Everyone for joining us today. I'm Mihir Bhatia. I cover consumer finance and specialty payment companies here at Bank of America. We're delighted to have Jeff Campbell, CFO and Vice Chairman of American Express, joining us at our conference again this year. In terms of the format, we'll do a fireside chat format. I have a few prepared questions that I'll go through with Jeff, and then closer to the end, maybe with five minutes left or so, I'll open it up for questions. We can just go ahead and get started. Jeff, thank you for joining us. No, thanks for having me. It's good to be here, and thanks for all of your interest. I will admit, I was listening to your introduction and thinking, are we a consumer company? Well, not really. Are we a specialty company? Specialty payments ... trying to figure out exactly how we fit into your coverage. Everything. Consumer- You're supposed to ask the questions, not me. Okay. why don't we just start. We're about halfway through the quarter. Yeah. We've been seeing some pretty good January sales data across the industry. Maybe you could just start about what you're seeing at American Express. Yeah. Maybe you wanna give us a quarter-to-date update on what you're seeing on billings across segments, geographies maybe even overall. We really just released our earnings a little over two weeks ago and gave people both obviously a good view of the momentum that we exited Q4 with, which led to what we think is some pretty good guidance for 2023. As of a couple weeks ago, all the trends in January looked very consistent with everything we said on that earnings call. We have a couple more weeks of data now through the middle of February, things continue to trend just really as we expected. To remind you, if you think about YoY comps, that does mean that relative to Q4, you would expect the YoY comps thus far in Q1 to actually look stronger. While it seems like a bit of an ancient memory at times, you know, you did see in Q1 of last year, particularly around T&E spending and particularly around spending outside the U.S., more of an Omicron effect, which held things down. The YoY trends look stronger, early on than what we saw in Q4, but that's what we would've expected. We feel good. you know, we continue here to read all the same headlines that everyone does. I do feel, and, you know, you're getting lots of different data points at this conference, that I think there is a little bit more optimism perhaps than there was even a month or two ago that at least significant parts of the economy continue to do well. You know, we are not representative of the whole economy. Our customer base, premium consumers around the globe, certain segments of small businesses, and the largest corporations in the world, you know, we feel good about those segments. On the small businesses, you did mention at earnings a little bit of softness... I think in digital advertising, specifically on small businesses. Are you seeing those trends or those trends also continue? Are you seeing a little bit of a recovery, anything on that? I would say, if you look at our U.S. small business segment, which we really have to break out U.S. and then outside the U.S. If you look at the U.S. small business segment, I would say it's really right in sync with the comments I just made more generally. In other words, if you look at the YoY numbers, you would see them stronger thus far in Q1 than what you saw in Q4. I would expect that because again, you know, Omicron particularly affected T&E spending, but it also probably had some effect last year even on spending around general goods and services. I would say the spending on digital media advertising, which we've called out for a while now, continues. There's no dramatic rebound there. I think you hear that not only from people like us, but also, of course, if you look at the couple of large companies where most of those dollars get spent, they continue to be down a little bit. Overall, we feel good about the trends outside the U.S. Similar to the rest of international, the small business trends look very strong YoY thus far in Q1. I would expect that outside the U.S., both of our consumer and small business segments tend to be a little bit more T&E-oriented than our U.S. segments. I'd remind you, if you think about the company overall, around 75% of our spending is just on goods and services, and in the small business sector, it's really B2B spending. It's how small businesses run their business. Outside the U.S., that number is a little higher, so the Omicron impact on T&E outside the U.S. makes those YoY numbers thus far in Q1 particularly strong relative to Q4. Great. Maybe switching gears a little bit. One of the things we've heard you say on the last couple of calls and conference appearances about premiumization of the cardholder base through the pandemic. Now, American Express is, I think in a lot of people's minds, always been a pretty premium cardholder base. I wanted to dig in a little bit more on what, you know, when you talk about premiumization of the base further? Yeah. What did American Express do differently maybe in the pandemic that enabled that to happen, and what are the implications of that? I would probably, Mihir, go back a few more years before the pandemic. I think, not to bore everyone with a really long history, but I would say sort of post-great financial crisis, there was a period where we explored as a company saying, "Do we want to appeal or focus or evolve our business to serve a broader spectrum of demographics on both the consumer and small business side. I would say a couple years prior to the pandemic, we reached the conclusion that no, we didn't wanna do that. In fact, when you think about our brand, when you think about our business model, when you think about the strengths of our existing customer base and what the most sustainable competitive advantages are that we have, we really said, "No. You know, we should be about premium consumers, select segments of small business, and the largest corporations in the world." At that point when you make that decision, there's not one thing you do, Mihir, you know, there's 100 things you do around how you go to market, how you structure your sales teams, what kind of value propositions you have, what kind of distribution channels you focus on. I think I'd call out two things in particular. It does all start with the value proposition. On both the consumer and small business side, we made a real pivot to refocusing on the fact that if we put value in our value propositions, then our premium consumers will pay for that value. I would suggest we're pretty unique in the way we are able to create a card member base globally on both the small business and consumer side that is willing to pay a lot of fees for cards. The second thing I'd say we really focused on is we do have a premium consumer customer base, and particularly in the U.S., a small business customer base that is unmatched in terms of its size and attractiveness relative to any of our competitors. That is very attractive to partners who want access to that customer base. We really began to focus a lot more, five or six years ago, on how do we get more partners to help fund the value propositions on both the consumer and small business side. Because that, of course, helps us, without incurring a lot of cost, create value propositions that are more attractive to our customer base. The more we can grow our premium consumer and small business customer base, the more attractive it is to those partners who want access to that customer base. This is really the virtuous cycle that you hear, may hear us begin to talk about a few years ago. We really see this as a key competitive advantage because, you know, I sometimes describe our current growth plan as both offensive and defensive. It's offensive because I would suggest our growth aspirations, which, we're ahead of right now, are well ahead of where we thought we'd be. Those growth aspirations are also defensive because it is very difficult for our competitors to catch up to us in terms of their ability to attract partner value. So that virtuous cycle is super important, and it's working well. If you look at our results in 2022, over 70% of all the new card members we attracted into the consumer and small business franchise were on our premium cards. If you look at our revenue lines, we grew our card fee revenue 25%. I think sometimes there's a misnomer that we're growing our card fee revenues that fast because we're constantly raising the price. That is an element, but it's actually a very small element of the growth. The growth strictly and primarily is driven by just attracting more customers onto those high fee paying cards. This premiumization, several people have asked me if that's a word, I'm not sure, but we use it, we like that word, is a really important strategic shift we made five or six years ago, and it's going really well. That means when you think about who we're bringing into the franchise, we have a more premium mix of customers who have better credit quality, who are higher spending, and all of those things are a key part of what gives us confidence in the multi-year growth aspirations that we've laid out. To follow up on that a little bit, American Express, you know, the premiumization and is a little bit somewhat something maybe a little aspirational maybe for an American Express card versus some of the other cards. When you think about the number of card members you're adding, the number of just the momentum you've seen, it feels like every quarter you're able to get on the call and talk about a record acquisitions in some segment or the other of your premium customer base. I guess the question is, how do you balance staying that aspirational brand and continuing to add services with all the card members you're adding? Yeah. When does card base get so large that it's hard to say it's really premium? Well, we are an aspirational brand, and I think that is a really important strength of the company. I think we've also demonstrated that we're an aspirational brand that is able to reach the younger generation. There's been another dramatic shift in the last five or six years ago, in that if you went back 10 years, we assumed, well, if we want to bring younger people into the franchise, we should bring them in on kind of no-fee, you know, small, tightly controlled credit cards. In fact, about 75% of the high fee paying cards we brought in last year all went to younger people. That's a big shift in our strategy. I don't think it's a big shift actually in the way younger people think. I think it's more us waking up and realizing we can pivot our value proposition and do a better job. We feel really good about the pivot to the younger generation. I think it's a key part of our confidence in our growth. It creates a market that has this wonderful reality that there's more young people created every year. The other point I might make, Mihir, is let's keep scale in perspective. I think the latest number, if you go look up, there's something like over 5 billion Visa and Mastercard debit and credit cards in the world. You've got a little over 100 million American Express cardholders around the globe. If you go outside the U.S., where our competition frankly, tends to be much more fragmented, less focused on the premium consumer or small business than what you see here, where competition is very fierce in the U.S. Our market shares outside the U.S. are very small. You know, the last comment I would make is if you think about that premium consumer market, and you don't need to look at us to look at sort of industry data, it is by quite a stretch, the fastest growing part of the U.S. consumer market. Small business formation looks really good. You know, we don't see when we look out a long ways, Mihir, anything in terms of the addressable market that gives us concerns about our ability to continue on our current path and our current growth trajectory. Given the growth of that segment and, you know, the focus that some of the banks, competitors have had on that segment, is there room in the market for something between, like, you know, right now you think of the top-of-the-line card as like Centurion, and then there's a pretty big drop off to get to Platinum? Is there room for something between those two? Because I assume you would be the one to come out. Mihir, you know I'm not gonna sit here and comment about specific products. The broader point I would make though, is even though we're not trying to appeal to every demographic, and I know I'm sounding like a broken record here, but it's so important. We're about premium consumers around the globe, select groups of small business, and then the largest corporations in the world. Even though we have that targeted focus, if you actually, you know, go to our website and think about the product line we have relative to any of our U.S. or non-U.S. competitors, it is by far the broadest product line. We do that because if I were to go around this room and ask each of you, what do you really value or think about when you think about a financial product like this? I think you would be amazed at how differently everyone would answer that question. I think sometimes people personalize our product and think, "Well, I like this, and I don't like this," and I assume the market's like that. It's remarkably varied, and that's why we have, for both small businesses and consumers, such a range of products, depending upon whether you have an affinity to one of our co-brand partners, or whether you are really somebody who loves to travel, or whether you're really a small business that is all about, I gotta buy a lot of inventory, and it's all about spending capacity. We've got the value proposition for you. And you will see us continue to offer that broad range relative to our competitors. I will respond, though, to maybe one part of your question, which is a common question, and maybe this is part of what's behind this. People say, "Oh my gosh, you know, the Platinum product in the U.S. is up to $695 a year. How could you possibly keep raising it?" You know, I had an interesting discussion with someone yesterday who said to me, "Boy, Jeff, one of the really impressive things during the pandemic was the fact that you folks had the courage, right in the middle of the pandemic, to refresh the U.S. Platinum product and raise the fee." I was struck by the question because when I reflected back on all our debates, frankly, it wasn't a hard decision for us. I think sometimes people with a U.S. perspective forget that on a global basis, we have 10 years, 20 years of history of every year doing refreshes of many different products in various countries where we put more value into the product, we attract more partners who are gonna help us fund that value, so we don't have to fund it all, and we raise the fee because we're putting more value into the card member's pocket. We have dozens and dozens of historical experiences where we know exactly how the economics work when we do that, and we've never had one that didn't work. As long as we are really thoughtful about what value we're really providing to whichever slice of our customer base a particular product is appealing to, we have a strong bit of historical experience that tells us we can keep moving prices up. The last comment I would make, which often surprises people, is we do offer the Platinum product in many, many different countries, and the reality is financial services is a by country business. Different regulations, different customer preferences, different financial systems. Actually, the U.S. fee of $695 million a year is one of the lowest fees we have on the Platinum product when you look around the globe. You know, if you just were to go to our largest neighbor to the south, Mexico, the Platinum product fee on an equivalent basis is well over $1,000 million. Maybe turning to credit a little bit, you know. You mentioned more optimism to start. We're weighing on that a little bit at this conference too. Obviously a lot of discussion. You know, financials conference, lots of discussion about economic and business cycle, where we are. There continues to be a lot concern among credit card investors still around this idea of credit deterioration, adding, delivering a lot of loan growth. You know, people accept, yes, it's a much more premium cardholder base. It's not gonna be, you know, the deterioration is we're not worried about like, you know, global GFC type. Yeah. There's gonna be increases and losses and provision expense or reserve levels. Yeah. Maybe you could just talk a little bit about how you expect that to trend through the year? Well, I think the first really important level setting relative to many other financial institutions is to remember that our company is driven by what our customers spend and the spend economics we get. Secondarily, we're driven by the fees that we charge our customers for our products. Then kind of at the end of that chain, we go, "Oh, by the way, to the extent our customers are going to carry balances on a card-based product, it's silly for us not to try to collect that as well." So I joined the company 10 years ago, and at that point, net interest income was about 18%-20% of the company's revenues. If you look at recent quarters, it's about 18%-20% of the company's revenues. I suspect five years from now or 10 years from now, Mihir, it'll probably still be about 18%-20%. I just start there because I think it is important to realize that credit's super important. For us, lending, which is really where most of your credit risk resides, is a relatively modest part of our business. The second thing is that when you think about all the discussion we've had, Mihir, over the last 15, 20 minutes, we've talked a lot about the steady premiumization, to use that word again, of our portfolio. When you look, both on the consumer and small business side today, we have a higher FICO mix and a better credit quality on average amongst our customers than we did even before the pandemic. That's why, unlike some others, we have said, when you think about 2023, while we fully, like everyone, expect credit metrics to continue to move from the incredibly, historically low levels they were at during the pandemic up, we don't expect our credit metrics on our card member loans to get to where they were before the pandemic anytime in 2023. Beyond 2023, you know, you tell me what economic scenario you wanna me to use, and I would give you the answer. But that's because of that premiumization of the portfolio. Another way to think about it, not to get overly into the weeds, but, for those of you who wanna look at this very quantitatively, you know, simplistically, the way I encourage people to think about this is if you look at an American Express balance sheet, you can just look at the size of our credit reserves relative to the size of our total receivables and lending AR. If you were to go back to use the vernacular, what we call day one CECL, when accounting for the industry so dramatically changed around credit reserves, those reserves as a percentage of the total outstandings were about 2.9%. We ended 2022 at 2.4%, so well below where we were pre-pandemic. You know, I expect that number will go up a bit this year. Certainly not gonna get near where it was pre-pandemic. You know, we feel good about credit trends. You can always, in any economic environment, find sectors that are under more or less stress, sectors that are booming, sectors that are not. You know, this is a tougher time right now, if you're involved in residential construction. I don't think that should surprise anyone in this room. Appropriately, if you were to look at our risk management practices over the last year or two, we're always either saying, "We wanna grow a little bit more in this sector," or, "Maybe we wanna pull in a little bit in these other sectors." We feel good about the trends. I probably should just conclude by reminding you again, we're not representative of a broad spectrum of the economy. We look at all kinds of industry data, right? It's remarkable in this industry how much detailed data you can get about what's going on in the industry. There certainly is more stress when you look at the subprime sector. In fact, there is tremendous growth, I would suggest, over the last few years in offerings to the subprime sector, and that sector is clearly showing signs of stress. That's just not our customer base. What about the idea that, you know, this time a lot of the layoffs are gonna be... You know, I think everyone sees the headlines, right? It's a lot of tech companies, a lot of seems like white collar type jobs versus maybe historical. Anything you're seeing in your data that gives you caution on from that perspective that though unemployment rate's low? Yeah Nature of unemployment is different? Well, I was debating whether to just say, "No. What's the next question? We can do that. Look, I'm a CFO, so my job is to always be cautious in looking at everything. I'll come back to we're not oblivious to what's going on in the broader economy, but you do need to put things in perspective. The media has seized upon tech companies who went on crazy hiring binges during the pandemic, saying maybe it's time to trim a little bit. I think both Steve Squeri and I, our CEO, have said in public forums, you know, we'll hire most of those people. It's been really hard to hire tech workers the last couple years, and you all see the employment data. The reality is all of those headlines aren't making a dent in the actual employment. The other thing, though, that is tricky, so we're always watching this, Mihir, is, you know, the macro unemployment data is not necessarily what we're sensitive to. Even if you go back to the absolute depths of the pandemic, the unemployment stats were toughest amongst different employee groups around the U.S. in particular that are not really our customer, right? Your white-collar, investment analyst at B of A, was not really, getting laid off the way others were, and that's more our customer. Makes sense. Maybe switching gears a little bit to B2B payments. You know, it feels like it comes and goes in terms of how important it is in investor conversations, I imagine. American Express, it's always an important thing. Can you talk a little bit about what American Express is doing, particularly on the non-card side? Right? Just I think, you know, being a closed loop network and the issuer can be an advantage. You can maybe move faster than some of the four-party networks. Just talk about what you're doing in that market and the growth you're seeing. I will do that, although if you'll indulge me, let me just make two general comments first, because I think people sometimes forget when you look at our small business card segment, that's all B2B, right? Small businesses use our card to run their business. It's the bike shop down on the Jersey Shore that says, "Okay, it's April. I gotta buy a whole bunch of bikes that I'm not gonna get a lot of revenue on till June." They use our products to manage their working capital needs. I think sometimes people think there's some separate B2B effort that has nothing to do with our card effort. Now, we do have a non-card B2B effort. I would say, though, Mihir, in, as you think about the industry, and all the discussions that happen around B2B payments, it's a slow transition to get particularly small and mid-sized enterprises away from using checks and really outdated ACH. I think part of that is because small to large, few people in charge of a business come to work in the morning going, "Wow, you know what my number one priority is for my company? It's, it's improving the way we pay our bills." Right? It's probably not on the top of most CEOs' investment list when they think about, okay, I've got a constrained amount of tech I can do. That's not to say the transition doesn't continually happen. You know, there is less use of checks in ACH than there was 10 years ago, and 10 years from now there'll be less. We view it as just a steady growth opportunity, not a breakout opportunity. When you think about the non-card side, I would say, Mihir, we're probably most focused, driven by the fact, to your point, that unlike sort of most people going at this, we have lots of relationships with businesses on two different sides. Both the small and medium-sized businesses are using our cards to make some of their payments, and then we have lots of merchant relationships. A lot of what we're about is working with some software that we provide to help companies manage all of their payables or all of their receivables, frankly, whether they wanna pay them via check, via ACH, or via our card. And we can embed our software, and when you do that, magically, how much they use the card goes up. We also partner with many, many different software players across the spectrum, 'cause there are many software players trying to solve the problem that all small to large companies have, which is the interconnections between how they actually make payments, how their accounting systems work, how their billing system works, are really clunky. You know, we embed, we work closely and embed our products in lots of people trying to sell software to solve that problem, whether it's WEX with their Synaptic product or companies like Tradeshift, or Extend or Bill.com. We're embedded and close partners with all of those companies, and we have our own solution. Our ability to work with somebody who says, "You know, boy, I mainly pay these 10 vendors, and some of them won't accept your card," you're right. We can then go to those 10 vendors and say, "Let's work on some kind of special arrangement." When you look at our commercial segment results, part of what drives the steady growth in that segment is the evolution to less use of checks and ACH, us embedding ourselves into that software, whether it's our software or one of our partners' software. I view this is not a breakout opportunity where next year, Mihir, we're suddenly gonna triple our growth rates because the logjam's gonna break. I just see it as it's a steady, sustainable growth platform for many, many years because the transition happens slowly. Maybe staying with, maybe in broadening the discussion a little bit more on the, in terms of, you know, some of the products, and you introduced business checking. Yeah. You also have a consumer product now, the rewards checking account. Give us an update on where we are with that process. I know it's open, but. Yeah what's the customer response been like? Is that something that you're looking to push a little bit more this year? Over the last year or two, we have introduced only in the U.S., both a consumer digital checking account and a small business digital checking account, and it's tied into our rewards program, etc. You know, it's very early days, Mihir, on both those. In fact, we really haven't gone fully into marketing mode on either of them because this is new to us. It's an industry where the regulatory environment in the U.S. says, make sure you've got every possible operational process incredibly well tied down before you aggressively grow the product. You'll see us begin this year and next to move those more aggressively in terms of our marketing efforts. What I would say though is I would never say to anybody in this room, boy, you know, you should be an owner of American Express stock because this is a key driver of profits in the next five years. We do it because what it is a key driver of is building stronger primary relationships with our consumers and with our small businesses, right. The very early data on the consumer side says, boy, when you look at the people who already have had several of our card products, perhaps they already have one of our high yield savings account, which I would remind all of you is our largest source of funding these days, and our cheapest source of funding. Then they add the digital checking account, and what you see when that happens is you tend to get a larger share of wallet across all the products. That's the goal. When you look on the small business side, we really just rolled out in the last couple of weeks, Mihir, as you know, a product we call Blueprint. This is really the technology that we acquired in the depths of the pandemic when we bought Kabbage. We didn't buy their loan book. We're not that into what they were doing on the lending side, but they had really good customer-facing technology for small businesses that allows a small business to basically manage every part of the business and their financial life using this front end. Our vision is really that is the front end we would like to see every one of our small business card members using 5, 10 years from now to run their business, probably with the small business checking account, probably with some embedded software to help them manage their receivables and payables, helps them manage their cash flows. You're building that primacy of the relationship. When you just look at the reality of this industry, the biggest chunk of the economics still come from the card products. I see there's about six minutes left, so I don't know if anyone has any questions. All right. Oh, you can raise your hand. Hi. There's been a growth deceleration in recent quarters in network volumes for the U.S. SMB segment. Have you seen any major differences in trend between the smaller end versus the mid-market? Yeah, it's a good question, and we spend a lot of time thinking about sources of growth. I would say for our business, if you look at where we have focused over the last year or two, we probably have been particularly focused on the smallest end. Part of our thinking there, if you think about all the discussion we had about consumers, was to the extent you catch the small businesses earlier in their formation, are you creating a even more attractive lifetime value if you can grow with that business? You know, like all things, you're always trying to balance your efforts. I think, probably full disclosure, one of our questions right now is that we like that focus. It's worked well for us. We've seen in our business, I'm not making an industry comment, a little bit more growth in the smaller businesses. Inevitably, you would expect us to then ask the question at some point, well, have we over-rotated? We're also still spending enough time on some of the medium-sized businesses. You know, you really have three very different segments when you look at our commercial segments. You do have the largest corporations in the world who use our corporate products mainly to manage their travel and entertainment. They're not using it, you know, IBM is not using our product to manage all their payment flows. You have the really small business, who might even have started with a consumer card, and then at some point they're running their business on their consumer card, and we can help them understand that actually we have products with very different value props that are targeted at someone who's using it for business. You have this big middle ground where they're doing a little bit of the corporate card use for travel, but they still are kind of struggling. How do they better manage receivables and payables? That's where a lot of the automation I talked about earlier, Mihir, helps. You know, we're constantly trying to balance, I would say, across all three of those broad segments. Sure. As your customer base has expanded, and you are adding new card members at a accelerating pace, and given that a big chunk of your revenue comes from the spend, have you looked at per account spend in real terms over the years, if it has come down, given that quite a few of recent card members skew younger? Yeah. What we're really looking at. On average, actually, card per spend continues to grow, and that's because of the more premium nature of who we're bringing into the franchise. As you would expect, when someone pays $695 for a Platinum card, you generally are gonna get a bigger share of their wallet, and you're generally attracting a higher income, higher credit quality person with higher spending patterns. That premiumization, if you look at the aggregate numbers, overwhelms the age difference, which I'll talk about in a second, so the average spend per card continues to go up. It's absolutely true that when you bring in a 25-year-old versus bringing in a 62-year-old like me, their average spend is below. What we're always monitoring is relative to the 25-year-olds we were bringing in 10 years ago, we are attracting a higher credit quality, higher spending 25-year-old, and we've got them. In our business, there's very, very little attrition. Once you get someone into the franchise, they're usually a customer for life, and that produces a tremendous lifetime card member value. Should we go to the front? You like the savings account business because of the low cost of funding. How much of that business, though, is in alignment with the Target credit card customer base? How much of it is actually an overlap of customers who are in the credit card portfolio? Yeah. Yeah, it's a good question, and I don't know that we've given precise numbers. What I would tell you is there is very significant overlap between people who have one of our card products and also a high-yield savings account. There is not complete overlap. One of the things, I will say that we probably under-executed on for many years is mining both ways the power of the overlap. We made an organizational change beginning of last year. I'm looking at, 'cause Karrie, our head of investor relations, used to run our high-yield savings firm. We made an organizational change, a little over a year ago to move the high-yield savings product right under the same group that is now managing most of our card products as well as the new checking account because we came to the realization we're probably not doing as good a job as we could of going to the people who have a high-yield savings account balance but no other American Express relationship and mining them for business. We're probably not doing as good a job of mining our own card member base to put them into the high-yield savings account. You know, we've had, if you know, I'm not gonna get the numbers right off the top of my head, but they're public numbers. If you look at the growth in our depositary programs, it's been very dramatic. If you think about what's happened during the pandemic, the large money center banks like B of A, who have much lower cost of funding than we do, but you have seen a steady drip of money out of those checking accounts into products like our high-yield savings account, and that's really been a benefit for us over the last few years. I think that brings us to time. Thank you everyone for joining and thank you, Jeff. Okay. Thank you for your time.