American Express Company (AXP) on Q2 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2021 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, today’s call is being recorded. I would now like to turn the conference over to our host, Head of Investor Relations, Ms. Vivian Zhou. Please go ahead. Vivian Zhou: Thank you, Kevin, 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. Steve Squeri: Thanks, Vivian, and hello, everyone. Welcome to our second quarter earnings call. Earlier today, we reported second quarter revenues of $10.2 billion and earnings per share of $2.80. These results reflect an acceleration of the momentum we’ve seen in our core business and a strengthening macro environment. Our improving performance is a clear indication that the steps we’ve taken to manage the Company through the pandemic and our investments to rebuild growth momentum are paying off. We’re particularly pleased with the progress we’re seeing in several key areas, including engaging and retaining our existing customers, acquiring new customers, continued excellent credit performance and an acceleration in spending. Since the onset of the pandemic, we’ve been investing in short-term value enhancements to several of our premium products, which has helped drive Card Member engagement and contributed to retention levels that remain higher than the last few years. We’ve also ramped up our acquisition engine over the past several quarters. And we’re really pleased to see that overall acquisitions of proprietary cards, which include our co-brands, have continued to increase with 2.4 million new cards acquired in the quarter. In fact, demand for our premium fee-based products accelerated this quarter with acquisitions of U.S. Consumer and Small Business Platinum and Gold cards well above 2019 levels and exceeding prior quarters, contributing to the continued double-digit growth in net card fees. Early spending on these new accounts is strong. We’re also pleased to see that acquisitions are increasing in many of our co-brand portfolios. For example, as Ed Bastian mentioned on Delta’s earnings call last week, Delta co-brand acquisitions reached 90% of 2019 levels in Q2. Turning to credit. We continue to see excellent credit performance with both delinquency and write-off rates improving further and reaching near historic lows in the quarter. We’re also seeing continued improvements in Card Member spending. Spending recovery accelerated in Q2 with overall billed business volumes growing 51% in the quarter on an FX-adjusted basis versus last year and exceeding pre-pandemic levels in June. Jeff Campbell: Well, thank you, Steve, and good morning, everyone. It’s good to be here today to talk about our second quarter results, which reflect strong momentum in the recovery of our core business and great progress towards our 2022 financial objectives. Starting with our summary financials on slide 2. Second quarter revenues of $10.2 billion were up 31% year-over-year on an FX adjusted basis, as we lapped the trough of the billings and revenue declines that occurred during the most significant pandemic lockdowns in Q2 of last year. Our second quarter net income was $2.3 billion and earnings per share was $2.80. These strong results were, of course, in part driven by an $866 million credit reserve release as we saw continued strong credit performance and some improvements in the macroeconomic outlook. Vivian Zhou: Thank you, Jeff. Before we open up the line for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. Thank you for your cooperation. And with that, the operator will now open the line for questions. Kevin? Operator: Our first question will come from the line of Sanjay Sakhrani, KBW. Sanjay Sakhrani: Thanks. Good morning. Obviously, very strong spending growth. I guess, when we look inside the bill business growth, how much of that strength is coming from pent-up demand versus some of the new account growth? I’m just curious, just trying to figure out how long this can last, obviously, knowing that T&E volume is still on the come. And just a quick clarification, Jeff, on the value injections, should we assume that as T&E comes back, those value injections slow? Thanks. Jeff Campbell: Maybe I’ll start, Steve, just because your -- last part of your question is quick, Sanjay. And then, you can talk, Steve, about the broader pent-up demand trends. On value injection, Sanjay, certainly, with what we’re seeing in the world now, we would expect that to continue to go down each quarter and be completely gone by the end of the year. And so, that’s one of the reasons. As you think about 2022, our overall marketing line dollars should be down a little bit in 2022 from 2021 because value injection will be at zero. But Steve, you probably want to talk a little bit about the demand issues. Steve Squeri: Yes. So, Sanjay, I think, it’s a really good question. And if you look at it, we didn’t acquire anywhere near the amount of cards that we normally acquire last year. And if you look at this year, we’re still ramping up, and we’re still not at overall levels of acquisition that we want to be at. And the reason for that is you’ve got international, which is not opened up. And so, acquisition levels from an international perspective, both from an SME side of it, from a consumer side of it, is not there. You’ve got corporate card acquisition. Not a lot of companies are adding a lot of people. And so, you don’t have that. So, when you really start to dig into this, a lot of this is really the pent-up demand. And so, just take a look at what we’re looking at. And we look at Hilton co-brand cards and we look at Delta co-brand cards, we continue to see them sequentially month-over-month add more volume. And what you’re now seeing is you’re seeing volume being added in T&E, but you are seeing sustained volume growth in goods and services. And so, we think we’ve done a really good job with the value injection in pivoting sort of people how they thought about these cards. And so, looking back years from now, we may find that one of the sort of the bright spots of this for us from a spending perspective is people found other ways to use their cards, and we actually improved our goods and services mix. So, I think you’re seeing that pent-up demand coming from existing cardholders. And yet, we’re not back to travel levels in any way, shape or form. The other thing, if you start to sort of dig into our spending by sort of age group, we mentioned that our millennial spending is up 30% over 2019. Well, then you can just take that and you go to the boomers and you go to our next level of people, and that spending is still building up. So, we believe there’s still a lot of spending within our existing base. You look at corporate spending, which is about half of what it was. Small Business, while doing very well from a goods and services perspective is still challenged from a T&E perspective. And so, we believe that a lot of the growth that we’ve had has come from the existing base and I think there’s more to come from that existing base. And as we get more and more Card Members on board, you’re going to see more spending there as well. So, hopefully, that gives you a little bit of color. Operator: Next question is from Betsy Graseck, Morgan Stanley. Please go ahead. Betsy Graseck: I did want to dig in a little bit on the commentary around the marketing spend and the value injection you just indicated. On the slide 15, you go through and indicate the degree of value injection quarter-by-quarter. And just wanted to understand how you think about that value injection and how that has impacted the retention as well as the acquisition with the question, as you move into next year, do you think that acquisition and retention rate will be able to remain at levels that you’re seeing this year even without that value injection? Thanks. Steve Squeri: So, the short answer is yes. But, you probably want a little more color than that. So, if you think about -- let’s go back to why. So, why did we do the value injection? So, we did the value injection to make sure that the value propositions that were challenged at the time, which were predominantly travel-based value propositions, would no -- people wouldn’t look at it and say, I’m not getting value from the card. And that was -- I think that we’ll look back on that as a very important decision because what it said to our customers is that, look, we know that you are -- you bought the product for a specific reason, you cannot use that product to -- we always talk about experiences and access, and you can’t get that. And so, what we did was -- and I give our teams and our marketing teams a tremendous amount of credit here, is we look for categories that people were going to really double down on in streaming services, wireless services, more shipping services, even dining on some of our co-brand cards, and we invested a lot of money in value injection. The other thing that we did is we also, at the top end on our Platinum and our Centurion, is put credits in for travel, okay, which is one of the reasons our -- I think our TLS bookings are now above 2019 levels in June. And we continue that at the beginning of the year because the beginning of the year, we were still unsure, but we changed the value injection. So on Platinum Card, we went to a PayPal credit. And that PayPal credit was to get more embedding within that ecosystem, so that you have more cards on file. But, our plan has been and always has been is that the value that we have in our products stands on its own. And once we got to the point where people could take advantage of the existing product, and this is predominantly more of a U.S. phenomenon at this particular point in time, you didn’t need that value injection. And so, then we get back to, okay, what did we learn? And then you look at the Platinum Refresh. And if you look at the Platinum Refresh, what does that have? Well, it has a wider variety of components to it in terms of streaming. It has digital credits, whether it’s Sirius or Peacock or New York Times or what have you. And it also has another travel credit within there. And so, we don’t believe we need to rely on value injection at all. And so, as you look at the high marketing going forward, we believe the value of the products will stand for themselves. Having said that, we’re also going to go back on our quest to continue to refresh our product portfolio, and you’re seeing that. You obviously just start it with the Platinum Card, and we’re not going to stop at the Platinum Card, but I’ll stop at that comment at this point. And so, when you look at the $5 billion in spending, what we made the decision this year is we weren’t going to cap that spending. So, at the beginning of the year, you’re seeing a lot of value injection, but we also made decision at the beginning to go in with more customer acquisition. And so, we’ll continue to do that, which will drive us closer to the $5 billion. But, the bottom line on this is that our products were resilient through this. We propped them up a little bit. We learned a lot. And what we’re seeing with our consumers right now is that they are utilizing these value propositions. And they’re utilizing these value propositions with lounge visits, with bookings, by using the travel credits and all the benefits that come with Gold and Platinum. We talked a lot about Platinum, but the Gold Card too is another premium product that we have. And that has been positioned a lot more as a dining product. And that has taken off as restaurants, especially in the United States, have come back. So the short answer I guess is that we don’t believe we need value injection anymore. We believe the value in the products will continue to sustain the spending. Operator: Our next question is from the line of David Togut, Evercore. Please go ahead. David Togut: What is your expected time line and trajectory of the international T&E billings recovery? And as a related question on international, when will domestic China American Express become material to overall revenue and earnings? Steve Squeri: All right. So, the first one, if anybody on the call can tell me, that would be good, because I don’t know. I think, you’ve got a situation in Europe. Look, look at Japan with the Olympics, right? I mean everybody is expecting spectators to be that there’s no spectators there. You’ve got Australia, which is still closed. You’ve got the UK, which is battling the delta variant. And so, I don’t know what’s going to happen with international. Having said that, our billings continue to improve in international. People, much like they were in the U.S., are looking for ways to travel, whether that be car trips, whether that be more restaurant and so forth. And so, I don’t really expect international to come back this year and hopefully, at some point next year. But that’s really all going to be driven by vaccination and the efficacy of vaccinations. And remember, the vaccines that are available in different -- in other countries are not the same vaccines that are available in the United States. And there’s different efficacy on all different types of vaccines, whether that’s AstraZeneca, which has like a 67% efficacy; or it’s a Moderna or a Pfizer, which is up at 88%. And so, what you’re seeing in the UK now is vaccinating -- vaccinated people actually get COVID, not being hospitalized or dying, but still getting COVID. So, I don’t think we’re going to see international come back this year. I think -- and it’s not really in our -- we look at it as a tailwind for sort of 2022 and 2023 for us. As far as China goes, look, China is -- we’re really pleased with what’s going on in China. And part of the China story is continuing to build the network and continue to build the card base, and we continue month-over-month to build that network and to build that card base. And as we move into other quarters, we’ll provide more insight into what’s going on. But I’m not -- I wouldn’t say you’re going to expect China to be a material part of our revenue base or our earnings base in the near-term future, more medium to long term, but I’d also like to remind everybody of the model that we have in China. The model that we have in China is a network-based model. And a way to think about a network-based model is to think about that model much like Visa and MasterCard’s normal model is. We’re not taking card fees. We’re not getting a discount rate. We’re getting network fees, and that’s the way that’s working. But we are building China. We believe it will add more scale, not only for us and more presence in China for both our card members at travel ad, but it will also add scale for us as people -- as Chinese Card Members travel outside of China and add more scale and add more volume to the overall network. So, China will not be material in the near term. Jeff Campbell: Steve, I would just emphasize one point back on the international spending, which is, it is important to go back to slide 5 of the deck and realize that outside the U.S., spending on goods and services actually has recovered just as strongly as it has in the U.S., and we expect that will continue. The other thing to remember is that as we express our confidence in our ability to get to our 2022 financial objectives, we’re really not counting on international T&E coming back in any meaningful way next year. If we are confident it will at some point and whenever it does, that will be a tailwind, but it’s not a key element of our confidence about 2022. So, next question, operator? Operator: And that’s from the line of Ryan Nash, Goldman Sachs. Please go ahead. Ryan Nash: So, I maybe just wanted to flesh out the 2022 expectations a little bit further. So, Jeff, you talked about 12% to 14% revenue growth this year. I think that would put you back at 2019 levels. So, can you maybe what -- explain to us what’s incorporated for the high end in terms of spend and top line? Are you assuming that GNS could continue to run elevated, or are you assuming some sort of a handoff to T&E, given all the pent-up demand? And secondly, Jeff, can you maybe just clarify the capital comments, -- how quickly can you get back to 10% to 11%? It seems like there could be a pretty big buyback over the next few quarters? Thanks. Jeff Campbell: Well, maybe we’ll work backwards, Steve, because I think the capital one’s simpler than the first one. The On capital, Ryan, you should -- as I said in my remarks, look, we’re going to increase the pace of our share repurchases. And we will get back within our CET1 target range of 10% to 11% over the next few quarters. In many ways, the governor on that is as we increase the size of our share repurchases, we want to be mindful of overall volumes in the market. And we’re not trying to do anything that is in the near term going to drive the stock price. So, we’ll get there in the next few quarters. Exactly when will be a little bit of a function of what kind of volumes and trading we see in the overall market. But we’re committed to being in that 10% to 11% range, and that means we got a lot of capital return to shareholders. Steve Squeri: So, as we think about next year and now, look, we went from comments of our aspiration was to be in the range to comments today of our anticipation is we’ll be at the high end of the range. So, what’s driving that? The first thing I want to -- so to clearly state is, given that the recovery is uneven, we will continue to invest, as we’ve been investing. And I think we have pulled back in our international card investment right now because it just doesn’t make a lot of sense to continue to double down on that. And so, we will continue as we move into next year to invest in not only our U.S. card acquisition, but international card acquisition, both small business and premium products. What are the assumptions behind sort of next year’s getting to that high end? Well, look, we need consumer T&E to fully recover in 2022. And it’s on a path to do that. So that is I think good. Obviously, like a reasonably healthy economy as well. And so all things being equal, things continue the way they are in the U.S., we feel really confident. What’s not in those financial objectives is the following, a full recovery of net interest income. And you can look at our revenue, and you see where we are from a net interest income perspective. Corporate T&E is not factored in there, which we don’t believe that will come back until 2023. Cross-border T&E we believe will continue to be challenged. And the comments that Jeff just made about international, while goods and services, we think will continue to grow. I think consumer T&E and corporate T&E and international will continue to be challenged. So, if that comes back, obviously, that provides upside and there would be tailwinds for 2022, but we’d more be counting on those as tailwinds for 2023. But again, it’s really hard to predict. But that’s a positive for us. The one thing I will have people keep in mind though is that we have -- we’ve had some big reserve releases. And as Jeff mentioned, when we talk about sort of $7.50 to $8.75, the $8.75 would anticipate some more releases, which would mean even bigger reserve releases. And so, you have to grow over that. And part of those reserve releases is the extraordinary bill that we did last year. But, I’d like to point out the other part of those reserve releases is the extraordinary job our credit team is doing. And so, that’s the other piece of it that we take into account, all that being said, we feel really good about how we’re tracking for this year. And that’s why we feel good about saying the high end of the range for 2022. And I just gave you a bunch of upside possibilities, and I just gave you the grow-over possibility as well, with the awesome notion is we’re not going to get the marketing cutting -- we’re not going to cut marketing to get there. We’re not going to be at $5 billion because we will not have value injection there, but we will continue to invest in marketing because I think it has proven for us to be a great source of revenue growth. Operator: Our next question is from the line of Chris Donat of Piper Sandler. Chris Donat: I had one question about net card fees, Jeff. When I look pre-pandemic, they’ve been growing -- and this is slide 18, grown around 20%. And then with the pandemic and the lower issues going on there, growth decelerated for the net card fees. As we think about the remainder of ‘21 and ‘22 and what you’ve got going on with retention and the value injections, and it sounds like a ton of good things going on, on the acquisition side. Should we expect an acceleration in net card fee growth over coming quarters? Jeff Campbell: So, Chris, as I said in my remarks, we feel really good about the net card fee growth. In fact, I’d like to point out that the dollars that we have grown net card fees by about -- more than $300 million a quarter since 2019, interestingly, kind of offsets the drop in net interest income, and we have a lot further to go. All that said, as most of you know, the accounting for card fees is a little complicated because we amortize people’s card fee payments over 12 months after they pay them. And so, that causes the trends to move slowly. So, I’ve said through much of this year that I expected card fee growth, because we weren’t acquiring a lot of new card members last year, to slow quite significantly in the back half of the year. I will tell you now that with the tremendous progress on bringing new fee-paying Card Members into the franchise, I think you might see a little bit of slowing in the next couple of quarters before it reaccelerates next year. But boy, it’s a lot less than we originally anticipated. The other thing I would remind people of is it’s really bringing new fee-paying Card Members into the franchise that drives that card fee growth. And in fact, when you think, Steve, about the Platinum Refresh that you talked about, while we raised the fee for existing Card Members, that fee actually doesn’t hit until their anniversary date next year. And then, once it hits, we’ll amortize it over 12 months. So, it’s a lovely long tailwind, but it’s not going to be the driver of the next couple of quarters. Steve Squeri: And the only point I’d make is when you look at that net card fees, the absolute dollars continue to grow. And so, -- and that’s a direct result of the retention efforts. Jeff Campbell: Yes. Operator: And next question is from the line of Moshe Orenbuch, Credit Suisse. Please go ahead. Moshe Orenbuch: Thanks. And I wanted to kind of talk a little bit about the 40% of variable customer engagement costs and how to think about that in the coming years. One of the things that -- you’ve obviously had tremendous success and you alluded to them in the prepared remarks in terms of the spending on the co-brand cards, but some of those contracts have kind of both volume levels and accelerators. If I recall, the Delta co-brand was supposed to accelerate it to 2023 in terms of the payments. Can you talk a little bit about that -- your views on that 40%? Jeff Campbell: Well, a couple of comments, Moshe. First, because of the effects of the pandemic, the variable customer engagement costs sort of have been flowing with revenues. But if you go back a year, you had our Card Members suddenly not redeeming travel-related benefits, not traveling around, and that caused some unusual declines. Boy, the good news now is they’re back traveling. And that recovery means that now we’re back incurring some of those costs. And that makes the year-over-year, when you look at it just for the quarter, look a little unusual. That’s why for simplicity purposes, we’ve said, look, we’re running at about 40% of total revenues. I’d expect that to be the case for the next few quarters. Next year, we’ll have to see how all parts of the business are performing. I guess, if I step back from all the math though, I would just say it’s very good thing to see our members back engaged with our travel-related benefits. We feel really good about the value propositions we have in the marketplace given the kind of acquisition and retention numbers Steve talked about. And it’s those Card Member engagement costs to drive that tremendous attachment for our existing customers and the ability to attract new customers. So, I think, the 40% is a good number for the next few quarters. And we’ll have to see where it ends up next year, and we’ll give you an update. Operator: Our next question is from the line of Lisa Ellis, MoffettNathanson. Please go ahead. Lisa Ellis: I had a question about retention. You’ve been highlighting the strength in retention throughout the pandemic. And just taking a peak at the supplementals, it looks like you’re up 2.1 million in cards in force on 2.4 million in cards acquired. So, that is, in fact, very good retention. Can you just talk a bit about what’s been driving that, and whether or not you think it will persist after the pandemic? And so, can we expect sustained growth in cards in force going forward? Steve Squeri: Well, look, I think as I said, I think some of the decisions that we made around value injection, some of the decisions we made around providing relief. But I will tell you, I think the largest thing that drove retention at the beginning of this pandemic, not a lot of companies were answering the phone. And our customer satisfaction scores from a servicing perspective really went through the roof for us during the pandemic. We pivoted people to home very, very quickly. We had equipment at the ready for them and they felt safe, they felt secure and they were able to take care of our customers. And so, at that time, people called American Express, we would then help them. And if you think about the help that we provided to people, it was -- I’m not -- I can’t take my trip, I’m canceled, I had tickets to this, I had -- whatever it might have been, and we were able to help. And when you help somebody one time, that’s a lifetime savior, because they’ll always remember it. And the reality is, I think it was the combination of outstanding customer service because more people needed customer service during this pandemic than they ever did before, especially with cancellations of events. And I think we stood out. I think, we stood out among everybody else, once again, and I think the value injection and the financial relief programs. And we have continually look to engage with our customers throughout the pandemic and meet their needs. So, our hope is -- and we’re seeing it persist right now is that we’ll continue to retain these customers and build their loyalty. But I wouldn’t -- I would not downplay customer services role in this retention. I can’t tell you how many emails and letters I got that people were calling out to say, look, I was on hold with somebody for five hours. And I went to you and you guys were able to handle it. You answered the call in four or five minutes. So I think that really helped a lot, Lisa, I really do. Operator: Our next question is from the line of Rick Shane of JP Morgan. Please go ahead. Rick Shane: I’m curious, when you think about the 80% recovery of T&E in the fourth quarter, how important corporate travel is to that recovery? And the reason I raised that is I think there’s an important distinction between leisure travel, which has a long-planning cycle and business travel, which tends to have a much shorter planning cycle. And I’m assuming that that short planning cycle creates volatility in terms of your expectations. And I’m curious how much upside downside there is associated with that corporate travel? Steve Squeri: Yes. I would say very little downside because we’re assuming -- we’re not assuming very much. And we’re just using ourselves as an example. There are a lot of companies that are still not even back yet, right? And it’s hard to travel when you’re not back. That’s -- and it’s hard to travel when there’s nobody to travel to. I think New York is a little bit different phenomenon in financial services here. But the reality is, is we’re not assuming very much from a corporate travel perspective, minimal improvement from really where we are. So, the downside volatility, I think, is negligible. The upside is pretty positive. But again, we’re not anticipating a lot of travel. Having said that, corporate travel will come back. Anybody that believes that Zoom, WebEx or Google Meets or Microsoft Teams or what have you is going to take the place of face-to-face, it’s crazy. It’s not. I think it’s a great supplement. But ultimately, people will get back. But people are still antsy about getting out there but not so much for consumer travel. They’re pretty willing to get out for consumer travel, but they are a little bit -- again, I think for corporate travel, it’s a different thing. But, the reality is it will come back. And I think there is nothing like face-to-face interaction and business -- and doing business that way. And so -- but I see it more as upside, Rick, and not a volatile downside. Now, having said that, if it does come back and then goes down, that’s when the volatility comes in. But I think behavior, once it shifts back to corporate travel, I believe will stay there. Jeff Campbell: And Rick, the only numbers I’d add to that is, yes, we expect Q4 to be at about 80% overall, led by consumer though, to Steve’s point. So, I’d expect global consumer to be at 95% probably of 2019 levels, the U.S. consumer at or above 2019 levels. And of course, the other thing, Steve, that’s interesting is small businesses even now are traveling more than the large businesses. Steve Squeri: Right. Jeff Campbell: It’s the large businesses where you really don’t see any signs of life right now. And we’re not counting on any. Operator: Our next question is from the line of Mark DeVries, Barclays. Please go ahead. Mark DeVries: Yes. Thanks. Just a quick clarification and a bigger picture question. On the higher end guidance for 2021, does that contemplate reserve releases that get you down around kind of the CECL day-one level? And then kind of big picture, for Steve, what’s your experience been historically on the impact of wealth effects on spend? Because obviously, if you look at, since the beginning of last year, there have been some pretty significant wealth effects for a lot of your cardholders. And what implications that may have for kind of where spend levels can recover to once your customers don’t have the same restrictions on their activities? Steve Squeri: Yes. So, well, I’ve said this many times, consumers like to consume. And so, giving opportunities to consume, they will start consuming. And I’ve been here a long time. And I remember, after 9/11, people sort of didn’t travel and sort of hoarded a little bit. And then all of a sudden, it exploded. And if you look back historically, you saw tremendous growth for us after 9/11. And it wasn’t in travel. I mean, people started to spend on their homes, spend on other lifestyle choices and things like that. And then eventually travel came back. And so, I think the wealth of -- if you look at the savings that has accumulated within the United States and the wealth that is accumulated from stock appreciation and what have you, I think that only bodes well for us for people to continue to spend. And so, I would anticipate -- and again, we saw this right after 9/11, and we saw this after the financial crisis as well. I’ve been -- it just tells you I’ve been around a long time. And I think that will actually happen. But we’ve never seen -- I haven’t seen wealth accumulation like this across the continuum when you look at the overall savings rate and then just look at where the stock market is, obviously at an all-time high. So, I think that really bodes -- that bodes well for us as we think about spending going forward. And that’s why we’re bullish on ‘22 and beyond. Jeff Campbell: And on the credit reserves, Mark, I’d point out, on slide 14, in dollar terms, we are actually already below the dollar reserves that we had day one of CECL, $4 billion now versus $4.3 billion. What’s still above, however, day one is the percent of the actual loans outstanding that the reserves represent. If you think about that $8.75 scenario, certainly, I would anticipate that that includes some reserve releases that bring that percentage below the day one CECL percentage. The unknowable question at this point is how far below. But, when you think about the credit metrics right now, it would suggest that your reserve levels, once all the various kinds of uncertainty work themselves through, it would suggest that your reserves as a percentage of loans outstanding should be significantly lower. Operator: And next question is from the line of Bill Carcache, Wolfe Research. Please go ahead. Bill Carcache: Your lens centric competitors have been very focused on elevated payment rates. Is Amex at all focused on stepping in to capture greater share of balance growth as payment rates normalize? I know capturing your fair share of balances that Amex customers carry with competitors was a big focus pre-pandemic. But I would appreciate any color on whether this is an opportunity that you’re actively looking to pursue now. Steve Squeri: Well, I think obviously, during the pandemic, that obviously slowed down, but we’re back at it. And the reality is we can be back at it, but if they’re not going to revolve balances, it really doesn’t -- it doesn’t matter. But we have opened up again, obviously. We tightened up -- just to remind everybody, we tightened up our credit controls pre-pandemic. And that allowed us to go in pretty quickly and I think do a lot of really good things for our customers and for ourselves. But, we’ve opened it up this year. And we’re out there looking to acquire balances. We’re not going to do crazy stuff, but we’re looking at acquiring balances where it makes sense. And what I mean acquiring balances, I’m not talking about fee free -- zero interest rate, things like that. What I’m talking about is engaging with our customers to see what their revolve needs are and to see if we can meet those needs, whether it be through a pay plan it or whether it be through a consumer personal loan or whether it just be through a normal card revolve product. So, that’s how we’re thinking about it. Operator: Our next question is from the line of Don Fandetti, Wells Fargo. Please go ahead. Don Fandetti: Steve, could you provide an update on the Amazon small business co-brand partnership? And also whether it would make sense to look at the consumer co-brand, if that were to come to market? It seems like a deal you don’t necessarily need but maybe it makes sense in some areas. Steve Squeri: Well, look, here’s what I would say. We are really happy with our overall Amazon relationship, and that is a multifaceted relationship. Not only do we buy Amazon services from them, but small business has been -- I think has been a good thing for both of us. I think it’s been good for our customers. I think we’ve been able to offer some great value. A lot of our customers use it as a companion product. And so, that’s worked. I think our Pay with Points efforts with Amazon has really worked. And what I would say about co-brand opportunities, look, we look at them all. That makes sense. And we look at -- predominantly, we’ve had a lot of travel co-brands, obviously. We’ve also had other co-brands, and people will remember the Costco co-brand, but we’ve also have a Lowe’s co-brand for the small business. Obviously, we have the Amazon co-brand for Small Business as well and not just in the United States, but in a couple of other markets. And we look at the opportunities. And what we do is we look at those opportunities, and can we provide a value proposition that makes sense to our customers and can we do that in an economical way. And an economical way may not just be the economics of the co-brand deal itself. It may also be the economics of what a co-brand could do to the overall portfolio, both positively and negatively. And so, there’s a lot of things you look at when you evaluate a co-brand. And we’ll do what’s right for our customers and our shareholders. Operator: And our next question is from the line of Bob Napoli, William Blair. Please go ahead. Bob Napoli: Good morning, Steve and Jeff. A question on the related, I guess, the SMB market itself and the competitive environment, you’ve seen new players coming into that market, whether it’s somebody like Square or there are a number of fintechs that are doing charge cards with spend management attached to it. Maybe just some thoughts on the importance of the growth of SMB, what you’re doing, and how you view that? Any change in the competitive environment? And what new value injections that maybe not in that term, but products or services you’re looking to add in maybe U.S. and international? Steve Squeri: Yes. Well, I think -- let me just -- I’ll just mention international. International, right now, certainly a different competitive environment internationally than in the United States. There’s not one competitor. It’s competitors by market. But I would say, at the moment, not a hotbed of activity, small businesses. The viability of a number of small businesses in international markets, not a lot of people have line of sight into those right now. And we’re not growing anywhere near like we used to grow. If you remember, small business international, high double digits, high double-digit teens for two, three years in a row. And we think we can get back to that. We just don’t -- we don’t see that happening this year, and we’re not counting on it for next year. But, internationally, you’re competing with local banks and so forth. And again, we’ve done Amazon deals in multiple countries. And I think that has helped. And we continue to look for partnerships where they make sense. In the United States, we continue to grow. In fact, June was one of our best acquisition months in the history of our small business card in the United States. So, we’re really pleased with that. There is a lot of competition. There’s a lot of fintechs. There are banks out there. Capital One is aggressive, U.S. Bank is aggressive, JP -- everybody is aggressive in this space. And ultimately, it comes down to value, and we continue to grow. And again, here, from a Small Business perspective, I think we did a nice job with value injection. I think you will see us continue our strategy of product refreshes over the coming year. But, I think one of the big things that we’ve done obviously is the Kabbage acquisition. And just last month, we launched the Kabbage checking account, the working capital, cash flow analysis and so forth. And what you’ll see ultimately is that Kabbage platform being the landing point for our small businesses. And the way you want to think about this is fintech with scale. And so, when you think about Kabbage, which is a pure-play fintech in the small business space and you think about American Express and the small businesses and you combine that together, you have a fintech at scale, not a fintech growing at scale, a fintech growing from scale, from scale with the balance sheet. And so, that has always been the vision of Kabbage. We’ve made -- as you bring Kabbage into the bank holding company structure, you have to do some other things to future-proof it, if you will, and that’s what we’ve been doing. But that’s what you will see. Ultimately, what you will see is a fintech with traditional bank scale and a very strong balance sheet, and we’ll continue to add products as we move along on to that platform. And that was the vision, right? I mean we see a lot of other people out there doing those kinds of things. But to be able to do that at scale from the get-go, I think, is a big win for us. So, that’s a long -- that’s the vision in the medium term here for Kabbage. And we just launched that platform from an Amex perspective just last month with those other products on it. Operator: And our final question will come from the line of Craig Maurer, Autonomous Research. Please go ahead. Craig Maurer: I really wanted to ask about the competitive environment in high-end U.S. consumer, considering we just saw Citi shutdown their platinum competitor going forward. Has the U.S. premium consumer race really just boiled down now to two competitors, Amex and Chase? Thanks. Steve Squeri: Yes. So, I don’t know. It’s the best way to answer it. Look, I don’t know what Citi’s strategy is. I don’t know if it’s a -- it’s just a pullback for now from a -- to a reentry. That’s a possibility. I know Wells is looking to get stronger in this space. And so, what we’re really focusing on, Craig, is -- what we’re focus in on is developing the best product possible and to make sure we could take on all comers. And some may say in the middle of pandemic, you’re relaunching your Platinum Card and you’re raising the fee. Yes, we are. Why? Because that was part of the strategy. We learned a lot during the pandemic as well. We were able to enhance the product. When you look at it, we added $1,400 worth of additional value for $140 worth of additional cost. And that’s a great example of leveraging our partnerships, leveraging our knowhow, leveraging the digital assets that we have, whether that be Resy or LoungeBuddy or what have you within that overall collection. And so, yes, maybe it might look like right now, it’s Chase and American Express. And Chase is a very formidable competitor with very smart people who are working really hard to beat us, and we’re working really hard to beat them. But, I’m not assuming it’s going to be just us and Chase for long. I think you will see other people I think try and get in this game. And our Platinum Refresh is another shot across the bow. And anybody that really wants to come in and play with us -- and play in this game, we’re ready. And we’ll continue to up our game and up our service and provide even more and more value to our card members. And look, as I said in my remarks, the Platinum Refresh last time worked, and that was in the face of JPMorgan Chase entering in with a strong product. And we believe it’s going to work this time in early results. And obviously, we’re only in for three weeks here. But, if you just do the value calculation, it is a really strong product. And we’re really proud of what we put out in the marketplace. Vivian Zhou: 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. Kevin, back to you. 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 the digital replay of the call at 866-207-1041 or 402-970-0847 with the access code of 9058079 after 1:00 pm Eastern Time on July 23rd through midnight July 30th. Now, this will conclude our conference for today. Thank you for your participation. You may now disconnect.
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American Express (NYSE: AXP) Surpasses Earnings and Revenue Estimates

  • Earnings Per Share (EPS) of $3.64, beating the estimated $3.47.
  • Revenue reached approximately $16.97 billion, slightly above the forecast of $16.94 billion.
  • Shares rose by less than 1% post-announcement, despite a 15% decline year-to-date.

American Express (NYSE: AXP) is a leading global financial services company known for its credit card, charge card, and travel-related services. Competing with giants like Visa and Mastercard, American Express reported an EPS of $3.64 on April 17, 2025, surpassing the estimated $3.47. The company also reported a revenue of approximately $16.97 billion, slightly exceeding the estimated $16.94 billion.

The company's quarterly earnings reveal a profit of $3.64 per share, surpassing the Zacks Consensus Estimate of $3.45. This marks an improvement from the previous year's earnings of $3.33 per share. The positive growth trajectory is driven by robust consumer spending, as highlighted by CEO Stephen Squeri. He noted that consumer spending in the first quarter was consistent with, and often better than, 2024 levels.

American Express's revenue increased by 7% year-over-year to $16.97 billion, exceeding analysts' predictions. Net interest income also slightly surpassed expectations, reaching $4.17 billion compared to the consensus of $4.10 billion. 

Despite the positive earnings report, American Express shares rose by less than 1% immediately following the announcement. The stock had been down approximately 15% for the year. Recently, Bank of America analysts upgraded the stock's rating to "buy," citing the company's "high-quality customer base" as a factor that would support its resilience.

American Express maintains a price-to-earnings (P/E) ratio of approximately 17.76, indicating the market's valuation of its earnings. The company's price-to-sales ratio stands at about 2.52, and the enterprise value to sales ratio is around 2.67. The debt-to-equity ratio is about 1.69, indicating the company's leverage level.

American Express (NYSE: AXP) Surpasses Earnings and Revenue Estimates

  • Earnings Per Share (EPS) of $3.64, beating the estimated $3.47.
  • Revenue reached approximately $16.97 billion, slightly above the forecast of $16.94 billion.
  • Shares rose by less than 1% post-announcement, despite a 15% decline year-to-date.

American Express (NYSE: AXP) is a leading global financial services company known for its credit card, charge card, and travel-related services. Competing with giants like Visa and Mastercard, American Express reported an EPS of $3.64 on April 17, 2025, surpassing the estimated $3.47. The company also reported a revenue of approximately $16.97 billion, slightly exceeding the estimated $16.94 billion.

The company's quarterly earnings reveal a profit of $3.64 per share, surpassing the Zacks Consensus Estimate of $3.45. This marks an improvement from the previous year's earnings of $3.33 per share. The positive growth trajectory is driven by robust consumer spending, as highlighted by CEO Stephen Squeri. He noted that consumer spending in the first quarter was consistent with, and often better than, 2024 levels.

American Express's revenue increased by 7% year-over-year to $16.97 billion, exceeding analysts' predictions. Net interest income also slightly surpassed expectations, reaching $4.17 billion compared to the consensus of $4.10 billion. 

Despite the positive earnings report, American Express shares rose by less than 1% immediately following the announcement. The stock had been down approximately 15% for the year. Recently, Bank of America analysts upgraded the stock's rating to "buy," citing the company's "high-quality customer base" as a factor that would support its resilience.

American Express maintains a price-to-earnings (P/E) ratio of approximately 17.76, indicating the market's valuation of its earnings. The company's price-to-sales ratio stands at about 2.52, and the enterprise value to sales ratio is around 2.67. The debt-to-equity ratio is about 1.69, indicating the company's leverage level.

American Express (NYSE:AXP) Earnings Preview and Analyst Insights

  • Analysts have initiated a Buy rating for American Express (NYSE:AXP) with a price target of $289, anticipating strong growth in premium card fees and consumer spending.
  • The company is expected to report an 11% growth in net income for 2025, driven by significant growth in net card fees and resilient consumer spending.
  • Despite anticipated growth, lower profits are expected from its Global Merchant and Network Services division, with an increase in network volumes during the first quarter.

American Express (NYSE:AXP), a leading global financial services company, is gearing up to release its quarterly earnings on April 17, 2025. Analysts are closely monitoring the company's performance, with Wall Street estimates projecting an earnings per share (EPS) of $3.46 and a revenue of approximately $16.93 billion.

The analysis of American Express (NYSE:AXP) has led to a Buy rating with a price target of $289, underlining strong growth in premium card fees and consumer spending. The company is poised for an 11% growth in net income for 2025, fueled by mid-to-high teens growth in net card fees and resilient consumer spending, surpassing consensus expectations and indicating a positive outlook.

American Express's closed-loop model and premium customer base are considered undervalued by the market, supporting an 18x forward price-to-earnings multiple. The company's P/E ratio is approximately 18.22, showcasing the market's valuation of its earnings, while the price-to-sales ratio stands at about 2.58, reflecting its revenue valuation.

Despite the anticipated growth, AXP is expected to report lower profits from its Global Merchant and Network Services division. However, an increase in network volumes during the first quarter is anticipated. These factors are crucial for investors as the company approaches its Q1 earnings release.

The company's financial leverage is highlighted by a debt-to-equity ratio of approximately 1.69. The enterprise value to sales ratio is around 2.74, and the enterprise value to operating cash flow ratio is approximately 13.64, providing insights into the company's valuation relative to its cash flow. The earnings yield is about 5.49%, offering a perspective on the return on investment.

American Express (NYSE:AXP) Earnings Preview and Analyst Insights

  • Analysts have initiated a Buy rating for American Express (NYSE:AXP) with a price target of $289, anticipating strong growth in premium card fees and consumer spending.
  • The company is expected to report an 11% growth in net income for 2025, driven by significant growth in net card fees and resilient consumer spending.
  • Despite anticipated growth, lower profits are expected from its Global Merchant and Network Services division, with an increase in network volumes during the first quarter.

American Express (NYSE:AXP), a leading global financial services company, is gearing up to release its quarterly earnings on April 17, 2025. Analysts are closely monitoring the company's performance, with Wall Street estimates projecting an earnings per share (EPS) of $3.46 and a revenue of approximately $16.93 billion.

The analysis of American Express (NYSE:AXP) has led to a Buy rating with a price target of $289, underlining strong growth in premium card fees and consumer spending. The company is poised for an 11% growth in net income for 2025, fueled by mid-to-high teens growth in net card fees and resilient consumer spending, surpassing consensus expectations and indicating a positive outlook.

American Express's closed-loop model and premium customer base are considered undervalued by the market, supporting an 18x forward price-to-earnings multiple. The company's P/E ratio is approximately 18.22, showcasing the market's valuation of its earnings, while the price-to-sales ratio stands at about 2.58, reflecting its revenue valuation.

Despite the anticipated growth, AXP is expected to report lower profits from its Global Merchant and Network Services division. However, an increase in network volumes during the first quarter is anticipated. These factors are crucial for investors as the company approaches its Q1 earnings release.

The company's financial leverage is highlighted by a debt-to-equity ratio of approximately 1.69. The enterprise value to sales ratio is around 2.74, and the enterprise value to operating cash flow ratio is approximately 13.64, providing insights into the company's valuation relative to its cash flow. The earnings yield is about 5.49%, offering a perspective on the return on investment.

American Express (NYSE:AXP) Earnings Preview: What to Expect

  • American Express is expected to report an EPS of $3.03 for Q4 2024, indicating a 15.7% year-over-year growth.
  • Revenue for Q4 2024 is projected at $17.18 billion, showcasing an 8.7% increase from the previous year.
  • The company's stock has surged over 70% in the past year, significantly outperforming its peers.

American Express (NYSE:AXP) is a leading global financial services company known for its credit card, charge card, and travel-related services. Competing with giants like Capital One and Mastercard, American Express is gearing up to release its fourth-quarter 2024 earnings on January 24, 2025, before the market opens.

Analysts are optimistic, expecting American Express to report an EPS of $3.03, slightly above the Wall Street estimate of $3. This represents a 15.7% increase from the previous year, highlighting the company's robust performance. Revenue is projected to reach $17.18 billion, reflecting an 8.7% year-over-year growth, as highlighted by Zacks.

The company's network volumes are anticipated to have increased, continuing the positive trend from previous quarters. For the entire year, American Express is expected to achieve revenues of $65.95 billion, marking a 9% increase from the prior year. The consensus estimate for the company's EPS for the current year is $13.40, indicating a substantial 19.5% year-over-year growth.

American Express has seen its stock price soar over 70% in the past year, reaching fresh 52-week highs of $319 per share. This performance significantly outpaces its peers, with Capital One rising 49% and Mastercard increasing by 20%. Investors are eager to see if this momentum can be maintained with the upcoming earnings report.

Despite a mixed track record in earnings, American Express has shown consistent growth throughout 2024. The company's premium valuation is supported by its strong brand and a customer base that leans towards higher-tier clients. With a price-to-earnings (P/E) ratio of 23.06 and a debt-to-equity ratio of 1.85, American Express maintains a balanced financial position.

American Express (NYSE:AXP) Earnings Preview: What to Expect

  • American Express is expected to report an EPS of $3.03 for Q4 2024, indicating a 15.7% year-over-year growth.
  • Revenue for Q4 2024 is projected at $17.18 billion, showcasing an 8.7% increase from the previous year.
  • The company's stock has surged over 70% in the past year, significantly outperforming its peers.

American Express (NYSE:AXP) is a leading global financial services company known for its credit card, charge card, and travel-related services. Competing with giants like Capital One and Mastercard, American Express is gearing up to release its fourth-quarter 2024 earnings on January 24, 2025, before the market opens.

Analysts are optimistic, expecting American Express to report an EPS of $3.03, slightly above the Wall Street estimate of $3. This represents a 15.7% increase from the previous year, highlighting the company's robust performance. Revenue is projected to reach $17.18 billion, reflecting an 8.7% year-over-year growth, as highlighted by Zacks.

The company's network volumes are anticipated to have increased, continuing the positive trend from previous quarters. For the entire year, American Express is expected to achieve revenues of $65.95 billion, marking a 9% increase from the prior year. The consensus estimate for the company's EPS for the current year is $13.40, indicating a substantial 19.5% year-over-year growth.

American Express has seen its stock price soar over 70% in the past year, reaching fresh 52-week highs of $319 per share. This performance significantly outpaces its peers, with Capital One rising 49% and Mastercard increasing by 20%. Investors are eager to see if this momentum can be maintained with the upcoming earnings report.

Despite a mixed track record in earnings, American Express has shown consistent growth throughout 2024. The company's premium valuation is supported by its strong brand and a customer base that leans towards higher-tier clients. With a price-to-earnings (P/E) ratio of 23.06 and a debt-to-equity ratio of 1.85, American Express maintains a balanced financial position.

American Express (NYSE:AXP) Price Target and Strategic Acquisition

  • Jeff Adelson from Morgan Stanley sets a price target of $252 for American Express (NYSE:AXP), indicating a potential downside of approximately -8.46%.
  • American Express is set to become the sole owner of Swisscard as UBS sells its 50% stake, aiming to strengthen its position in the Swiss market.
  • Despite the recent price target, AXP's current price is $271.81, with a market capitalization of approximately $193.23 billion, reflecting its significant presence in the financial sector.

On October 21, 2024, Jeff Adelson from Morgan Stanley set a price target of $252 for American Express (NYSE:AXP). At the time, the stock was trading at $275.29, indicating a potential downside of approximately -8.46%. American Express is a major player in the financial services industry, competing with companies like Visa and Mastercard.

American Express is set to become the sole owner of Swisscard, as UBS sells its 50% stake in the credit card provider. This strategic move aligns with UBS's plan to divest parts of the Credit Suisse business it acquired last year. The acquisition will allow American Express to strengthen its position in the Swiss market.

Despite the recent price target set by Morgan Stanley, AXP's current price is $271.81, reflecting a decrease of 1.80%. The stock has dropped by $4.99 today, with a trading range between $271.51 and $276.16. Over the past year, AXP has experienced a high of $286.36 and a low of $140.91.

American Express has a market capitalization of approximately $193.23 billion, indicating its significant presence in the financial sector. The trading volume for AXP today is 712,781 shares, showing active investor interest. The company's acquisition of Swisscard is expected to enhance its growth prospects in the European market.