American Express Co at Morgan Stanley US Financials, Payments & CRE Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jeff Adelson - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>So it seems like we can't really go a week without hearing about some news on the slowing discretionary spend from the consumer. 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?

Question: Jeff Adelson - Morgan Stanley - Analyst : And you've had great success in the fee-paying US 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 viewing in, 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, reaccelerate card fees in the back half of the year, how is 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?

Question: Jeff Adelson - Morgan Stanley - Analyst : And I think part of that is also the 40 card refresh you have this year?

Question: Jeff Adelson - Morgan Stanley - Analyst : And have you ever thought about any kind of natural ceiling and 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 in retaining that customer? And as a part of that, the question we always get. I know you're probably not going to answer, when are you going to refresh the Platinum Card.

Question: Jeff Adelson - Morgan Stanley - Analyst : I am.

Question: Jeff Adelson - Morgan Stanley - Analyst : And 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? And 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 that?

Question: Jeff Adelson - Morgan Stanley - Analyst : And 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?

Question: Jeff Adelson - Morgan Stanley - Analyst : 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, Plan It versus the normal revolving credit card piece? And then as we think about the forward look, 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?

Question: Jeff Adelson - Morgan Stanley - Analyst : 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"?

Question: Jeff Adelson - Morgan Stanley - Analyst : 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% to 11% growth guided for the year and then how you're thinking about, maybe, the quarterly trajectory over the rest of the year? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 12:45PM, AXP.N - American Express Co at Morgan Stanley US Financials, Payments & CRE Conference

Question: Jeff Adelson - Morgan Stanley - Analyst : Okay, that was clear. Thank you. Maybe shifting topics onto something that came out more recently. Last week we learned about eBay's decision to stop accepting AmEx beginning in August. You put out your response. It is 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 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, 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?

Question: Jeff Adelson - Morgan Stanley - Analyst : 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 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 slow, gradual, continued normalization higher. Can you talk a little bit about 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?

Question: Jeff Adelson - Morgan Stanley - Analyst : 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 the charge card proxy for line of credit dynamic?

Question: Jeff Adelson - Morgan Stanley - Analyst : And just 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 --

Question: Jeff Adelson - Morgan Stanley - Analyst : Something that's been very topical over the past year, 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-term opportunities for AmEx relative to tech and AI?

Question: Jeff Adelson - Morgan Stanley - Analyst : Yes, my personal experience, I found with the other banks, you have to turn on the notifications somehow you can get through the app, but that's nice to see. 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 may be skeptical that the multiple can expand from here? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 12, 2024 / 12:45PM, AXP.N - American Express Co at Morgan Stanley US Financials, Payments & CRE Conference

Question: Jeff Adelson - Morgan Stanley - Analyst : We're looking forward to it and Christophe, thanks for joining us.