The American Express Q4 2023 Earnings Call began with a reminder about the call being recorded and a statement about the call containing forward-looking statements. The call then moved on to Chairman and CEO Steve Squeri discussing the company's progress and results, followed by Chief Financial Officer Christophe Le Caillec providing a more detailed review of the financial performance. The company had a strong year with record revenues and net income, and in the fourth quarter, they saw strong customer engagement and demand for their premium products.

The company had a successful fourth quarter with strong growth in billings, new account acquisitions, and credit quality. They achieved record revenues and EPS, and the CEO is confident in the company's future. Over the past two years, they focused on accelerating growth and have exceeded their goals. They have increased their annual revenues by 40% and annual card spending by 37%. This growth is attributed to their focus on customer needs and investments in technology and marketing.

In the past two years, over 25 million new proprietary card accounts have been added, with a majority coming from fee-based products. The company's focus on innovation has led to increased brand relevance among millennials and Gen Z consumers. Retention rates are high and credit metrics are strong. The company's business model has four key differentiating features, including diversified revenue sources, a focus on premium customers, a growing partnership ecosystem, and a global brand and servicing ethos. The company's future prospects are positive due to these factors.

The company's strong business model, global scale, talented employees, and attractive growth opportunities have contributed to its success and confidence in its long-term aspirations. While there may be fluctuations in yearly performance, the company remains focused on its goal of delivering annual revenue growth of 10% or more and mid-teens EPS growth. For 2024, the company expects to see continued momentum and has provided guidance for annual revenue growth between 9% and 11%, with plans to increase its quarterly dividend by more than 60%.

The article discusses the company's focus on long-term growth by listening to customers and providing exceptional service. The company had a strong year in 2023, with record revenues and net income. Billed business also saw growth, reaching record levels for the full year and fourth quarter. This growth was more stable compared to the previous year, which was impacted by Omicron.

The 6% growth rate for the company reflects a slight decrease from the previous quarter, but the number of transactions from card members continues to grow. Business services spending increased by 5%, while travel and entertainment spending saw strong growth at 9%. Restaurant spending reached a record high of $100 billion for the year, while airline spending slowed down. U.S. consumer billings grew by 7%, with millennials and Gen Z driving the highest growth. Commercial services saw a 1% growth, with small and medium-sized businesses facing unique challenges. However, the company saw strong demand for new accounts, high retention rates, and good credit performance in this segment. International Card Services saw the highest growth this quarter.

The company has seen double-digit growth in all regions and customer types, with international spending and engagement remaining strong. Loans and card member receivables have also grown, but are expected to moderate in the future. The company's credit metrics remain strong due to their high-quality customer base and risk management practices, but delinquency and write-off rates have increased slightly. This has resulted in a reserve build and provision expense in the fourth quarter. The company ended the quarter with a reserve rate that is slightly lower than pre-pandemic levels.

The company expects the reserve rate to increase slightly in 2024, as it has in recent quarters. Total revenues were up 11% year-over-year in the fourth quarter and 15% for the full year, driven by growth in discount revenue and net card fee revenues. The company plans to refresh around 40 products globally next year and acquired 2.9 million new cards in the quarter. Net interest income was up 30% year-over-year in Q4 and 33% for the full year, driven by an increase in revolving loan balances and net yield expansion. However, net interest income growth is expected to moderate in 2024 as balance growth slows. The company's diversified model continues to drive strong revenue momentum.

The company expects to see revenue growth of 9-11% in 2024. Total expenses were up 5% in the fourth quarter and 10% for the full year, but lower than revenue growth. Variable customer engagement expenses were lower than expected due to slower T&E spending and lower rewards cuts. Marketing expenses were also lower than expected, but are expected to increase in 2024. Operating expenses for the full year were above expectations due to some notable items in the fourth quarter.

The company has set up reserves to cover expenses and mitigate the impact of the devaluation of the Argentine peso. They expect operating expenses to remain flat in 2024 and are focused on delivering low levels of growth. They plan to return excess capital to shareholders and increase their dividend by over 15%. Their long-term aspiration is to achieve revenue growth of over 10% and mid-teens EPS growth.

The company is reducing its guidance for revenue growth and earnings per share for the full-year 2024, but this remains in line with their aspirations and takes into account various scenarios. They have also announced the sale of their Accertify business, which is expected to result in a sizable gain. The company plans to reinvest a substantial portion of this gain back into their business. The call was then opened for questions, with the operator reminding participants to limit themselves to one question. The first question asked about the company's guidance for 2024 and the potential impact of January spending on their business. The company declined to provide specific numbers and advised waiting until the end of the quarter for more details.

The company expects billed business in 2024 to be consistent with recent quarters, with a focus on winning back SMEs. They are prepared for potential changes in society, but this is the assumption they have used in their plans and guidance. They also anticipate growth in discount revenue and card fees, but a deceleration in NII. They expect billing and discount revenue to grow at a similar pace to recent quarters.

The company expects card fees to continue to be a major contributor to growth, with a potential increase in Q4. Net interest income growth is expected to moderate due to slower asset and lending growth, and the company does not anticipate a significant impact from changes in interest rates. Overall, the company expects revenue growth to be in the range of 9% to 11%.

In paragraph 14, the speaker discusses the company's loan growth and where it is coming from. They mention that about 70% of the growth is from tenured card members, who have been with the company for more than 12 months. The company's strategy is to acquire card members and develop relationships with them, rather than relying on balance transfers or promotional offers. They also mention that the credit profile of new card members has not changed and the company still focuses on positive selection in terms of credit risk.

Christophe Le Caillec discusses the company's strategy for driving customer engagement and balancing it with operating expenses. He mentions the shift towards premium products and the resulting increase in variable customer engagement expenses. However, the company is continuously innovating and introducing new initiatives to optimize these expenses. One such initiative is the "pay with point" option, which has led to efficiencies in the weighted average cost per point. In Q4, the company saw less point redemption for expensive items like airline tickets, resulting in cost savings.

The company has seen softness in T&E categories and less point accelerators earned, resulting in some efficiencies. This is an example of natural hedges in their business model, which helps to offset any softness in the top line. They are monitoring the increase in variable cardmember engagement expenses and are committed to containing OpEx. The model is strong and able to generate earnings over time, with a focus on risk-adjusted earnings. They have seen softer trends in T&E, particularly in airline spend and point redemptions for tickets.

In the paragraph, the speaker discusses the current trends in travel and entertainment (T&E) spending among American Express card members. They mention that T&E spending has decreased slightly but is still up 9% compared to the previous year. The speaker also notes that there has been a decline in redemptions for airline tickets among card members, but they are not concerned about this trend. They mention that they have not yet disclosed their assumptions for T&E spending in 2024, but they are not worried as their card members are avid travelers. The speaker also mentions that the reserve rate is expected to increase in 2024, but does not provide further details on the reasons for this.

The speaker is responding to a question about the increase in reserve rate on the loan portfolio. They explain that the absolute levels of delinquency and write-off rates are low and below pre-pandemic levels. They also mention that their competitors have experienced similar trends but at a higher magnitude. The increase in the reserve rate is due to normalization after the pandemic, and the speaker feels comfortable with the current 2% write-off rate. They also mention that the biggest contributors to loan growth are their pay overtime facility and co-branded cards.

The company's portfolio is shifting towards products with a strong credit profile and high velocity, leading to a slight increase in normalization. The company's thoughts on capital management have not changed, but they have been meeting with regulators and are waiting for their next version of the rules, expected by the end of 2024.

The speaker is not worried about the company's starting point and capital position, as they generate a high return on equity and have a strong capital policy. They plan to increase dividends and use the rest for share buybacks to maintain a capital buffer of 10-11%. They will adapt to Basel rules and continue to run the company conservatively. The speaker then mentions the pay overtime business, a facility attached to charge card products with strong growth and high quality customers. The charge card has a no preset limit feature.

The company offers a revolving credit facility to its Premium Gold card members, which is attached to a premium base and helps improve their credit profile. The revenue growth expectations for 2024 are based on a conservative assumption of rate cuts, but the impact on NII is expected to be small. The company is slightly liability-sensitive, but the exact impact of rate cuts is uncertain. There is no new information to add on the revenue growth expectations for 2024.

In this paragraph, the speaker expresses optimism about the company's performance in the upcoming year. They mention the potential for higher billed business and strong card fees, and acknowledge that the trend for net interest income is well-established. They also mention the possibility of increased growth if the economy rebounds and card members continue to spend. The speaker then answers a question about the company's total card growth, explaining that proprietary cards make up the majority of their cards and drive their economics, and that there was a 5% increase in proprietary cards-in-force and a 6% increase in total cards-in-force.

The speaker, Christophe Le Caillec, thanks the operator for the question and introduces the next question from Arren Cyganovich of Citi. Cyganovich asks about plans for a Platinum card refresh in the US and the guidance for the year. Steve Squeri responds by stating the company's commitment to refreshing 40 products this year and strategically refreshing all products every three to four years. He also mentions that they do not pre-announce specific plans for the Platinum card. The next question is from Craig Maurer of FT Partners, who asks about the potential impact of slowing airline spend on the company's partnership with Delta Air Lines. He also asks about the small business segment and whether there has been any reluctance from small business owners to take on additional products.

The American Express CEO and CFO discuss the current state of small business spending and the company's partnership with Delta. They note that while there has been a slight decrease in organic spending among small businesses, card acquisition and credit quality remain strong. The Delta partnership continues to perform well, with strong billing growth and new card originations. The credit quality of Delta customers is also strong. Overall, the executives are not concerned about the current state of small business spending or the Delta partnership.

Mihir Bhatia of Bank of America asks about the billings growth and how much is being driven by new card members versus winning wallet share. He also asks about the environment for new card acquisition and if the 3 million level is the right level to think about for the next year. Christophe Le Caillec responds by saying that they consistently acquire around 3 million to 2.9 million card members and will continue to do so as long as they have line-of-sight into high credit quality premium card members. He also mentions that they are focused on acquiring billed business and that any growth in small-business is from new cardholders acquired.

The growth in American Express' consumer base is due to new cardholders, which gives the company confidence in engaging with them and increasing their share of wallet. The company has a lot of confidence in the long-term value of millennials and Gen Zers, who currently make up 32% of their spending. The company expects to see a step-up in growth as the economy improves and aims to be a 10% plus revenue company. The call has ended and the webcast replay will be available on the Investor Relations website.

After the call, a digital replay will be available by calling 877-606-06853 or 201-612-7415 with the access code 13743240. The replay will be accessible from January 26th to February 2nd at 1:00 PM Eastern Time. The conference call has now ended and participants may disconnect.

This summary was generated with AI and may contain some inaccuracies.