth of 18% to 20% for the full year of 2022. So all of the revenue momentum, we just discussed, was driven by the investments we've been making in marketing, value propositions, coverage, technology and talent. And those investments show up across the expense lines you see on slide 19. Starting with variable customer engagement expenses, the strong spending growth and customer engagement that Steve discussed earlier is driving the growth in these expenses lines. In total, these costs came in at 41% of total revenues for the first quarter and are tracking in line with our expectations for variable customer engagement costs to right around 42% of total revenues for the full year. On the marketing line, we invested $1.2 billion in the first quarter, on track with our expectation to spend around $5 billion in 2022. We feel really good about the strong momentum of our new card acquisitions, as I talked about earlier. And more importantly, about the revenues from those acquisitions, which is trending significantly higher than what we saw pre-pandemic. We continue to see great demand for our products across a wide range of attractive investment opportunities, even beyond those we are currently funding. Moving to the bottom of slide 19. Operating expenses were $3.1 billion in the first quarter, tracking with our expectation to spend a bit over to $12 billion for the full year. While OpEx was up 26% year-over-year this quarter, it is important to note that we were growing over a benefit of $384 million in net mark-to-market gains in our Amex Ventures strategic investment portfolio from the first quarter of last year, including in the OpEx line. I would point out that, what I said earlier that, inflation is having some modest positive impact on volumes, it is also putting some pressure on our operating expenses, but we'll have to wait to see how material any impact might be for the full year. In any event, I still expect to have far less growth in OpEx compared to revenues and see these costs as a key source of leverage. Turning next to capital, on slide 20, we returned $1.9 billion of capital to our shareholders in the first quarter, including common stock repurchases of $1.5 billion and $394 million in common stock dividends, on the back of strong earnings generation. Our CET1 ratio was 10.4% at the end of the first quarter, within our target range of 10% to 11%. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. That brings me to our growth plan on slide 21, and then we'll open up the call for your questions. For the full year 2022, we are reaffirming our guidance of having revenue growth of 18% to 20% and earnings share between $9.25 and $9.65. We continue to expect the amount of our volumes, revenues and core earnings to sequentially strengthen throughout the year, driven in part by our pandemic recovery tailwinds. As I mentioned earlier, clearly uncertainty as it relates to the current geopolitical and inflationary environment. As we sit here today, despite that uncertainty, the combination of our investments, successful execution of our strategy and a number of structural shifts have all come together to deliver our strong first quarter results and build growth momentum. We remain committed to executing against our new growth plan and running the company with a focus on achieving our aspiration of delivering revenue growth in excess of 10% and mid-teens EPS growth on a sustainable basis in 2024 and beyond. With that, I'll turn the call back over to Vivian.

Operator:

[Operator Instructions] Our first question will come from the line of Sanjay Sakhrani with KBW. Go ahead please.

Steve Squeri :

So let me start and Jeff can maybe add some color as well. But this is not being driven by inflation, try and book a flight. So that's not inflation. Now that doesn't mean that the airline prices are not a little bit higher. But not just for T&E, but just for the overall business, transactions are up. We had billings up 35%. That's not sort of driven all by inflation. We don't have 35% of inflation. But -- as far as travel goes, you have to realize, people have not been traveling for probably two years. There's a tremendous pent-up demand for travel. I mean our bookings, just from a consumer perspective, on a global basis were up about 38% -- 37%. In the U.S., they were up 48%. That's not over last year. That's over 2019. So people are looking to get out there and travel. And I think that's what's driving us. That is not -- it is not inflation driven when we look at that T&E number. The other thing I think is important with the T&E number, 121% is a great number, but also let's put it in context. Is 121% over last year, it's not 121% over 2019. So we're not all the way back. Consumers back, but we're not all the way back. As far as large corporations go, and we're seeing it in our own company, people are looking to get out and not only gather with their own colleagues, but they're also looking to get out and meet with customers. You're seeing conferences come back and so forth. And so I know in our own company, we are getting together as a senior management team, our top 100, 150 people. We have some sales meetings that are going on because people have not seen each other, as well as you're seeing customers opening up their offices. And I think as far as COVID affecting all of this, I think we are starting to learn to live with this. The reality is COVID is not something I think we've all learned that is going away. We'll wind up dealing with this as we deal with the flu, as we deal with [Indiscernible], as we deal with other viruses, people will continue to get have colds and get sick and off will go. But I think the world is opening back up at this point, and people are excited to go out and see the world again, both from a business perspective and from a consumer perspective.

Operator:

Our next question will come from the line of Mihir Bhatia with Bank of America. Go ahead please.

Steve Squeri:

Good morning Mihir.

Mihir Bhatia:

Thank you for taking my question. A lot has changed since guidance was initially set. And I am curious if you could maybe just talk about how your plans for the year have been evolving since they were established? Are there areas that made sense to lean into now versus what you had thought coming into the year versus maybe pulling back in others? Like I guess I'm just trying to understand the flexibility in the model, particularly on the expense side in terms of as things change, what's changing under the hood even as you maintain guidance? Maybe just give us a flavor of that? Thank you.

Jeff Campbell:

The only sort of simple financial summary, I put to that here – when we gave the guidance for our revenue ambitions are quite ambitious, we feel really good about the momentum we built, but we have more investment opportunities, as I said in my remarks, than we probably anticipated, and maybe a little bit of pressure on costs from inflation. So all of those things, I think, position us really well to build momentum towards our long-term target of sustainable over 10% revenue growth.

John Pancari:

Good morning.

John Pancari:

So given the expected Fed moves to cool the economy and tame inflation, what degree of slowing in network volumes or build business volumes, let's go with do you incorporate in your outlook? And then on the T&E side, I know you indicated, it's up nicely and continues in April. How do you view this trend being as the Fed tightens and the economy cools through the year?

Operator:

Our next question will come from the line of Betsy Graseck with Morgan Stanley. Go ahead.

Steve Squeri:

Hi, Betsy.

Betsy Graseck:

I wanted to just dig in a little bit on the loan growth and the card fee growth. As you indicated, the loan growth is – still has room to run. So maybe – and as well the impact on the NII. So maybe you could help us understand, is it the NII that's likely to accelerate here, but loan growth will be stabilizing, or how are you thinking about that? And also how it relates to the card fees, which I noticed were up nicely in the quarter? Thanks.

Jeff Campbell:

Well, I just emphasize financial location, Steve, of what you just said, which is we are now that growing those lending balances faster than the industry, and we absolutely expect that to continue. So, there's a lot of runway for growth on the lending side. And because of quarters like we just had with a record level of new US platinum and Gold Cards on the consumer side and a record level of US business Platinums, I'd expect net car fee growth to probably accelerate even further from where it is.

Bill Carcache:

Hi. So, you've clearly navigated the pandemic exceptionally well and your acceleration in investment spending couldn't have been better timed, as evidenced by your customer acquisition growth. But as you look ahead from here, I wanted to follow-up on some of your earlier comments. Are you at all concerned over the risk that the Fed may be forced to actually push the economy into recession to payment inflation? Does that give you any pause to be growing aggressively into that? I mean everything looks great now, but just would love to hear your thoughts a bit more on how about that risk? And maybe if you could help us understand how you think the Amex customer base would perform in that kind of environment?

Operator:

We'll go next to the line of Mark DeVries with Barclays. Go ahead please.

Steve Squeri:

Well, I think the way you got to think about both of these is we are constantly and continuously adding more benefits and more services to the card. When you look at both of those partnerships, they onto themselves, they do not have top line growth. What they do, do though is they, in our mind, drive more engagement, drive more retention and give people more reason to want to be with the card. Now I'll just talk about resi for a second. Resi is not only a vehicle for giving our card members access to restaurant reservations and card members do get access to the global dining program, but it's also a card acquisition vehicle as well, because resi is an open platform. And so, resi was all about where our card members spend their money and how we can integrate more with restaurants and connect our card members and really take advantage of our closed loop in a different way, not just for payments, but the reservation piece and then, which leads to payments. And so, when you look at the partnerships that we have, that are sort of around the core of the card. And I'm not talking about the Delta co-brand partnerships and so forth. But when you look at the other things that we do add on, what we're constantly adding to our products are more services, better access, more experiences and so forth, so that you continue to build the value propositions in different and more sustainable ways. And Vanguard is an example of offering an investment service opportunity for card members that want to take advantage of it that combines Vanguard's digital adviser service, with the personal adviser service and puts an NMR component into it. And so, we'll continue to look at other lifestyle, financial and travel and entertainment services that just add to the overall underlying value of our card products.

Ryan Nash:

Hey, good morning, Steve. Good morning, Jeff.

Jeff Campbell:

Hi, Ryan.

Steve Squeri:

Well, let me answer questions one and three, Jeff can answer two. So -- if I remember one and three. But, look, the reality is that, we continue to see good opportunities. And as those opportunities continue to arise, we'll continue to invest in them. What's important to know is that, well, when we make an investment, we're making those investments through the cycle. So as we underwrite ROIs -- as we underwrite and we look at ROIs, we feel good about what we see. Now why those opportunities presenting themselves? Well, I think for a couple of reasons. Number one, I think the premium card space has been expanding. I think, especially as you think about Gen Zs coming into the workforce. I think about Millennials, which are getting a little bit older now, but Millennials who are still gravitating to the product. So the opportunities have risen I think because the pool for our product has been getting bigger and bigger. And we've talked about this in the past. When we used to look at people coming into our franchise, we used to start them off on fee-free cards. Well, a lot of our fee-free cards are probably not as differentiated as some of the others. And we have better service, and so forth. But when you look at the value of the products or the fee product, the fee products that we're offering, a smart consumer and a smart small business person can really generate a lot more value out of those products than they're paying for the card. And as you know, with our value propositions, given our partner network, we work with our partners to provide value to our card members, and it all works out for all three of us, the Card Member, the partner and for us. I think the other thing that's important, and you've seen a growth in small business acquisition as well is more and more small businesses are forming, and that's one of the structural shifts that we are taking advantage of. And to get to the third question and Jeff can get to the second question, which if he remembers it at this point. But to get to your third one, will we take -- if credit continues to perform better, we release more reserves, will we take advantage of opportunities. We will continue to take advantage of those opportunities as they present themselves. As I said, we're running this for the medium to long-term and it really is irresponsible in my opinion, of me to pass up really good investment opportunities that will pay off over the longer-term. I think one of the things that you've seen this year is, look, we're committing to 18% to 20% revenue growth off of a -- basically off of a 2019 revenue base. And you've never seen that from us before. And that is a direct result of us investing in our card members, investing in our brand and not walking away from good investment opportunities.

Operator:

We'll go next to the line of Meng Jiao with Deutsche Bank. Go ahead.

Steve Squeri:

Good morning, Meng.

Steve Squeri:

Well, I mean, look, we -- this is a competitive space. When you're talking about U.S. consumer, it's a competitive space. It's always been a competitive space. And it will continue to be a competitive space. And you've got Capital One out there with the new product and JPMorgan, all terrific companies that are looking to double down on the premium side of it, and we'll continue to -- again, going back to what I said when we -- the question was asked about resi and Vanguard and so forth, we're going to continue to add value to the products and making sure that we are still top of mind and top of wallet. And that -- look, we had record acquisitions. However, it's still a competitive space. When you think about competition, though, we just don't think about competition in the US Consumer, we also think about it in the US small business, and which is competitive as well. And you can go market by market by market, both from a small business perspective. And so there is a lot of competition out there. We keep our eye on the competition, and our objective is to continue to understand what our customer needs are, understand where our customer needs are going and continue to develop our products and services. And the reality is, you just don't -- you don't launch a product and then go to sleep for a few years and then say, okay, in three years, we'll come up with a new one. We're constantly adding value. And I think you saw that as we added more value to the Platinum Card even after the refresh when we put the Walmart Plus benefit on. So we always assume high competition, and we always assume that the competition is really good. And that has served us well, having that mindset on running the business.

Steve Squeri:

No, that's a real good call out. And remember, that virtuous cycle sits on top of an actual network, right? Because where we get those partners from are from our network, our merchant network. And so you have this physical merchant network, and we're able to create that flywheel to drive more and more value, not only to card members but to partners and the more -- as Jeff said, the more cardholders you have and the more value our customers get it, the more they want to invest in that base.

Chris Donat:

Good morning. Thanks for taking my question.

Chris Donat:

I just wanted to -- yeah, hi. Just want to double check on the net card fees and the year-on-year growth there and the acceleration in the growth. So a bit of that being a function of new additions, but also fee changes. Should we expect a similar year-on-year trajectory for the next four quarters as you recognize some of that revenue over time, or is this a onetime kind of bump…?

Operator:

Our next question will come from Rick Shane with JPMorgan.

Steve Squeri:

Well, I think that the very careful word that I inserted, Rick, when we talked about sequential growth was in what we're calling core earnings, which is why we included that pre-tax pre-provision net income number on the first page, because credit reserves are going to bounce over the place. Although in terms of dollars, I would credit reserves at the end of the year, assuming AR continues to grow as we expect to be a little bit higher. So I absolutely do expect pre-tax pre-provision net income to be a little bit stronger each quarter as you go through the year. I don't expect that necessarily of GAAP earnings per share because we just had really, we pulled forward in many ways, a good sized credit reserve release into Q1 that drove your GAAP EPS up to 270. Clearly, I do not expect sequential growth of that number, if you just do the simple math. That's pretty obvious given our EPS guidance. The other point, I'd come back to is we feel really good about the revenue momentum, but boy, Steve, I think, has made very clear our focus on pursuing good investment opportunities when they arise. And so we're very comfortable with the EPS guidance we've given for the year.

Lisa Ellis:

Good morning. Thanks for taking my questions.

Lisa Ellis:

Hi. I was hoping to dig in a little bit on the New Card acquisition with proprietary cards in force at $72.8 million. It was up 6% year-on-year. I was just peaking back at the model. We haven't seen a quarter up 6% since back in 2018. So can you just talk a little bit about what's driving that acceleration in card acquisition? And specifically, is that temporary like the return of the Delta co-brand growth, or is it more that you're just seeing a higher ROI on some of your card addition marketing spending?

Operator:

Our final question will come from the line of Don Fandetti with Wells Fargo. Go ahead.

Steve Squeri:

So, just -- I'm sorry, just one other point. Just retention helps a lot. And our retention numbers, if you look at the last couple of years, have improved significantly. So, if you think about your base is having a leak in it, the leak got a lot smaller. So, that's -- I think that's important. Don, as far as fintechs go, I think there's some opportunities for us, and I think the partnership with I2C -- we already have a partnership with them in Latin America. And I think this will just make it easy to onboard fintechs that want to have American Express because the reality is a lot of them -- not a lot of most of them don't do their own processing, they'll partner with somebody else to do this. And having I2C and being able now to do this on a global basis will enable us to approach. I don't look at that as a necessarily a threat. I look at this as an opportunity for us. And what was the first part of your question, Don? Cap One, no limit. I don't know what no limit. I really don't know what no limit is. And so -- yes, I think what they've done is put out a no preset spending limit, but -- and I'm not being flipping here, I just don't know what that no preset spending limit is. So, we'll see how that plays out. Again, a really good company. It had lots and lots of success, very tough competitor. They're the first ones to go down this road, and we'll see how it all plays out, how it all plays out. But we take them very seriously as we take everybody else. Yes, it is part of our secret sauce and we'll see. So, again, just look at the results in the first quarter for us, we had 30% growth from a small business perspective. So, we feel pretty good about small business at this point.

Steve Squeri:

Acquisition, yes.

Operator:

Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 866-207-1041 or area code 402-970-0847 with the access code 1532444 after 1:00 PM Eastern Daylight Time today, April 22, through midnight, April 30. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.

Vivian Zhou:

Thank you, Alan, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We will begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the Company's progress and results; and then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we will move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.

Jeff Campbell:

Well, thank you, Steve, and good morning, everyone. It's great to be here to talk about our fourth quarter and full-year 2021 results, the ambitious new growth plan that Steve just talked about, and what it all means for 2022 and beyond. You see the growth momentum that Steve just discussed in our summary financials on Slide 2 with fourth quarter revenues of $12.1 billion, up 31% and full-year revenues of $42.4 billion, up 17%, both on an FX-adjusted basis. In understanding our full-year net income of $8.1 billion and earnings per share of $10.02, I would point out that we had around $3.5 billion of significant impacts from items that we do not expect to repeat in the same magnitude going forward, including a $2.5 billion credit reserve release benefit in provision, as well as a few sizable net gains on equity investments. Getting into a more detailed look at our results, let's start with volumes. You will notice in the several views of volumes on Slides 3 through 9 that we continue to show 2021 volume trends on both a year-over-year basis and relative to 2019. There are a few key insights that I would highlight across these slides that strengthen our conviction in the investment strategy we have been focused on to deliver our new growth plan. To start, we saw a record levels of spending on our network in both the fourth quarter and full-year 2021 with total network volumes and billed business volumes, both up more than 10% relative to 2019 on an FX adjusted basis in the fourth quarter, as you can see on Slide 3. This growth in billed business as shown on Slides 4 and 5 is being driven by continued momentum in spending on goods and services, which strengthened sequentially and grew 24% versus 2019 in Q4. This momentum is from the strong growth in online and card-not-present spending that continued throughout 2021, even as offline spending fully recovered and resumed growth, demonstrating the lasting effect of the behavioral changes we've seen during the pandemic. Importantly, this 24% growth versus 2019 in Q4 represents a cumulative growth rate over the past two years that is well above the growth rate we were seeing pre-pandemic. In our consumer business, our focus on attracting and engaging younger cohorts of card members through expanding our value propositions and digital capabilities is fueling the 50% growth in spending from our Millennial and Gen-Z customers you see on Slide 6, and spending from all other age cohorts also showed steady improvement throughout 2021 and exceeded pre-pandemic levels in Q4. Our strategic focus on helping our small and medium-size enterprise clients to run their businesses by expanding the range of products and capabilities that meet their B2B payments and working capital needs, is driving the strong SME spending trends you see on Slide 7. Global SME expanding particularly B2B spending on goods and services has been driving the growth of our commercial billed business throughout 2021 and reached 25% above pre-pandemic levels in Q4. Now turning to T&E spending, you can see on Slide 8 that it continues to recover in line with our expectations, with overall T&E spending reaching 82% of 2019 levels in the fourth quarter. We did see some modest impacts from the Omicron variant in T&E spending as the pace of recovery slowed a bit in December. But even with that modest slowdown, U.S. consumer T&E was not only fully recovered in the fourth quarter, but actually grew 8% above 2019 levels. On balance, the T&E trends we have seen throughout 2021 reinforce our view that travel and entertainment spending will eventually fully recover, but at varying paces across customer types and geographies, and we remain focused on maintaining our leadership position in operating -- offering differentiated travel and lifestyle benefits to our consumer and commercial customers as they return to travel. Finally, on Slide 9, you see that our billed business momentum continues to be led by the U.S., where spending improved sequentially throughout 2021 and grew 16% above 2019 levels in the fourth quarter. International billed business has also shown continued steady though smaller improvement with spending almost fully recovered in Q4. Importantly though, growth in goods and services spending continues to be strong both in the U.S. and outside of U.S. So, what do all of these takeaways mean for 2022 and beyond? Most importantly, we expect the strong momentum in goods and services spending to continue given the investments we've made in premium card member engagement, Prospect acquisition, value propositions that particularly appeal to our Millennial Gen-Z and SME customers, growing our coverage and expanding relationships with key partners. For T&E, we expect the total global consumer and SME T&E spending will be fully recovered by the end of 2022 led by the growth in the U.S. The recovery will be slower for the International and cross-border components of the spend, we've also long said that large and global corporate T&E spending would be the last to recover across our customer types. So these spending types may represent a steady tailwind in both '22 and 2023 as they gradually recover. Moving on to receivable and loan balances on Slide 10, we are seeing good sequential growth in our lending balances that is led by spending. And so the portion of our lending balances that are revolving is recovering more slowly. Because our balances are spend-driven, we do expect to continue to see a strong rebound with loan balances surpassing 2019 levels in 2022, but we expect it to take more time for the interest-bearing portion of these balances to rebuild as paydown rates continue to remain elevated due to the liquidity and strength amongst our customer base. Turning next to credit and provision on Slides 11 through 13, as you flip through these slides, there are a few key points I'd like you to take away. Most importantly, we continue to see extremely strong credit performance with card member loans and receivables, write-off and delinquency rates remaining around historical lows. As loan balances begin to rebuild more meaningfully, we do expect delinquency and loss rates to slowly move up over time, but we expect them to remain below pre-pandemic levels in 2022. This strong credit performance combined with continued improvement in the macroeconomic outlook throughout 2021 drove a $1.4 billion provision expense benefit for the full-year, as the low write-offs were fully offset by the reserve releases as shown on Slide 12. As you see on Slide 13, we ended 2021 with $3.4 billion of reserves, representing 3.7% of our loan balances and 0.1% of our card member receivable balances respectively. This is well below the reserve levels we had pre-pandemic given the strong credit performance we've seen. In 2022, we will be growing over the $2.5 billion reserve release benefit we saw in 2021, since I would not expect to see reserve releases of the same magnitude going forward. In fact, depending on credit trends and the pace at which our balance sheet grows, it's possible we may need to build some modest level of reserves. Moving next to revenues on Slide 14. Total revenues were up 30% year-over-year in the fourth quarter, up 17% for the full-year. This is well above our original expectations for the year, driven by the successful execution of our investment strategy and it is part of what emboldens us to launch our new growth plan. Before I get into more details about our largest revenue drivers in the next few slides, I would note that other fees and commissions and other revenue were both up year-over-year in the fourth quarter and for the full-year, primarily driven by the uptick in travel-related revenues we began to see in the second half of 2021. These travel-related revenue still remain well below 2019 levels, however and their complete recovery will likely lag and be a tailwind into 2023 along with International and cross-border travel. Turning to our largest revenue line, discount revenue, on Slide 15, you see it grew 36% year-over-year in Q4 and 25% for the full-year on an FX adjusted basis. This growth is primarily driven by the momentum in goods and services spending we saw throughout 2021. Net card fee revenues have grown consistently throughout the pandemic and for the full-year of 2021 were up 10% year-over-year and up 28% versus 2019 as you can see on Slide 16. The resiliency of these subscription-like revenues demonstrates the impact of the investments we've made in our premium value propositions and the continued attractiveness of those value propositions to both prospects and existing customers. As a result, I expect net card fee growth to accelerate from these already high growth rates in 2022. Turning to net interest income on Slide 17, you can see that it was up 11% year-over-year in the fourth quarter. This is the second consecutive quarter of year-over-year growth, as we clearly hit an inflection point in the second half of 2021. The growth in net interest income is slower than the growth in lending AR due to the strong liquidity demonstrated by our customers that I spoke about earlier, which is leading to both our historically low credit costs and to high paydown rates that are driving lower net interest yields and a slower recovery in revolving loan balances. Looking ahead, we expect net interest income to be a tailwind to our revenue growth in 2022 and likely 2023 due to the slower recovery in revolving loan balances. So, to sum up on revenues. The successful execution of our investment strategy has driven the revenue recovery momentum, you see on Slide 18. Looking forward into 2022, we expect to see revenue growth of 18% to 20% driven by the continued strong growth in spend in card fee revenues and the lingering recovery tailwinds from net interest income and travel-related revenues. The revenue momentum we saw in 2021 was clearly accelerated by the investments we made in marketing, value propositions, technology and people and those investments show up across the expense lines you see on Slide 19. Starting with variable customer engagement expenses at the top of Slide 19, there are a few things to think about. Most importantly, the investments we are making in our premium value propositions are resonating with our customers and this of course is driving growth in these expense lines. In addition, over the course of the pandemic, we added some temporary incremental benefits to many of our premium products in an effort we refer to as value injection because our customers were not able to take advantage of many of the travel-related aspects of our value propositions. The cost of this value injection effort generally showed up in the marketing expense line. Throughout 2021, we gradually wound down the value injection offers as our customers were again engaging more with the travel aspects of our value propositions, as well as with the new rewards and benefits we introduced through recent product refreshes. This is all a good thing in terms of our long-term customer retention and growth prospects. It does however mean you see more year-over-year growth in these variable customer engagement costs. Putting all these dynamics together, I'd expect the variable customer engagement costs overall to run at around 42% of total revenues in 2022. Moving to the bottom of the slide, operating expenses were just over $11 billion for full-year 2021 and in line with 2020. In understanding our OpEx results however, it's important to point out that we've benefited from $767 million in net mark-to-market gains in our Amex Ventures strategic investment portfolio in 2021 and that these gains are reported in the OpEx line. We also increased investments in critical areas of technology and our talented colleague base in 2021 and expect to continue to grow our investments in these areas this year. For 2022, we expect our operating expenses to be a bit over $12 billion and we see these costs as a key source of leverage relative to our much higher level of revenue growth. Last, our effective tax rate for 2021 was around 25% and I'd expect a similar effective tax rate in 2022 absent any legislative changes. Turning next to our marketing investments, we are making to build growth momentum, you can see on Slide 20 that we invested around $1.6 billion in marketing in the fourth quarter and $5.3 billion for the full-year as we continue to ramp up new card acquisitions while winding down our value injection efforts. We acquired 2.7 million new cards, up 54% year-over-year. Steve emphasized the critical point, however, that in particular, we see great demand for our premium fee-based products with new accounts acquired on these products almost doubling year-over-year and representing 67% of the new accounts acquired in the quarter. Acquisitions of new U.S. consumer and small business Platinum Card members were all-time highs this year with Q4 being a record quarter of new account acquisitions for both of these refresh products. Much more importantly though than just the total number of cards, we focus internally on the overall level of spend and fee revenue growth we bring on from these new acquisitions. We are pleased to see that the revenues from 2021's acquisitions are trending significantly stronger than what we saw pre-pandemic. Looking forward, we expect to spend around $5 billion in marketing in 2022. Turning next to capital on Slide 21, we returned $9 billion of capital to our shareholders in 2021 including common stock repurchases of $7.6 billion and $1.4 billion in common stock dividends on the back of a starting excess capital position and strong earnings generation. As a result, we ended the year with our CET1 ratio back within our target range 10% to 11%. In Q1 2022, another sign of our growing confidence in our growth prospects, we expect to increase our dividend by around 20% to $0.52 and to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. That brings me to our growth plan on Slide 22 and then we'll open up the call for your questions. The combination of our pre-pandemic strategies, our learnings from the pandemic and the strong momentum we have achieved have all come together to embolden us to announce our new growth plan. What does that mean financially? In the near-term, we expect our revenue growth to be significantly higher than our long-term aspiration due to the range of pandemic recovery tailwinds that I've talked about throughout my remarks, which is why we have given 2022 guidance of 18% to 20% revenue growth. We've also given EPS guidance for 2022 of $9.25 to $9.65. We feel good about this earnings guidance, as the momentum we have built on the revenue side helps us to grow over the number of notable items that benefited our 2021 results that we certainly don't expect to repeat in the same magnitude in 2022, as I discussed the very beginning of my remarks this morning. Our 2022 guidance does assume an economy that will continue to improve and reflects what we know today about the regulatory and competitive environment. It also assumes that based on current exchange rates, we would not see a significant impact from FX on our reported revenue growth in 2022. In 2023, we expect our revenue growth to remain above our long-term aspirational targets to go to due to the lingering recovery tailwinds which should create a platform for producing mid-teens EPS growth. Longer-term, as we get to a more steady-state macro environment, we have an aspiration of delivering revenue growth in excess of 10% and mid-teens EPS growth on a sustainable basis in 2024 and beyond. In closing, we are committed to executing against our new growth plan and will be running the company with a focus on achieving our accelerated growth aspirations. With that, I will turn the call back over to Vivian.

Operator:

[Operator Instructions]. Our first question comes from Ryan Nash with Goldman Sachs. Please go ahead.

Stephen Squeri:

Hey, Ryan.

Ryan Nash:

So it's good to hear about the better-than-expected 2024 plus long-term aspirations for in excess of 10% revenue growth and mid-teens EPS growth. So Steve, I would maybe talking -- hoping you could maybe just talk about what is allowing you to drive this better structural growth, is it the investments you're making, the brand resonating more with investors? And what are the key drivers? And clearly, you're investing heavily in the near-term, Jeff mentioned higher variable engagement costs. Can you maybe just talk about what should give investors confidence that as we get to 2024, the business going to be able to drive operating leverage versus historically a view of reinvesting a lot into the business. And just lastly, one point of clarification, Jeff. Can you just clarify the platform for mid-teens EPS growth, were you mentioning that you expect mid-teens in '23 or more than it was positioning you well for mid-teens within '24? Thanks.

Stephen Squeri:

Okay.

Stephen Squeri:

Yes. But just to talk about the operating leverage for a second, too, because when you look at and Jeff mentioned that we had sort of the contract to operating expense with the venture gains this year. When you look at that, you will have operating expense leverage growth this particular year because you're looking at 18% to 20% revenue growth. And if you sort of normal -- even if you don't normalize it, you're going to have a much higher revenue growth and you will. So we're still going to drive operating expense growth throughout this -- throughout our journey. But let me talk to you about what gives me the confidence. And when I look at sort of what we've done over the last four years, where we are now and how we're exiting, what I would sum this up, is it's a combination of three things. It is the strategy that we put in place. It is the secular tailwinds that we have and the momentum. I'm going to start from the back and work my way forward. Look at the moment, I mean you've got 30% revenue growth in this particular quarter, you got 2.7 million cards that we acquired, you've got historically high billings growth. We haven't gotten into this, but we see travel bookings. When we looked at travel bookings in the fourth quarter, it was 24% up over '19. When we look at the first couple of weeks in January, we're 44% up over '19. So we have tremendous momentum entering 2022. And I'll move to the beginning go to strategy. We at the -- back in 2018 and I made this in my remarks, we talked about being the premium card provider. And I think the skepticism was from Millennials and Gen-Z, that skepticism from my perspective is over, 60% of the cards that we acquired are Millennials and Gen-Z in this quarter; 75% of our premium cards were Millennials and within the next strategic imperative was SME. We had probably the best SME acquisition year that we've ever had. We talked about our ability to be in people's digital lives with 31% online spending growth over 2019. And we had 16% online spending growth just over last year and look at what we've done from a merchant perspective. We're at parity in the U.S. and we added over 7 million merchants, just last year internationally, and then look at the secular tailwinds. I think the pandemic has moved online spending forward for three years to five years and we're getting more than our fair share and then look at our business. We're at 82% of the overall T&E business from 2019. Now, consumer is doing really well. In the fourth quarter, we were up 8%, but the rest of it is below 2019 levels. And so we believe from a T&E perspective, we've got more room to go. When we look at our, as we segment our card members, Millennials are blowing it out. We had over 50% spending from Millennials in our Gen and Gen-Z increased over both 2019 and 2020. And as we look at sort of our Gen-X is up and our boomers are not. And our boomers is traditionally the ones they travel and have money. And once we get from pandemic to endemic here, they're going to start traveling again. Jeff talked about modest loan balances that will grow over time, which is the comment he made about some reserve increases, but we're going to get back to where we were. We look at international consumer. International consumer tends to be a more traveling card member and that business is flat and large and global has not come back, and I'll leave you with this on large and global. People are skeptical about business travel because of all the remote workforce. In fact, I think business travel is going to be completely different. And I think as you have more people in more remote locations, they may need to get together three, four, maybe five times a year to come to headquarters or to come to locations where they never had to come to before. And let's face it. We all realize that there is nothing better than sitting in front of your customers. And I just came back from an opportunity at the Amex Golf Tournament to sit in front of a lot of my customers. So when we look at the secular tailwinds, that's why we believe it's not only doable but sustainable as we move forward.

Vivian Zhou:

Alan?

Betsy Graseck:

Hi, good morning.

Betsy Graseck:

I just wanted to dig in a little bit more on some of the opportunities that you were discussing. I mean when I sit from my seat, I'm wondering what type of penetration do you think you have in the U.S. Millennial and Gen-Z, the numbers you just quoted were very impressive, but I'm wondering do you feel you're at 90% of that market or 10%? Give us a sense as to how you're thinking about that. And in addition, on the SME side where you're the clear leader, where is the room for you to run? Is it by increasing the product set, i.e. the revolving line of credit that you recently announced? Or is it more in acquiring new customers? And really the question is what's the TAM and what percentage of that TAM do you think you have right now in the various customer sets? Thanks.

Operator:

Our next question will come from the Mihir Bhatia with Bank of America. Go ahead please.

Stephen Squeri:

Hey Mihir.