American Express Q1 2025 Earnings Report

American Express EPS Results

• Actual EPS: $3.64
• Consensus EPS: $3.47
• Beat/Miss: Beat by +$0.17
• One Year Ago EPS: $3.33

American Express Revenue Results

• Actual Revenue: $16.97 billion
• Expected Revenue: $17.04 billion
• Beat/Miss: Missed by -$74.72 million
• YoY Revenue Growth: N/A

American Express Announcement Details

• Quarter: Q1 2025
• Date: 4/17/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 17, 2025
• Conference Call Time: 8:30AM ET

American Express (NYSE:AXP) Company is a multinational financial services company based in New York City. The company provides credit cards, charge cards, traveler's cheques and other financial services to individuals and businesses worldwide.

Founded in 1850, American Express has been a pioneer in the credit card industry and has developed a reputation for offering premium products and services that cater to high-income consumers. The company operates in over 130 countries and employs over 75,000 people globally.

Stephen J. Squeri has served as American Express Chairman and Chief Executive Officer since 2018, succeeding Kenneth I. Chenault. Squeri joined the company in 1985 and has held various leadership positions.

He is credited with leading the company's digital transformation and developing new partnerships with technology companies such as Apple, Google and Amazon. Other key management team members include Chief Financial Officer Jeffrey C. Campbell and Vice Chairman Douglas E. Buckminster.

American Express has consistently generated strong financial results, with revenue increasing consistently over the past few years. The company's net income has also grown during this same time frame. The company's profit margin has remained relatively stable at around 14%.

American Express has maintained a strong balance sheet, with a debt-to-equity ratio and a price-to-book ratio consistent with industry averages. Over the past couple of years, American Express' stock has performed well, leading its industry peers. 

The credit card industry is highly competitive, with a few prominent players dominating the market. American Express competes with other major credit card companies, such as Visa and Mastercard and banks that issue private-label credit cards.

The industry has been growing steadily, with global credit card transactions expected to reach $8.8 trillion by 2025. However, the industry faces several challenges, including increasing regulatory scrutiny and the threat of disruption from fintech startups.

American Express has several growth opportunities, including expanding its presence in international markets and developing new partnerships with technology companies. The company has made significant progress in these areas, with global revenue growth from 2016 to 2022.

American Express has also partnered with companies such as Uber, Marriott and Delta Airlines to offer unique benefits to its cardholders. Additionally, the company has been investing in its digital capabilities by launching its digital wallet and mobile app.

Despite its stable financial performance and growth opportunities, American Express faces several risks and challenges. The company's high-end products and services may be vulnerable to changes in consumer preferences, and the company may need help to appeal to younger generations who prefer debit cards and mobile payments.

Additionally, American Express is subject to increasing regulatory scrutiny, with regulators monitoring the company's anti-money laundering practices and compliance with consumer protection laws. The company's debt levels and dependence on the global economy also pose risks, as a recession or economic downturn could impact its profitability.

Another major challenge for American Express is the increasing competition from fintech startups, disrupting the traditional credit card industry by offering innovative products and services. These startups are often more agile and adaptable than established companies like American Express and may be able to offer more attractive rewards and lower fees to customers.

To stay competitive, American Express must continue to innovate and develop new products and services that cater to changing customer preferences.

American Express Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q1 twenty twenty five Earnings Call. At this time, all participants are on a listen only mode. Later, we will conduct a question and answer session. As a reminder, today's call is being recorded.

[Operator]

I would now like to turn the conference over to our host, Head of Investor Relations, Mr. Kartik Ramachandran. Thank you. Please go ahead.

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non GAAP financial measures.

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Christophe Lakayak, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q and A session on the results with both Steve and Christophe.

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

With that, let me turn it over to Steve.

[Stephen Squeri, Chairman & CEO at American Express]

Thanks, Kartik. Good morning, and

[Stephen Squeri, Chairman & CEO at American Express]

thanks for joining us. We had another strong quarter to start the year. We delivered revenues of $17,000,000,000 up 8% year over year on an FX adjusted basis or 9% excluding the leap year impact. And we generated net income of $2,600,000,000 or $3.64 per share. During the first quarter, our premium customer base continued to spend at healthy levels.

[Stephen Squeri, Chairman & CEO at American Express]

Total card member spending grew 6% in the quarter or 7% excluding the impact of leap year with spending on goods and services continuing to grow at a faster rate than in 2024. In T and E, while we saw a sequential slowdown in airline billings growth, billings in restaurants and lodging remained strong in the quarter and overall T and E growth was in line with the steady levels we saw through most of last year. We also continued to grow our customer base adding 3,400,000 new cards in the quarter. As in past quarters, millennial and Gen Z consumers made up over 60% of new consumer accounts acquired globally in Q1. In addition, card fee growth was up 20% on an FX adjusted basis.

[Stephen Squeri, Chairman & CEO at American Express]

Retention continued to be high and our credit performance remained excellent. While it's still very early in the second quarter, through the first week and a half in April, overall spending levels have remained consistent with what we saw in the first quarter in both goods and services and T and E and across all customer segments. Based on the steady spend and credit trends we've seen to date, we're maintaining our full year revenue growth guidance of 8% to 10% and EPS of $15 to $15.5 While we recognize that uncertainty in the environment has increased, the guidance incorporates the changes that we see in the macroeconomic outlook as of today. As we think about the near future, we have a resilient and differentiated business model that positions us well to navigate a range of economic environments. First and foremost, we have a global premium customer base at scale.

[Stephen Squeri, Chairman & CEO at American Express]

In fact, as our customer base has grown over the past several years, it has gotten even more premium. Our card members have high incomes, are loyal, high spending and have excellent credit profiles. And as you know, we underwrite all our card members through the credit cycle. Another key differentiator of our model is our mix of revenues. While the combination of spend and fees accounting of 75% of our overall revenue base, which makes us less reliant on lending revenues and less sensitive to credit cycles compared to our competitors.

[Stephen Squeri, Chairman & CEO at American Express]

Also, we have significant expense leverage and flexibility that has grown as our scale has increased over the past several years, enabling us to effectively control our cost while continuing to invest for the long term. In addition to the natural hedges in our customer engagement expenses, we have several levers across our marketing and operating expense lines enabling us to quickly pivot if the environment changes. Looking ahead, we'll need to see how things play out in the coming months. That said, we are operating from a position of strength and we have a set of principles that guide us. Our fundamental objective as it is with everything we do is to manage the company for the long term growth for our shareholders.

[Stephen Squeri, Chairman & CEO at American Express]

As we do so, we are focused on four core principles. Above all, we'll back our customers through ongoing enhancements to our products and services as well as providing support for those who may need it. We'll also back our colleagues so they continue to focus on innovating for our customers and providing a world class experience that is core to our brand. We'll exercise disciplined expense management using the various levers in our business model and maintain financial flexibility. And we'll continue to invest strategically for the long term in areas that strengthen our foundational capabilities such as technology, control management and customer acquisition as well as capitalizing on opportunities that emerge for expanding our membership model with new and enhanced products, services and experiences.

[Stephen Squeri, Chairman & CEO at American Express]

As we move ahead, we are committed to following these principles and leveraging the advantages of our business model, which makes me confident that we are well positioned for continued growth over the long term. I'll now turn it over to Christophe to provide more color on our first quarter results and then we'll answer your questions.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Thank you, Steve, and good morning, everyone. In the first quarter, we generated 8% FX adjusted revenue growth or 9% excluding the impact of Deep Pure and earnings per share of $3.64 These results are tracking in line with the guidance we gave for the full year. Key business indicators such as spend, retention, credit performance and demand for our premium products continued to be strong and stable in the quarter. While the level of macroeconomic uncertainty has increased, the activity that we see across our customer base is consistent with and in many cases better than what we saw in 2024. Turning to billed business performance, starting on slide three.

[Christophe Le Caillec, Chief Financial Officer at American Express]

I'd remind you that the grow over from leap year in 2024 drove about a percentage point drag on year over year growth rates across segments and spend categories. As we look at spend trends over the next few slides, I'll speak to bill business growth rates that are adjusted for leap year as well as FX. Total bill business was up around 7.5% year over year. This growth is around one percentage point higher than what we saw for the full year 2024. Goods and Services spending sustained the uptick we saw in Q4 of last year, continuing to grow at a faster pace than what we saw in 2024.

[Christophe Le Caillec, Chief Financial Officer at American Express]

And T and E grew in line with the steady levels we saw for most of the last most of last year, reflecting continued strength in restaurant and lodging spending. We did see a deceleration in airline spending relative to 2024 trends. Although spending on front of cabin tickets remained strong, up around 11% in the quarter. As we break down spend trends across our business over the next few slides, there are a few key points I want to highlight. We continue to see solid growth across our affluent U.

[Christophe Le Caillec, Chief Financial Officer at American Express]

S. Consumer base. We spent up 8%. Millennial and Gen Z customers once again drove our highest billed business growth within this segment. Commercial services spend was up 3% versus last year consistent with the trends we saw in 2024.

[Christophe Le Caillec, Chief Financial Officer at American Express]

U. S. SME spending at wholesale merchants saw a modest acceleration in growth over the quarter, possibly reflecting higher purchases in advance of potential price increases. International card services spend was up 14%. This strong growth was seen across geographies with each of our top five markets growing by double digits.

[Christophe Le Caillec, Chief Financial Officer at American Express]

And we continue to see strong demand for and engagement with our products. Turning to lending performance on slide seven. Loans and con member receivables increased 7% year over year on an FX adjusted basis. Our premium products continue to be the primary driver of that growth with our pay over time and co brand portfolios driving around 80% of growth in card member revolving loans in the first quarter. These products tend to attract high creditworthy customers, supporting our model of growing lending while maintaining best in class credit performance.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Turning to Slides eight and nine. Our credit performance continues to be very strong. Both delinquency and write off rates were below pre pandemic levels and flat to the prior year. The profile of the portfolio has strengthened over the past few years. Looking at our recent acquisitions, the delinquency rate of low tenure customers defined as those with twenty four months or less of tenure is about 30% lower than twenty nineteen levels for U.

[Christophe Le Caillec, Chief Financial Officer at American Express]

S. Consumer Card members. This quarter, we had about $1,200,000,000 of provision expense. This include a small reserve release, mostly reflecting the strong quality of the portfolio and the macroeconomic outlook as of quarter end. Turning next to revenue on slide 10.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Total revenues were up 8% year over year on an FX adjusted basis or 9% excluding leap year. Before we discuss this quarter's trends, I'll remind you that the strengthening of the U. S. Dollar that occurred throughout last year continues to be a headwind to reported revenue growth, although a bit less than we anticipated earlier in the quarter. Also starting this quarter, we consolidated Process revenue within service fees and other revenue.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Starting with discount revenue. Our largest revenue line was up 5% year over year FX adjusted and is mostly driven by the spend trends I discussed earlier. Net car fees were at record levels and increased 20% FX adjusted, as shown on Slide 12, reflecting our twenty seventh consecutive quarter of double digit car fee growth. And we saw strong demand for our products as we acquired 3,400,000 new cars in the quarter. A key driver of our strong car fee growth over the past few years has been the acquisition of new card members on fee paying products, which accounted for around 70% of new accounts in the quarter.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Another important contributor has been our ability to attract customers on higher fee products over time. Over the past three years, the average card fee per new account acquired has increased by around 40%, reflecting strong demand for our premium products and our success in pricing for the increased value we provide customers as we refresh our products. Turning to Slide 13. Net interest income increased 11% on an FX adjusted basis, growing slightly faster than loans and receivables as we saw increases in net yield versus last year. Turning now to expense performance on slide 15.

[Christophe Le Caillec, Chief Financial Officer at American Express]

The VCE to revenue ratio came in at 43% this quarter. Rewards expense grew 16% year over year. As a reminder, this quarter we are growing over the benefit we saw in Q1 of last year from changes to our URR model. In addition, as we mentioned last quarter, some small changes we made to the program that are good for both customers and our overall economics are driving a small increase in the URR in the short term. Now that we have lapped the impact from the URR model change last year, we expect rewards to grow more in line with the historical trend for the remainder of this year.

[Christophe Le Caillec, Chief Financial Officer at American Express]

As you can see, marketing and OpEx continue to be key sources of expense leverage for our business. And our flexible model is an important advantage that allows us to dial up or down expenses as needed through different economic environments. Let me move to capital on slide 16. Our CET1 ratio was 10.7%, within our 10% to 11% target range. We returned $1,300,000,000 of capital to our shareholders, including $600,000,000 of dividends and $700,000,000 of share repurchases.

[Christophe Le Caillec, Chief Financial Officer at American Express]

And this quarter, we increased our dividend by 17%. Our differentiated spend and fee driven business model generates a strong ROE, which was 34% in the quarter, providing us with very strong capital flexibility. Before we turn to our 2025 guidance, let me talk about the trends we're seeing in recent weeks. As Steve discussed, looking at the April, overall spending trends are consistent with Q1. We are seeing this performance for both the T and E and Goods and Services as well as across our U.

[Christophe Le Caillec, Chief Financial Officer at American Express]

S. Consumer, international and commercial customer segments. Given the environment, we have also seen SME purchases accelerate with wholesale merchants. Additionally, demand for our products is in line with our expectations. This brings me to our 2025 guidance.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Given the stability of our performance to date, we are maintaining our guidance of revenue growth of 8% to 10% and earnings per share between fifteen percent and $15.5 This guidance incorporates a macroeconomic outlook with a peak weighted average unemployment rate of around 5.7%, higher than the outlook as it stood at quarter end. Of course, there are clearly many uncertainties in the macroeconomic environment, but given the balance of factors, we believe this guidance is appropriate. And more importantly, we remain confident and focused on the long term growth of the company. With that, I will now turn the call back over to Kartik, and we will take your questions.

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

Thank you, Christophe. Before we open up

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

the lines for Q and A,

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

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. Operator?

[Operator]

You. Our first question comes from Sanjay Sakhrani of KBW. Please go ahead. Sanjay? Please make sure your phone is not on mute.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Sorry, I was on mute.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

Morning. Sorry.

[Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)]

So Steve, we've heard a lot about pull forward of spending. And I'm just curious if you guys have seen any indication that that's sort of propping up spend volumes. And then just sort of along the lines, if we do see some volatility or weakness in spending and revenues, how far do you want to go in terms of sort of protecting earnings? How low does revenues need to go for you to just cut the line in terms of expense reductions? Thanks.

[Stephen Squeri, Chairman & CEO at American Express]

So look, we really haven't seen any pull forward at all. I think when you look at the entire first quarter and I think you really want to focus in on March and early April, there's really been no pull forward at all. We see a

[Stephen Squeri, Chairman & CEO at American Express]

little bit in small business,

[Stephen Squeri, Chairman & CEO at American Express]

a little bit in wholesale pull forward. But I mean you're talking a couple of points here. You're not talking about anything significant. So I don't think that has been a phenomenon. Having said that, it's still early in the game, right?

[Stephen Squeri, Chairman & CEO at American Express]

I mean we're early innings here and we'll just have to see how it all plays out. But just to be clear, from a consumer perspective, we've seen no pull forward at all. And people continue to book and we didn't talk about this in the call, but we had the highest number of travel bookings that we've had that we've ever had in Internet and that included that includes a high in international as well, international bookings from our travel related services. So I think that we haven't seen a pull forward. We're seeing our customers act as they have acted in the past.

[Stephen Squeri, Chairman & CEO at American Express]

The other two points I'll make and then I'll get to the revenue one is that one thing that has not been associated with our card member spending has either been what's happened with the stock market or what's happened with consumer confidence. Our card members may say they don't have any confidence in the economy, but they still continue to spend. And they're not spending off what's in the market. So those two factors, which I get asked a lot about, are not really factors in our customer spending. I think look as we've said before from a perspective and I said this at conferences, we believe that at that 8% range we can make EPS number.

[Stephen Squeri, Chairman & CEO at American Express]

And but the other thing that I will say is that I'm not going to pass up good opportunities to invest for the future just to hit a number. I mean, it's not how I've run the company over the last seven years or so. And as I said, even during COVID, we continue to invest when others might have pulled back. And so I just want to reinforce, we are running this company for the longer term. If I see a good opportunity, I'm going to continue to invest in it.

[Stephen Squeri, Chairman & CEO at American Express]

But I do believe where we are right now with the macroeconomic situation the way it is that we can continue to be within our guidance range on both revenue and EPS. And as we've said in the past, we have the aspirational goal of 10% revenue. However, we also have said that we can make we can hit our EPS range if revenue goes lower.

[Operator]

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

[Mark Devries, Director at Deutsche Bank]

Yes. Thanks. So if some of these steeper tariffs go through as initially proposed, Steve can you just talk about which segments of your business you would expect to be under the most pressure? And is there anything you can do from a risk management perspective to get out in front of that?

[Stephen Squeri, Chairman & CEO at American Express]

Well, I mean, from a risk management perspective, we're constantly on a daily basis modifying our inputs and modifying our models and looking on that. So we always like to think we're way out in front of that anyway. But I think that way you would wind up looking is you would look at small businesses first. I think small businesses might be the ones that would be impacted first. And if you think about our consumers, what our consumers tend to do is what they would tend to do is they spend a little bit less, revolve a little bit less.

[Stephen Squeri, Chairman & CEO at American Express]

And I'll just take you back to COVID. Remember, we have a really a self liquidating balance sheet, right? And so our balance sheet is made up a lot of our AR. And as consumers spend a little bit less, that's how they regulate risk. And but small businesses, I think small businesses are the ones that we would pay a lot more attention to just because cost may not they could be put in a situation that will not be able to compete effectively in the market.

[Stephen Squeri, Chairman & CEO at American Express]

So we'll continue to look at small businesses as this situation evolves. But rest assured, we're looking at this proactively right now much like we did pre COVID in terms of looking at people's lines, looking at who we bring into the franchise. And what I would say is that if you look at our card base now versus our card base in 2019, it is more premium than it was at that point with higher FICOs. And the other thing that I'll say, because people will start looking at millennials and low tenure card members. Our millennial and Gen Zs are performing significantly better both from a FICO perspective and from a delinquency perspective than the industry.

[Stephen Squeri, Chairman & CEO at American Express]

And secondly, our low tenure card members, their delinquency rates are actually lower than our low tenure card members were back in 2019.

[Operator]

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

[Donald Fandetti, Managing Director at Wells Fargo]

Good morning. Steve, can you talk a little bit about card refresh I know one of your competitors recently raised fees on co brand cards. Kind of in this environment, do you still feel like you have the ability to sort of grow fees?

[Stephen Squeri, Chairman & CEO at American Express]

I think that look, we're still committed to doing refreshes. We've refreshed over 150 products over the last five years or so. We've got a bunch of refreshes in progress. How many we wind up doing, we'll see how it all plays out. It's more due I think there's a lot of them in progress.

[Stephen Squeri, Chairman & CEO at American Express]

The question becomes how from a value proposition development, technology development, how they all get through this through the pipeline this year. But we're still committed to doing refresh. As far as raising fees, we don't raise fees indiscriminately. You raise fees when you add value. And our playbook has been we will raise the fee when we raise value that is even more commensurate than with the fees.

[Stephen Squeri, Chairman & CEO at American Express]

So as we think about refreshes, what I would tell you is that whatever fee we wind up raising and look, the reality is we don't do a lot of refreshes without raising the fees, but we also don't do any refreshes without significantly enhancing the value that we put in. So you can rest assured that when someone does a rational calculation of what the fee raise is and what the value is, it becomes an easy decision to continue with the product or even a better decision to get the product at that particular point in time. So that the environment will not impact our fee decisioning with our cards because that fee decision is totally based on value and our card members wind up getting back more than they put in. And one might argue it might even be a better investment at this time than in a good environment.

[Operator]

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

[Rick Shane, Analyst at JP Morgan]

Hey, guys. Thanks for taking my questions this morning. Steve, you talk about investing across the cycle basically as a strategic initiative. I'm curious tactically given where we are, where you see opportunities. And I'm curious sort of where you're going to be more aggressive, where you're to be more defensive.

[Rick Shane, Analyst at JP Morgan]

And I did note that the amount of capital you retained from first quarter profits was the highest it's been since COVID. So I'm curious how you're looking at capital aggressively or offensively, defensively as well.

[Stephen Squeri, Chairman & CEO at American Express]

Yes. So I'll let Christophe answer the capital question. I mean, there's always we look to return about 80% of our earnings to our shareholders. And you'll notice from quarter to quarter, it does swing. And particularly in the first quarter, just go back historically, the first quarter is usually one of our lowest quarters where we do return capital.

[Stephen Squeri, Chairman & CEO at American Express]

But the capital that we return this particular quarter was only about $300,000,000 less than we actually returned in the fourth quarter of last year. So it wasn't all that much. They're checking the slides to make sure that my comment was correct there. But look, from an investment perspective, you just saw that we just completed the center acquisition. We believe that that's an important acquisition for us for small business and for middle market.

[Stephen Squeri, Chairman & CEO at American Express]

And that obviously has some capital implications especially in the second quarter as we closed it. But when you at our business and specifically in technology, we're constantly upgrading our technology infrastructure. When I talk about technology infrastructure, I'm not only just talking about the hardware aspects of it, but I'm talking about all the systems that run behind it. And the reality is that some of these projects go for a couple of years and some of them are months and what have you, but you can't stop the upgrading and the investment from a technology infrastructure because you anticipate times may be a little bit tough. It has to continue because we're running this company for the long term and anybody that's ever been involved in this realize you don't stop and start long term projects.

[Stephen Squeri, Chairman & CEO at American Express]

The other thing that you don't stop and start is you don't stop and start your refresh strategy. I mean, have been committed to continually enhancing and developing our products and services over long term. And we're on a program that basically says we're going

[Stephen Squeri, Chairman & CEO at American Express]

to refresh all our products and I'll

[Stephen Squeri, Chairman & CEO at American Express]

put all in quotes from a three to four year cycle. And so you just can't stop that. If you did, then I think you're doing a disservice to your customers and you're doing a disservice to your shareholders. And this goes back to Sanjay's earlier question about how much potentially would you cut to make EPS guidance. And my perspective is that again, we're running it for the longer term.

[Stephen Squeri, Chairman & CEO at American Express]

And for me to stop a technology project or for me to stop a refresh or enhancements because I want to make another $0.20 for the year is foolhardy. And it's not something that you would ever you shouldn't ever expect me to do. So we're looking to make sure that this company continues to become stronger day by day, and you do that by continuing to invest and continuing to stay true to what your core principles are.

[Christophe Le Caillec, Chief Financial Officer at American Express]

So maybe to add a bit of color on capital. There's not a lot to add as a matter of fact because you covered most of it. But as you know, Rick, the governor here is our CET1 ratio. That is what will define the amount share repo that we're to do. And we target between 1011%.

[Christophe Le Caillec, Chief Financial Officer at American Express]

We're a little bit on

[Christophe Le Caillec, Chief Financial Officer at American Express]

the high side at 10.7%, but you shouldn't read anything in that. And if you look at over time, we've been at 10.8%, ten point five %. So we're ending up a little bit on the high side at the end of the quarter, and that's it. Peter, we distributed exactly the amount that we had in our plans in terms of capital. I will mention though that this is the first quarter where we increased the dividend by 17%.

[Operator]

Thank you. The next question is coming from Erika Najarian of UBS. Please go ahead.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

Hi, thank you. I just wanted to confirm, the 8% to 10% revenue guide, you said something to the effect of that now takes into account a 5.7% unemployment rate. I just wanted to confirm that, A, you feel like you can generate 8% to 10% revenue growth even in light of an unemployment rate, that we haven't seen in a while. And to that end, I think, Steve, you mentioned that the stock market really didn't impact spend. I'd be curious to understand since your data is so good in terms of how spend progressed January through March, particularly in your affluent consumer segment.

[Erika Najarian, Managing Director & Equity Research Analyst at UBS Group]

As you had mentioned in the last call that January is off to a strong start. And then just wondering whether or not the resilience had sort of carried through even though we had all the headline risk and stock market volatility in March.

[Stephen Squeri, Chairman & CEO at American Express]

Yes. So I'll give you a little color on the spending here. The reality is January, February and March pretty much looked exactly the same, 0.2 here, 0.2 there. And the first eleven, twelve days in April are slightly stronger than that. So it has been consistent.

[Stephen Squeri, Chairman & CEO at American Express]

There has been really no movement really up or down. The only thing I would say is that when you looked at small business, you did see a little bit of a tick up as we moved into the March, but I'm talking minor, half a point or something like that. And then you saw a little

[Stephen Squeri, Chairman & CEO at American Express]

bit of a pickup in

[Stephen Squeri, Chairman & CEO at American Express]

the first eleven days. But we'll see how all that plays out. And I think April will be an interesting month because you have Easter. And traditionally, you don't have as much corporate spend. You may not have as much small business spend, retail spend, so forth and so on.

[Stephen Squeri, Chairman & CEO at American Express]

So we'll see how April plays out. And last year, Easter was, I think, at the March. As far as unemployment, look, we have 5.7% incorporated in our macro. I think

[Stephen Squeri, Chairman & CEO at American Express]

for

[Stephen Squeri, Chairman & CEO at American Express]

us, what when we look when we really look at unemployment, it's really more white collar unemployment that is more of a driver of potentially spending than it is total overall unemployment because of how our card base tends to skew. So we watch that very carefully, but we feel really comfortable with the even though the unemployment level is that we have in our outlook is higher than it's been, we feel comfortable with holding the guide at this particular point in time. So obviously, there'll be more to come as the months go by. But right now, a spend perspective, very consistent, and we feel comfortable with the we're I mean, we feel comfortable where the unemployment level is as far as our guidance goes.

[Christophe Le Caillec, Chief Financial Officer at American Express]

Let me maybe, Erika, give you a bit more color in terms of how to think about that 5.7 We thought it would be useful to investors, to analysts to share with you how we've been thinking about their credit reserve. And as you know, we run multiple scenarios. The math is very complicated. Lifetime losses. So the 5.7% represents the peak unemployment rate for the purpose of this reserve calculation.

[Christophe Le Caillec, Chief Financial Officer at American Express]

So it doesn't mean that we are anticipating that tomorrow unemployment will jump to 5.7% and will stay there for the balance of the year, right? You have to think about it in the context of the CECL calculation.

[Operator]

You. The next question is coming from Jeff Eilson of Morgan Stanley. Please go ahead.

[Jeffrey Adelson, Executive Director at Morgan Stanley]

Hey, good morning. Thanks for taking my questions. Steve, I know that millennial and Gen Z cohort continues to be a source of strength for Amex. You're calling out the continued 60% plus of acquisitions, the better FICO and DQs versus the industry, and your spend growth is running higher there. But just curious, are you noticing any sort of under the hood issues with that group from things like, you know, student loan repayments starting.

[Jeffrey Adelson, Executive Director at Morgan Stanley]

You know, there's been some reporting of, some servicing issues for that group with the repayment starting. And I'm just wondering if if there's any stats you can give on maybe, spend per a card or account for that cohort just given that it's represented so much of your account growth so far? Thanks.

[Stephen Squeri, Chairman & CEO at American Express]

Yes. We haven't seen anything. And I'll just take you back to we'll just throw a couple of statistics out. When you look at spend growth for that cohort for the quarter, it was up about 15% in The U. S.

[Stephen Squeri, Chairman & CEO at American Express]

Consumer business and it's representing about 35% of overall spend. When you look at it internationally, it actually was up 22% in the quarter. So millennial and Gen Z is even a larger contributor internationally. I'll take you back to Investor Day where we talked about how they continue to grow year to year. And so we're still seeing that.

[Stephen Squeri, Chairman & CEO at American Express]

The thing I will point out is that our millennial not every millennial, not every Gen Z have our card. As I think I mentioned a little bit earlier, the delinquency rate that we're seeing is a lot less than what the industry sees. The FICO is a lot higher. And a lot of them tend to be more lower tenure as they come into the franchise, and that delinquency rate is better than it was back pre COVID. So we don't disclose the actual card account billings on it.

[Stephen Squeri, Chairman & CEO at American Express]

And we did disclose it as we did that last at the Investor Day. And maybe we'll do that at another point in time. But today, I'm not going to share that because I don't have it at my fingertips either.

[Christophe Le Caillec, Chief Financial Officer at American Express]

So maybe what I can add to those, if you're looking for numbers, their millennial and Gen Z combined spend about 20% less than the older generation. So they do spend a bit less. They revolve a bit less as well. The other data point that we have shared in the past as well that echoes what Steve just said is that at acquisition, the average FICO of this cohort is $750,000,000 So very strong, very strong.

[Operator]

You. The next question is coming from Craig Moore of Feet Partners. Please go ahead.

[Craig Maurer, Managing Director at Financial Technology Partners]

Yes, Appreciate taking the questions. I wanted to go back to something you said earlier. Investors are spending time hardening their books for what is expected to be a significant change in the economy over the next sort of nine to twelve months. So you had mentioned FICO scores as consumer confidence wealth effect. Not to not to channel John Wick, but the the boogeyman of the last recession was FICO creep and, you know, was FICO creep and companies getting caught thinking they were making better loans.

[Craig Maurer, Managing Director at Financial Technology Partners]

Plus, with consumer confidence falling and the wealth effect, especially how that might impact the younger cohorts, maybe you can talk about what you're basing your view on that consumer confidence and wealth effect won't impact spend. And sorry not to sneak this in, but could you also let us know what percentage of SMB build business is related to e commerce businesses? Thanks.

[Stephen Squeri, Chairman & CEO at American Express]

Patrick? I don't have your the sneak in, I can't answer because I don't have that at my fingertips here either. But I guess that will become potentially more important as time goes on, and so we'll look into that. Craig, as far as what we're basing it on in terms of the wealth effect and consumer confidence, history, the history of our cardholders. Mean, it's just look, I've been here for forty years and been through nineeleven, financial crisis, COVID and everything else.

[Stephen Squeri, Chairman & CEO at American Express]

And the reality is that has not been sort of the determining driver from a credit crunch perspective for us. So and again, look, I think we'll continue to look at FICO scores. And I think there has been we've said this and I think the industry has said this, there has been an acceleration probably in some of the FICO scores. But it's not the only thing we look at. It's an easy metric to talk about.

[Stephen Squeri, Chairman & CEO at American Express]

But certainly, that's not what was in our it's not within our models, the only thing in our models. There's a lot more in our models that go into making credit decisions. But look, we look at historically at what our card base has done and what has impacted our card base. And I would say that white collar unemployment from a credit perspective has probably been our John Wick, if you will, than more than anything else.

[Christophe Le Caillec, Chief Financial Officer at American Express]

So I'll add just one thing, Craig. If you put if you take a step back away from FICO and you look at, say, delinquency rate, as you would expect, the variability on the credit standpoint is either higher with the low tenure card members. And therefore, we are looking and that's why we in my prepared remarks, I shared this new data point for you guys to get an appreciation in terms of how we're thinking about that credit risk. If you look at the low tenure card members, so those who've been with us less than two years, and you look at their delinquency rate today for that for those balances versus what it was for this same group of customers back in 2019, the delinquency rate of 30% lower, right? So that reflects a lot of things, including the skew that we saw in the previous five, six years in terms of acquiring premium card members and managing the book very, very carefully.

[Christophe Le Caillec, Chief Financial Officer at American Express]

So delinquency rate is just it's a good metric to look at and that looks much better than where we were pre COVID. And at that time, we were already best in the industry.

[Operator]

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

[Cristopher Kennedy, Research Analyst - Financial Services & Technology at William Blair]

Good morning. Thanks for taking the question. Steve, you mentioned the acquisition of Center that comes after a string of other deals, whether it's Cabbage, Nuependo, others. Can you just talk about that journey and kind of give a state of the union on the SME technology investments? And then how can that translate into better organic spend over time?

[Cristopher Kennedy, Research Analyst - Financial Services & Technology at William Blair]

Thank you.

[Stephen Squeri, Chairman & CEO at American Express]

Yes. I think look, we've been on a journey here is to build more capabilities up for our SME customers. And if you look at it, one of the things that we've said is we wanted to increase our relevance with our SME customers. And CABG has become the platform where we want our SMEs to live. Within that platform, obviously, you have the ability to look your card information, to do cash flow analysis, to have a checking account, to apply for loans.

[Stephen Squeri, Chairman & CEO at American Express]

When you look at one AP and Npendo, that's really all about automating the B2B piece of it. And then I think one of the things that was missing for us and we were doing this through partnerships, but it became apparent it needed to be more core to our more core to us overall is the expense management piece. We already have the travel piece with our travel service. And so what we're doing is we're constantly building out the offerings that we have for our small businesses. How that affects organic spend, we'll have to see.

[Stephen Squeri, Chairman & CEO at American Express]

But I think what it does, it will certainly help from a retention perspective and an acquisition perspective as well. I think from an organic perspective, the more we can utilize one AP and Impendo, the more we can get B2B more B2B payments in there through that channel. But we're on a journey and now it all needs to continue to be knitted together. Obviously, Center is not integrated into the Cabbage solution, but that's to the Cabbage platform. But ultimately, what you will do is you'll have one ecosystem where all of these things live.

[Stephen Squeri, Chairman & CEO at American Express]

And I think that will help drive more retention, more acquisition and potentially more organic spending. I mean organic spending traditionally is more of how they're running their businesses. And we saw pre COVID or just during COVID how all that organic spend went down. And then we saw post COVID how it went up as they stocked up on inventory. So we'll have to see how that plays out.

[Stephen Squeri, Chairman & CEO at American Express]

But we're excited about center and we're excited about the suite of capabilities that we've built out from an SME perspective now.

[Operator]

Thank you. The next question is coming from Terry Ma of Barclays. Please go ahead.

[Terry Ma, Senior Equity Research Analyst at Barclays]

Hi. Thank you. Good morning. Maybe to just follow-up on your comments around refresh strategy. You called out about 35 to 50 planned product refreshes for this year last quarter.

[Terry Ma, Senior Equity Research Analyst at Barclays]

And I get that you want to invest in the long term and you don't want to stop the refresh strategy. But just given that there's so much macro uncertainty and maybe potential uncertainty around the ROI of those refreshes. Do you kind of adjust or delay some of those until there's more clarity? And what does that mean for your marketing budget for the year? Thank you.

[Stephen Squeri, Chairman & CEO at American Express]

Yes. So at the moment, no changes to the marketing budget at all. I don't think the refresh itself, when you're looking at the refresh, think that as I said before, we haven't stopped refreshes in the face of even the pandemic. I mean, we were working through our Platinum refresh at that particular and green at that particular point in time and also working on others behind the scenes because as I've said before, refreshes don't happen overnight. Years ago, we got a lot of credit for reacting to the Chase Sapphire, but it's something that we started nine to ten months ago.

[Stephen Squeri, Chairman & CEO at American Express]

So no, we're not going to stop the refresh strategy. I don't think that from an ROI perspective there is there would be, as I would say, a reason to do that. As we go to acquire cards, we look at where the credit box is at that particular point in time. We'll see. But that's a these refreshes happen over a period of time.

[Stephen Squeri, Chairman & CEO at American Express]

So it's hard to stop them once they're in progress. And I think we have a lot of confidence once they're done to put them out into the marketplace.

[Operator]

Thank you. The next question is coming from Gus Gala of MCH. Please go ahead.

[Gustavo Gala, Analyst at Monness, Crespi, Hardt & Co., Inc]

Hey, good morning, Steve. Good morning, Christophe. I wanted to ask around restaurants. It seems like a lot of the work done there has been key in winning Gen Z millennial share versus other premium value props available in North America. How do you think about enhancing the value proposition there?

[Gustavo Gala, Analyst at Monness, Crespi, Hardt & Co., Inc]

And similar vein, can you talk about other categories or maybe your experiential differentiation where you're not really competing on the rewards, but more like the, you know, services, could further help capture that Gen z millennial base?

[Stephen Squeri, Chairman & CEO at American Express]

Well, millennials and Gen z are spending way more in restaurants from a transaction perspective than any other cohort that we have. And if you just look at the refresh strategy, look at what we did with Gold. I mean Gold could have been renamed the restaurant card between the rewards accelerator, the resi credit and the Global Dining collection. I think look, you go back to the acquisition of resi, you go back to the acquisition of TOP, you look at Rome, all three of those things are really targeted at sort of trying to build a moat around the restaurant industry, not only from a Cardmember perspective, but also from a restaurant perspective. I mean it is a microcosm of our closed loop, right?

[Stephen Squeri, Chairman & CEO at American Express]

When you think about what we've done with resi and Toc and then as we integrate the Rome capabilities in, it's a closed loop within a closed loop. And I think that is that's something that's really appealing to our restaurant customers and it's also appealing to our card members and especially millennials and Gen Z. Look, we'll look for other verticals where that makes sense. Look, one would argue that the other verticals where it does make sense with our travel business is also with lodging and with airline, right? I mean, if you think about it, look at the Platinum Card and being able to book through Platinum Travel Services, it's another example of a closed loop within.

[Stephen Squeri, Chairman & CEO at American Express]

And when you look at the Platinum Card value proposition with Fine Hotels and Resorts, it is really a way to provide value, especially to our younger customers. I mean, when you book a Fine Hotel and Resort, the value proposition here is pretty good, right? I mean, it's early check-in, late checkout, upgrades, free breakfast, 100 credit. So that's another example of where we're connecting our card members with our partners from a hotel perspective. And obviously, we've been doing that with airlines for years.

[Stephen Squeri, Chairman & CEO at American Express]

So I think when you think about millennials and Gen Z, I think leaning in those areas for them are pretty critical. And the Gold Card relaunch is a really good example. Our partnership with Dunkin' was a really good example of really leaning in to the transaction affection that they have for dining and for all things that are dining.

[Operator]

Thank you. The next question is coming from Rob Wildhack of Autonomous Research. Please go ahead.

[Robert Wildhack, Equity Research Analyst - Director at Autonomous Research]

Good morning, guys. I wanted to follow-up a little bit more on the SMB technology side with Cabbage Center, etcetera. Steve, I think you mentioned eventually having one ecosystem. Could you speak to the integration effort there? How all these platforms come together?

[Robert Wildhack, Equity Research Analyst - Director at Autonomous Research]

How that looks for the end customer today? And then when do you expect you can go to market with the full expanded product suite inclusive of Center? Thanks.

[Stephen Squeri, Chairman & CEO at American Express]

Well, we just closed on Center yesterday. So that's it'll happen over time here. But if you look at if you're an SME customer, you go on to the CABG platform, you can reach Micah, which is if you're a cardholder and a lot of our cardholders just do business right now with us through the app anyway. But pre app, it was through MyCard account. And so as you go through Cabbage, you can access MyCard account.

[Stephen Squeri, Chairman & CEO at American Express]

You can apply for the loan. You can access your transaction checking account. So that's pretty much there at this point. What the next step is to really then as we integrate CenterOn in, is to link that right in. I don't have an exact time on that.

[Stephen Squeri, Chairman & CEO at American Express]

As a bank holding company, there are certain hardening that we need to do, let's say, that around the center project product. And so we're going to do that. But part of all of that will be integrating it on into But again, just to remind everybody, we closed on yesterday.

[Operator]

Thank you. Our final question today is coming from Mihir Bhatia of Bank of America. Please go ahead.

[Mihir Bhatia, Analyst at Bank of America]

Hi, good morning and thank you for taking my question. Steve and Christa, you're not striking a pretty confident tone on the call today about the outlook in a variety of macro environments. I think you've also talked before about being more confident in achieving the mid teens EPS versus maybe some noise in year over year revenue. So I just wanted to go back to where we started the q and a where Sanjay started the q and a. Can you just talk a little bit more about the cost structure and the potential for cost optimization if things get choppy?

[Mihir Bhatia, Analyst at Bank of America]

Like I understand there's rewards costs and things like that that naturally get lower. But big picture, just talk a little bit about the expense flex in the model as you continue to invest? Thanks.

[Stephen Squeri, Chairman & CEO at American Express]

Yes. I mean, here's what you can expect. I mean, obviously, you've got the story as it relates to rewards and as it relates to sort of cost of card member services. As spending goes down, those go down. From a technology perspective, we're not going to veer off our technology plan.

[Stephen Squeri, Chairman & CEO at American Express]

I mean it just doesn't make any sense to stop and start from a technology perspective. Our marketing budget is a lot bigger than it ever has been. And in an environment of uncertainty, you would raise the thresholds. You may not have as much line of sight into the credit box as you'd like to have. And so there's a tremendous amount of expense flexibility within that line and there's expense flexibility within our OpEx line as well.

[Stephen Squeri, Chairman & CEO at American Express]

So but what we will not do as I said earlier and I started this way, we're not going to just cut expenses to make the EPS number if we see good opportunities for growth. And one of the things that we did during COVID was we really ratcheted back on acquisition tremendously because we didn't have good line of sight into creditworthy cardholders. But what we did do is we pivoted a large percentage of that money and added incremental value to our value propositions at that particular point in time, which the end result of that was twofold. Number one, it led to higher retention for us and it led to more stickiness in terms of where we actually made those value proposition investments. And so we'll play the whole thing out.

[Stephen Squeri, Chairman & CEO at American Express]

But again quarter to quarter, year to year, it's about really investing for the long term here and making the right longer term decisions, but there is flex in the model as it relates to marketing and as it relates to OpEx.

[Kartik Ramachandran, SVP & Head of Investor Relations at American Express]

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.

[Operator]

Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at (877) 660-6853 or (201) 612-7415, access code 13752401 after one p. M. Eastern Time on April 17 through April 24. That will conclude our conference call for today.

[Operator]

Thank you for your participation. You may now disconnect.

Participants

Executives

• Kartik Ramachandran, SVP & Head of Investor Relations
• Stephen Squeri, Chairman & CEO
• Christophe Le Caillec, Chief Financial Officer

Analysts

• Sanjay Sakhrani, Managing Director at Keefe, Bruyette & Woods (KBW)
• Mark Devries, Director at Deutsche Bank
• Donald Fandetti, Managing Director at Wells Fargo
• Rick Shane, Analyst at JP Morgan
• Erika Najarian, Managing Director & Equity Research Analyst at UBS Group
• Jeffrey Adelson, Executive Director at Morgan Stanley
• Craig Maurer, Managing Director at Financial Technology Partners
• Cristopher Kennedy, Research Analyst - Financial Services & Technology at William Blair
• Terry Ma, Senior Equity Research Analyst at Barclays
• Gustavo Gala, Analyst at Monness, Crespi, Hardt & Co., Inc
• Robert Wildhack, Equity Research Analyst - Director at Autonomous Research
• Mihir Bhatia, Analyst at Bank of America