American Express Company · NYSE:AXP
American Express — Q2 2023 Earnings Presentation
42 slides from American Express's earnings presentation, Jul 21, 2023
Slide 1: American Express Earnings Conference Call Q2'23
American Express Earnings Conference Call Q2’23 JULY 21, 2023
Slide 2: Summary Financial Performance
Summary Financial Performance ($ in millions; except per share amounts) YoY% Q2’23 Q2’22 Inc/(Dec) Total Revenues Net of Interest Expense $15,054 $13,395 12% FX-Adjusted* $13,361 13% Pretax Pre-Provision Income** $3,932 $2,953 33% Provision Expense $1,198 $410 # Net Income $2,174 $1,964 11% Diluted
Slide 3: Total Network Volumes Growth
Total Network Volumes Growth % Increase/(decrease) vs. Prior Year (FX-adjusted): Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Billed Business 35% 30% 24% 15% 16% 8% Processed Volumes 15% 19% 19% 17% 15% 13% Total Network Volumes 32% 28% 23% 16% 16% 9% $ in Billions $413 $427 $395 $394 $399 $56 $59 Total Netw
Slide 4: Q2'23 Network Volumes Growth by Customer Type
Q2’23 Network Volumes Growth by Customer Type % Increase/(decrease) vs. Prior Year (FX-adjusted): U.S. Consumer Services: Commercial Services: International Card Services: 10% 2% 17% 19% 16% 13% 10% 2% 2% % of Total US US US Large & 1 Int’l Int’l SME & Processed Network Volumes Consumer SME Global C
Slide 5: U.S. Consumer Services Billed Business
U.S. Consumer Services Billed Business Millennials + Q2’23 Gen-X Baby Boomer + Total Gen-Z YoY 21% 8% 3% 10% % of Total 31% 37% 32% 100% $ in Billions $155 $149 $141 $140 $142 $123 $107 G&S, 8% YoY $99 $98 $108 $96 $87 $42 $42 $41 $46 $48 T&E, 15% YoY $35 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 5 Note:
Slide 6: Commercial Services Billed Business
Commercial Services Billed Business Q2’23 US SME US Large & Global Corp Total YoY 2% 2% 2% % of Total 83% 17% 100% $ in Billions $128 $128 $131 $130 $125 $114 $103 $103 $106 $99 $103 G&S, 0% YoY $95 $25 $25 $25 $26 $27 T&E, 8% YoY $19 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Note: All growth rates reflec
Slide 7: International Card Services Billed Business
International Card Services Billed Business Q2’23 Int’l Consumer Int’l SME & Large Corp. Total YoY 16% 19% 17% % of Total 64% 36% 100% $ in Billions $82 $77 $77 $71 $70 $63 $57 G&S, 15% YoY $56 $53 $50 $49 $47 $21 $21 $21 $24 $25 T&E, 23% YoY $16 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Note: All growth
Slide 8: Worldwide Total Loans and Card Member Receivables
Worldwide Total Loans and Card Member Receivables Total Ending Loans and Card Member Receivables $ in billions Pre- Pandemic FICO <660 % US CM Loans & 10% 8% Receivables* $171.0 $172.4 $179.2 $155.5 $159.2 $149.6 $145.3 Card Member 4% 7% 8% Receivables 18% 13% 3% 27% YoY Growth Total Loans 8% 27% 28
Slide 9: Card Member Loans and Receivables Credit Metrics
Card Member Loans and Card Member Receivables Credit Metrics 30+ Days Past Due* Net Write-off Rates* Pre- Pre- Pandemic Pandemic 2.2% 1.8% 1.5% 1.6% 1.1% 1.2% 1.2% 1.2% 0.9% 0.9% 0.8% 0.7% 0.7% 0.8% Q4'19 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q4'19 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Corporate Net Wri
Slide 10: Total Provision
Total Provision ($ in millions) $1,198 Total Provision $1,027 $1,055 Reserve $327 Build/(Release)* $778 $320 $492 $387 $410 $871 Write-offs ($33) $58 $735 $535 $352 $391 $287 ($320) Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 See Variance Commentary in the appendix section for an explanation of the provisio
Slide 11: Total Reserves
Total Reserves Balance Sheet Credit Reserves* ($ in billions) $4.7 $4.3 $4.4 $0.3 Card Member $0.2 Receivables $0.1 $0.2 $0.3 $0.3 Total $4.5 $4.2 $4.1 Loans Q1'20 Beginning Q1'23 Ending Reserves Q2'23 Ending Reserves Reserves Reserves as a % of: Total Loans & CM Receivables 2.9% 2.5% 2.6% Total Loa
Slide 12: Revenue Performance
Revenue Performance ($ in millions) Q2’23 YoY% Q2’23 Q2’22 % of Total Inc/(Dec) Revenue Discount Revenue $8,481 $7,873 8% 56% Net Card Fees $1,789 $1,481 21% 12% Service Fees and Other Revenue $1,232 $1,265 (3%) 8% Processed Revenue $447 $416 7% 3% Net Interest Income $3,105 $2,360 32% 21% Revenues
Slide 13: Discount Revenue
Discount Revenue Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 YoY Growth* 38% 32% 26% 16% 17% 8% $ in billions (on a reported basis) - % Increase/(decrease) vs. Prior year (FX-adjusted): $ in Billions 8.2 8.5 7.9 7.8 7.9 6.8 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 * Discount Revenue adjusted for FX and the relat
Slide 14: Net Card Fees and New Cards Acquired
Net Card Fees and New Cards Acquired Net Card Fees Growth* Proprietary NCA % Increase/(decrease) vs. Prior year (FX-adjusted): (in millions) 30% 25% 25% 23% 23% 3.3 3.4 22% 3.2 3.0 3.0 3.0 19% 20% 16% 15% 10% 10% 10% 10% 11% 14% 5% 0% Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23
Slide 15: Net Interest Income
Net Interest Income Q4’19 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 YoY Growth* 13% 20% 31% 30% 32% 36% 32% $ in billions (on a reported basis) - % Increase/(decrease) vs. Prior year (FX-adjusted): $ in Billions $2.8 $3.0 $3.1 $2.3 $2.4 $2.6 $2.2 Q4'19 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 WW Net Interest Y
Slide 16: Total Revenue Net of Interest Expense
Total Revenue Net of Interest Expense Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 YoY Growth* 31% 33% 27% 19% 23% 13% $ in billions (on a reported basis) - % Increase/(decrease) vs. Prior year (FX-adjusted): $ in Billions $15.1 $14.2 $14.3 $13.4 $13.6 $11.7 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 * Revenue Net
Slide 17: Expense Performance
Expense Performance ($ in millions) YoY% Q2’23 Q2’22 Inc/(Dec) Card Member Rewards $3,956 $3,591 10% Business Development $1,388 $1,404 (1%) Card Member Services $949 $678 40% Q2’23 VCE % of Revenue Variable Customer Engagement $6,293 $5,673 11% 42% Expenses Marketing $1,408 $1,502 (6%) Operating Ex
Slide 18: Capital
Capital Common Equity Tier 1 Capital Return ($ in billions) 10.4% 10.3% 10.6% 10.3% 10.6% 10.6% $1.9 $1.6 $1.0 $1.0 $1.0 $0.6 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 CET1 Ratio Target: 10-11% 18
Slide 19: The Growth Plan
The Growth Plan January 2022: 2022 Guidance 2023 Expectations 2024+ Aspiration Revenue Growth: Revenue Growth: 18% - 20% Higher than long-term in excess of 10% aspirational levels of EPS: Revenue growth EPS Growth: $9.25 - $9.65 Mid-teens January 2023: 2022 Actuals 2023 Guidance 2024+ Aspiration Rev
Slide 20: Appendix
Appendix AMERICA 8XBReESS
Slide 21: Travel & Entertainment Billed Business
Travel & Entertainment Billed Business Q2’23 Restaurants Lodging Airlines Other Total T&E YoY Growth 15% 12% 12% 18% 14% % of Total Billed Business 7% 6% 7% 8% 27% 21 Note: All growth rates reflect FX-adjusted rates. Subtotals may not add to 100% due to rounding
Slide 22: Card Member Credit Metrics
Card Member Credit Metrics Q4’19 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Card Member Loans Net Write-off Rate* 2.3% 0.8% 0.8% 0.8% 1.1% 1.5% 1.7% Card Member Receivables Net Write-off Rates* 1.9% 0.6% 0.8% 1.0% 1.4% 1.9% 1.9% Corporate Net Write-off Rates** 0.8% 0.2% 0.3% 0.4% 0.6% 0.6% 0.6% Card Member
Slide 23: Credit Reserve Macroeconomic Scenarios: Select Variables
Credit Reserve Macroeconomic Scenarios: Select Variables US Unemployment Rate % US GDP Growth* % 10% 8% 9% 6% 8% 7% 4% 6% 5% 2% 4% 0% 3% 2% (2%) 1% 0% (4%) Q2'21 Q1'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22
Slide 24: Funding and Deposits
Funding and Deposits Funding Mix Retail Deposit Program ($ in billions) $164 $172 Short-term $120 $122 92% FDIC 1% insured at 1% Funding Q2’23 71% Deposits Direct 74% 74% 74% Deposits*** Third Party 7% 9% Card ABS* CDs 13% 12% Unsecured Third Party 18% 19% Term** 13% 13% Sweep Q1'23 Q2'23 Q1'23 Q2'2
Slide 25: FX Impact on Network Volumes and Revenue Growth
FX Impact on Network Volumes and Revenue Growth Network Volumes Revenue Net of Interest Expense % Increase/(decrease) vs. Prior year: % Increase/(decrease) vs. Prior year: 50% 50% (15%) (15%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22
Slide 26: Additional Commentary – Variance Analysis
Additional Commentary – Variance Analysis The following summary provides selected variance information for the three months ended June 30, 2023 compared to the same period in the prior year. It should be read in conjunction with the statistical tables for Q2'23, available at ir.americanexpress.com.
Slide 27: Additional Commentary – Variance Analysis
Additional Commentary – Variance Analysis • Card Member Rewards Expense: Increased 10 percent versus Q2'22, primarily driven by increases in Membership Rewards, cobrand rewards and cash back rewards expenses, all of which were primarily driven by higher billed business. The increase in Membership Re
Slide 28: Annex 1: Pretax Pre-Provision Income
Annex 1 Pretax Pre-Provision Income ($ in millions) YoY% Q2’23 Q2’22 Inc/(Dec) Pretax income $2,734 $2,543 8% Provisions for credit losses $1,198 $410 # Pretax pre-provision income $3,932 $2,953 33% 28 Note: # Denotes a variance of 100% or more.
Slide 29: Annex 2 (1 of 2): Network Volumes – Reported & FX-Adjusted
Annex 2 (1 of 2) Network Volumes – Reported & FX-Adjusted* % Increase/(decrease) vs. Prior year Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q2'23 Billed Business Billed Business Reported FX-Adj.* Reported 34% 27% 21% 13% 15% 8% G&S 6% 6% FX-Adjusted* 35% 30% 24% 15% 16% 8% T&E 14% 14% Processed Volumes Re
Slide 30: Annex 2 (2 of 2): Billed Business – Reported & FX-Adjusted
Annex 2 (2 of 2) Billed Business – Reported & FX-Adjusted* % Increase/(decrease) vs. Prior year Q2’23 Q2’23 Reported FX-Adj.* Reported FX-Adj.* US Large and Global Corp 2% 2% International Consumer 15% 16% Commercial Services International SME & Large Corp 16% 19% Total Billed Business 2% 2% Inter
Slide 31: Annex 3: Discount Revenue – Reported & FX-Adjusted
Annex 3 Discount Revenue – Reported & FX-Adjusted* ($ in billions) Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 GAAP Discount Revenue $5.0 $6.0 $6.4 $7.1 $6.8 $7.9 $7.8 $8.2 $7.9 $8.5 FX-Adjusted Discount Revenue* $5.0 $6.0 $6.2 $7.0 $6.8 $7.9 YoY% Inc/(Dec) in GAAP Discount 37% 30%
Slide 32: Annex 4: Net Card Fees – Reported & FX-Adjusted
Annex 4 Net Card Fees – Reported & FX-Adjusted* ($ in billions) Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 GAAP Net Card Fees $1.3 $1.3 $1.3 $1.3 $1.4 $1.5 $1.5 $1.6 $1.7 $1.8 FX-Adjusted Net Card Fees* $1.2 $1.2 $1.3 $1.3 $1.4 $1.5 YoY% Inc/(Dec) in GAAP Net 14% 15% 17% 21% 20% 2
Slide 33: Annex 5: Net Interest Income – Reported & FX-Adjusted
Annex 5 Net Interest Income – Reported & FX-Adjusted* ($ in billions) Q4’18 Q4’19 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 GAAP Net Interest Income $2.0 $2.3 $1.8 $1.8 $2.0 $2.1 $2.2 $2.4 $2.6 $2.8 $3.0 $3.1 FX-Adjusted Net Interest Income* $2.0 $2.3 $1.8 $1.8 $2.0 $2.1 $2.2 $2.
Slide 34: Annex 6: Consolidated Net Interest Yield on Average Card Member Loans
Annex 6 Consolidated Net Interest Yield on Average Card Member Loans ($ in millions, except percentages and where indicated) Q4’19 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Net interest income $2,284 $2,199 $2,360 $2,578 $2,758 $2,983 $3,105 Exclude: Interest expense not attributable to our Card Member
Slide 35: Annex 7: Revenues Net of Interest Expense – Reported & FX-Adjusted
Annex 7 Revenues Net of Interest Expense – Reported & FX-Adjusted* ($ in billions) Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 GAAP Revenues Net of Interest $9.1 $10.2 $10.9 $12.1 $11.7 $13.4 $13.6 $14.2 $14.3 $15.1 Expense FX-Adjusted Revenues Net of $9.0 $10.0 $10.7 $11.9 $11.6 $
Slide 36: Forward Looking Statements
Forward Looking Statements This presentation 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 reg
Slide 37: Forward Looking Statements
Forward Looking Statements • the company’s ability to achieve its 2023 revenue growth outlook and its longer-term revenue growth aspirations for 2024 and beyond, and the sustainability of the company’s future growth, which could be impacted by, among other things, the factors identified above and in
Slide 38: Forward Looking Statements
Forward Looking Statements • future credit performance, the level of future delinquency, reserve and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on macroeconomic factors such as unemployment rates, GDP and the volume of bankruptcies; the
Slide 39: Forward Looking Statements
Forward Looking Statements • the company’s ability to control operating expenses, including relative to future revenue growth, and the actual amount spent on operating expenses in 2023 and beyond, which could be impacted by, among other things, salary and benefit expenses to attract and retain talen
Slide 40: Forward Looking Statements
Forward Looking Statements • the company’s ability to expand its leadership in the premium consumer space, which will be impacted in part by competition, brand perceptions (including perceptions related to merchant coverage) and reputation, and the company’s ability to develop and market new benefit
Slide 41: Forward Looking Statements
Forward Looking Statements • the company’s ability to grow internationally, which could be impacted by regulation and business practices, such as those capping interchange or other fees, mandating network access or data localization, favoring local competitors or prohibiting or limiting foreign owne
Slide 42: American Express
AMERICAN EXPRESS
American Express Company — Q2 2023 Earnings Presentation on 6ix