American Express Company (AXP) — Q4 2024 Earnings Call Transcript

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 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.

Thank you, Kartik. Good morning and thanks for joining us. 2024 was another strong year for American Express. We delivered record revenues of $66 billion for the year, up 10% on an FX adjusted basis, achieving our long-term aspiration. We had record net income of $10 billion with earnings per share of $14.01, up 25% for the year, which is higher than our long-term aspiration. The great work of our colleagues around the world drove 2024 results that were strong across our key metrics, setting new records in many categories. In addition to record revenues and net income, we had record levels of annual Card Member spending, record net card fees, and a record 13 million new card acquisitions. We also saw continued high Card Member retention, best-in-class credit performance, and disciplined expense management. Notably, we exited the year with increased momentum as fourth quarter billings growth accelerated to 8% overall driven by robust holiday spending. We continue to enrich our membership model refreshing over 40 products globally in 2024, including the US Consumer Gold Card which is particularly appealing to Millennial and Gen-Z consumers, as well as refreshing our Delta Co-Brand cards. We also enhanced our dining portfolio with the acquisitions of Tock and Rooam and we launched several new top-tier sponsorships and experiences such as our multi-year global partnership with Formula 1. Our US small and medium-sized enterprise customer base continue to grow with strong new card acquisitions throughout the year and we saw an improvement in small business sentiment in the fourth quarter which linked to stronger organic spending by our small business customers through the holiday season. A key driver of our growth is the ongoing global expansion of our merchant network. We added millions of new merchant locations globally in 2024 and we reached an average of 80% coverage across our top 12 international countries with coverage in travel and entertainment categories well above 80%. That's an increase of eight percentage points from three years ago. These results clearly show that our strategy of backing our customers by investing in our value propositions, coverage, marketing, technology, and talent is working. As we look ahead to 2025, American Express will be celebrating a major milestone, our 175th year in business. Our company's history is one of innovation and growth from our start in 1850 as a freight delivery company operated with horses, wagons, and trains to becoming a global travel services company in the early 20th century, pivoting into a card-focused payments company by the 1960s and ultimately evolving into the global premium financial and lifestyle company powered by technology we are today. Our longevity has been fueled by talented colleagues who have delivered a steady stream of innovative products and services that are focused on serving premium consumers and businesses of all sizes and who have stayed true to our brand that has been built on trust, security, and service since our earliest days. As I've discussed over the past several years, we've continued the cycle of customer-focused innovation, which has been largely responsible for resetting the growth trajectory of the company. We believe our growth is sustainable. We're confident that we will continue to bring in large numbers of new premium customers, especially Millennial and Gen-Z consumers and small businesses while also maintaining high growth across our international business. In looking at the external marketplace, we continue to see strategic opportunities to sustain our growth. For example, in the US fee-based consumer premium cards are the fastest growing part of the industry and we have about 25% of those cards indicating a continued upside opportunity. Across the industry, the number of Millennials and Gen-Z consumers with premium products are growing at an even faster rate and we're adding highly creditworthy customers in these cohorts faster than the industry with substantial room to continue this growth. It's clear that our premium products are resonating well with these age groups whose spending needs will continue to expand as they move forward in their lives and careers with many likely to also start new small businesses in the coming years. In SME, we see continued growth opportunities in the US where we expect to continue adding new small business customers and expanding our offerings to meet more of their needs beyond the card such as lending, checking, and cash flow management. And when we look at international, which is our fastest growing segment, we are under-penetrated in both consumer and SME. We have an average of 6% spend share across our top five countries, which represent almost a third of the revenues outside the US. International SME in particular is growing off a small base and with the differentiated products and capabilities we offer, we have an opportunity to continue our rapid growth in this part of our business. The long runway for growth we see both in international consumer and SME coupled with the opportunities we have to continue expanding our merchant coverage across the globe gives us confidence that we can sustain our growth trajectory outside the US. So as we look at this year and beyond, we're going to continue with our strategy of investing at high levels in innovative value propositions, marketing, and technology to drive growth. This includes our ongoing focus on our product refresh strategy. Currently, we're refreshing between 35 and 50 products a year and we're planning to maintain that pace in 2025 along with other enhancements to our membership model for both our consumer and commercial customers. Turning to guidance for the year. We expect 2025 revenue growth of 8% to 10% and EPS of $15 to $15.50, or a 12% to 16% increase over 2024 adjusted for the Accertify Gain. Regarding our thinking and establishing this year's guidance, as we've said, Card Member spending is the largest component of our total revenues. In putting our plan together, our assumption had been that steady billings growth we saw through most of 2024 would continue in 2025. But the fourth quarter spend numbers were stronger than we expected. While it's too soon to tell how this year will play out, we're encouraged by that increased momentum we saw exiting 2024. For now, we're assuming 2025 billings growth will be similar to full year 2024 numbers. However, if spend growth continues at the elevated Q4 level throughout this year, we would expect to come in at the higher end of our revenue range, all else being equal. I'll now turn it over to Christophe for additional commentary about our results and our 2025 guidance.

Thank you, Steve, and good morning, everyone. Given we are at year-end, I will discuss both our Q4 and full year results. Starting first with our full year performance, 2024 was a strong year with 10% revenue growth on an FX adjusted basis and EPS of $14.01 up 25%. And we continue to deliver superior returns driven by our spend and fee-led model as we ended the year with an ROE of 35%. Notably, we also returned $7.9 billion of capital to shareholders this year which included the Accertify Gain. We saw a stable spending environment for most of 2024 with an acceleration in spending as we exited the year. We continue to see healthy loan growth, and we achieved record net card fees. We achieved these results while maintaining our best-in-class credit performance, investing at high levels for growth, as well as driving significant operating leverage. In sum, the building blocks of our financial model are performing well and drive our confidence in the year ahead. Now taking a closer look at total billed business performance on Slide 3, robust spending during the holiday period by our premium customer base helped generate 8% FX adjusted growth year-over-year in Q4, an uptick from the 6% range we saw for the past few quarters. The increase in growth was broad-based across both T&E and Goods & Services categories, across geographies and across every customer segment, as we'll see in a moment. In addition, transaction growth also accelerated to 10% in the quarter, reflecting greater engagement from our Card Members. I'll highlight a few key points as we look at spend trends across our businesses over the next few slides. US Consumer spend was up 9% year-over-year in the quarter as strong holiday spending drove momentum versus Q3. Growth accelerated in both G&S and T&E categories with performance a bit more concentrated in this strong holiday shopping period compared to the rest of the quarter. Looking across generations, Millennial and Gen-Z spend continues to grow faster than the other age cohorts, up 16% in Q4 versus last year. Notably, all generations saw an uptick in spend this quarter compared to Q3. Commercial services spend was up 4% versus last year for the quarter with US SME growing 3%, a bit of an uptick from the past few quarters as organic spend growth improved a bit sequentially. We also saw an increase in spending from our large and global client base with improvement in T&E spend across client industries as well as improvement in Goods & Services spend. Lastly, international grew 15% in Q4 versus last year on an FX adjusted basis as we continue to make strides in our international business. This rapid growth was visible across spend categories and across our consumer and commercial businesses with each of our top five markets growing in mid to high teens. As you can see, Q4 spend results were strong across our businesses and we feel good about the spend acceleration we saw. While growth in Q1 will be impacted by the growth over from leap year in 2024, so far the first three weeks of January look more in line with Q4 trends. At the same time, we need to see if the momentum will sustain. So as we think about 2025, we are assuming at this point a similar spend environment to what we saw in 2024 on a full year basis. Moving on to loans on Slide 7, Q4 total loans and Card Member receivables grew at 9% on an FX adjusted basis versus last year. As a reminder, these growth rates moderated over the course of the year as expected as we lapped the period when customers were still building back revolving balances coming out of the pandemic. With that process largely behind us, for 2025, we expect loans and receivables growth to continue to grow a bit faster than spend as we continue to meet more of the borrowing needs of our premium customers. Turning to Slides 8 and 9, our credit performance continues to be excellent. Delinquency rates and write-off rates are stable versus last quarter and are still below levels from five years ago. Total provision expense was down from a year ago as we build fewer reserves. These results are an outcome of our premium strategy that attracts high credit quality customers. Combined with our risk management capabilities, this strategy has widened the margin of safety and enabled profitable growth. We continue to expect some modest upward movement in write-off and reserve rates over time as we continue to acquire new customers at elevated levels and increase our share of lending from existing customers. Turning next to revenues starting on Slide 10. We saw another strong year-over-year revenue growth with revenues up 10% on an FX adjusted basis for both Q4 and the full year. Discount revenue grew 8% FX adjusted in Q4 in line with billed business growth. Our cycle of product refreshes helped drive card fee growth to 19% FX adjusted in the quarter and fueled new card acquisition to a record level of 13 million for the year with around 70% of new accounts acquired on fee-paying products. We expect card fee growth in 2025 to continue to grow in the mid-to-high teens but to moderate as we progress through the year. Turning to Slide 13, Q4 NII was up 13% on an FX adjusted basis. Growth was driven by increases in revolving loan balances and net yield versus the prior year. As expected, growth moderated this quarter as it has over the course of the year. An important long-term driver of yield is our ability to improve our funding mix as a result of our growing deposits program. Our high yield savings account balances grew 17% in 2024. As with our premium cards, we see that our HYSA product is resonating with younger customers. Millennial and Gen-Z customers make up over half of the accounts and about a third of the total balances today. As we think about 2025, we expect NII growth to outpace the growth in total loans and receivables supported by growth in revolving balances. And while there is uncertainty in the rate outlook, as a reminder, we are mildly liability-sensitive with a relatively small impact from changes to the fed funds rate. I'll turn next to expenses on Slide 15. In Q4, the VCE to revenue ratio was 43%. Rewards expense in particular grew 15% in the fourth quarter largely driven by the slow growth in rewards expense in the prior year. Additionally, as we mentioned last quarter, we made some small changes to the program that are good for both customers and the overall economics of the program, but drive a very small increase in the URR in the short-term. Stepping back, we expect overall VCE expenses to grow slightly faster than revenues in 2025 as we continue to invest in our products and drive Card Member engagement and as our portfolio continues to become more premium. We expect rewards growth to remain a bit elevated in Q1 as a result of the URR model changes from the year ago before growing more in line with the historical trend. We ended the year with $6 billion in marketing expenses, up 16% for the full year as we invested at elevated levels based on the attractive growth opportunities we saw. Given the significant increase of the investment pool in 2024, we expect a modest increase in marketing expense for 2025. Finally, operating expenses for the quarter were down 1% versus last year at $4.2 billion. On a full year basis, operating expenses of $14.6 billion were down 2%. Excluding the gain on sale of the Accertify business in Q2, operating expenses were up 1% for the full year. In 2025, we expect operating expenses to grow in low single digits versus 2024 levels adjusted for the Accertify Gain. This continues our strong track record of disciplined expense management as we maintain low levels of growth from last year while still investing in key areas such as technology. Let me move now to capital on Slide 16. Our Q4 CET1 ratio was 10.5% and continues to be within our 10% to 11% range. We returned $7.9 billion of capital to our shareholders for the year including $2 billion of dividends and $5.9 billion of share repurchases. In 2025, we also expect to increase our quarterly dividend by 17% to $0.82 per share, consistent with our approach of growing our dividend in line with earnings and our 20% to 25% target payout ratio. With this planned increase, we expect to more than double the dividend since the beginning of 2019. We have also reduced the share count by 17%, demonstrating our confidence in the sustainability of earnings of our differentiated model. This brings me to our 2025 guidance. We continue to run our business with an aspiration to achieve 10% plus revenue growth and mid-teens EPS growth. As Steve noted, for the full year 2025, we expect revenue growth between 8% to 10% and earnings per share between $15 and $15.50. The EPS range reflects 12% to 16% growth year-over-year adjusted for the Accertify Gain in 2024. I'll note that the revenue guidance reflects the balance between the spend environment we saw for most of the year and the acceleration in spend growth we saw in Q4. If the spend momentum we saw in Q4 were to continue, we would expect revenue growth to be closer to the high end of the range, all else equal. Our guidance also factors in a range of scenarios based on what we are seeing in our business today. It assumes a stable economy and reflects what we know today about the regulatory and competitive environment. At the same time, there is uncertainty in the environment, whether in tax policy, interest rates, or currency movements. Our outlook is based on the FX rates as they are today. As a global company, the strengthening of the US dollar is a headwind to our growth. In closing, as you heard, 2024 was a strong year for the company. We are well positioned to continue our track record of strong growth into 2025 and we feel good about the year ahead. With that, I will now turn the call back over to Kartik and we will take your questions.

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.

Hey, good morning, everyone.

Good morning, Ryan.

I didn't want to disappoint you, Steve, so I'm going to ask about revenue growth. So you gave a lot of different comments, obviously, 8 to 10. You're exiting at 10. You highlighted that billings are starting the year at an elevated level similar to the fourth quarter. So Steve maybe just talk a little bit about what could be the potential headwinds to revenue growth that would put you towards the lower end? And I guess given GDP is strong, you've acquired a ton of cards in 2024. Why is 2025 not in line with sort of the aspirational revenue growth given it feels like this is sort of the right kind of environment where we could see that type of top line growth? Thank you.

Yes. So I would say that it is in line. I mean, we've got, we give a range and that range has our top end, the 10% at the top end is in line with our long-term aspiration. Just like this year, we did hit our long-term aspiration not only for the quarter, but for the year on a full year basis. So what would cause you to go sort of below, middle, or at? I think what you have to look at last year is a lot of our consumer customers were building balances. And so you had some pretty strong NII growth. And that's sort of moderated a little bit as we got into the year. So if you look at it, it really does come down to a billing story for 2025. And I think the way that we've guided is absolutely right. We've guided that if in fact billings are like they were in the fourth quarter, you will see us at the top end of the revenue range. And as Christophe said and I said all else being equal, you don't have any sort of surprises. But and as we've said at your conference, just giving you another plug for your conference, it really becomes billings. And I think if billings continue at where they were in the fourth quarter, then I think what you will see is us at the top end of that revenue range. If you see them where they were for the whole year, you can assume we'll be in the middle. And I don't think this will happen, but this is why you give ranges if they were below last year you would be at the lower end. So I think it really truly is a billing story. I think we're very confident with card fees. We've got 26 consecutive quarters of double-digit card fees. We expect that to continue more to the mid-teens to the lower high-teens. And NII will continue albeit at a little bit of a lower growth rate than you saw in the first two quarters of last year. So I think the guide is truly in line with what we said. I mean, last year we went 9 to 11 and we came in at 10 and we said it was about billings and we got billings in the fourth quarter, which pushed us over the line. So we're just providing guidance that incorporates all those scenarios.

Thank you. Good morning. Maybe just, well, thank you, Steve for getting in front of that question on the revenue guide. I appreciate that. I guess just a follow-up, if we were to think about where the acceleration came from in spending. I know Christophe you kind of mentioned it was balanced, but maybe can we get a little bit more deeper into that so that we can figure out like how much could sustain itself over the course of the year? And then so is it more discretionary versus travel type? And then if we think about the upside to the revenues, I mean, do you think that there would be an upside to the EPS range or that's pretty static on getting higher?

So let me deal with the EPS range. I mean, one of the things that we've done over the years is, if we've had opportunities to invest, we've invested. And now just take a look at this year. This year we provided our guidance at the beginning of the year was obviously lower than what we ended the year with. And our expectation was that we were going to reinvest the Accertify Gain, but we wound up using that to buy shares back. And we increased our marketing by $800 million. So we want to keep the flexibility, if we have good investment options to invest back in the business. Having said that, if in fact we had a year like we had this year, we're not only do we have good investment options, but we could also exceed EPS, we would do that. So I think as you start to get to the high end of that revenue range, what winds up happening is management has to make a decision. Do we reinvest in the business? Do we drop some more of that back to shareholders? And that'll be a decision that we will make on an ongoing basis as we see what the opportunities would be, whether those will be opportunities in technology, whether those will be opportunities in marketing, more value proposition, and so forth. So we want to leave ourselves that flexibility to be able to make those investments. But having said that, there is a top end of the range is $15.50. It is at 16% growth and that is more likely to happen if you have higher revenue growth again with the commentary that I made that we could make a decision that we want to invest that back in. So it's plausible that in fact would happen. As far as billings go for the quarter and I'll let Christophe comment a little bit more. I think what you saw across the board, you saw consumer come up, it was 9%, which was two points above where we have been running. We saw more organic spend lift in SME, which made SME from 1% to 3%. And that's still not where we want to be from an SME perspective. And international continues to perform very, very well both from an SME perspective and from a consumer perspective also picking up two points. Travel was higher this particular quarter and particularly airline. Airline doubled sequentially quarter-over-quarter of 13%. The more surprising number I think was front of the cabin up 19% and restaurant continues to be strong. So T&E was very, very strong in the quarter for us. And Christophe, I don't know if you want to add anything else?

I don't have much to add because you've addressed most of it. I will mention that the holiday shopping season was particularly strong for us. Regarding sustainability, that’s the important focus, and our team is considering whether it will extend into 2025. That’s a key question, and it’s quite challenging to provide a clear answer. As I mentioned in my comments, the first three weeks of January align closely with what we experienced in Q4, but we still have 49 more weeks ahead, and we cannot predict how it will unfold. More updates will come, but what we've seen so far appears very promising.

Hi. Good morning. Just wanted to continue to unpack the billing story for 2025. When I look at the proprietary net cards acquired, it looked like it slowed down a bit in the fourth quarter after being up double-digits in the second and third quarter, of course, up 6.5% year-over-year. As we think about what's going to drive the billing strength in 2025, particularly in light of, Christophe, your comment about modest increase in marketing expenses. Should we think about, what is the split between, an increase in new cards acquired in terms of versus that 6.5% versus better spend per account? We noticed, of course, that spend per account was up a little bit in the fourth quarter, up 3% versus 2% for the year.

Yes, there's a lot to unpack in your question, Erika. First, it's important to note that the quarterly distribution of New Card Accounts (NCA) can be challenging to interpret. There isn't a clear alignment between marketing spend and NCA for the quarter due to timing differences related to how we account for welcome incentives. However, we made significant investments in 2024 and issued a record 13 million cards. As we project how this will affect our 2025 spending, we typically analyze billing growth by separating contributions from newly acquired Card Members, organic growth from our established 10-year Card Members, and attrition. Our expectations for attrition in 2025 remain consistent with trends observed over the last four to five years, indicating it should remain very stable and low. The hardest part to forecast is the contribution from organic growth, which accounts for the softness noted in the fourth quarter and the positive performance we saw in 2024. While it's difficult to predict the performance of organic growth in 2025, it is certainly a source of volatility. Historically, about 7% of our billing growth comes from new customers, with the remaining growth typically coming from organic spend and attrition.

Thanks. As we've been discussing, you're seeing accelerating billed business growth into year-end. We're also getting consumer and business confidence that's really been climbing. So, Steve, I was hoping to hear about what you may have learned both from any conversations you've had with customers recently about kind of their optimism and spend. And also just looking at your historic billed business numbers and how that has historically kind of responded to rising confidence?

I believe we observed an increase in confidence during the fourth quarter, particularly from consumers, who showed a 9% rise. In terms of travel, which is typically not a significant contributor for us in the fourth quarter, we saw it double sequentially from the prior period. The demand for premium cabin travel serves as a strong indicator of consumer confidence. When people lack confidence, they may not cancel trips, but they tend to downgrade their accommodations and travel arrangements. We're witnessing increased consumer confidence, supported by our survey of small businesses, which indicates a sentiment that is notably positive and higher than it has been in a considerable time. This has contributed to our organic growth. Internationally, our performance has remained robust, continuing to strengthen since two years post-COVID. This gives us optimism for ongoing performance in the upcoming year. However, we recognize that hope is not a strategy; we base our planning on current data. As we review the early months of the first quarter, we aim to maintain growth and expect to be at the high end of our revenue forecast. It's important to note that the first quarter will have one fewer day due to leap year, which we will manage accordingly. We prefer to assess on an adjusted basis, so we can better understand the implications for the second quarter. Overall, the landscape shows consumer and small business confidence, but we remain cautious about drawing conclusions from just one quarter, preferring to see sustained trends before making any decisions.

Yes, good morning and thank you. I have two questions. First, regarding SME, we've noticed significant growth from some newer competitors like Ramp. How do you view your customer-facing technology in SME, and is this an area you might consider for potential acquisition in the future? Second, Delta has provided strong insights about the growth of their Co-Brand card and their expectations for 2025, indicating that growth will remain robust. How does this align with your views on the travel sector and how has the Delta portfolio been performing compared to the rest of your offerings? Thank you.

Yes. We closely collaborate with Ed and his team, so we're in sync with that. It's important to note that the Delta book reflects not only what is spent on Delta but also the spending patterns of American Express Card Members across all categories. We expect the remuneration we provide to Delta to continue growing, which is a positive sign as it indicates increased spending, and we benefit from that growth as well. This suggests a favorable outlook for travel, as evidenced by our observations in the fourth quarter. I'm optimistic that this trend will persist, and Ed has expressed confidence about this year in our discussions. Regarding SME Tech, we are continuously seeking ways to enhance the customer experience. While I won't comment on potential acquisitions, we are pleased with our current position and the progress we've made, particularly with our Kabbage acquisition. We are also attentive to competitors like Ramp and Brex. They may operate from a smaller base, but they offer strong products and are gaining traction, and we will ensure we remain responsive.

Hi. Good morning. Steve, it looks like the Capital One, Discover merger is going to go through. Any thoughts on the competitive impact? I know they don't have incremental affluent consumers, but it's more scale, ability to build lounges and they do compete in SME.

Yes, I believe Rich is a very astute CEO, and this merger is advantageous for them as it acquires a debit network and significantly increases their scale, potentially making them the largest credit card issuer in the United States. Discover is a diverse company that not only offers debit and credit cards but also provides various loan products and services related to cardholders. This merger aligns well with their overall strategy. Capital One's Venture X is gaining traction in the premium segment, and while we continue to perform strongly, they are indeed a tough competitor. However, I anticipate they will face challenges in integrating Discover over the next few years, and we will keep evolving our products and look forward to competing with them.

Thanks for taking my question. Hey, Steve, one of the key initiatives of your team and your tenure is the increased focus on experiences and incentives versus reward. The impact on account growth has been significant, well understood. Is it fair to say that the other benefit besides growth is that there's higher operating leverage because there's more fixed costs associated with experience than there is with traditional rewards?

That's a valid point, and you're absolutely correct. When it comes to experiential sponsorships and lounges, we do incur more fixed costs compared to a variable rewards model. However, as we grow, similar to technology where you start with a certain capacity and expand as needed, we will need to make further investments in both new and existing lounges. Our Card Members enjoy not just the rewards but also the experiences and access we provide. By carefully balancing our investments in these areas, we aim to deliver both the experiences and rewards that our members appreciate, which also allows us to spread fixed costs across a larger base.

Hey, good morning. Thanks for taking my question.

Good morning.

Steve, I was wondering if you could shed a little bit more light into the planned product refresh strategy for this year where you might go with that. I know you previously talked about refreshing every three to four years in platinum. US Platinum is one that's sort of been sitting out there since 2021. And, Christophe, I was wondering if you could maybe shed a little bit more light into your credit commentary. The credit has been doing pretty well. It seems like it's outperformed what you've been looking for stable this year. Can you talk about why you might be expecting a little bit of a modest increase from here? Is that conservatism on your part or do you think you could actually see a better result than that?

Yes. So I'll disappoint you with the first answer. But, so look, we're going to do between 35 and 50. I'm not going to comment on which ones and preannounce. I think that we'll let you speculate on what's going to happen. But, yes, we look to refresh products on an ongoing basis and also when we feel the need that those products need to refresh. And so you'll just have to wait and see what we come out with, but we got 11 more months to go.

Good morning, Jeff. Regarding the credit metrics, we are still significantly below our pre-COVID levels, unlike most of our competitors, which reflects positively on our credit performance. The growth we've experienced over the past few years has primarily been in the premium sector, which is encouraging. While I mentioned similar upward trends at the beginning of last year, the credit metrics remained quite stable, particularly in the latter part of the year. I still believe that these metrics will gradually improve while remaining best-in-class. This improvement is expected as we continue to acquire many customers, leading to some seasoning of those vintages. The current metrics are already strong, so there’s limited room for movement upward, but we are very satisfied with our credit performance. Our premium strategy is effectively translating into strong credit results. By issuing premium products, we are attracting customers with very low credit risk. Overall, we find ourselves in a solid position. I hope that by the end of the year, I can say I was wrong and that our credit metrics remained stable, but in the long run, I expect those metrics to trend upward, albeit modestly.

Good morning. Thanks for taking the question. Marketing investment has increased a lot in recent years. Can you just talk about how the allocations have evolved between the different buckets, such as customer acquisition, general brand marketing and sponsorship activity? Thank you.

General brand sponsorship has been fairly stable over the past years. And the lion's share of the growth that you saw in marketing, so say, over the last 12 months, the $800 million between last year and this year. The lion's share of that is going into acquisition then we split it between what we call consumer acquisition versus prospect acquisition. Consumer acquisition, customer acquisition, sorry, refers to upgrading and companion cards. And these are very attractive investments. So we try to find the right balance between investing and deepening the relationship with our current customers and prospect acquisition. So I don't have the split between the two, but we typically try to fund first that customer acquisition, which is the most attractive in terms of return. And we look at the opportunities that exist in the market and we maintain our very strict standards in terms of underwriting and returns and try to maximize that. So we have, as you know, a sophisticated process to optimize those marketing dollars, but at a very high level, I think that's the story.

Great. Thanks for that. Most of my questions have already been asked and answered. But maybe could you drill down a little more on the SME business? You saw a little bit of acceleration in the fourth quarter. Any thoughts either about the trends and momentum there more specifically or plans? I know Steve you said you didn't really want to talk about plans for refresh. But are there things that we should be looking for in 2025?

I would say that we continue to acquire the same number of SME customers and our attrition remains stable. This is truly an organic narrative. However, organic spending has not yet returned to pre-COVID levels. During the pandemic, organic spending dropped significantly, began to recover post-COVID, then slightly stabilized, followed by challenges like inflation and rising interest rates. Recently, we observed a halt in the deceleration of organic spending, and it seems to be starting to improve. If we can achieve a 3% organic growth, we can expect SME to contribute more significantly to overall billings. This remains an organic story, and as mentioned, I won’t discuss refreshes. Ultimately, it hinges on small business confidence, and it’s not simply about acquisition or attrition; it is fundamentally an organic story for us, and I believe the industry reflects that as well.

Hey, good morning. I hate to use my question on FX. But is the 8% to 10% FX adjusted guide or GAAP because I think you mentioned you assume the dollar stays here. And then can you remind us the EPS impact? I know there's some expense and hedging. So is there any appreciable EPS drag we should think about embedded in the 15% to 15.5% range.

Thank you for your question, Brian. The first point I want to make is that we discuss FX adjusted and FX reported figures because it's beneficial for both you and us to understand the underlying momentum in our revenue and billing when excluding currency fluctuations. This gives us a clearer picture of our transactional growth without the influence of foreign exchange variations. Therefore, we focus on FX adjusted metrics. When it comes to forecasting and predictions, it's challenging to accurately forecast our FX situation. Consequently, we avoid making projections based on FX reported figures at year-end as we cannot predict the dollar's movement. To illustrate the impact of currency fluctuations, in Q4, the difference in revenue growth attributable to FX was one percentage point. Specifically, the FX adjusted revenue growth was 10%, while the FX reported, GAAP reported growth was 9%. Thus, the effect amounts to a notable one percentage point of revenue growth. On the topic of EPS, the situation is more complex since our expenses are distributed globally and we have various centers of excellence. I would recommend checking our K or Q reports where we outline our sensitivity. For instance, a 10% increase in the dollar can lead to a $136 million negative effect on PTI. While this impact is not enormous, it is still somewhat significant.

Hi. Good morning. Thanks for taking my question. Could you provide more details about the international businesses? You mentioned that in each of your top five markets, you experienced growth in the mid to high teen range. Can you comment on the factors driving this growth and the momentum in merchant acceptance? Additionally, how are the sales changes implemented a couple of years ago affecting this? I am looking to understand your perspective on the growth trajectory and its sustainability.

We are very optimistic about our growth trajectory and its sustainability. Merchant acceptance internationally continues to expand significantly. We have acquired millions of merchants, and currently, we have achieved 80% LIF coverage in our key markets. Our T&E numbers are also over 80%, reflecting an eight-point increase over the last three years. International merchant acceptance is growing rapidly for us. We are investing heavily in card acquisition in these markets, and our prospects for card acquisition remain strong, with much of the growth coming from new cards. With less than 6% market share in the top five markets, and considering the emerging SME environment, we see substantial opportunities in both SME and consumer sectors. We expect that double-digit billings will persist in the foreseeable future. It's worth noting that pre-COVID, international was our fastest-growing segment due to an increase in merchant locations and card issuance. Although international growth faced a pause during COVID, it has rebounded to pre-COVID levels, and we believe this positive trend will continue.

Hey, thank you. Good morning. I just wanted to ask about net card fee growth. I think you guided to mid to high teens growth in '25 with some moderation. So maybe just unpack that a bit. You've historically had more of a runway to accelerate that kind of growth when you've done major refreshes. So I'm just curious why that would actually moderate this year?

The growth rates have been consistently strong for an extended period. This quarter marks the 26th straight quarter of double-digit card fee growth, with a compound annual growth rate of around 13%. At the start of the year, we anticipated beginning at 16% and expected an acceleration by year-end, which indeed occurred, reaching 18% last quarter and 19% in Q4. This growth is complex due to numerous factors, but a major contributor to the acceleration was the cycle of product refreshes, evident in our models. Looking ahead to 2025, the acceleration observed in Q3 and Q4 is projected to continue into Q1 2025, followed by a trend resembling the mid-teens growth rate we saw at the start of 2024. We are still on a strong trajectory of card fee growth. Additionally, out of the 13 million cards acquired this year, 70% are fee-paying products, which supports this growth alongside our robust renewal rates. Overall, our performance has been impressive over the last five years, and we expect this success to persist into 2025.

Good morning and thank you for taking my question. Maybe I just wanted to take a little bit of a step back in a big picture question for you, just about competition from Fintechs and how that has been evolving? You talked a little bit about it on the commercial side earlier in response to Craig's question. But maybe just talk about it on the consumer side as well. Specifically, I was wondering, we've been seeing some pretty rich cashback offers from some of the newer entrants in the market, if you will. Is that starting to have any impact in drawing customers away from the traditional rewards card and just what are you seeing on competition there from the Fintech in the consumer side? Thank you.

No, I would refer back to my previous answer. I believe Rick Shane asked about our investment approach. Our Card Members have a distinct profile and are not primarily focused on cash back. While we do offer cash back products for those interested, our Card Members prioritize the balance of rewards, experience, and service. From a Fintech standpoint on the consumer side, we haven't observed any significant shifts. Not that we aren't monitoring the situation or aren't aware, but it's crucial to understand our customer, who greatly values experience, access, and service alongside rewards. This is something that Fintechs have struggled to replicate, as they tend to focus more on cash back products. Regarding SMEs, we are aware of the integration of technology with cards and will take necessary measures to address this. On the consumer side, we haven't noticed any inroads, and our card acquisition remains strong, reaching record levels. We've successfully acquired a substantial number of consumer cards, so there's nothing significant to report at this time, but we will keep an eye on developments.

Steve, thank you. 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.