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American Express Q4 2022 Earnings Call Transcript


Listen to Conference Call View Latest SEC 10-K Filing

Participants

Corporate Executives

  • Kerri S. Bernstein
    Senior Vice President & Head, Investor Relations
  • Stephen J. Squeri
    Chairman & Chief Executive Officer
  • Jeff Campbell
    Vice Chairman & Chief Financial Officer

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q4 2022 Earnings Call. [Operator Instructions] 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. Kerri Bernstein. Thank you. Please go ahead.

Kerri S. Bernstein
Senior Vice President & Head, 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. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com.

We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results; and then Jeff Campbell, Chief Financial Officer, who will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff.

With that, let me turn it over to Steve.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Thanks, Kerri. Good morning, everyone. Thanks for joining us today.

It's great to be with you to talk about our 2022 results and our outlook for 2023. As I go through our results, I'll tell you why they strengthened my confidence in our plan to generate strong growth over the long-term. A year ago, we introduced our growth plan, which provided a road map for delivering annual growth rates for revenue and earnings per share at levels that are higher than the strong growth rates we were delivering before the pandemic. Our results over the last four quarters demonstrate that our strategy is clearly working.

We exceeded the full-year guidance we laid out in our growth plan for both revenues and EPS, and we did so against the mixed economic environment. Revenues which reached all-time highs for both the quarter and the year were up 25% for the full-year, exceeding the 18% to 20% guidance. We started the year with an earnings per share of $9.85 was well above our guidance of $9.25 to $9.65. The momentum we saw through the year in Card Member spending engagement and retention continued in the fourth quarter. Fourth quarter billed business reached a record quarterly high of $357 billion and was up 25% for the full year, demonstrating our continued ability to acquire, engage and retain high spending premium card members.

Customer retention and satisfaction remained very strong. In addition to strong internal metrics, we were recognized once again by our customers for providing industry best products and services, ranking number one in customer satisfaction in both 2022 JD Power US Consumer Credit Card study and the US Small Business Card Study. The investments we've made in our value propositions continue to attract larger numbers of new premium customers. We acquired three million new Card Members in the fourth quarter, even as we increased our already high credit thresholds through the year.

For the full year, new card acquisitions reached a record level, growing $12.5 million and nearly 70% of our new accounts acquired on our fee based products. Millennial and Gen Z, customers continue to be the largest drivers of our growth, representing over 60% of proprietary consumer card acquisitions in the quarter and for the full year. Credit metrics remained strong, supported by the premium nature of our customer base, our exceptional risk management capabilities and the thoughtful risk actions we've taken through the year.

Looking ahead to 2023 and beyond, let me tell you why these results increased my confidence that we're positioned to deliver on our growth plan aspirations. First, we're in a great business. We operate in the most attractive segments and geographies of the fast-growing payment space. As highlighted by our leadership positions with premium consumers, including millennials and Gen Zs, small and medium-sized businesses, as well as serving the largest corporations in the world. We bring to this space a number of advantages that are very difficult for our competitors to replicate. These include our brands, our unique membership model, our premium global customer base and an integrated payments model.

Forming the foundation of these advantages is our talented, dedicated colleagues, who deliver unparalleled service to our customers. Together, the marketplace opportunities we see in the competitive advantages we can leverage, create a long runway for growth. We intend to capture these opportunities and build in our momentum by continuing to invest at high levels in several key areas. Continuously innovating our consumer and SME products, refining our powerful marketing and risk management engines and capturing our fair share of lending.

Growing merchant acceptance with a particular focus outside the US, and expanding partnerships to drive customer value across the enterprise, continuing to introduce new digital capabilities that deliver seamless intuitive customer experiences in their channels of choice and expanding into adjacencies that reinforce our core such as new lifestyle and financial services for consumers and SMEs, which adds more value to our membership model. All this investment happens while continually focus on gaining efficiencies in our marketing and operating expenses.

As we've demonstrated consistently over the past two years, executing this investment strategy build scale, which fuels a virtuous cycle of growth that starts with a high spending, highly engaged premium customer base. These premium customers attracting growing network of merchants and partners, who add more value to our membership model, which in turn enables us to attract more premium customers, who attract more merchants and partners, which creates more scale. This scale enables us to generate more investment in operating efficiencies in our membership model, making it more difficult for our competitors to catch up. So what does this mean for 2023.

Our plan for this year is built on continuing our investment strategy in the areas, I mentioned, while factoring into Blue-Chip economic consensus for slowing macro-economic growth. And as always, we have plans in place to pivot should the economic environment changed dramatically. This translates into 2023 guidance consistent with what we originally laid out in our growth plan last year. Specifically, we expect revenue growth of 15% to 17%, which is higher than our long-term growth plan aspirations and EPS of $11 to $11.40.

In addition, we plan to increase our quarterly dividend on common shares outstanding to $0.60 a share, up from $0.52, beginning with the first quarter 2023 dividend declaration. To sum up, our 2022 performance shows that our strategy is working and based on our performance to date and what we see for 2023, I mean, we're more confident in our ability to achieve our aspirations for double-digit annual revenue growth and mid-teens EPS growth in 2024 and beyond.

I'll now turn it over to Jeff to provide more detail about our performance. As always, we'll have a Q&A session after Jeff's remarks.

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

Well, thank you, Steve, and good morning, everyone.

It's good to be here to talk about our '22 Results, which reflects steady progress against our multi-year growth plan that we announced last January, and also to talk about what our 2022 results mean for 2023. I'll also spend some of our time this morning focusing on our full-year trends. Since it is year end and since looking at our business on an annual basis, it's more in sync with how we actually run the company.

Starting with our summary financials on Slide 2, full-year revenues reached an all-time high of $52.9 billion, up 27% on an FX-adjusted basis. Notably, our fourth quarter revenues of $14.1 billion also reached a record high for the third straight quarter and grew 19% on an FX-adjusted basis. This revenue momentum drove reported full year net income of $7.5 billion and earnings per share of $9.85. For the quarter, we reported net income of $1.6 billion and earnings per share of $2.07, which did include a $234 million impact from our net losses in our AMEX Ventures strategic investment portfolio.

As I've said throughout the year, year-over-year comparisons of net income have been challenging due to the sizable credit reserve releases we had in 2021. Because of these prior year reserve releases, we have also included pre-tax, pre-provision income as a supplemental disclosure again this quarter. On this basis, pre-tax pre-provision income was $11.8 billion for the full-year and $2.9 billion in the fourth quarter, up 27% and 23%, respectively, versus the prior year, reflecting the growth momentum in our underlying earnings.

So now let's get into a more detailed look at our results beginning with volumes starting on Slide 3. We saw good quarter-over-quarter growth in volumes. I would note that we've reached record levels of spending on our network in both the fourth quarter and full-year 2022. Total network volumes in billed business were up 16% and 15% year-over-year in the fourth quarter, and 24% and 25% for the full-year on an FX-adjusted basis. Now, of course, growth rates for quarters earlier in the year included more of a recovery on the lower levels of volumes in 2021. And we are now to the point, where we have lapped the majority of this recovery. We are pleased with this growth and the fact that it is being driven across customer types and geographies.

On Slides 4 through 7, we've given you a variety of views across our US Consumer Services, Commercial Services and International Card Services segments and the various customer types within each. There is a few key points I'd suggest you take away from these various perspectives. Starting with our largest segment, US Consumer billings grew 15% in the fourth quarter, reflecting the continued strength in spending trends from our premium US consumers.

Our focus on attracting, engaging and retaining number of cohorts of Card Members through our value propositions, throughout the 30% growth in spending from our millennial and Gen Z customers on Slide 5, where you can now see make up 30% of spend within the segment. Turning to Commercial Services, you see that spending from our US small and medium-size enterprise customers represents the majority of our billings in the segments, supported by our strategic focus on expanding our range of products to help our SME clients run their businesses. We saw another quarter of solid growth in US SME. Those who can see that it was the slowest growing customer type this quarter, up 8% year-over-year.

As you heard Steve talk about a bit last month at an Investor Conference, our SMEs have recently started to slowdown spending in certain categories such as digital advertising. So we continue to monitor spending trends. Moving to our US large and global corporate customers, the one small customer type that is not come back to pre-pandemic spend levels. They did continue through their steady recovery this quarter with overall billings now 11% below pre-pandemic levels.

And lastly, you see our highest growth in International Card Services. As this segment is now in a steep recovery mode given it's started it's pandemic recovery later than other segments. Spending from international consumers and international SME and large corporate customers grew 2023 and 32% year-over-Year, respectively, in Q4. Across all customer types T&E spending momentum remained particularly strong in the fourth quarter, while we also saw a nice sequential growth in the amount of goods and services spending versus last quarter. So there were a few pockets that slowed such as the digital advertising spend in SME that I mentioned earlier. So, what do all of these takeaways mean for 2023?

At this point, on a dollar basis, most of our spending categories have fully recovered. So I would expect more stable growth rates this year across spending categories with the exception that year-over-year growth rates for T&E spending will likely be elevated in Q1 as we lap the impact of Omicron from the prior year. Importantly, all of the things that Steve just talked about that make up the strategy underlying our growth plan, have created a foundation for sustainable growth rates greater than what we were seeing pre pandemic.

Now moving onto loans and Card Member receivables on Slide 8, we saw year-over-year growth of 24% in our loan balances as well as good sequential growth. This loan growth is now exceeding our spend growth as customers steadily rebuild their balances. Given the volumes of course have now lapped, there's steep phase of recovery, we do expect the growth rate of our loan balances to moderate as we progress through 2023, but to remain elevated versus pre-pandemic levels. The interest-bearing portion of our loan balances, which surpassed 2019 levels last quarter also continues to consistently rebuild with over 70% of year-over-year growth in the US coming from our existing customers, which is about 10 percentage points more than what we saw in the years leading up to the pandemic.

If you then turn to credit in provision on Slide 9 through 11, the high credit quality of our customer base continues to show through in our strong credit performance. Card Member loans and receivables write-off and delinquency rates remain below pre-pandemic levels. So they did continue to pick up this quarter as we expected that you can see on Slide 9. Going forward, we expect delinquency and write-off rates to continue to move up over time, but to remain below pre-pandemic levels in 2023 for Card Member loans.

Turning now to the accounting for this credit performance on Slide 10. Since it is year-end because the pandemic has clearly impacted the timing of quarterly reserve build and release adjustments across the industry, I think it's helpful to look at our full-year provision results. Full-year 2022 provision expense was $2.2 billion, which included a $617 million reserve build, primarily driven by loan growth, the continued steady and expected increase in delinquency rates and changes in the macroeconomic outlook as the year progressed.

The $2.2 billion number is, of course, still unusually low by historical standards relative to the size of our loan balances and Card Member receivables. Of the full-year $617 million reserve build, we saw $492 million of it in the fourth quarter. Since earlier this year, we were still releasing a significant amount of the credit reserves we built to capture the uncertainty of the pandemic. At this point, we no longer have any of these pandemic-driven reserves remaining on our balance sheet.

Moving to reserves on Slide 11, you can see that we ended 2022 with $4 billion of reserves representing 2.4% of our total loans and Card Member receivables. This reserve rate is about 50 basis points below the levels we had pre-pandemic for day one CECL, reflecting the continued premiumization of our portfolio and the strong credit performance we have seen. We view this consolidated reserve rate is more comparable to day one CECL than the individual loans and receivables rates because as we talked a bit last quarter, our charge products in many instances now have some embedded blending functionality. We expect this reserve rate to increase a bit, as we move through 2023, but to remain below pre-pandemic levels.

Taking all this into account, in 2023 you should expect to see provision expense move back towards more of a steady state relative to the size of our loan balances and Card Member receivables for the first time since we adopted CECL in early 2020. Given the combination of our strong loan growth and usually low level by historical standards and provision expense in 2022, I would expect a significant year-over-year increase in provision expense.

Moving next to revenue on Slide 12, total revenues were up 17% year-over-year in the fourth quarter and up 25% for the full year. This is well above our original expectations, driven by the successful execution of our strategy and this part of which strengthens our confidence in our long-term aspirations. Before I get into more details about our largest revenue drivers in the next few slides, I would note that you see a 200 basis-points spread between our FX-adjusted revenue growth and reported revenue growth for this quarter. While this is less of an impact from the strong dollar than what we saw in the prior quarter, it does remain a modest headwind.

Our largest revenue line discount revenue grew 16% year-over-year in Q4 and 27% for the full-year on an FX-adjusted basis, as you can see on Slide 13. This growth is primarily driven by the momentum seen in our spending volumes throughout 2022.

Net card fee revenues continued to accelerate throughout this year, up 25% year-over-year in the fourth quarter and 21% for the full-year on an FX-adjusted basis, as you can see on Slide 14. In 2023, I'd expect net card fees to be our fastest growing revenue line. I would expect growth to moderate from the extremely high level we saw this quarter. This steady growth is powered by the continued attractiveness to both prospects and existing customers of our fee-paying products due to the investments we've made in our premium value propositions, as Steve discussed earlier, with acquisitions of US Consumer Platinum and Gold Card members and US business Platinum Card members, all reaching record highs in 2022.

Moving on to Slide 15, you can see that net interest income was up 32% year-over-year in Q4 and 28% for the year on an FX-adjusted basis due to the recovery of our revolving loan balances, the rising interest rate environment has had a fairly neutral impact on our results in '22 as deposit betas lag the rapid and steep benchmark rate increases during the year. However, when you think about 2023, deposit betas are now in line with more historic levels. So I would expect the year-over-year impact from rising rates to represent more of a headwind in 2023. To sum up on revenues, we're seeing strong results across the board and really good momentum. Looking forward into 2023, we expect to see revenue growth of 15% to 17%.

Now all this revenue momentum, we just discussed has been driven by the investments we've made and those investments show up across the expense lines you see on Slide 17. Due to variable customer engagement expenses, these costs, as you see on Slide 17, came in at 42% total revenues for the fourth quarter and 41% for the full year. Based off the Q4 exit rate, combined with our continued focus on investing to innovate our products and expect variable customer engagement costs to approach 43% of total revenues in 2023. On the marketing line, we invested around $1.3 billion in the fourth quarter and $5.5 billion for a year. As a reminder, our marketing dollars mostly represent the things we do to directly drive the great customer acquisition results we are seeing. As we look forward, we remain focused on driving efficiencies, so that our marketing dollars grow far slower than revenues, as we did for many years prior to the pandemic. As a result, in 2023, we expect to have marketing spend that is fairly flat to 2022.

Moving to the bottom of Slide 17, brings us to operating expenses, which were $4.1 billion in the fourth quarter and $13.7 billion in full year 2022. In understanding our opex results, it's important to note the net mark-to-market impact to our Amex Ventures strategic investment portfolio that I mentioned earlier, with reference to Q4. These gains and losses are reported in the opex line and totaled $302 million at losses for full-year 2022, while in the prior year, we had a $767 million benefit in net gains.

Even putting this aside, as Steve and I have discussed all year, our 2022 operating expenses do represent a step function increase compared to prior years, as we have invested in key underpinnings to support our revenue growth, and as inflation has had some impact on our expenses. Moving forward, similar to marketing, we are focused on gaining efficiencies and getting back to the low levels of growth in opex that we have historically seen. For 2023, we expect operating expenses to be around $14 billion and CVs cost as a key source of leverage relative to the high-level of revenue growth in our growth plan. Last, our effective tax rate for full-year 2022 was around 22%, our best estimate of the effective tax rate in 2023 is between 23% to 24%, absent any legislative changes.

Turning next to capital, on Slide 18, we returned $4.9 billion in capital to our shareholders in 2022, including $1 billion in the fourth quarter with $639 million of common stock repurchases and $389 billion in common stock dividends, all on the back of strong earnings generation. We ended the year with our CET1 ratio at 10.3% within our target range of 10% to 11%. In Q1 '23, as Steve discussed, we do expect to increase our dividend by 15% to $0.60 per quarter, consistent with our approach of growing our dividend in line with earnings and our 20% to 25% target payout ratio. We'll continue to return to shareholders, the excess capital we generate while supporting our balance sheet growth going forward.

That's then brings me to our growth plan and 2023 guidance on Slide 19. 2022 was a strong year, where we exceeded our full-year guidance that we laid out in our growth plan last January for both the revenues and EPS. These results have strengthened our confidence in our 2023 guidance. First and most important, we expect the strategies that Steve laid out earlier to deliver continued high levels of revenue growth, leading to our revenue growth guidance for 2023 of 15% to 17%, and setting us up well for 2024 and beyond. As you think about the drivers of EPS growth in 2023, first, we expect to return to the low levels of growth we have historically driven in our marketing and operating expenses, producing some nice leverage.

Going the other driver, the two notable headwinds that should be just 2023 challenges are around the year-over-year impacts of provision and of interest rates, as I discussed earlier. Combining all of these factors together, at least to our EPS guidance of $11 to $11.40 for 2022. There is clearly uncertainty as it relates to the macroeconomic environment. But as Steve discussed, our 2023 guidance factors in the blue-chip macroeconomic consensus, which is for slowing growth though not a significant recession. I'd also say that our guidance is based on what we're actually seeing in terms of behavior from our customers around the globe. And of course, it reflects what we know today about the regulatory and competitive environment. We feel good about the momentum we see in our business and in any environment remain committed to running the company with a focus on achieving our aspiration of sustainably delivering revenue growth in excess of 10% and mid-teens EPS growth in 2024 and beyond as we get to a more steady state macro environment.

And with that, I will turn the call back over to Kerri, to open up the call for your questions.

Kerri S. Bernstein
Senior Vice President & Head, Investor Relations at American Express

Thank you, Jeff.

Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation.

And with that, the operator will now open up the lines for questions. Operator?

Questions and Answers

Operator

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

Ryan Nash
Analyst at The Goldman Sachs Group

Hey. Good morning, everyone.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Good morning, Ryan.

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

Good morning, Ryan.

Ryan Nash
Analyst at The Goldman Sachs Group

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

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Well, I think, Jeff really hit it. I mean, what he basically said was and this is where we -- what we're focused on is, we can only run the business and forecast the business on what we're seeing. And what we're seeing is, we're still seeing high consumer growth, we're seeing high consumer growth in international, we talked about some moderation in small business. Corporate spending still has not come back. Jeff talked about T&E. I think when you think about the model, I think what you have to get an appreciation for is, we're a small segment of the overall US population, and it's a premium customer base. And that premium customer base will not immune to economic downturns certainly.

Right now is spending on through. And so the other thing that we've been doing is we're constantly tightening up the Card Members that we're acquiring. I mean looked at the Card Member base we have today is from a credit perspective, better than the Card Member base that we had pre-pandemic. And Card Members we're acquiring today are reaching a higher hurdle rate than once we acquired just a year ago. And because of the value there is still a good pool of customers that are out there. As far as overall white collar unemployment, what I would say is, yeah, you've seen some headlines of individual companies that are going through layoffs.

But the one thing that I would say is I think it's really important to look at where these companies were pre-pandemic. And they're probably still unemployment levels that are much higher than what they were pre-pandemic. And so there is a -- there's a rightsizing a little bit, but even with that rightsizing, we still have unemployment rates under 4%. And so, look, we look at unemployment, but it has not, at this particular point in time, had any impact on our Card Member base. I mean you, again, keeping our right offset 0.8 and 0.6 is sort of not sustainable, and we're at 1.1 as Jeff said it shows on the slides. And that will tick-up a little bit over time. But that's just normal for the business.

So I think what you have to really -- have to look at is, this is a premium card member base that appreciates premium products and is spending. And it is a small -- it is a small piece of the overall US economy. And we've talked about the economy being bifurcated, and there's probably no better example of what we have here. The other thing that I would say, and when you think about revenue growth, unlike our competitors, we have a three legged revenue stool here right. You've got fees that we get for merchants, you have card fees.

Now card fees grew 25% growth in the fourth quarter. And while that's a high number, we certainly expect double-digit card fee growth to continue. And then you have, obviously, which is a small portion of our business. We have, obviously, interest revenue is all -- as well. So we look at the Card Members we're acquiring, we're really looking at acquiring revenue across those three components. And the other thing I'd point you to is 70% of the cards that we acquire are paying fees. So that's how we come up with 15% to 17%.

Operator

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

Sanjay Sakhrani
Analyst at KBW

Thanks. Good morning. I had revenue questions as well. Jeff, could you maybe just disaggregate the building blocks of the revenue growth? I know you mentioned a couple of things in terms of the trends on fees and NII. I'm just looking at Discount Revenue and the year-over-year change in growth, and that's sort of decelerated a little bit more than, I had anticipated. I guess -- does that slow down, maybe some help there would be helpful?

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

I think, Sanjay, the building blocks are pretty straightforward. And of course, as Steve just pointed out in our model, you always have to start expanding right, because that's what drives our model at lending. And I think probably the important words that I would pick out of some of the things Steve and I have just said is, for most of our spending categories, if you think about what's important in terms of dollars, we really have hit recovery point. And so as we look at the Q4 rates, I actually see those days approaching pretty stable levels for what we think, given the tremendous success we're having in bringing new customers into the franchise, because as you know, Sanjay, that is a key aspect of what drives our growth. And we see those rates being fairly stable going forward. So that's what drives first really strong Discount Revenue Growth. Our card fee growth, as Steve just mentioned, is super sustainable. I'd just remind everyone that is the front-line item that grew double-digits right through all the ups and downs of the pandemic.

And Gosh, our latest figures that Steve just gave you, 70% of our Card Members on fee-paying products this quarter, we have long ways to go and keep growing Net Card Fees. And then, look, it's the third leg of the stool, it's only 19% to 20% of our revenues, but net interest income matters. And we are still in a rebuilding mode, a balance, certainly that process has now begun in earnest. And that's why you saw our loans grow a little faster than volumes this quarter. So I don't expect to see quite as higher rate next year as you saw in Q4, but it's still above in 2023, I would say, the stable level and still above where we were pre-pandemic because of that rebuilding process. So you put all that together with the comments that you've now heard both Steve and I made which is look. We got to run the business based on what we see with our customers who our premium consumer, select segments of small businesses and the largest companies in the world. And that's where you get to the 15% to 17% revenue growth.

Operator

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

Betsy Graseck
Analyst at Morgan Stanley

Hi, good morning.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Good morning, Grase.

Betsy Graseck
Analyst at Morgan Stanley

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

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Well. I'll -- there is a lot there. But let me try and talk about marketing, and Jeff can pick up on other components. But, so, the $5.5 billion of marketing spend was all time record high in 12.5 million cards that we acquired. The fact that you saw a 300,000 card decrease sort of sequentially quarter-over-quarter is not something that we're concerned about at all and some of that compete, timing of when you do your acquisition and so forth. And so, but the key point here is that we're all looking at marketing efficiencies. And we continuously raise the bar on who we are bringing into the franchise.

So we're not -- I wouldn't say we're at a bubble in terms of card acquisition. We don't project card acquisition. We provide the Card acquisition numbers, but for us, and probably need to do a better job going forward from a metrics perspective, but we really look at revenue. I mean, we look at the cards that we acquire in terms of how much revenue we can acquire. It's the same thing with billings. I mean not all billings are created equal. I mean there's billings that -- that you have that don't have a lot of value to it within the industry. We look at profitable billings. We looked at it card fees and we look at that, as Jeff said, interest income.

So I wouldn't take away from this that we're at an inflection point or a bubble or anything like that. I think the $5.5 billion is a tremendous amount of money to go out there and acquire with and we're pushing the organization to even be more efficient and more effective with that money. So we're looking at the same kind of acquisition levels that we've had in the past with higher underwriting standards as well. As far as operating expenses go and, as you start to think about that, we had a big step-up in operating expenses as we had tremendous growth. And having had a lot of experience running the components of this organization from both a technology perspective and operating perspective, travel and what have you.

As you see those volume increases, you need to manage and to get to that -- to get to that next level of scale. And we believe that we have gotten to that next level of scale. And we'll get back to normal operating expense growth. And the other part of it, just like everybody else, look, the way it increased, there was some inflationary pressure within there. But make no mistake about it, there was -- we had to get to another scale. When you have 25% revenue growth, we have 25% billings growth. When you have you know travel bookings that at all-time highs and continuing to increase quarter-over-quarter, you have to put in-place, not only to digital capabilities, but the people to make sure that you can handle all that.

So from an expense perspective, the reason we're able to expect that, we think marketing will be where it is and operating expenses will not grow at the same level that they will, is because we believe we've gotten to that scale component that we now believe that we can grow revenues 15% to 17%, get into a 10% growth mode 2024 -- 10% plus growth mode 2024 and beyond. With that scale until the point in time and I don't know when that is, where we have to have another scale jump. But what you saw from a growth perspective, last year was all about -- all about the scale. So, Jeff, you want to talk about credit or anything else or? All right. So that's how we think about that in terms of going below sort of the components of revenue and house expenses relate to that revenue.

Operator

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

Mark DeVries
Analyst at Barclays

Yeah. Thank you. Sorry, if I missed this. But can you talk about how sensitive your revenue guidance as to the macro kind of what gets you to the high- and low-end of the range you provided. And are you using at all the same assumptions around GDP and unemployment that you used kind of set the reserve levels?

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

You know, Mark, one of the interesting things that I think surprises people is we have looked historically everywhere you can imagine and trying to find really direct correlations between GDP growth, and for that matter between movements in the markets that affect people's financial wealth. And the -- I think surprising thing to many people is we can't find any direct corporation between those two things. So when you look at our 15% to 17% guidance, it's really -- I go back to what Stephen and I have both now said a couple times, driven by our best indicator is what we see with our customers around the globe and how they're behaving. And we certainly are aware of and thinking about various macroeconomic forecasts, but you start with what behaviors are we actually seeing.

And I'd also remind everyone that the US remains by far our largest market. The US economy shrank in the first two quarters of 2022, and we just posted revenue growth for the full-year 25%. So when I think about the 15% to 17% range, it's really not over. 15 is a weaker economy, 17, frankly it's -- I wish we were more precise about forecasting. But it's just a little bit of forecast error, I would say, based on the trends we've seen and the macroeconomic consensus, which is absolutely. The economy is supposed to slow when you look at that consensus and that's factored in here as well.

Operator

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

Mihir Bhatia
Analyst at Bank of America

Thank you.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Hi Mihir.

Mihir Bhatia
Analyst at Bank of America

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

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

Well, so what I'd say is that when you look at lending, I am going to go back to that 70% number. And I do think it's an important one to think about the implications. I think occasionally people look at our loan growth and say, oh, is that all the new customers you're acquiring, and what do you know about it? And so we actually draw a lot of comfort from the fact that you have 70% of that loan growth coming. So just our existing customers who we go well, we have history with really just to rebuilding more towards historical levels. If you think about spending, in our model, we talked a lot about the fact that we have, I think by the standards of most industries remarkably higher retention rates in the high 90% well -- range.

And that's a real key strength of our model. Once we get someone into the franchise, they tend to stay. That group -- depending on the economy is growing organically a little bit, when you think about adding our new customers, that is a key engine at any point in time of adding another in normal environment, and it varies over time. But I might think you're around an 8% to 10% kind of number. So it's a mixture of super-low retention. What we're doing to spur more spending by our existing customers end that steady flow of new customers. And so one of the things that again, that Steve and I have both just talked about, because I think people seem a little surprised Steve by the 15% to 17%, is a key driver of why we're comfortable with that is our tremendous success over the last year and in the first weeks of 2023 had bringing great new customers into the franchise.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Yeah. And the other thing I would say is, and I've said this in my remarks this virtual virtuous cycle that we talk about, the more Card Members we bring in the more merchant and partner offers that we can get. And so, the engagement the increased engagement from existing cardholders is a really important driver of growth. So that the membership model is, we just still bring our Card Members in and sort of watch them hope they grow. We bring our Card Members in and we want to work with them to grow. We do that from a small business perspective, what our account development teams, making sure that they are taking advantage of all the benefits of the car and making sure they're spending in categories that they can spend in, maximizing rewards and so forth.

And we do that with our card base from an offer perspective to MX offers through other direct offers from partners embedded offers within the model. And so a lot of our engagement not only from a customer service perspective is to making sure that our Card Members are taking advantage of all the aspects of the of the cards that are out there. And so we really look to grow same-store sales, right. I mean, so from existing Card Members, we're constantly looking to grow that share of -- share of their wallet. And again, that gets easier as the cycle gets bigger, because more and more merchants want to reach more and more of our Card Members.

Operator

Thank you. The next question is coming from Brian Foran of Autonomous Research. Please go ahead.

Brian Foran
Analyst at Autonomous Research

Hi. Obviously, a very positive outlook. I don't want to sound negative, but I think what we're all kind of dealing with investors seem like this is great. I'll take it. But help me think about what are the risks, where could it go wrong? So maybe one question and one follow-up along the same theme. Jeff, when you were talking about the macro sensitivity, one question I hear sometimes is the no that's the aspirational 2024 and beyond is a steady-state macro. And I get the investor question like, whereas the dividing line, like what would a non-steady-state macro look like with that guidance within our aspiration within not apply. So maybe you could touch on that, like what -- would it the balance in your mind for a steady-state macro?

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

Well, I think, Brian, I would start with two comments. First, when you think about our long-term aspirations, we don't actually worry about recessions at all because they're obviously -- at some point. And I don't know if it's six months from now or six years, there will be a recession. And after that recession, there will be a recovery. And to touch and change, our view of -- we should be able to steadily grow this company in excess of 10%. Now, when there's a recession, where you see a very significant shrinkage in GDP, so not by the first half of last year, where maybe the US GDP went down of half a point or something. But where you suddenly see a quarter or two, where you have pandemic like or great financial crisis like larger percentage declines in GDP, and you see huge spikes in unemployment.

If you go back to one of the appendix slides, you will see that our CECL, credit reserve accounting assumes a baseline and also builds in a downside scenario. In that downside scenario you got 8% unemployment by the third quarter of 2023. Well, there is 8% employment by the third quarter of 2023. We're going to have a few quarters, where we're probably below our longer-term aspirations. But is that kind of large shock that's going to knock us off for a few quarters -- but I really want to keep coming back to and I suspect, Steve, you might reinforce this. But it doesn't change our long-term aspirations are how we're going to run the company.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

No. And I think -- just go back to the pandemic. So, look we pulled back on -- we pulled back on acquiring Card Members because I don't think anybody had any line of sight. I mean, that -- the pandemic was worse than the financial crisis from a credit and underwriting perspective. You never say never, but that's sort of like the 100-year flood, right. And so my perspective is we'll still acquire in that kind of scenario -- and remember everything we acquired today, we acquired through the cycle. But what we do is move the credit criteria even further up. But what we would do again is we will engage with our Card Members. I think one of the most successful things that we did during the pandemic was retaining cardholders, retaining those cardholders through financial relief programs that gotten through the hump for a couple of months, for six months, whatever it was, we're engaging them to spend in other areas and to stick with us.

So the reality is that, if we are running this business quarter-to-quarter, which we don't, you would pull back. But the reality is, as Jeff said, after every recession there is a recovery. And the last thing you want to do is retrench in such a way that you're not going to be able to take advantage of the recovery. And that retrenchment looks -- it looks like layoffs that don't make sense and market -- pulling back on marketing and trying to hit an EPS number for a quarter or for year, that is irrelevant. What's relevant is for 172 year-old company to continue to grow over the medium and long-term in the way you do that is you invest judiciously and you invest smartly.

And in times when things are bad, you invest in your infrastructure, you invest in your people because you're going to get great people through when the recession is over and your infrastructure is going to need to do that. And when company's make mistakes, is like go get great people and also do not invest in those things, they're going to need six to nine months from now when the recession is over. So, yeah, we may have a moment in time as Jeff said, it could be six months, it could be six years, but there will be a time when we don't make that and -- but there will be a time when we exceed that. And that's why we say our long-term aspiration is for 10% plus growth in revenue, and we feel we're on our way to that.

Operator

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

Rick Shane
Analyst at JPMorgan Chase & Co.

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

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Well, the short answer Rick is no. When you think about the behavior of the Millennials and Gen Zs, there are a few distinguishing features, and we've talked about these. They tend to be more digitally engaged -- they tend to be more engaged with the overall value proposition, which we actually see is a good thing, because of that they often will engage more quickly when they get a new product.

But I'd also remind you of the other stat we've talked about this morning, which is 70% of our growth in loans right now is coming from existing customers. So as we add a lot of these Millennials there, that segment is still not adding as much to loan growth, because of the rebuild imbalances by your existing customers. So while the behaviors of the younger Card Members are on average similar to the older Card members when you think about borrowings, just sort of the math you, because you've got this rebuilding effect, which say that they're not dropping that bigger portion of our loan growth.

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

Yeah. And we tend to get a higher share of their wallet, but they have lowered. They do have lower spending. And the great part about Millennials and Gen Zs is that there -- and depending on where you are Millennials -- I mean some Millennials are 40 now. So, I mean, they're on a different thing. But the reality is the lifetime value of these card holders is going to be significantly more than the lifetime value of acquiring a boomer or acquiring a Gen X right now. And that is -- that's very attractive as well. And if you look again, Rick, on Page 5, you'll see that, look, it's 30% of billed business growth. On the other hand, Boomer growth is only -- is only 6%. And some of those have been literally go back travel still. So we'd also expect that to go up.

Operator

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

Dominick Gabriele
Analyst at Oppenheimer

Hey, good morning.

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Hey, Dominick.

Dominick Gabriele
Analyst at Oppenheimer

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

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

I mean I think you just reminded us. The reality is couple of things, right. Number one, we constantly go through and look at contingent liability that's not being utilized. And so, if we have somebody that has X for a line, and they were only using 25% of X, we may not keep X stay that long because we don't want to be a lender of last resort, right. That's number one. Number two, we also are -- for new Card Members, we're raising those cycles. But -- raising the limit -- excuse me, raising the limit, the hurdle rate that we acquired Card Members, but we underwrite every transaction. We make a credit decision, not based on the line, because most of our Card Members do not have a line. I mean, obviously, traditional lending cards have line.

But other than that, we are underwriting every single transaction. So we're not letting somebody just run it up because they run it up in the past and we're not letting somebody run up to a limit and have that write-off. One of the advantages of our model and I'm not going to get into all the variables underneath, for a couple of reasons; number one, we don't have time, and number two, it's very complicated, and number three, I probably don't fully all understand the whole thing either. But it's -- it is a -- in advantage this model is that every single -- every single transaction is adjudicated on its own merits. It's not adjudicated based on an open to buy. And that is very important.

Also but -- that's a -- that's from a credit perspective, that's a really reassuring thing, but from a spending perspective, it also enables why you read some of these stories of hey, I just bought a painting for $75 million. There is nobody has the $75 million line, right? Now, those are very difficult underwriting decisions and not for the faint of heart. But it does show that we make those same kinds of decisions on a $200 purchase, on a $400 purchase. Every single transaction that comes through this system is adjudicated on its own merits, not on sort of some open to buy. And that gives us great comfort in terms of not having somebody just run something up and have something written off.

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

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

Operator

Thank you. The next question is coming from Moshe Orenbuch of Credit Suisse. Please go ahead.

Moshe Orenbuch
Analyst at Credit Suisse Group

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

Jeff Campbell
Vice Chairman & Chief Financial Officer at American Express

Well, so, two comments. I -- it's a good callout Moshe. The first comment is, as you think about 2021, of course, the base year here, you saw things progressively pickup as you went through the year. So that's why each quarter, our volumes on a year-over-year basis have slowed a little bit. But we also have pointed out, I think you're sort of through that recovery period now. So I think what you see in Q4 in our view is very typical of what you're going to get. Now, the one exception that we do think will accelerate is the net interest income fees, because you do have customers continuing to rebuild balances. So net card fees probably moderates a little bit, net interest income probably accelerates a little bit, but your discount revenue should be pretty consistent with what you have seen in this quarter. And that's really the model that lead you from Q4 to what we expect for 2023.

Operator

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

Bob Napoli
Analyst at William Blair

Thank you. Maybe some topics that haven't been touched on yet. And Steve, you called out investment in services and adjacencies, I'd say. And also the International fees expanding your merchant acceptance there. So just any call-outs on adjacencies to B2B payments? And your -- how that contributes to your long-term strategy. And then International, I seem to recall Japan being an important market for you, saw some good growth internationally. Japan reopened, China is reopening. Is there acceleration potential in International in 2023?

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Yes. So let me hit a couple of these topics and hopefully I'll remember them all that you went through. But look, I think, International, we've seen really good and just look at the slides -- you've seen really good growth from not only a consumer perspective, which is over 20%, but International SME and large corporations are growing at 32%. So -- and remember, pre-pandemic, those are the fastest growing parts of our business. So we expect that to continue to grow which, obviously, Japan is -- Japan is part of it and one of our top markets. From a -- from an acceptance perspective, we continue to grow acceptance internationally. We're really happy with the coverage gains that we -- that we've had and we'll continue to focus on that. We've talked about focusing on priority cities.

We focused on all the categories, e-commerce and restaurants and lodging and tourist attractions, airlines, hotels and so forth, to get those up. But again, with that, we're getting 23% and 32% billings growth. And our coverage is not where we want it to be yet, and we will continue to invest in net coverage. Look, as far as B2B goes, B2B continues to be a good story for us, but it's just a small part, it's a smaller part of the business. And we continue to invest in capabilities and we'll continue to focus on B2B, but that will add not only to commercial spending, but that will also add to small business spending as well. And remember, 80% of the small business spending that we have is in the category of B2B spending. And so, we'll continue to hunt for that and try and automate more and more of those billings, and it makes it easy to get on the card.

Operator

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

Don Fandetti
Analyst at Wells Fargo & Company

Thanks, Steve. Just curious if you've seen anything that sort of raised your concern level around competition in US consumer or small business. I mean, it seems to us like you might be pulling away a little bit from competitors. I'm not sure, if you, your metrics suggests that are about?

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Well I mean, I don't -- we continually look to raise the bar. And I think that there's a lot of great competitors out there. We've got JP Morgan and Bank of America and Wells Fargo and US Bank, and Capital One. Everybody is -- they're all strong and they -- I mean, they had pretty strong results from a growth perspective. But as I said in my remarks, the more value we continue to add, the more we get our flywheel working, the harder it is to catch up. And we're not resting on our laurels. And that's why we continue to invest. We continue to invest in value propositions, we continue to invest in capabilities, we continue to invest in service. And so are we increasing the distance between us and our competitors. I don't know, how you measure that.

But I think we are -- our goal is to constantly make it hard for them to catch up and our goal is to make sure that we're trying to be one step, two steps, or three steps ahead of them. And it's flattering -- actually they're coming after the segments that we're in. And -- but competition is there and it is fierce. And for us, competition is just not the US consumer, it's small business, it's corporate, it's in international. And so we're finding a lot of battles here in terms of defending our -- defending our territory. But I think the team is doing a really, really good job. But we're never going to rest. And if in fact they stopped, we still keep going. So it is really important. I think it's one of the things that we decided a number of years ago that we would constantly refresh our products on a regular basis and add value on an interim basis, which you've seen with our Platinum Card and our other products. And I think that's really helped us out quite a bit.

Operator

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

Lisa Ellis
Analyst at MoffettNathanson

Terrific. Thank you. Thanks for squeezing me. And I had a question about international. The 26% billed business growth in international really caught my eye because that figure is more than 2x what Visa and MasterCard's international credit growth was in the fourth quarters. And so, I was hoping to just dig in a little bit. So into what -- looking at your international business is driving that and how sustainable it is? It looks like it's mostly driven by spending per card -- that card growth isn't unusually high. So is there a -- I'm trying to understand, is this a significant share gain going on? Is it acceptance that you're driving? Is it something unique about the geographic composition of the customer base? Can you just dig into that a little bit?

Stephen J. Squeri
Chairman & Chief Executive Officer at American Express

Yes, so, Lisa, I think it's a -- look pre-pandemic, we're pretty close to 20% anyway from an international perspective. And look, it's a smaller base than Visa, MasterCard. And it's a really high premium customer segment. And it's a segment that travels -- it's a card base that travels quite a bit. So pre-pandemic, we were growing in that 20% range. And that growth was due to a real focus on value proposition and a focus on merchant acceptance. I think what you're seeing right now, which is 26% growth, which is slightly outsized growth, is still recovery from the pandemic, right. I mean, if you think about it, this 26% growth quarter-over quarter, you still had a lot of lockdowns, people were not traveling last year at this time in international.

And so, look, we're -- our goal is to -- our hope is to continue to grow this business as it was pre-pandemic at around that 20% level, but from my perspective, there is really nothing unusual here. We're sticking to our strategy, enhancing the value, continuing to add merchant acceptance and continuing to invest in this segment -- these two segments, in small business and international consumer card, which were fast-growing pre-pandemic. So, nothing really unusual. And it probably normalize a little bit as the year goes on, because people were getting out there and traveling when we got into the second and third quarters.

Kerri S. Bernstein
Senior Vice President & Head, Investor Relations at American Express

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

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 877-660-6853 or 201-612-7415. Access code, 13734498 after 01:00 PM Eastern Time on January 27th through February 3rd.

[Operator Closing Remarks]

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