Right, I think we're gonna get started. Welcome everyone, to the third day of the Barclays Global Financials Conference. My name is Terry Ma. I cover U.S. Consumer Finance at Barclays. I'm very pleased to have on stage, the CFO of American Express, Christophe Le Caillec. So welcome, Christophe. Thank you for having me. Yeah, thank you for coming. So I think we'll just jump right into it. Maybe just to start off with the consumer, wanted to get maybe a mark-to-market on what you're seeing on consumer spend quarter to date. U.S. Consumer Services group network volume is about 8% in the Q1, but that did decelerate modestly to about 6% in the Q2. So how is consumer spend shaping up in the Q3? Yeah. So good morning, everyone. So maybe before I answer the question, I want to acknowledge that today is the 23rd anniversary of the 9/11 terrorist attack, and I've got a thought for those who lost their lives, including eleven American Express colleagues. So to your question about consumers. So we released Q2 earnings a few weeks ago, and the word that I used back then was stable. It's stable in a slow growth economy, and really, over the last six, seven weeks, nothing has really changed much, right? So we're still in that same situation of stability. You mentioned a little bit of a decline. So Q1 was a little bit inflated by the extra day. It was a leap year. But so if you control for that and look at over the last few quarters, you know, we're kind of like in the same range, and nothing has really changed there. So that on the spend side. What we've seen, though, on the consumer side as well, we're seeing consumers who are very engaged with their American Express products. Either the level of transaction remain, and transaction growth remains, you know, higher than billings. Either they're, you know, engaged with the products, they're signing up for cards, they're paying fees. You know, I talked about the card fee line being up 16%, and we're expecting this to tick up a little bit in the balance of the year. They're revolving and they're paying back their balances because, you know, our write-off rates remain very, very, very strong and our credit metrics very, very strong. So in balance, I would say that nothing has really changed much from the Q2. It's slow growth. As I said, it's a slow growth economy, and it's very much stable in that environment. Got it. Maybe just to dig in a little bit more, are you seeing any differences in T&E versus goods and services? And what about also, obviously, you're more levered to the higher end consumer, but are you seeing any differences between generational cohorts? Yeah. So when it comes to the mix between goods and services and T&E, we've seen a little bit of a, you know, moderation in terms of T&E growth. You know, it was stronger, think about like the back end of last year in particular, and we have lost a little bit of momentum there, but it remains, you know, very strong when you look at the details. Our card members are very engaged in terms of dining, which is number one category when it comes to travel and entertainment spending, and we see as well, you know, engagement across all generations. As you would expect, the younger generations, the Millennials, the Gen Z, are more growing at a faster pace also because we're adding to that population. But I think the growth rate back in Q2 was 13%, so it gives you an idea of like the disproportionate growth we're getting from the younger generations. And so, yeah, that's what I would say. In terms of the spend by income level, as you would expect, right? I mean, I don't think it's specific to this economy or this time. Card members who have a higher income tend to spend more and to be more comfortable than those who have a lower income. I don't think there is anything different at this time. Got it. So just to touch on SME, that's an area of softness the last couple of quarters. Yeah. You mentioned in the Q2 you saw a slight improvement in U.S. SME. So maybe just an update there, and maybe just talk more broadly about what it's gonna take for this segment to fully lap some of the organic softness that you've kind of called out. Yeah. So listen, if there is like an area of American Express that we are analyzing and scrutinizing, it is that part of the business. And as we've said in the past, there are many things that are going very well in that segment. Acquisition, the credit profile of those new small businesses that are joining the franchise. The credit performance of the portfolio remains, you know, very, very strong. The piece that is not as strong is the organic spend, which is, if you're not familiar with our terminology, this represents the kind of like same store sales concept. So this is the incremental spend, the spend growth coming from tenured card members. It's that specific part of the portfolio that was negative for the last few quarters. Nothing really has changed there for now. You said, right, right, so the last quarter was a little bit better. We're gonna need a bit more than one quarter before we call it a recovery. But what I can tell you is that the team is working really hard to win that recovery, to make sure that we have the best product in the hands of small businesses. And when they're ready to spend, we'll be there for the recovery and we'll be there with them. Got it. Got it. And now, maybe just turning to the product refresh cycle. You guys refreshed the Delta portfolio or cards earlier this year in February, and more recently, the Gold Card. You guys mentioned about 40 of the planned product refreshes for twenty twenty-four have been implemented. Maybe just talk about what you're seeing with respect to card acquisitions and also attrition so far. Yeah, for this product? Yeah. So, it's probably too early to talk about, you know, the Gold card. What I can tell you is that it's performing very well. You know, I was talking to the head of the U.S. consumer business, and he was telling me that the main reason why card members and prospects were calling us was actually not to ask about the benefits of the products, but it was to or about the fee. It was predominantly to get their hands on the White Gold limited edition. So people like that form factor. It's a real success. On the attrition side, we've seen absolutely nothing. As expected, I would say we've done a lot of product refreshes, and we are committed to executing on about 40 product refreshes this year. It's something like 150 over the last five years, including during the pandemic, and so it's a bit of a machine for us at American Express, and it works, it works really well. In the case of Gold, I think it's important to understand what we're doing here, right, with those product refreshes, so what we're trying to do here is just, like, to either create more value for card members, and if you're familiar with the value proposition, we added a Resy credit on top of the dining credit that we had before. If you're familiar as well with the product, you would know that you get a $84 credit with Dunkin' Donuts, so we're trying to add value to the product and price for that. So there's your, this, this is very much the playbook that we've been using for all the products and all the refreshes. And when we look at, you know, the past performance of this product refreshes, it works really well for us, right? It supports growth, it creates demand, it creates reengagement with card members who are less engaged with the products, like those who are calling us to get the White Gold, you know, form factor. So it's really a success factor for us. And what it does across the entire business system is just, it's just like, it, it's, you know, it improves pretty much everything. It's accretive to almost every metric that we have. Got it. And you called out the growth in net card fees and the guidance there. Maybe just talk about what the longer-term growth runway is for the net card fee line item. And then maybe just talk more broadly about, like, is there any sort of limit where consumers will say no to annual fee increases? Yeah. You know, first, it's not an analysis that we've done, which is like, is there a limit to that, to that number? Because, again, we're not trying to test the limit to see how far we can go in terms of pricing. Again, you know, we are injecting value in the product, and we're pricing for that value. If you are like a purely rational card member, and you look at you know how much credits and how much benefit you can get, the fee is not an issue, right? The value is definitely justified. And when we look at, you know, overseas and international, we have, you know, all sorts of product and history of product refreshes as well. And we've, you know, for that matter, we have pushed, you know, the price to much higher level. At Investor Day, we talked about the Platinum Card specifically, that is north of $1,000 in many countries outside of the U.S., and the demand is really there. So I think there, you know, we're gonna keep doing that. We're gonna keep pushing that playbook and ingest value and price for that value and as opposed to kind of, like, try to find the limit in terms of how much the card member can pay for a product, and so I think that there's a lot more growth to come here. And definitely, we've not been in a situation where we said, "Oh, we've been, you know, we priced that product too high." You know, as I said, you know, I've been in the company for 27 years, and I recall only once in those 27 years where we said, and maybe that time, you know, it was not a good product refresh. But outside of that, you know, and we learned from that lesson. Outside of that, it's just a very successful playbook for us. Got it. Maybe just to follow up on that. Historically, you've kind of injected value in the form of merchant-funded credits. With the recent Gold Card refresh, it seems like Dunkin's merchant-funded. You also added a Resy credit, which, you know, Amex owns. So how should we kind of think about that? Can that be viewed as a rebate on the price increase? You know, for all the value proposition that is embedded in the product, some of it is funded by American Express, some of it is co-funded by the partner, and, you know, just like every possible construct in between those two limits, right? Resy is a way for us to, you know, you're right, we own Resy, right? So it's definitely a way for us to engage with the Resy platform. It's a way as well for us to partner with the merchants, and, you know, we have Resy, because you're mentioning it, is a very important one of the most successful acquisitions we've made, and we've grown tremendously. We've multiplied, I think, by five, or like, we have about 50 million users on the platform. So it's a very strong success, and we want to support that success even more. And what we're trying to do as well is just, like, get card members to engage with Resy, Resy to engage with card members, and just, like, find the synergies between the two. We introduced as well, or a few months back, the Global Dining Access, which is our either a way for card members, Gold and Platinum, to have access to tables in certain limited number of restaurants. So there's like a lot of synergies between that industry, dining, Resy, and the card. And we thought that since the value proposition of the Gold Card is so focused on dining, that it was a way for us to, you know, just like to beef it up a little bit. Got it. That's helpful. So now just to turn to loan growth, receivables growth remains in the double digits. Amex has made an effort over the years to recapture or to capture a larger portion of their customers' lend, and it seems you've had success. Just some stats from your Investor Day, you have 1.3 times the revolving growth versus the industry since 2019. More than 70% of your revolving loan growth comes from existing customers, and you're capturing 24% of your customers' borrowing. So can you talk about the things you've kind of done to generate this incremental share of lend, and how much higher can that share grow? Yeah. So first, we typically under index in terms of meeting the borrowing needs of our card members. And, you know, we've seen over and over that the card members would spend with us, and when they have borrowing needs, they would actually use a competitor's products. And we've thought that that was a missed opportunity, because once we underwrite a customer, why not extend a bit of revolving to them? So that explains a little bit that growth rate. I will mention, though, that if you go, because you mentioned in 2019, right? If you look at the spend growth from 2019 to now, it's higher than the, you know, AR and loan growth. So we still remain a, you know, a spend-centric business model. So the way we're doing it is first and foremost, we extend lending to our premium card members. We have a premium portfolio, and, you know, one of the questions that I get regularly is like, why do Platinum Card members revolve? And so when you look at this specific population, the way they revolve is typically, you know, in the two, three months prior to entering revolving, we see a spike, and quite a sizable spike in their spend. And when you kind of, like, unpeel the onion a little bit more, that incremental spend is DIY spend because people are doing work in their home, or it's travel-related spend. It's booking the vacation three, four, five months in advance of traveling with the family. Sometimes it's luxury spend as well. What those card members do after, you know, the increase in their spend is that they're going to revolve. You know, for those first-time revolvers, we see that they pay back their entire balance within two months, and 75% of the card members pay back their balances within six months. The way to think about that borrowing is very short term, typically attached to a premium card members, and it's going to have a very high pay down rate. That's the kind of borrowing, if you want, or loan that has generated most of the growth over the last few years. It's a very attractive kind of revolving, and we're still under indexing in terms of the lending wallet of those card members. And you've seen their credit numbers. You've seen their CCAR results, you know, very, very strong portfolio, and, you know, it's a very attractive part of our business, and I can tell you this as well. It's a way to meet the needs of our card members. You know, when people ask, so why is American Express, you know, extending credit? It's because that's what our card members need. So we listen to their needs, and we saw that they needed borrowing over a short period of time, and we thought that we would be best positioned to do that. Got it. Makes sense, so maybe just turning to NII, the growth rate in NII has decelerated. Can you just talk about the drivers of NII growth, and at what point should we expect the growth rate of NII to kind of converge with the growth rate of loans? Yeah. So there are two parts here, right? One is volume, the other one is the margin or the spread. So I talked a little bit about how we're growing AR. So you're right, the AR growth rate is moderating. The dynamic here, I'm sure, is the dynamic you're familiar with during the pandemic. Everybody paid back their balances and people spent less as well, so the balances came down quite a lot, and since then, you know, they have rebuilt those balances. So that generated a lot of growth over the last two, three years, and since then, that growth rate is moderating. We are kind of like at a stage where we're starting to lap that COVID discontinuity. As I said, for us, you know, lending starts with, you know, the premium portfolio that we have, the positive select products that we have. We attract a disproportionate, percentage of low risk, credit, low credit risk card members, and we extend credit to, to those, right, so that, that business either is still gonna grow a little bit faster than billed business because we're starting from a very low penetration, but you know, it's, it's, as I said, you know, it's a very profitable business for us, especially because on their spread side, and I tried to explain it at Investor Day, we've done a better job at pricing, and also we've done a far better job over the years at funding those balances, so we have been able to increase the spreads. on those balances, quite materially, which contributes to this NII growth, right? If you look at the volume growth, it's a little bit higher than some of our peers, but not that much, right? It's kind of growing at the same pace as the rest of the industry. What makes the difference, probably from an NII growth standpoint, is the expansion in the spread that we've been able to generate. And, Peter, and you know why, right, on the funding side, it's because we are funding more and more of our balances with our high-yield savings accounts, which, for us, is the most effective funding source that we have. Got it. That's helpful, so just turning to the topic of revenue growth. Yeah. You guys have guided to 9%-11% revenue growth for this year. First half averaged about 10% on an FX adjusted basis. That did decelerate to 9% in the Q2 from 11% in the Q1. So maybe just remind investors the assumptions that kind of went into the guide and maybe just talk about how you're tracking for the rest of the year and what can maybe get you closer to the high end versus the low end. Yeah. So first, the reason why we give a range at the beginning of the year for the guidance is because it's, Peter, either there's uncertainty, there's economic uncertainty. Remember where we were at the beginning of the year, everybody was expecting the rates to come down, and then a few weeks or a few months later, we learned that we needed to live with higher rate for longer. So it's an example, right? The environment changes, things happen, so we want to give a range. This, Peter, the second thing that I'll say about that range before I comment on where we are, is the fact that, in January as well, I remember this slide that I shared with you is about there was, like, two blocks of numbers, right? One was restating the ambition that we have about growing this business in double digit revenue-wise and mid-teen EPS-wise, and that is the ambition that we still think is the right one for us. Peter, we're in the process of doing the long range plan, and, you know, I can see a path that leads us to that ambition, right? So it is the right ambition for us. And specifically for twenty twenty-four, we guided 9%-11%. And as you say, year to date, we are at 10%. Billing, Peter, the assumption in here is that billing is going to be kind of like where we are, stable at about the rate that you've seen in Q1 and Q2. We've said as well that NII should be growing at a faster rate than this, and I think in Q2 we were at 20%. And I made several times the comments as well, that card fee, I think we were at 16% in Q2, should expect card fee to kind of like tick up a little bit, and we're definitely seeing that tick up in Q3. And so that has not changed. Where is that going to get us at year-end? You know, we'll see, and but that has not changed. And I think in the long run, it's still the right, the right ambition for us. Now, if you take another step back, right, in terms of what it means from an earnings standpoint, I said on Q2 that the business model was actually generating more earnings than we initially thought at the beginning of the year. Credit is very, very strong. We've been able to control expenses in a better way than I anticipated at the beginning of the year. So definitely we don't need, Peter, like, we are able to generate the mid-teen EPS growth under various revenue construct, whether it's 9%, 10%, or 11%. Got it. Maybe this is a good time to maybe just pause for the first polling question. Can you just prompt the question? So question one: Do you expect Amex revenue growth for twenty twenty-four to come in below 9%, between 9%-10%, 10%-11%, or above 11%? And just register your responses using the controllers. So 36% think between 9%-10%, and 39% between 10%-11%, so pretty fairly evenly split. Maybe you should come here for their next planning process just to see whether it's more accurate than the planning team. Great. So we covered revenue growth. Let's talk about earnings power. Yeah. So one of your strengths, or the strength of the Amex model, is that under many levers you can actually pull to drive earnings growth. Can you maybe just speak to how the model works and the way to think about your long-term aspirational EPS growth? Yeah. So the way to think about American Express is to start, I think, with a very premium and pristine customer base that we have. I say it's pristine because it's also an incredibly loyal and engaged customer base that has a special relationship with the company and with the brand. And, Peter, the product service we deliver to this customer base, at the core of it, is a technology product, right? It's a payment infrastructure that we deploy globally with a ton of sophisticated models, decision model, to manage risk, to manage marketing, to manage targeting.... And so we have this, you know, very attractive customer base. We have this very sophisticated, at scale technology infrastructure propelled by very rich data, and we use that to meet, you know, the payments, the lifestyle, the borrowing needs of our Card Member. That's the way to think about American Express. And I would add to that, that we have, you know, something like 75,000 colleagues who are 100% focused on that mission day in, day out, whether it's about servicing, whether it's about helping Card Member, whether it's about innovating in the product side. So that's the DNA of the company. And we are in an industry that is growing, you know, very nicely, and at Investor Day, I shared some of their growth that we're looking at in terms of the revenue pool and profit pool. We are a leader in terms of innovation. We've defined that space to a large extent. Most of our competitors, they benchmark themselves to us in terms of their product, their servicing, and their performance. Marketing in here is the amount of money that we use to grow, to attract new Card Members. The main part of this marketing line is gonna be what we call the acquisition dollars, right? It's the money we spend to incentivize Card Member to join American Express, and all the marketing that we do to reach out to prospects. That number is a number that we choose at the beginning of the year, right? It's a function of the demand that we have. It's a function of the return that we are expecting, but it's also a number that we choose. It can be that high or a little bit less, and it's the number that we use to adjust, either, like, to absorb, whatever surprises or opportunity we see in the P&L. To give you an example, last year, during the SVB event, we thought that it was wise to pull back a little bit on acquisition. There was a little bit less visibility. We needed a little bit of a, of a margin of safety in terms of our decision models, and therefore, we pulled back a little bit on marketing, and, and you saw exactly what happened in the P&L in Q3 and Q4, right? That number of marketing dollars kind of, like, went down. And once we had, you know, more visibility in terms of what was happening in the marketplace, we decided to kind of, like, invest a lot more, and we did so, right? And that's why you saw in Q1, the marketing dollar budget kind of, like, went up. And so it's a very sophisticated machine that we can use to dial up and dial down, and therefore, the 15% or the mid-teens EPS that we are targeting is something that either I think is the, is, is like, is the primary objective, if you want, that, that we try to achieve with that, with that model. Got it. So on the topic of marketing, you guided to $6 billion in marketing expense in twenty twenty-four. Maybe just talk about kind of the areas you're gonna spend that on. Yeah. Are you still kind of tracking toward that number? We are. $6 billion is still a good number for us, and as I said, a big part of this is the welcome incentives that we give to Card Members. And maybe I can talk a little bit about the things that we're working on and that, you know, I find exciting. So we are developing the technology, the science, the data to personalize those offers, you know, as much as we can. And we wanna be able to personalize those offers without impacting the credit bureau of the applicant. So either I'm sure that some of you, I hope that most of you are American Express Card Members, and if some of you are recently joined, you've seen the offers are up to a certain amount, and we ask you a couple of information. We do a soft pull from the credit bureau, which allows us to know more about you without impacting your credit bureau, and we can therefore calibrate the offer to exactly the amount that our decision model say is the optimum incentive for you in terms of the number of miles that we offer, for instance. So these are sophisticated technology that we are deploying at scale and that, you know, are either a big chunk of that $6 billion. And we are subjecting those dollars to our profitability metrics that are elevated. As you know, in a normal year, it's gonna be the same thing this year. Our return on equity is in the 30% range. So we subject those marketing dollars. We call them investment internally at American Express, because we subject them to the same kind of like, discipline that you would see with, you know, assets or with our, you know, capital investments, although it's an expense. So it's a very sophisticated engine to maximize the returns on that $6 billion. Got it. And just to follow up, the $6 billion is a pretty big number. It's about 15% higher year- over- year. Yeah. So that's a sizable budget. Is that kind of the level of marketing expense we should kind of think about going forward? So the $6 billion is a good reference point. The 15% is elevated because, as I said, you know, last year we cut back a little bit in the back end of the year, and this year we saw with the launch of Gold, of Delta, opportunities and with personalization opportunities to deploy more marketing dollars. I wanna mention something as well, is that that 15% year-on-year marketing increase represents $800 million. And so, you know, if you take a step back, we're increasing the marketing dollars, we're increasing the expenses by $800 million, and on top of that, we're gonna grow earnings per share in the mid-teens range. You know, excluding and Accertify, the Accertify gain is going to come on top of that. So, you know, I was talking about the profitability of the business model, the strength of the business model. This is a good example, right, is that we can increase the marketing budget by $800 million and still grow and maintain EPS on a sustainable basis. Great. I'll pause here and just cue up that last polling question. So over the next year, would you expect your position in Amex to, one, increase, two, decrease, or three, stay the same? So 43% stay the same, 30% decrease, and 28% increase. Good. Make sure that those who answered 27% or 42% come back next year. Okay, I'll pause right here. We have about seven or eight minutes left. I'll open it up to the audience for Q&A, if there are any. We have one here in the middle. One of the things that stuck out in Q2 results, I don't want to spend, I don't want to dwell on quarters, but, like, there was some slowing by older spenders and also travel. I know you covered travel already, but can you talk about what trends you're seeing among older consumers? Can you help me with, like, how you define old? Sorry. How do you define older card members? I can't remember what the word- It's like, is that they're Gen X and they're Baby Boomers? Baby Boomers. Basically. So, yeah, I mean, that's a, it's almost natural. You know, when you look at their spend curve of the card members over time, it's exactly what you would expect, right? It starts very low. Remember where we started in life, and then as we get families, it goes up, and then it kind of, like, stays elevated for a while before it slows down until it gets down to nothing, right? That's their normal cycle, and so that's the dynamic that we are seeing. And so when we look at specifically the card members who are north of, like, 60 years old, you know, there's definitely a lot less growth there. You know, I need to say as well that it's, you know, we're not adding much in terms of, like, new card members in that segment. You know, those card members who didn't want to have an American Express card for 50 years, it's very unlikely that when they turn 55 or they retire, they're going to sign up for one. But this gives me the opportunity just like to mention something which I think is just like a, an important point, and that's why we're talking so much about the younger generations, is that, you know, for years, for years, you know, the number one question we were getting from investors was about something like this, right? You have a fantastic product and a fantastic brand with middle-aged, you know, people, but the card doesn't resonate with young people. We addressed this in a big, big way. Today, the card is the favorite for a lot of, and probably the favorite card for the younger generation. It's a big turnaround in terms of brand, in terms of value proposition, even for us, in terms of how we design the products. We have done a lot of work internally to appeal to the younger generations. And boy, we're doing a lot of math on that, but the lifetime value of those card members is just, like, super attractive. So it's something that will carry the brand and will carry American Express for many, many years. And, you know, I also want to say that, the way to think about this, it's not like we are declining, say, a 50 year-old applicant to make room for a 28 year old. We're still attracting a lot of middle-aged and 50 year old successful, you know, and premium card members. What's different and what's new here is that to that population, we're adding younger card members. Any other questions from the audience? So maybe we'll just, I'll keep going. Let's maybe touch on credit. So Amex's credit performance has outperformed the industry. It's done very well this cycle. Maybe just talk about what's driving the strength in your credit performance. Yeah. You know, if our Chief Credit Officer was here, he would say the first thing, the single most important thing for us to maintain this is to keep focusing on premium card members and attracting a loyal base of card members, people who are committed to the product, and that's the number one thing. That's the number one underwriter. Afterwards, in terms of the selection and managing the credit lines, I think we have a best-in-class, you know, organization, talent, capabilities, system, decision models, but it starts with, you know, the premiumness of the brand and the positive selection that we are creating, orchestrating, reinforcing with the product, with the brand that we have. It starts with that. You know, I'll say this as well, because it's definitely a number that I watch-... you know, in a lot of details, and not only every quarter, I can tell you, like every week, if not every day, is what happening to these credit metrics. You know, the credit metrics that we have now are as good, if not better, than where we were in twenty- nineteen, and that's after generating all the growth that you're familiar with. If you compare and contrast with what, you know, our peers are showing in terms of credit metric, not only we are, of course, best in class, but the distance between us and the peers is increasing further, which gives me confidence in terms of what we're doing is the right thing. It gives me confidence as well, in terms of, you know, keeping deploying this playbook that works really well and tracking a premium base. And the last data point that I will share with you, which I'm sure you've seen as well, is that there's not a lot of detail, but there is some on the CCAR process. And when the Fed subjected our portfolio to the same stress tests as they did for the rest of the industry, there's, like, no better portfolio in the country, and it's less volatile, it's more resilient. And you've seen as well that over even that kind of like, very intense stress test, we remain positive and profitable. I will remind you that, you know, not only we are much better than I was back in the Great Financial Crisis, but in that, you know, in two thousand and nine, we recently had an ROE of 15%, which was, you know, one of the lowest we had in the last 25 years, probably the lowest we had, right? It was 15%. So it talks a little bit about the strength of the model, the quality of the portfolio, and the quality of the portfolio now is just, like, much better than what we had back then. Okay, great. I think we're pretty much at time. With that, we'll just wrap it up. Thank you for your questions.