American Express Company (AXP) — Q4 2023 Earnings Call Transcript

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.

Good morning, and thanks for joining us. 2023 was another strong year for American Express. We delivered record revenues of $61 billion for the year, up 15% on an FX adjusted basis, and we had a record net income of over $8 billion, with earnings per share of $11.21. In the fourth quarter, we continued to drive strong customer engagement and demand for our premium products. We had solid growth in billings, strong new account acquisitions, and continued strength in credit quality, which remains the best in the industry. As a result, we achieved fourth quarter revenues of nearly $16 billion, which was another quarterly record, and EPS was $2.62. Christophe will provide detail on our quarterly results, but I would like to take a step back to talk about what we've accomplished over the last two years and why I’m feeling good about where we are today and why I'm confident in our future. Coming out of the COVID pandemic in January of 2022, we saw an opportunity to accelerate our growth, and we set an aspiration to sustain growth over the longer term at levels that were higher than what we were achieving prior to the pandemic. At that time, we laid out our growth plan with the objective of positioning the company to be able to deliver on our aspiration of driving annual revenue growth of 10% plus and mid-teens EPS growth over the long-term. In executing the plan, we focused on listening to our customers and understanding their needs, and we invested in innovating our value propositions, as well as uplifting our marketing and technology capabilities and backing our colleagues to meet those needs. Looking back over the two years since we announced the growth plan, I'm pleased to say that we achieved what we set out to do and in fact, we're ahead of where we thought we'd be on our journey, thanks to the millions of premium customers we have around the world and the American Express colleagues who support them. Today, we are a larger and stronger company. Since 2021, we've delivered record annual revenues, increasing the scale of our business by over 40% in just two years from $42 billion to $61 billion in annual revenues. Annual card spending over this period has increased 37% on an FX adjusted basis to a record $1.5 trillion. We've added about 25 million new proprietary card accounts over the last two years, and over 70% of these new accounts are coming into the franchise on fee-based products. With the growth and new accounts we've seen over the past few years, we now have a total of over 140 million cards running on our global network. Our focus on continuously innovating our value propositions to meet the needs of our customers is driving increased brand relevance across generations, including millennial and Gen Z consumers. These customers represent over 60% of the new consumer accounts we acquired globally in 2023, and 75% of new consumer Platinum and Gold accounts acquired in the U.S. came from this cohort. At the same time, retention continues to be very high and our credit metrics remain strong and best-in-class. These strong results reflect the success of our strategic investments we've made in our business along with the tremendous earnings power of our business model. Looking ahead, let me tell you why I feel really good about our future prospects. We have a business model that is delivering premium performance, and we have strong momentum, which is driven by four key features of our model that differentiate us from the competition and are difficult to replicate. First, our economic construct has a set of diversified revenue sources that include card fees, spending and best-in-class lending with our subscription-like card fees being a core and fast-growing component of our revenue mix. We have a singular focus on premium customers and superior innovative value propositions. Our premium customers are high-spending, loyal and drive our strong credit performance. We have a large and growing partnership ecosystem that expands our brand value to card members and merchant partners around the world, and we have a global brand and a servicing ethos that truly sets us apart. Our business model provides us with strong competitive advantages, and the way we've been able to leverage the model's unique elements and execute our strategy has strengthened those advantages, giving us the runway for continuing our momentum across generations, geographies, and both our consumer and small-business customers. The power of our business model combined with the global scale of our premium customer base, the dedication and focus of our talented colleagues, and the attractiveness of the many growth opportunities we see ahead are the key reasons why I'm confident in our ability to continue on our growth plan. And it's why going forward, we will remain focused on our long-term aspiration of delivering annual revenue growth of 10% plus and mid-teens EPS growth. We believe this aspiration is the right one and we aim to achieve it every year. However, we manage the company for the long-term, and we anticipate there'll be a range of potential outcomes in any given year due to a variety of factors such as the external environment and actions we might take that we decide are best for the business. Looking at this year, the continued momentum we've seen in the business as we've executed our strategy gives us confidence in our guidance for 2024, which is in line with our long-term aspiration. For the year, we expect to deliver annual revenue growth between 9% and 11%, and full-year EPS of $12.65 to $13.15. In addition, we plan to increase our quarterly dividend on common shares outstanding to $0.70 a share, up from $0.60, beginning with the first quarter 2024 dividend declaration. This represents more than a 60% increase in the dividend from when we introduced our growth plan in January of 2022. As always, we will continue to run our business for the long-term, and we'll do that by listening to our customers and meeting their needs through innovative, unique value propositions and exceptional service that reflects our brand built on trust and security, delivered and supported by a world-class colleague base. In keeping our focus on backing our customers and our colleagues, we are confident that we will continue to deliver strong growth on a sustainable basis over the long-term. Thank you. And let me now turn it over to Christophe.

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 growth 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 remain 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 card members 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 costs than we had expected. For example, a lower mix of redemptions for airline 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.

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

Hi, good morning. Did you say the '24 EPS guidance and rev guidance? I guess on January spend, some of your peers have noted a slowdown on weather. Can you comment on that, and then just maybe talk a little bit about billed business in '24 in terms of SME?

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 the 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 are 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.

Hey, good morning, guys.

Good morning.

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.

Yes, good morning, Ryan, and thank you for your question. The core elements of our revenue growth will remain consistent. Overall, we anticipate billing and discount revenue to grow at a similar rate to what we have observed in recent quarters. We expect card fees to play a significant role in our growth moving forward, with Q4 projected at 17% and the full year at 20%, and we actually expect card fees to end Q4 at a higher level than we are currently seeing. This expectation is supported by robust premium acquisition, product refreshes, and renewals that we are committed to executing, along with strong retention rates we have maintained for many years. Regarding our net interest income, you should expect that growth rate to moderate, mainly due to the trend of asset growth and lending growth rates slowing down over the past quarters, which we believe will continue. The substantial growth previously observed was due to tenured card members rebuilding their balances post-COVID, and we will eventually reach a more normal growth rate in that area, which will naturally lead NII to a more moderated growth level. Additionally, we believe that the interest rate dynamics set by the Fed will not significantly influence what happens to NII. Considering all these factors, even when running various scenarios—such as stronger billing or weaker NII—we find ourselves landing in the same revenue growth range of 9% to 11%. This is how we approach our revenue guidance.

Yes. Thanks. I was hoping you could dig a little further into kind of where the loan growth is coming from, how much of it is from new customers or relatively recently added customers versus older and gaining share there, and also whether you're seeing any kind of difference in credit performance on kind of balances from newer customers versus older.

Let me start with loan growth. The trend in loan growth has remained consistent, reflecting our long-standing philosophy in managing the company. Approximately 70% of our loan growth originates from long-term card members, defined as those who have been with us for over a year. This approach influences our customer acquisition strategy. We bring in new card members and build relationships with them, subsequently offering additional products, forming partnerships, and nurturing these connections. This is effective because we gain a deeper understanding of their spending habits, and they become more familiar with our offerings. Our focus is primarily on growing with our long-term card members. We generally avoid balance transfers and have limited promotional offers, as our strategy aims to maintain control over credit risk. Regarding the credit profile of new card members, our credit underwriting practices remain unchanged, and we continue to utilize the same marketing channels and products. We still prioritize positive selection regarding credit profiles, and I want to emphasize that the new card members we bring in generally possess strong credit profiles.

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?

Yes. There’s a lot to discuss. Let me start with customer engagement. The main points for us, which we've emphasized for years, are that we create premium products and price them according to their value. You’ve also heard us mention that over the past few years, our portfolio has shifted more towards premium products. This trend towards premiumization is crucial for the ratio of variable customer engagement expenses to revenue, which increases as we attract more platinum card members. However, we also have numerous initiatives aimed at optimizing this. We are constantly innovating in this area, and one example driving efficiencies for us is our new pay with points option, allowing customers to use points for specific transactions directly through our app or website. This continuous innovation is aimed at enhancing customer satisfaction, simplifying their experience, and achieving efficiencies in the average cost per point. Specifically, in Q4, one reason for the efficiency in variable card member engagement expenses was the decline in point redemptions for airline tickets, one of our most costly redemption options. This helped improve that metric. Additionally, softness in certain travel and entertainment categories resulted in fewer points being earned, which also contributed to efficiencies. I'm highlighting this to illustrate the natural hedges within our business model; when there’s a slight decline in top-line performance, it can lead to savings in some expense areas. We expect a slight increase in variable card member engagement expenses, and we will continue to monitor this. I'm confident about this trend and believe that our margin remains robust and capable of generating strong earnings. We have committed to managing operating expenses and expect our operating expenses for 2024 to remain roughly flat compared to the end of 2023. Our marketing expenses will adjust according to the opportunities we identify based on the efficiencies we achieve. The model is functioning effectively, and I am confident in its strength. We are rigorously stress-testing this model under multiple scenarios, and it reliably produces earnings over time. I’d also mention that our model generates risk-adjusted earnings because the investment in variable card member engagement expenses pays off significantly in terms of credit line returns. We attract high-quality card members with strong credit profiles, and I prefer investing in that rather than managing credit risk later on.

Hi. Good morning, and thank you for taking my questions. Chris and Steve, just wanted to dig into the softer T&E trends a little bit. You know, it looks like you're seeing some softness, particularly in airline spend, you're seeing some slower point redemptions for tickets there. Just maybe give us some insight into what you're hearing and seeing from your card members on that front, and then just maybe in the quarter book, can you help us understand what you're kind of embedding in your expectations for T&E from here? I think in the past, you've talked about how the booking trends have been a pretty good indicator of what's to come. Maybe any comment on what you're seeing there?

T&E growth has slowed sequentially, but it's still up 9% year-over-year, which is quite strong. In the airline sector, many airlines have mentioned softer demand, and since a lot of customers use American Express to pay for tickets, we noticed a similar trend. However, bookings in our TLS segment remain strong, and while I don't have specific numbers at the moment, I know they are positive. It's uncertain whether this is the start of a trend or just a single data point. Nevertheless, our partnership with Delta is performing very well, and we're seeing robust card origination. Card members have opted to redeem fewer airline tickets in Q4 compared to previous periods, which we've observed in past fluctuations. I'm not concerned; it's just one data point. For 2024, we haven’t detailed our assumptions by category, but I’m not overly worried. Our card members enjoy traveling, and I believe they will continue to do so.

Thank you for answering my questions this morning. You've mentioned that the reserve rate is expected to increase or trend upward in 2024. I'm interested in what is causing that. I assume it's related to a shift between loans and card member receivables, but I'm also curious if you are suggesting that the reserve rate for the loan portfolio will rise due to any changes there. Is it simply a shift in mix as the loan portfolio expands more rapidly than the card member receivables?

Yes. So thank you, Rick, for your question. This is an important point, so I'm glad you're asking the question. The first thing I want to say is that the absolute levels when you look at the delinquency rates or the write-off rates are very low in terms of our historical performance, and on the slide I put as well the pre-pandemic levels. The write-off rate is 2% in Q4. It was 2.2% pre-pandemic, right? So we're still below where we were pre-pandemic. So in absolute they’re very low. Relative to our peers, which I know you know well, they also very good. And I'm sure you noted that every competitor or peer reported their numbers and experienced the same tick, but at a higher magnitude. I would take up of 20 basis point is one of the lowest in the industry. So I feel good about where we are and I feel good about the trend. When it comes to the dynamic in the portfolio, the key driver behind this is that there's still some normalization going on here. We are moving from sub-1% write-off rate during the pandemic. As you all know on this call, this was not a sustainable level and these rates are normalizing and they are normalizing at a slow pace, and I like that, and the 2% is, again, a place where I feel comfortable from a credit standpoint. The other thing to expand a little bit and take a step back in terms of, you know, what kind of loan growth we are seeing. The biggest contributors in terms of loan balances are their pay overtime facility that we offered with our charged products and their co-brands cards. And so both those portfolio have very strong credit profile and better credit profile than what we call internally proprietary lending, which includes blue cash every day for instance. So if anything, the profile of the portfolio and the mix of the portfolio is shifting and evolving more towards product that have a strong credit profile and high velocity. This being said, that normalization is happening and that's what's creating that little tick-up. And as I said in my comments, we're not quite done with that normalization, there's still a bit more to come in our minds, but not a lot.

Hey, good morning. Thanks for taking my question. Just ask on capital, is there any updated thoughts on how you're thinking about Basel end game? Obviously, your preliminary expectations of the proposal, at least, are that it would take you down to closer to 7%, but there is a lot of talk about that being softened, just how are you thinking about capital management, you obviously increase your dividend, but how are you thinking about buybacks going forward in light of the uncertainty?

Thank you for your question. There haven't been many changes in that area except that we've been in discussions with regulators. Both Steve and I have met with them, and I'm pleased to say they are listening and engaged. I believe they comprehend our feedback. The next steps are now with them as they consider input from the industry, which I'm sure you've also seen. They have considerable work ahead. Currently, we are in a waiting phase, and we anticipate receiving their next set of rules by the end of 2024. We'll see. It took ten years to reach the first draft, so it will be interesting to see when the next version arrives. I'm not overly worried. I feel positive about our starting position and our capital status. We consistently achieve about a 30% return on equity, which allows us to generate significant capital. For the time being, we will not alter our capital policy. Our primary focus is on funding the balance sheet, followed by dividend distribution. We're very confident about the increase we plan to implement this year, with the surplus allocated to share buybacks to maintain capital at 10% to 11% of our risk-weighted assets. This has been our approach for years, and it will remain unchanged. We will also adapt to the Basel rules, operating the company conservatively with a substantial buffer over the 7% threshold we have. Overall, not much has changed in that regard, and we look forward to sharing more when we receive the final rules.

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.

Yes, your description is correct, Moshe. We have introduced a feature with our charge card products that allows cardholders to choose if they want to revolve part of their bill. This area is experiencing the fastest growth for us in terms of loan expansion and has been well received by our card members. The charge card has a no preset limit, which is an important aspect. This feature provides a seamless option for cardholders to manage their payments over time. As I've mentioned before, the credit profile for this product is very strong, largely because it is linked to a premium customer base. Premium Gold card members frequently utilize this facility and occasionally choose to revolve their balances.

Thank you. Maybe I could ask the questions regarding what's embedded in the revenue growth expectations for 2024 differently. If we look at the fourth quarter exit run rate, would that sort of target as to the low end of the guidance range? And then Christophe, you mentioned that lower rates shouldn't help, but aren't you guys liability-sensitive on the charge card portfolio? Thanks.

Let me address the second question first. We are somewhat sensitive to liabilities, and while the overall impact of rate cuts on our net interest income will be minimal, the uncertainty lies with how beta will respond. Historically, we've seen a trend around 0.7 as rates increased, and we anticipate a similar trend as they decrease, although this won't happen immediately. At this time, it's difficult to pinpoint where we'll be when the Fed begins to cut rates. We are making conservative assumptions, but there remains a level of uncertainty. What is clear is that you shouldn't expect a significant effect on net interest income relative to the rate curve. Regarding your first question about revenue, I don’t have much more to add beyond what I stated earlier. If our billed business turns out to be stronger and if card fees perform well, I would be pleased to report those results. The net interest income trend appears stable, and for billing, we are currently assuming it will align with what we've observed in previous quarters. If the economy improves and growth exceeds economists' expectations, leading to optimistic spending from our card members, I would be thrilled to report higher billed business.

Hey, good morning, Steve and Christophe. 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.

Yes. We have approximately 140 million cards that can be used on our network. Of these, around 80 million are American Express-issued cards, which we refer to as proprietary cards. These proprietary cards account for the majority of spending and significantly contribute to our economic performance. In terms of growth, proprietary cards have increased by 5% year-over-year, while the total number of cards, including those issued by our network partners, has grown by 6%. Does that address your question?

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

Thank you.

Thanks. And maybe I was wondering if you could talk about the plans for the next Platinum refresh in the US. I think the last one on 2021. And whether or not you have any plan to do that this year, and if that's your guidance for the year as well.

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.

Good morning. Thank you. I have two quick questions. Considering Delta Air Lines' strong performance over the years, they have consistently been the leading airline. You've clearly seen significant benefits in new card issuance and spending as they have managed to maintain fares effectively. As we observe a slowdown in airline spending, does that benefit start to decrease, and is this a factor you need to consider? Additionally, regarding small business, we've been relatively stable for a few quarters. I'm interested in what insights you can share about this. Are you still able to issue new cards, or are small businesses hesitant to adopt new products that might increase their expenses? I'm trying to gain a better understanding of the situation for small business owners. Thank you.

Yes. So from a small business perspective, the drive is really organic spend. We're not seeing existing small businesses spend more than they spent the year before. And that's not an American Express phenomenon. That is an industry phenomenon. As far as card acquisition within small businesses, that still remains strong. As far as small businesses, looking at our platform and looking at our loans and so forth, that remains strong and the credit quality remains strong. I think as Christophe said in his remarks, there is this phenomenon of inventory buildup, some interest-rate shock and so forth, and so small businesses tend to be very, very secular. I would be much more concerned if we weren't acquiring cards, if we weren't engaging in new small businesses, or if write-offs and delinquencies were higher. So at the moment as we look at this, we truly believe this is an organic spending issue and it's not American Express-specific. I'll let Christophe talk a little bit about Delta.

The Delta product continues to perform very well. For the entire year, total billing growth for the Delta product increased by 15%, and we are seeing a significant number of new card issuances. While there may be some softness observed in Q4, it's uncertain whether this indicates a long-term trend or if it's merely a temporary fluctuation; only time will clarify this. However, the product's growth remains robust, and our partnership is very strong, so I don't perceive any weakness in that area. Additionally, the credit quality of new cardholders remains high. It's worth noting that this segment is one of the fastest-growing on the loan side, showing impressive performance. Customers who travel frequently tend to demonstrate strong credit quality, which is evident across loans, spending, and card originations. Thus, I am not concerned about this situation at this point.

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?

Yes. Let me discuss card acquisition numbers. We aim to acquire card members who are focused on generating billed business and revenue. Excluding the first quarter of last year, which was an anomaly with 3.4 million cards, we have consistently been around 2.9 to 3 million cards. As long as we can identify high credit quality premium card members, we will continue to actively pursue acquisition within that range of 2.9 to 3.1 million. While we don’t provide specific guidance, the investments we plan to make support this assumption. Our main objective is to ensure we’re acquiring billed business. In a stronger environment, we would expect more organic growth from existing cardholders, but currently, the growth we see from small businesses is primarily coming from newly acquired cardholders. Most of the consumer growth we are experiencing is also from new cardholders, which boosts our confidence in future engagement and wallet share expansion. As our card members return to previous spending levels, we believe there is potential for increased billings. We have confidence in the long-term lifetime value of our millennial and Gen Z cardholders, especially since they account for 32% of total spending in the fourth quarter. Currently, much of the growth stems from new card acquisition, and we anticipate an inorganic increase as the economy improves. This positions us well for long-term growth, leading us to confidently project that we should aim for revenue growth of over 10%. This is reflected in the guidance we have provided this year regarding revenue and EPS.

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.