Good morning, everybody. My name is Jeff Adelson, Morgan Stanley Consumer Finance Research Analyst. Before we get started, I'm just gonna quickly read some disclosures, get them out of the way. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. The taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. So today, we're very excited to welcome Christophe Le Caillec, CFO of AMEX, to our conference. This is your first time joining us. Great. Thank you for the invite. Very, very happy you're here. Why don't we get right into it? So, you know, it seems like we can't really go a week without hearing about some news on just slowing discretionary spend from the consumer. But I think AMEX, their consumer, the high-income consumers, continue to hold up here. What's your take on the consumer today, especially the AMEX versus the broader consumer? And maybe you could just give us a quick update on what you're seeing so far this quarter on trends. Yeah. Yeah. So good morning, everybody. It's a pleasure for me to be here today. And again, thank you for inviting American Express. So I read the same news, and I see the same things. So it's a very slow-growth economy. And what we're seeing in the Q2 is very much the continuity, continuation of what we saw in the previous quarter. So you might remember in Q1, we were at about 7% billing growth. That included an extra day of shopping. And so the numbers were a little bit inflated by that. But we are very much seeing the same thing in the second quarter. And you heard Steve earlier last week talk about a 6% for the quarter. So we're, you know, quarter to date, we're very much in that zone. If you step back a little bit, the makeup, I think, is useful. The makeup of the number is useful to talk a little bit about. We see relative strength in the consumer space, whether it's in the United States or international. You remember our numbers in Q1. The U.S. billing for U.S. Consumer was up 8%. In international, 13%. And of course, this was offset by, you know, low single-digit growth rate in the SME space, which for us is the place where we see the most softness. But Q2 looks very much like this. You've had great success in the fee-paying U.S. premium card segment. At your Investor Day recently, you did highlight that you're now 25% of the segment versus 20% a couple of years ago. So for me, outside of you, it seems like the strategy to double down on premium card here is working, even as you do face competition from some of the other banks out there. I guess a couple of questions there. In the near term, as we think about the path to kind of re-accelerate card fees in the back half of the year, how, how's that playing out so far? And then longer term, how do you think about the growth runway? Is there a point where this competition actually becomes a bad thing instead of a rising tide lifts all boats situation? So it's card fees are a super important indicator for us. And I'm glad you were, you know, you're raising it. It's a super important indicator because the way you move this metric is, you know, like you need to do like three things. One is acquire more fee-paying card members, which is what we're doing, premium card members. The second thing you need to do is make sure that those card members renew their membership. It's the single most important assumption we make when we try to predict where this number is gonna go, right? We have an installed base of premium card members. If you're a Platinum Card member, you pay $695 a year. And once a year, you have to renew that commitment. And so it's a super important driver as well of driving their card fee number up. And of course, what we need to do from time to time to support those two things is actually to refresh the product, right? And the way we do it is we inject value into the product, and we price for that value, which means that we are raising the fee. And it's the combination of these three things that move that metric. And you know, I just need to remind all of you that we've been growing that metric in double-digit for the past six years. And actually, if you even, you know, look at it in more detail, for 20 of the 23 quarters, it was north of 13%. Even during COVID, we grew that metric. So it speaks a lot about the nature of the franchise, the premiumness of the franchise. It speaks a lot as well about, you know, the relationship that we have with our customers and our card members. We are delighted to see that. So I pay a lot of attention to that card fee growth rate because I think it's representative of the strategy, it's representative of where we wanna take this business forward. To the first part of your question, yes, we're still expecting, as we exit the year, to accelerate the growth rate. We're very much on track to delivering on that expectation. I think part of that is also the 40-card refresh you had this year. Exactly. So part of the, you know, the things that Steve introduced when, he, he took the role of CEO was to, you know, increase the pace of the company. And one way to increase the pace was the cadence of the product refreshes. And it's definitely creating momentum in the company. And it's creating momentum as well in terms of our communication externally and how we acquire and how many card members we, we bring to the franchise. So we're very much on track, to, to deliver on these 40 refreshes. And if you take a step back, I think we talked at Investor Day that we refreshed something in the range of 150 products over the last, you know, was it like five years, right? So, it's very much part of the machinery of American Express. Mm-hmm. And it's working well. And it's just part of creating momentum and supporting and sustaining the momentum going forward. Have you ever thought about any kind of natural ceiling in where your annual card fees could go? I mean, I know you point to some of the international markets. Is there some sort of analysis you're doing on the friction of raising versus injecting value and retaining that customer? And, you know, as a part of that, the question we always get, you know, I know you're probably not gonna answer, when are you gonna refresh the, the Platinum Card? Are you a Platinum Card member? I am. Morgan Stanley pays for it, though. Okay. So, You get that nice benefit. So you know my story, right? I spend most of my time at American Express outside of the United States. In any given year, we would have like 20, 30 product refreshes. We tried every single combination many, many times. Every time, the lesson learned is the same, that there is hardly any attrition. When there is, what people do is just that they typically downgrade as opposed to leave the franchise. Many times, the lesson learned is we could have raised the fee higher. We're clearly not talking about a ceiling. You're right, at Investor Day, we gave a couple of examples of the card fee, you know, price point in various markets. You know, in Mexico, in Japan, it's like north of $1,000. In the United States, it's $695. So there's still a lot of room to, you know, grow for us. I need to say this, though. The way we think about it, and the way we start, and the way we, where we start, and the way we model those decisions, we don't start by saying how much, you know, I can increase and what's the level of, you know, tolerance, for the card members. The way we think about this is like, how much value can I put in this card? How can I innovate? How can I make the card more attractive? And once we solve for that, and once we found the right partners, the right value proposition, then we try to answer the question around how much is it worth, and where should the price point be? And then we work on how are we gonna communicate this to the card members and explain it to make it like a rational decision for card members. And last time we refreshed their, the Platinum Card, that's exactly what we did. And, and you've seen that number. But if you add up all the benefits, it's like probably like twice the price of the card fee. So it's a rational decision. That's very much how we think about it. We price for value. Part of the strategy here on premium card, it's clear that your focus on Millennials and Gen Z has been a clear driver of success here. About 60% of your that cohort is fee-paying for you. I guess one question we always get, though, is where are these customers, where do they keep coming from? Is there also a natural ceiling on that, maybe as these folks start to settle down and stop traveling as much, or does the next generation step in for you? Yeah. So before I go, you know, I answer your question, just take a step back a bit. For those of you who have been following American Express for a long time, you know, 10, 15 years ago, one of their most complicated questions we were getting is, you have a beautiful franchise, you have beautiful products, it's perfect for my dad, but it's not good for younger card members. We solved that problem. We have a brand, we have a value proposition, we have products that resonate with younger card members now. And those younger card members come with a lot of things, a lot of good things, including, you know, they typically give us a much higher share of their wallet. Second, we know that we're gonna be in a relationship with them for a much longer period of time. We talked about 20 years. So the embedded value, the lifetime value, the embedded revenue growth that is included in creating and building those relationships with younger card members is super attractive to us. And so, you know, we feel good about, about where we are from that standpoint. You know, I'm very optimistic about there are always gonna be young people. And we're always gonna have to win them. I'm pretty sure that a generation from now, we're gonna have to innovate around the products to win them again. But right now, the products that we put in front of them resonate extremely well with them. Remember that it's a, it's a generation that is used to paying fees for many things, including how, you know, experiences, you know, how they consume, music, you know, through a membership or a subscription fee, how they consume entertainment. And so we're just, we're just playing on that, in that space as well. And as you said, it's resonating like very, very well with their younger card members. And to your point, like almost 60% of them enter the franchise, and the first thing they do is pay us a fee. There's been some reporting out there, I think, from the New York Fed pointing to maybe some rising stress in the younger cohort. Are you seeing that, or what are you seeing? I'm sure that's the case. But, you know, I need to say as well that the card members that we're talking about for the Gen Zs and younger Millennials are not the average Gen Z or younger Millennials that, you know, are impacted by this. We are very disciplined about who we bring to the franchise. As a matter of fact, our underwriting models do not have age as an input, you know. So we do not differentiate between underwriting a Gen X or a Gen Z. It's a function of what their credit profile looks like. So the people we're talking about, the card members we're talking about are typically young professionals who have jobs and who are starting in life. You know, like many of you, many of us, you know, a long time ago for me. But these are typically the card members that we bring to the franchise. We're very disciplined about their credit profile. And at Investor Day, Howard Grosfield shares some metrics around that. You might remember that the average FICO of our Gen Z and Millennials when they join the franchise is north of 750. It's a very good FICO. It's actually as good as what many of our competitors have for their, you know, Gen Xers. So we are very disciplined about who we bring to the franchise. And, you know, it's inevitable that this population is gonna be more exposed if there is a downturn. But we feel that, you know, our card members, you know, are just gonna navigate that very, very well. And again, you know, I'm very optimistic about our ability to retain these card members and, you know, bring to bear their, the embedded lifetime value that is included in those relationships. Maybe switching to the last piece of revenue growth here. So your loan growth has been really robust for a decade now, if we ignore the pandemic. How much of that growth today, or even over that history, is coming from existing versus new customers, and maybe some of the more Pay Over Time play in it versus the normal revolving credit card piece? And then as we think about the forward look, you know, maybe absent any shift in the macro, is this double digit type additive to the overall revenue growth here to stay on the loan growth? So the first thing I wanna say is that we have innovated quite a lot in that space with this Pay Over Time value proposition, which is different, right? And for that reason, and that it's typically attached to charge cards. So for that reason, when I look at, you know, asset growth, I combine, you know, receivables and loans together. And if you look at all together combined, our growth rate is actually not that much different from most of our peers. So at least the big banks we compete against. So maybe, you know, we are 100-200 basis points stronger, but not that much more. So that's the first thing. The second thing is the type of asset that we put on the balance sheet is different from what we used to do, like, say, you know, before the Great Financial Crisis. I had a page at Investor Day, which I hope you saw, but we're not growing loans by issuing balance transfers. You know, balance transfers today are a little tiny part of our acquisition strategy. You know, it's less than 1%. You know, and most of the growth, the single biggest contributor to asset growth is coming from this Pay Over Time facility that is attached to premium products. So what it is, is a flexibility we give to card members to revolve for typically a short duration, you know, some, you know, big-ticket items. And we see it, right? When we analyze, you know, what's their, what's the revolved behavior of these premium card members, what we see is typically a spike in the spend the month before they enter into that revolved status because they purchase a big ticket item, because they purchase the vacation for the family, you know, like two or three months ahead of time. And half of those actually would actually pay down the entire balance within two months. You know, so what they need is, is some flexibility to actually amortize over a shorter period of time some big ticket items. And so this is, you know, shorter revolve, that is attached to premium card members, very low risk. And there was another interesting stat that, we shared at Investor Day, which I felt, you know, caught your attention. Under, there was a slide that showed that most of the asset growth was attached to fee-paying products. The write-off rate on these fee-paying products was 1.3%. So it's very, very small. So it's super attractive business. So in terms of the second part of your question, where is that going? You know, there's been a big discontinuity here, you know, due to COVID. So there was a lot of normalization of balances that created, you know, very strong growth. This growth rate is moderating and has been moderating for a few quarters now, and it's gonna keep moderating, you know, you know, in the coming quarters. Long term, you know, it's hard for me to say exactly where we're gonna go, but I'm gonna say this. We're gonna stay true to what I just said, which is premium customer, and we're not gonna, you know, we're not gonna offer revolve or balance transfer at acquisition. As a matter of fact, there's another stat that I like quoting, which is that 70% of the balance growth comes from tenured card members. So people join the franchise, they spend, we get to know each other a lot better, we extend credit to them, and we extend credit when we know them better so we can better underwrite them and monitor the balances. I mean, it sounds like there's a bit of a proactive approach on your part where you notice those big ticket purchases and you make them an offer on the financing. I imagine, I mean, is a lot of the growth coming from more of that, or are you finding more of the card members are just coming to you and say, "Hey, I need to borrow"? So statistically, so we know a lot, and we have, you know, those what we call trigger marketing, where, you know, specific type of transactions might trigger a marketing message for us to upgrade the card to, you know, take some loans. So definitely these are the things that we do. But card members know as well when they take the Platinum Card, the Gold Card, that, you know, we give them that facility, and it's for them to use when, when they need it, right? And so maybe just rounding out the discussion on revenue growth, we've gone through all the key components here. Let's take a step back and talk about what that means for the 9%-11% growth guide for the year, and then how you're thinking about maybe the quarterly trajectory over the rest of the year. Yeah. So we issued guidance at the beginning of the year, 9%-11%, for the full year. I'm still very comfortable with that, with that guide. Talking more specifically about the quarter, as I said, billing is trending in the same direction as what we saw in Q1, especially once you control for the leap year. As I said, NII is just moderating in terms of growth. And we talked about card fee, and the point here is that card fee is gonna take up as we exit the year, but not in Q2. So when you put all of this together, when you put all of this together, you're gonna get, you know, a revenue growth that is, you know, not as strong as Q1 was. There, the other thing that I'd say that is impacting the quarter is the strength of the U.S. dollar. So the number we're gonna print is gonna be impacted by that. We have, as you know, a fast-growing business outside of the United States, especially in Japan. And I was recently in Japan, and definitely feels cheap to be in Japan these days versus what it was, you know, a decade ago, or even a few years ago with a yen at 160. So, you know, there will be, you know, probably a bigger gap between FX adjusted and FX reported when it comes to revenue growth this quarter. But as I said, you know, the guide for the full year is still very much the 9-11. Okay. That was clear. Thank you. Maybe shifting topics to something that was, you know, that came out more recently. You know, last week we learned about eBay's decision to stop accepting AMEX, beginning in August. You know, you put out your response. It's not overly material. I think less than 20 basis points of your network volumes. And it seems like if you do high level back of the envelope, maybe it was only 5% of eBay's volumes at that point. So not overly material to either side here. But we've been getting asked the question, you know, is there a risk of other merchants or retailers doing something similar? And is this maybe just more of a negotiation tactic on their part, or do you think this is it? Yeah. So, you're right. It's a small part of our business, less than 20 basis points. And it's a reminder as well that unlike other networks, we negotiate one-on-one with every, like, with the merchants, right? And we have thousands and thousands of merchants that we negotiate with every year. And it's, I mean, what's surprising is that it only happens once in a while, and it's quite a rare event that we cannot find, we cannot settle with a merchant. In this case, our research says that our, you know, price and our offer was very competitive to competitive networks. It also says that our card members have much higher transaction size, you know, to the magnitude of 2X, than our competitors. And therefore, we feel good about the value that we bring. You know, it's important for us to stay true as well to our pricing discipline. It's very disappointing that we couldn't find an agreement with eBay. But, you know, we are where we are, and we're gonna keep talking to them as we keep talking to all the merchants we deal with and explain the, you know, the value that we bring and why we price that value that way. So, I don't have a lot more to say, you know, on that situation. So we touched on credit a little bit earlier. Obviously very strong performance from that fee-paying customer. As we think about the outlook from here, you know, you have other peers who dabble more in the near prime, subprime area that are looking for peak losses in the first half of this year. It seems like maybe you're looking for a slow, gradual continued normalization higher. Can you talk a little bit about, you know, some other drivers other than what you already talked about, of that strong performance and maybe why there's a little bit of a divergence in the forward look there? Yeah. So it's very hard for me to comment on what our, on some of our competitors because not all competitors have made, to your point, have made that comments about, you know, write-off reaching some kind of plateau, a few quarters from now. The first thing to remember as you look at our credit, situation is the fact that last quarter we reported a write-off rate of 2.1%. Very strong. Very strong, relative to our peers. Very, very strong in absolute given, you know, where the APRs are. So I feel really good about the credit situation. Delinquency rate, we're also best in class. And there is a metric that I like, monitoring every quarter, which is the spread between our credit metrics and our peers. And that spread is increasing. So you're right that I've been making comments about you should expect this, you know, write-off rate and delinquency rate to tick up a little bit over time. But we're starting from such a low number of 2.1% that we're still gonna be like best in class. We'll see where our peers are. You know, I've heard as well many of our large competitors making comments about next year's write-off rates being a bit higher. So we're clearly, you know, in that, in that camp, but from an incredibly low base. And, you know, I do think as well, because I wanna make a comment, you know, on this, is that the portfolio is especially resilient to a credit event. And I, you know, we'll see a few weeks from now, the reports from the Fed on the CCAR exercise. You know, I'm sure you will see that American Express is performing well in that exercise as we have done always in the past exercise. So we have really a very pristine and premium franchise, very low write-off rate. It's gonna tick up a little bit, but boy, it's still, you know, an extremely attractive business. And maybe while we're on that subject of capital, what are you hearing on the new capital proposals out there? And, do you think they'll ease that operational risk element or some of the proposed changes out there on, you know, the charge card, you know, proxy for line of credit dynamic? Yeah. So this is the Basel III Endgame question. Yes. Correct. Yeah. Listen, I don't know what the Fed is gonna decide here. If you know, please, share with me your, your insights. What I can tell you is that we spend time with, with the Fed, at all levels. We took them through, our thoughts. I can tell you that they listen very carefully. I also can say that they understand that the draft rules were generating some unintended consequences that were not their objectives and their goals. I know they're working on it as we speak. I don't know where this is gonna go, but I'm, I'm optimistic that they're gonna make changes and it's gonna be, you know, better, not in terms of lower, but something that will address exactly what they wanted to do, which makes the system more resilient and put more capital where the risks are. You know, I don't think the risks are in their, in the premium franchise, such as, such as American Express. So we'll see where it's gonna go. Now, you know, it's possible as well that they don't change much their, the rules as they were drafted. And I think, you know, as a CFO, I need to be ready for that scenario as well. I think it's worth reminding ourselves that, you know, the ROE of this business is 30%, north of 30%. We generate a ton of capital. We distribute dividends, of course. We repurchase shares. So for us, you know, we have flexibility in our capital management, you know, to be able to deal with that. And if there is a bit of a reset, there will be a bit of a reset, but there is no need for us to change anything to our strategy, to our pricing, to exit products. I feel really good about what we're doing, and it's not gonna impact what we're doing. And the optimistic in me says that our, you know, the new rules are gonna be different and, you know, for that matter, better. Does planning for that bear scenario, I mean, you did raise the dividend already, but does planning for that bear scenario maybe change how you're thinking in the near term about capital return or you? No, in the near term, we are buying back shares, and we're feeling good and confident and comfortable about, about that for the reason I just explained, right? Is that if, there is a bear scenario, to quote you, we'll leverage our 30% return on equity to quickly rebuild capital. I need to say as well that, we operate with our CET1 target between 10% and 11%. That's, you know, 5%-6% north of the regulatory capital. We have the lower stress capital buffer. You know, we'll see what the Fed comes up with in a few weeks now, but the regulatory capital, including the SCB, is 7%. So we have flexibility there as well, you know, in terms of, you know, adjusting our capital. Something that's been very topical over the past year, you know, we just heard from Apple the other day on this, AI. You've done a lot of work in tech. You're doing some more in generative AI. We learned about that at the Investor Day. How much are you spending on tech and where does this go from here? And how are you thinking about the longer, longer-term opportunities for AMEX relative to tech and maybe AI? So I'm glad you are raising this because this is probably one of the most unappreciated part of our business. And maybe it's because we don't talk enough of it. So thank you for asking the question. You know, I'll answer your question about how much we're spending, but, you know, let me take a step back first. Technology, data, science is clearly part of the DNA of American Express. And it has been not, it's not a recent development, you know, on the back of GenAI and the buzz around GenAI. We always operated this franchise without branches. We knew that the way for us to make this business successful would rely on data, on science, on technology. And we invest a lot in it. So by the time we end this year, we will have spent something in the neighborhood of $2.1 billion in terms of technology development. I'm talking here about, you know, like improve the bank versus run the bank. So it's like it's north of $2 billion. And it increased by 40% over the last, is it about like three years? So we're clearly investing a lot. We're clearly investing a lot more in technology. I wanna give you a couple of proof points as well, for you just to evaluate this. The first thing is that, as, you know, you have to think about technology not only as like a standalone activity, but combined with their very rich data that we have and their years and years of operating a very successful, you know, card business and, you know, building those powerful models. So the way it's translating into value is when you look at, for instance, our fraud performance, it's like 2-3x better than competitive networks. It's not like a small difference. We are 2-3x better on the back of technology, data, and those algorithms that we build. You know, something, you know, also we're proud of is that recently J.D. Power issued their, you know, their rankings of the best app in the credit card space. We were rated the best app in the credit card space, you know, on the back of that technology and the experience we have in that space. And there are many, many other examples. If you use your American Express card and tap and pay, and use, you know, the Apple Pay features, you will notice that you get a notification that your card has been used. If you try to do this with, you know, I don't wanna name anyone, but like competitive products, you will notice that you do not get that notification. It talks a little bit about the integration that we have in terms of our technology and, and Apple's technology. So definitely it is something that is front and center. It's something that it's taking a bigger space on American Express. You know that our current CEO used to run the technology department of the company as well. And so it's, as I said, it's, it's unappreciated. And part of my job is just gonna be to, to share more with you and, and with investors about, you know, the strength and the power of our technology. Yeah. My personal experience I found with other banks, you have to turn on the notifications somehow if you can get through the app, but that's, that's nice to see. And, and maybe just wrapping up, with the few minutes we have left here, you're now approaching your one-year anniversary, I think, with AMEX at this point. Maybe highlight some of the biggest learnings and opportunities after your first year as CFO. And what do you say to investors who are impressed with your growth story and the credit quality you're putting forth, everything about the franchise, but maybe skeptical that the multiple can expand from here? Yeah. So as I said, I've been in the company for 27 years, and I spend most of my time at American Express, operating this company at a very granular level and, and, you know, at increasing level, just like many other leaders in American Express. And so where we are today, we are at a time where we have a clear strategy and we are very focused on as, as a management team on executing on that strategy. We do not need a new strategy. We have one. And we've been, we've been operating on that strategy for a while and it's delivering. And we laid out an ambition to grow revenue in excess of 10% and earnings per share, in mid-teens. When you compound this, you know, it's a super attractive value proposition for investors. Back to their time at American Express, you know, for the most part on American Express, when I was there, you know, at a more junior level, we were trading at a premium to the S&P 500. The recent history, you're right, it's the history, but it's the recent history we are trading at a discount. I, the market will tell what the right multiple is, of course. I hope that if you believe in the, the strategy, if you believe in their, in their credit profile of this franchise, if you believe in our ability to execute and the strength of this leadership team, then if you compound that, that EPS growth over time, you know, you can rationalize a higher multiple, which is where we were, you know, I would say, you know, a few, a few years ago. I hope that that's what happens in the coming years and in the coming months. Well, we're looking forward to it. Christophe, thanks for joining us today. Thank you. Thank you for your questions. Bye.