American Express Company · NYSE:AXP
American Express — Investor Presentation (March 2020)
47 slides from American Express's investor presentation, Mar 17, 2020
Slide 1: American Express Company Investor Update
oO AMERICAN EXPRESS American Express Company Investor Update
Slide 2: Strategic Overview, Financial Update, Q&A
Strategic Overview 2 Financial Update Q&A 2
Slide 3: We have delivered strong and consistent results
We have delivered strong and consistent results driven by our differentiated business model and our focus on our strategic imperatives We have a long runway to drive growth by continuing to execute against our strategy While we are managing the near term challenges, we are focused on running the com
Slide 4: Revenue, Adjusted EPS, ROE
Adjusted EPS Revenue ROE (FX-Adjusted) 13% 12% 10 Quarters of 8%+ FX- Adjusted revenue growth 32% $8.20 10% $7.33 10% 10% 10% 9% 9% 9% 9% 8% 8% 2018 2019 Q3'17 Q4'19 2018-19 (Avg.) Adjusted diluted earnings per common share, a non-GAAP measure, excludes the impacts of a litigation-related charge in
Slide 5: Integrated Payments Platform
Integrated Payments Platform Diverse Global Customer Footprint Base Issuer Network Acquirer Revenue Trusted Mix Brand Data Service Lifestyle Relationships Excellence Assets Economics 5
Slide 6: High-spending Global Customers
Consumer Card We have a long runway High-spending Global A broad range of Members that to continue to deepen Customers business of all sizes account for… our relationships 114M+ Cards-in-force ~35% of U.S. Credit / Charge Small Business Card #1 ~2x AXP share of U.S. Consumer card spending(2) issuer
Slide 7: Expand leadership in the premium consumer space
Make Build on our Strengthen our Expand leadership American Express strong position global, integrated in the premium an essential part in commercial network to provide consumer space of our customers’ payments unique value digital lives Focusing on the customer as a platform for growth Expanding st
Slide 8: Expanded our product offering
Expanded our product offering 50+ Delta Partnership renewed New or refreshed for businesses through strategic products 2018-19 through 2029 acquisition and partnerships Reached Virtual Parity Coverage in U.S. Acquired new digital premium Took share in consumer capabilities 8 of 8 top intl. countries
Slide 9: More frequent digital touchpoints
More frequent digital touchpoints Multi-business unit Offers and solutions to meet relationships broader set of needs Personalized Brand affinity membership experience Card acceptance in Seamless everyday more places functionality 9
Slide 10: Expanding everyday functionality
Expanding everyday Building on our heritage Create value for Card functionality in Travel & Lifestyle Members & Merchants ~2x Plan it growth 2019 vs. 2018(1) Split the bill ~ 2x Increase in partner-funded value Merchant commitments Card Value Installment loans in 12 (2019 vs. 2018) Member Value coun
Slide 11: Deepen relationships across U.S. SME
Deepen relationships Grow penetration among Corporate Card refresh across U.S. SME International SME Virtual cards by +16% FX-Adjusted International SME billings growth(2) <5% ~75% When a customer has 3 solutions(1) ~2x ~70% Profitability Lower attrition Proportion of SMEs with AXP Small Business Ca
Slide 12: Build on Virtual Parity
Build on Virtual Parity Grow International Invest in Network Coverage in U.S. Coverage Capabilities ~99% Build network in Technical Acceptance(1) 2M+ New Locations-in-Force China outside U.S. (2019) Payment Products Form Factor ~75% Continue targeted City and Industry strategies in Payment enablers
Slide 13: Make American Express an essential part of our customers' digital lives
Deliver Membership Integrate with personalized, anchored customer and relevant offers around digital partner systems Make American Express an essential part of our customers’ digital lives Expand leadership Build on our Strengthen our global, in the premium strong position integrated network to cons
Slide 14: We have delivered strong and consistent results
We have delivered strong and consistent results driven by our differentiated business model and our focus on our strategic imperatives We have a long runway to drive growth by continuing to execute against our strategy While we are managing the near term challenges, we are focused on running the com
Slide 15: Financial Update
Strategic Overview 2 Financial Update Q&A 15
Slide 16: Financial Growth Algorithm
Broad-based and sustainable revenue growth Increasingly efficient investments in areas that drive engagement and revenue Our long-standing history of driving operating expense leverage, which mitigates the impact of margin compression from investment growth A disciplined approach to risk man
Slide 17: Q4 2019 and Feb QTD vs. Expectations
Q4 2019 2020 Feb QTD vs. Expectations (1) Billings Growth % 6% 6% Revenue Growth % 9% 9% FX-Adjusted (1) 9% 10% WW Lending Write-off % 2.3% 2.4% WW Charge Write-off % 1.9% 2.0% Net write-off rates above include Principal only. Charge write-offs do not include Global Corporate Payments. (1)FX-Adjuste
Slide 18: Billings growth has slowed in many more markets
❑ Billings growth has slowed in many more markets ❑ Economic forecasts are becoming more pessimistic, which could have CECL credit reserve build implications 18
Slide 19: Our strong financial model is resilient through different scenarios
Our strong financial model is resilient through different scenarios, including event-driven impacts to demand as well as more sustained slowdowns Broad-based revenue growth Expense flexibility and prudent investment management Industry-leading credit quality Enhanced through-the-cycle planni
Slide 20: Proprietary Billings by Geography and Industry
Proprietary Billings by Geography Proprietary Billings by Industry FY 2019 FY 2019 EMEA Other T&E Dining JAPA 10% 8% Lodging 6% 9% 7% LACC 5% Airline 9% 71% 76% U.S. Non-T&E 20
Slide 21: 2019 Revenue Drivers
2019 Revenue Drivers(1) % Increase/(decrease) vs. prior year (FX-Adjusted): 19% Cross-Border = 3% of Total 13% Revenue 9% 7% 7% Revenue Net Card Fees Discount Revenue Net Interest Income Other Revenue % of Total 100% 9% 60% 20% 11% Revenue (1)Revenue is Net of Interest Expense and adjusted for FX an
Slide 22: Investments by payback period
Acquiring New Card Members & Brand Marketing More Enhancing Existing Relationships Rewards and Flexible and/or demand-based Card Member Services Salesforce Servicing P&L Impact Coverage Customer Engagement Operating Expense Tech Development Less Short Medium Long Payback Period 22
Slide 23: Operating Expense Leverage
Operating Expense Leverage Indexed to 2010 Billed Business Key Drivers of Leverage: Adj. Revenue Digital Servicing & Effectiveness Centers of Excellence Technology Cost Efficiencies Adj. OpEx 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Adjusted Revenue reflects pre-revenue recognition st
Slide 24: Provision Expense
Provision Expense ($ in millions) $1,024 $954 $861 $879 $161 Reserve builds $817 $809 $248 $66 $75 $87 $18 $791 $795 $804 $863 Write-offs $730 $706 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 WW Lending 2.1% 2.0% 2.3% 2.3% 2.1% 2.3% Net Write-off Rates Net write-off rates above include Principal only. 24
Slide 25: Risk Management Actions and U.S. 2019 Credit Stats
Risk Management Actions U.S. 2019 Credit Stats(1) High FICO to Low FICO Enhanced data and modeling capabilities Ratio on New Accounts 14x Evolving underwriting criteria and Average FICO +16pts robust acquisition quality guardrails at acquisition 749 vs. 2017 Proactive credit line management
Slide 26: Common Equity Tier 1 and Funding & Liquidity
Common Equity Tier 1(1) Funding & Liquidity ($ in billions) 10.7% $113.5 $138.2 9.7% 8% 5% Short Term Funding 14% 35% Personal Savings 30% 18% Third Party Deposits 14% Card ABS(2) 49% (3) 28% Unsecured Term 2008 2019 2008 2019 Payout Ratios 35% 87% $13 $22 Liquidity Portfolio Payout Ratio is calcula
Slide 27: March Volume Uncertainty, CECL, Q1 Outlook
❑ March Volume Uncertainty ❑ CECL ❑ Q1 Outlook 27
Slide 28: We have delivered strong and consistent results
We have delivered strong and consistent results driven by our differentiated business model and our focus on our strategic imperatives We have a long runway to drive growth by continuing to execute against our strategy While we are managing the near term challenges, we are focused on running the com
Slide 29: Enhanced methodology to allocate Discount Revenue and funding costs
Enhanced methodology to allocate Discount Revenue and funding costs between our operating segments Minimal impact on segment growth rates No change to Consolidated AXP financials 8-K to be filed on or around March 20th 29
Slide 30: Financial Update, Q&A
Strategic Overview 2 Financial Update Q&A 30
Slide 31: American Express
AMERICAN EXPRESS
Slide 32: Glossary: Billed business
Billed business — Represents transaction volumes (including cash advances) on cards and other payment products issued by American Express (proprietary billed business) and cards issued under network partnership agreements with banks and other institutions, including joint ventures (GNS billed busi
Slide 33: Global Consumer and Global Commercial
Global Consumer (45% of WW Total) Global Commercial (42% of WW Total) FY 2019 FY 2019 Other T&E Other T&E Dining 4% Dining 9% Lodging 6% 8% 8% Lodging 6% Airline 10% Airline 8% 69% 72% Non-T&E Non-T&E 33
Slide 34: 3x Growth in non-T&E vs. T&E
Commercial Billings FY 2019 ($ in Billions) T&E 22% SME $389 78% Non-T&E 3x Growth in non-T&E vs. T&E (2019 vs. 2018) Global 43% Non-T&E $124 T&E 57% & Large 34
Slide 35: Total Loan Mix and Contribution to U.S. Loan Growth
Total Loan Mix Contribution to U.S. Loan Growth (1) FY 2019 Ending Total Loans: $92 billion FY 2019 GCS 18% New ~40% Intl. Consumer 12% New ~60% ~40% Existing Existing 70% U.S. ~60% Consumer Consumer SME U.S. Low Tenure 44% 34% A/R vs. 2007 (1)Represents Average Revolving Loan Growth on Charge Cards
Slide 36: Total Revenue Mix and Pre-Tax Income Mix
Total Revenue Mix Pre-Tax Income Mix FY 2019 FY 2019 LACC LACC JAPA 6% JAPA 9% 9% 8% EMEA 10% EMEA 12% 75% 71% U.S. U.S. 36
Slide 37: Card Member Services
2019 YoY ($ in billions) Growth $19.8 10% Card Member Services: Scalable assets $17.9 2.2 25% and variable costs based on usage Card $15.8 1.8 Member Services 1.4 10.4 8% Rewards: Grows broadly in line with 9.7 Proprietary Billings Rewards 8.7 Marketing: Becoming more efficient over time, demand-bas
Slide 38: M&BD: $7.1B
2019 Marketing and Business Development 2019 Cobrand Loans & Billings M&BD: 38% $7.1B 4% Other (1) Cobrand Payments 3% British Airways Marketing: & Other 5% $3.6B Hilton Cobrand Payments & 4% Marriott Other Business 18% Marketing Development: Delta GNS Issuer 4% Payments $3.5B 2% 2% 22% Corporate 2%
Slide 39: Diluted Earnings per Share Growth
Diluted Earnings per Share Growth ($ share amounts) FY’19 FY’18 FY’17 Diluted EPS - GAAP $7.99 $7.91 $2.99 Resolution of certain prior years’ tax audits (0.18) Adjustment to Tax Act provisional charge (0.09) Certain other discrete tax impacts(1) (0.31) Q1’19 Litigation-related charge 0.21 Tax Act pr
Slide 40: Revenues Net of Interest Expense – Reported & FX-Adjusted
Revenues Net of Interest Expense – Reported & FX-Adjusted ($ in billions) Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 FY’18 FY’19 GAAP Revenues Net of Interest Expense $8.6 $8.9 $8.7 $9.2 $9.3 $9.7 $9.7 $10.0 $10.1 $10.5 $10.4 $10.8 $11.0 $11.4 $40.3 $43.6 FX-
Slide 41: International SME Billed Business Growth – Reported & FX-Adjusted
International SME Billed Business Growth – Reported & FX-Adjusted % Increase/(decrease) vs. prior year FY’19 FY’19 Total Int’l SME Reported 12% Total Int’l SME FX-Adjusted 16% See glossary for an explanation of FX-Adjusted information. 41
Slide 42: Revenue and Billings Growth – Reported & FX-Adjusted
Revenue and Billings Growth – Reported & FX-Adjusted % Increase/(decrease) vs. prior year Revenue Billings Feb’20 Feb’20 Q4’19 Q4’19 QTD QTD Q4’19 Feb YTD Q4’19 Feb YTD AXP AXP Reported 9% 9% Reported 5% 5% FX-Adjusted 9% 10% FX-Adjusted 6% 6% See glossary for an explanation of FX-Adjusted informati
Slide 43: Revenue Drivers – Reported & FX-Adjusted
Revenue Drivers – Reported & FX-Adjusted ($ in billions) Inc % of FY’19 FY’18 (Dec) Total GAAP Discount Revenue $26.2 $24.7 6% 60% FX-Adjusted Discount Revenue $24.5 7% GAAP Net Card Fees $4.0 $3.4 17% 9% FX-Adjusted Net Card Fees $3.4 $19% GAAP Other Revenue $4.7 $4.5 5% 11% FX-Adjusted Other Reven
Slide 44: Total Operating Expenses Indexed to 2010
Total Operating Expenses Indexed to 2010 ($ in billions) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 GAAP Total Operating Expenses (OpEx) $10.7 $12.0 $13.4 $13.0 $12.2 $11.8 $10.2 $10.9 $10.9 $11.80 Operating Expenses Reclassifications $0.2 $0.3 Visa/MasterCard Settlement Payments $0.9 $0.6 GB
Slide 45: Revenues Net of Interest Expense Indexed to 2010
Revenues Net of Interest Expense Indexed to 2010 ($ in billions) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 GAAP Revenues Net of Interest Expense $27.6 $29.9 $31.5 $32.9 $34.2 $32.8 $35.4 $36.9 $40.3 $43.6 Global Business Travel Revenues(1) ($1.4) ($1.6) ($1.5) ($1.5) ($0.7) Gain on Sale of C
Slide 46: Tier 1 Common Equity
Tier 1 Common Equity ($ in millions) Dec 31, 2008 Total Shareholders’ equity $11,841 Effect of certain items in accumulated other comprehensive loss excluded from Tier 1 $1,238 common equity Less: Ineligible goodwill and intangible assets ($3,018) Other items $26 Tier 1 Common Equity $10,087 46
Slide 47: Forward-looking statements
This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. The forward-looking statements, which address American Express Company’s current expectations regarding business and financial pe
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