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Below is an ongoing record highlighting notes from select AXP investor presentations and earnings calls (newest content shown first).

Goldman Sachs Financial Services Conference, 12/5/2018


Interview with Steve Squeri, Chief Executive Officer

The Divergent View One Line Summary: AXP CEO, Steve Squeri, gave a largely upbeat presentation, highlighting expectations of continued high single digit revenue growth and double-digit EPS growth driven by increased focus on coverage, market share gains in SMB (domestically and internationally), and market share gains in lending.  Squeri also highlighted that AXP has seen some “slight deterioration in credit in the low FICO band” although this is not a big segment where AXP plays in

  • What has surprised you the most and what are you most excited about since becoming CEO?
    • What I’m continually impressed with is the strength and depth of our relationships with partners
    • We are in an industry that is growing in many geographies and across consumer and commercial business
  • Where have you had the most success in the four priorities you laid out?
    • Consumer business – continue to gain share not only in the US but other markets. Have done a good job enhancing our value proposition
    • Commercial – have grown four quarters in a row. On track to get to our goal of virtual parity by end of 2019
    • Bigger part of consumer’s digital lives – most of our acquisition come from mobile with 70% of acquisitions come from mobile. From payments perspective, have made partnerships with Apple, PayPal.  We are seeing less calls into our service centers as more problems being solved online
  • Thoughts on broader economic backdrop going into 2019?
    • Hard to look at one macro indicator, but as we look at it right now, we still see strong growth in all these segments
    • Having said that, it’s important to look at what’s going on from a trade perspective
    • Important to watch credit and interest rates. As you hear from others, there is a slight deterioration in credit in the low FICO band.  We do see a slight deterioration in that segment of lending
    • Economy has given us a kick of 100 – 150bps, which we started to see in 4Q of last year, which we see continuing, but rest of growth has been investing for good returns
  • Financial model going forward
    • Our objective is to deliver consistent double-digit EPS growth, and we have been doing that through revenue growth recently
    • The revenue growth we’ve been getting has been 2x what we were getting coming out of the financial crisis
    • With that high revenue growth, there is also more competition and regulatory focus, which requires investment
    • Going forward, will see higher revenue growth than we’re used to and double-digit EPS growth
  • Top drivers of maintaining that 8-10% revenue growth
    • Acquisitions are a key part of that, where digital is a vast majority of those acquisitions
    • Recommitment to value proposition refreshes. Announced a new business Platinum refresh
    • It’s all about coverage as well. We need places for our card members to spend.  More coverage means more spend
  • Competition
    • Competition has leveled off from the frenzy 18 months ago but still high and don’t think competition is going to slow
    • Growing billings 10%, which has allowed us to pick up market share
    • Co-brand partnership are important as it is a great way to acquire cards and reach customers through a specific value proposition
  • Small business and middle market – what are you doing to win market share?
    • Biggest thing to help us is our ability to provide spending power to small businesses
    • Small businesses don’t use it for T&E or small purchases…they use it for working capital as we provide 3x spending capacity vs. competitors
    • We try to provide things people want through specific value propositions (Hilton, Marriott, Delta, Amazon, Lowe’s)
  • Lending – thoughts on pace of growth going forward
    • Have grown lending book by 16%
    • 60% of growth coming from existing customers, who are currently borrowing from competitors, whereas growth from new customers in-line with rest of the industry
    • We have 85% less balance transfer (which is what got us in trouble during the last downturn)
  • Competitive dynamic internationally?
    • At end of 2015, we re-organized the company into global business units
    • Competition in these markets is not as frenzied as premium in the US
    • Make sure we are providing value other than just rewards
  • B2B opportunity – where are biggest areas of growth?
    • We saw a lot of B2B on commercial cards and we believe it is a longer-term play
    • Think about B2B from small business perspective, middle market, and large global
    • Small business uses bill.com, online banking, etc – so now, Amex is integrating more products and services
    • Middle market – more businesses moving to cloud-based procurement, so working with A/P automation players
    • Large, global accounts – these companies use SAP, Ariba, Oracle. This is less of a card payment opportunity and more of a payment opportunity.  We have a large percentage of Fortune 500 on corporate card, over 3mm small business that use Amex products, and millions of businesses that accept Amex
  • Discount rate trends
    • Discount rate is not a proxy for margin for the company
    • The discount rate goes down as we make investments from a coverage perspective
    • Seeing more B2B spending, which has lower discount rate
  • How do you think about card member cost and billings?
    • Rewards cost move in-line with proprietary billings and that will continue
    • Card member services – we are investing in lounges. Some initiatives are merchant funded or funded by us.  Investing in events.
    • Marketing spiked this year due to a brand campaign
    • But we have been really good with opex, which has grown 3% in total in the last 8 years, which we will continue to try to leverage
  • Profitability of lending business
    • Lending business does require more capital, so it is a lower ROE business
    • Even if we grew lending at the way we are growing for the next 10 years, you’d still see a revenue mix of 25% lending / 75% fees and spending, so ROE will still be in the mid-20s
  • GNS – strategy for next few years?
    • In Europe, we still count on GNS in other parts of Europe that are not the EU
    • Still opportunities in the US and excited about Wells Fargo partnership
    • Expect this to ultimately come back up

Bank of America Conference, 11/6/2018


Interview with Jeff Campbell, Chief Financial Officer

The Divergent View One Line Summary: AXP’s CFO, Jeff Campbell, gave a largely upbeat presentation, expressing confidence in the growth outlook and confidence in the underlying drivers of that growth, including SMB and lending.  Campbell reiterated the AXP stance that double-digit EPS growth is doable from high single digit revenue growth, but unlikely to experience significant EPS leverage that the company saw earlier in the decade when 3-4% revenue growth created mid-teens EPS growth

  • 4Q update
    • We feel really good about the momentum we have built over the last 5-6 quarter with revenue growth of 8-10%. The last time we had that type of growth was pre-financial crisis
    • For the most part, we can tie that revenue performance to very specific changes we have made in the business over the last few years
    • We saw middle of 4Q2017 a noticeable uptick in organic growth (yoy spend from long-tenured customers), so there is a modest piece of the uptick in growth attributable to the economy. As we have gone through 2018, we haven’t seen that tailwind increase or decrease
  • How has strong financial market performance bled into the strong momentum of the business?
    • We are not a business where things change overnight. As we went from growth in the 3-4% range to 9-10% range, only a modest portion of that was attributable to the uptick in economy at end of 2017
  • Anything in corporate card spend indicative of a pick-up?
    • We have 60% of Fortune 500 companies and most of that spend is T&E
    • It is difficult for us to sort through what’s related to the tax cut vs. increased confidence
    • We feel good about what it says about the overall confidence in the economy
  • Lending activities
    • We look a lot at the macro trends. If you look at credit card debt, it took many years to get back to where we were pre-financial crisis
    • Our heritage is offering a charge card that people payoff in 30 days
    • Lending was 19% of our revenue last quarter (net interest income)
    • Four years ago, we realized that US consumer business did 50% of their card-based spending on our cards vs. competitor cards, but only 25% of their card-based borrowing on American Express
    • Opportunity was why can’t we capture the same card-based borrowing market share as card-based spending
    • We have tried to change that mindset, so for four years now, we have been growing lending a bit faster than the industry and have done that with best in class credit metrics because we are just getting better at capturing our fair share of our own customers’ behavior, which is an opportunity that no one else has
    • We are still a spend and fee-centric company (81%) but meeting a broader range of customer needs
  • Small business market – how should we thinking about growth here?
    • US – in the US, we were the first issuer to really focus on SMB. We have unique strengths to meet small businesses.  Our card is all about providing working capital
    • US consumer is only 38% of business and is by far the most competitive segment, but if you come back to small business in US, the competition is use of cash and checks
    • One of the biggest areas of growth is getting the A/P file from businesses and working with businesses to see how we can put more of their transactions on their card
    • International is more of a greenfield opportunity as our share is still very small outside the US
  • Investment goals for near-term growth vs. long-term growth
    • To have consistent growth, it takes higher level of spend and investment than it took 10 years ago
    • Consumer environment is more competitive and regulatory environment is much different, which has led us to be very clear that we are all about sustaining this level of revenue growth, but doing that will require some margin compression
    • We can offset some of that margin compression by leveraging some fixed costs
    • We can still achieve double digit EPS growth on this type of revenue growth, but unlikely to have the type of EPS leverage we did in the 2011-12 timeframe where we grew mid-teens EPS growth from 3-4% revenue growth
  • Discount rate
    • Our focus is driving discount revenue growth and not managing to any particular discount rate
    • Our drive to reach coverage parity in the US has led to some discount rate pressure
    • Regulatory pressures in EU and Australia have also led to pressure
    • Some of those pressures are starting to abate
    • B2B – we can charge a lower discount rate to some merchants but offer less in rewards to the businesses using the payment network, so the spread remains the same
    • Discount rate in any particular class of merchants or geography is stable
  • Impact of rising interest rates?
    • Net interest yield – at the point where we are caught up on pricing. All else equal, rising interest rates are a modest headwind.  If rates jumped 100 bps overnight, it would cost us $167mm over the next twelve months
    • We have resumed growing our online savings accounts, which we expect to grow high teens this year and expect it to continue to grow, which will become a larger source of our funding structure and therefore decrease interest rate impacts
  • Wealth effect and impact to spending? Any concerns about October volatility?
    • We can track our improvements in performance over the last few years to specific operational changes, so any macro impacts over the last few years have not really been significant factors


Third Quarter 2018 Earnings Call, 10/18/2018


The Divergent View One Line Summary: AXP reported strong 3Q results with EPS of $1.88 beating consensus expectations of $1.77.  AXP also raised its EPS outlook to $7.30-$7.40 from its prior $6.90-$7.30 range while expressing confidence in sustained revenue and EPS growth due to broad-based strength in billings and loan growth

  • Saw continued momentum in business that was in-line with strong first half growth
  • Feel really good about company’s performance. This is sixth consecutive quarter of growth of at least 8%.  Delivered EPS of $1.88
  • Our growth has been broad-based driven by card member spending, fees, and loans and spread across geographies, businesses, customer segments
  • See very consistent and positive trends
  • Generated healthy top-line revenue growth of 10% with EPS growth slightly higher than that
  • Gaining spending and lending share in almost all countries
  • Seeing very good payback in targeted enhances we’ve made to customer value proposition, but that does translate into some margin pressure
  • Margin compression from higher cardmember benefits is being partially offset by opex leverage (opex growing much slower than revenue)
  • Strategic Imperatives
    • Expand leadership in premium consumer space. New Gold card in the US.  Refresh international product line.  New consumer US Platinum accounts up 50% and half of those from millennials
    • Building on strong position in commercial payments, SMB is fastest growing segment
    • Strengthen our global network – continue to add more places worldwide where Amex is accepted
    • Make Amex a critical part of consumers’ digital lives
  • Excited about expanding our digital relationship with Amazon and PayPal
  • PayPal
    • Has long been one of our largest merchants
    • As part of expanded relationship, cardmembers can use membership rewards points for purchases at millions of PayPal purchases online and send money through Venmo or PayPal through the Amex mobile app
    • Pay Amex bill through PayPal or Venmo balance through Instant Transfer feature
    • Amex will have a more prominent place on the PayPal platform
  • We now expect 2018 revenue growth to be between 9-10%
  • Raising adjusted EPS guidance to $7.30-7.40 up from $6.90-7.30 range at start of the year
  • We are now back within target leverage range, so have resumed share buybacks
  • Worldwide billings growth accelerated to 10% yoy from 9% yoy in Q2
  • AXP Billings – 41% commercial, 44% consumer, 15% Global Network Services
    • US SME was up 10%, and we feel good about the consistently strong billings growth in this customer segment
    • International SME was up 23% FX-adjusted and growth in this segment has accelerated significantly. We believe we have a long runway for growth due to low penetration
    • US Consumer – 3rd consecutive quarter of double digit growth
    • International Consumer growth of 18%
    • GNS billings down 1% on FX-adjusted basis due to ongoing regulatory impacts in Europe and Australia. Excluding Europe and Australia, GNS was up 8%
  • Loan Performance
    • Total loan growth was 16% in 3Q with 60% of growth in lending from existing customers. The Hilton portfolio acquisition contributed 125 bps of growth this quarter, consistent with contribution to first half growth
    • Net interest yield of 10.8%, but expect increases in interest yield to moderate
  • Funding
    • Half of funding comes from deposits and half of deposits come from our online personal savings accounts
    • Continued to grow our online savings accounts, which is our cheapest form of funding
    • View a rising rate environment as a modest headwind, but usually offset by a strong economic environment, which is what we see now
  • No change in charge-offs that would suggest any underlying changes in trends
  • Discount revenue (61% of revenue)
    • Average discount rate of 2.38% which is down 2bps. Now expect average discount rate for the full year to be down less than the 5-6bps communicated at March investor day
    • Discount revenue growth up 9%, which is the highest FX-adjusted growth rate since 2012
  • Costs
    • Card member services cost growth of 30% and expect this to be our fastest growing bucket of cost, which provides differentiated value proposition for card members such as airport lounges
    • Rewards expense growth of 11% consistent with billings growth
    • Operating expenses down 1%
  • 3mm growth of card acquisitions this quarter
  • 10-11% target Common Equity Tier 1 ratio
  • Expect 2018 revenue growth of 9-10% and EPS of $7.30-7.40
  • Q&A with Sell-Side Analysts
  • Where is revenue outperformance coming from and confidence that it will persist?
    • We really focused on investing in value propositions and certainly invested in coverage
    • Growth is across the board with double digit growth in every billings segment we report
    • Late in last year’s 4Q, we did see a notable uptick in organic growth due to the economy, which has sustained itself, so there is modest boost from the economy
  • Trajectory of discount rate going forward?
    • Focus on is on driving discount revenue growth. We feel good about where the discount rate is in any given category of merchants
  • Tougher comps on proprietary – can billed business growth accelerate or have we peaked out?
    • Focus is on sustaining strong revenue growth
    • Will continue to invest in card acquisition and coverage. We are not at where we want to be in terms of coverage in the US and International, and there is a relationship between coverage and billed business growth
    • We are investing for share and scale going forward
  • Billed business from large and global customers?
    • Particularly good quarter for large and global. Seeing a bit more diversification with a bit more B2B.  Seeing large corporate spend in the T&E space.  Happy with double digit growth haven’t seen that in quite awhile
  • International SME and Consumer growing at a fast rate – what is driving that?
    • We can leverage global infrastructure and footprint to drive International SME
    • From a consumer perspective, Amex has been a premium brand outside of the United States for a long time
    • As we continue to increase coverage, we believe spending will increase as well
  • Amazon program – how does that fit in and compete with other SME programs?
    • We have a range of small business products including a Delta co-brand, a Hilton co-brand, a Marriott co-brand, a Loewe’s co-brand
    • A lot of our customers have multiple products
    • The beauty of these programs is that we provide customers a choice to use what they need to choose the rewards programs they like
  • Cost of card member services growing 30% – how long will that last?
    • Feel great about the revenue growth that this cost is generating
    • Allows us to build scale and relevance
  • Differences in how seasoned customers build loan balances
    • Historically, consumers don’t think of building balances on American Express. Customers have historically used Amex for 50% of their spending and only 25% of their borrowing
    • We’ve worked on trying to market, incentivize, etc to change that mindset
    • So now 60% of loan growth from existing customers and see a long runway to grow that
  • Relationship between revenue growth, engagement expenses, and EPS. Historically, Amex grew mid to high-single digit revenue which translated to mid-teens EPS growth…would you be able to return to that type of relationship?
    • We are focused on sustaining high levels of revenue growth, which is a great basis to generate double digit EPS growth
    • If you look at 2012-4, we had slower revenue growth and we squeezed expenses out of the business, which led to higher EPS growth. We don’t believe that is the right way to sustainably grow the business
    • We believe the right way to win is to focus on higher revenue growth, which a narrowing of that revenue and EPS growth number
  • Help understand strong credit performance?
    • Closed loop is the secret sauce from a fraud perspective, underwriting perspective, targeting for who we acquire. Good credit starts right at the beginning of the funnel
    • Our machine learning and data capabilities is all powered by our closed loop
    • Small businesses use credit cards as a form of working capital, so the data we have from millions of businesses is key for us
  • PayPal – how eager are Amex customers to add Amex card to the PayPal wallet?
    • Our relationship with PayPal goes way back from a merchant acquiring perspective, so always made sense to expand our relationship with them
    • The more seamless you can make things, the easier you make it for customers to transact
    • Merchants want to make sure that they don’t lose shopping carts online
    • PayPal offers a tremendous expansion of our network today by offering access to millions of merchants
    • We were looking for more ubiquity for cardmembers to use points, so going to be good for merchants and cardmembers. This will be an uptick in points earned, cardmember satisfaction, and merchant satisfaction
  • Cardmember fees
    • People will pay for value, so the more we inject value, the more people will pay for it
    • We raised Platinum card fees by $100 during a difficult competitive environment with the launch of Chase Sapphire, but Platinum attrition went down and acquisitions went up