American Express Company · NYSE:AXP
American Express — Q3 2022 Earnings Presentation
45 slides from American Express's earnings presentation, Oct 21, 2022
Slide 1: American Express Earnings Conference Call Q3'22
American Express Earnings Conference Call Q3’22 OCTOBER 21, 2022
Slide 2: Summary Financial Performance
Summary Financial Performance ($ in millions; except per share amounts) YoY% Q3’22 Q3’21 Inc/(Dec) Total Revenues Net of Interest Expense $13,556 $10,928 24% FX-Adjusted* $10,651 27% Pretax Pre-Provision Income** $3,237 $2,259 43% Provision Expense $778 ($191) # Net Income $1,879 $1,826 3% Diluted E
Slide 3: Total Network Volumes Growth
Total Network Volumes Growth % Increase/(decrease) vs. Prior Year: Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Billed Business (9%) 51% 31% 33% 35% 30% 24% Processed Volumes (1%) 26% 18% 15% 15% 19% 19% Total Network Volumes (8%) 46% 29% 30% 32% 28% 23% $395 $394 $368 $350 $54 $55 $ in Billions $331 $
Slide 4: Total Network Volumes Growth vs. 2019
Total Network Volumes Growth vs. 2019 % Increase/(decrease) vs. 2019: Q2’22 Q3’22 Billed Business 28% 30% Processed 17% 23% Volumes Total Network 26% 29% 40% Volumes 30% Billed Business Total Network Volumes 20% Processed Volumes 10% 0% (10%) (20%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Note: All
Slide 5: Q3'22 Network Volumes Growth by Customer Type
Q3’22 Network Volumes Growth by Customer Type % Increase/(decrease) vs. Prior Year (FX-adjusted): U.S. Consumer Services: Commercial Services: International Card Services: 22% 20% 37% 43% 43% 34% 22% 17% 19% 1 % of Total US US US Large & Int’l Int’l SME & Processed Network Volumes Consumer SME Globa
Slide 6: U.S. Consumer Services Billed Business
U.S. Consumer Services Billed Business G&S vs. T&E Billed Business Growth by Age Cohort Millennials Baby Q3’22 G&S T&E Total Q3’22 Gen-X + Gen-Z Boomer + YoY 16% 39% 22% YoY 39% 21% 12% % of Total 30% 37% 33% $ in Billions 100% Pre- $141 $140 Pandemic $129 80% $123 $100 60% Millennials + Gen-Z $99 $
Slide 7: Commercial Services Billed Business
Commercial Services Billed Business G&S vs. T&E US SME vs. US Large & Global Corporate US Large & Q3’22 G&S T&E Total Q3’22 US SME Global Corp Total YoY 12% 71% 20% YoY 17% 43% 20% vs. ‘19 33% (10%) 22% vs. ‘19 32% (13%) 22% $ in Billions % of Total 84% 16% 100% Pre- % Increase/(decrease) vs. Prior
Slide 8: International Card Services Billed Business
International Card Services Billed Business G&S vs. T&E Int’l Consumer vs. Int’l SME & Large Corp. Int’l Int’l SME & Q3’22 G&S T&E Total Q3’22 Consumer Large Corp. Total YoY 24% 86% 37% YoY 34% 43% 37% % of Total 64% 36% 100% $ in Billions % Increase/(decrease) vs. Prior Year (FX-adjusted): Pre- Pan
Slide 9: Worldwide Total Loans
Worldwide Total Loans Total Ending Loans $ in billions Pre- Pandemic $103.9 $99.5 $92.2 $91.5 $92.1 $79.4 YoY Growth 8% 9% 20% 27% 28% 31% Q4'19 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 9 Note: Total Loans reflects Card Member loans and Other loans.
Slide 10: Card Member Loans Credit Metrics
Card Member Loans Credit Metrics Card Member Loans Net Write-off Rates Pre- Pandemic 2.3% 0.8% 0.8% 0.8% 0.6% 0.6% Q4'19 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 30+ Days Past Due 1.5% 0.7% 0.7% 0.7% 0.7% 0.9% 10 Net write-off rates based on principal losses only. See Statistical Tables for the third quarter o
Slide 11: Total Provision
Total Provision ($ in millions) $2,621 $1,703 $1,555 $628 $665 $778 Total Provision ($111) Reserve ($675) $410 $387 $918 $927 ($606) ($191) $53 ($33) Build/(Release)* $781 $58 $563 $391 $379 $260 $202 $221 $287 $352 Write-offs ($116) ($168) ($320) ($393) ($674) ($866) ($1,054) Q1'20 Q2'20 Q3'20 Q4'2
Slide 12: Total Reserves
Total Reserves Balance Sheet Credit Reserves* ($ in billions) $1.5 $5.8 ($2.4) $0.1 $0.3 ($0.2) $4.3 $1.4 Card Member ($2.2) $0.1 $3.4 ($0.3) $0.4 $3.5 Receivables $3.1 $0.1 $3.2 $0.1 $0.3 $0.2 $5.6 $0.1 $0.1 $0.0 $4.2 Total $3.4 $3.0 $3.0 $3.4 Loans Q1'20 Q4'20 Q4'21 Q1'22 Q2'22 Q3'22 Beginning End
Slide 13: Revenue Performance
Revenue Performance ($ in millions) Q3’22 YoY% Q3’22 Q3’21 % of Total Inc/(Dec) Revenue Discount Revenue $7,848 $6,369 23% 58% Net Card Fees $1,541 $1,312 17% 11% Service Fees and Other Revenue $1,169 $839 39% 9% Processed Revenue $420 $414 1% 3% Net Interest Income $2,578 $1,994 29% 19% Revenues Ne
Slide 14: Discount Revenue
Discount Revenue Discount Revenue Growth* % Increase/(decrease) vs. Prior year (FX-adjusted): 70% 60% 57% 50% 36% 38% 40% 34% 32% 30% 26% 20% 10% 0% (10%) (10%) (20%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 * Discount Revenue adjusted for FX and the related growth rates are non-GAAP measures. See
Slide 15: 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) 25% 23% 3.3 3.2 3.0 19% 2.7 20% 2.6 2.4 16% 2.1 15% 11% 10% 10% 10% 10% 10% 10% 10% 11% 14% 5% 0% Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q1'21 Q2'21 Q3'21 Q
Slide 16: Net Interest Income
Net Interest Income Net Interest Income* $ in billions (on a reported basis) - % Increase/(decrease) vs. Prior year (FX-adjusted): $2.6 $2.4 $2.2 $2.2 $2.1 $2.0 YoY Growth 13% 6% 11% 20% 31% 30% Q3'19 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 WW Net Interest Yield on CM 11.2% 10.8% 10.3% 10.5% 10.4% 10.8% Loans
Slide 17: Total Revenue Net of Interest Expense
Total Revenue Net of Interest Expense Total Revenue Growth* % Increase/(decrease) vs. Prior year (FX-adjusted): 45% 33% 35% 31% 31% 31% 27% 24% 25% 15% 5% (5%) 10% (13%) 9% 9% 1% (28%) (20%) (18%) (13%) 29% (15%) (25%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 * Total Revenue Net of Interest Expense
Slide 18: Expense Performance
Expense Performance ($ in millions) YoY% Q3’22 Q3’21 Inc/(Dec) Card Member Rewards $3,571 $3,020 18% Business Development $1,194 $943 27% Card Member Services $774 $579 34% Q3’22 VCE % of Revenue Variable Customer Engagement $5,539 $4,542 22% 41% Expenses Marketing $1,458 $1,412 3% Operating Expense
Slide 19: Capital
Capital Common Equity Tier 1 Capital Return ($ in billions) $3.6 $3.4 12.6% 10.5% 10.4% 10.3% 10.6% $1.9 $1.0 $1.0 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 CET1 Ratio Target: 10-11% 19
Slide 20: The Growth Plan
The Growth Plan 2022 Guidance 2023 Expectations 2024+ Aspiration Revenue Growth: Revenue Growth: 23% - 25% Higher than long-term in excess of 10% aspirational levels of EPS: Revenue growth EPS Growth: Above original range of Mid-teens $9.25 - $9.65 Pandemic Recovery Tailwinds (2022-2023) Steady Stat
Slide 21: Appendix
Appendix AMERICA 8XBRESS
Slide 22: Historical Network Volumes Trend
Historical Network Volumes Trend Network Volumes Indexed to 2000 COVID-19 Great Financial Recession YoY (18%) YoY 9/11 Flat YoY (9%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 22 Note: 2022 network volumes are based on forecaste
Slide 23: Billed Business G&S Growth
Billed Business G&S Growth G&S by Online vs. Offline % Increase/(decrease) vs. Prior Year (FX-adjusted): 50% 30% Offline Total G&S 10% Online (10%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q3’22 Online Offline Total YoY 15% 17% 16% % of Total 66% 34% 100% 23 Note: Online = Online + Card Not Present
Slide 24: Billed Business T&E Growth
Billed Business T&E Growth T&E by Customer Type % Increase/(decrease) vs. 2019 (FX-adjusted): 60% Q3’22 % of Q3’19 40% US Consumer 136% 20% US SME 115% Total T&E 111% 0% International Card 105% (20%) Services (40%) US Large & 65% Global Corporate (60%) (80%) (100%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'2
Slide 25: Travel & Entertainment Billed Business
Travel & Entertainment Billed Business T&E by Industry % Increase/(decrease) vs. 2019 (FX-adjusted): 60% 40% Restaurants 20% Other Total T&E 0% Lodging (20%) Airlines (40%) (60%) (80%) (100%) (120%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q3’22 Restaurants Lodging Airlines Other Total vs. ‘19 37%
Slide 26: Credit Reserve Macroeconomic Scenarios: Select Variables
Credit Reserve Macroeconomic Scenarios: Select Variables US Unemployment Rate % US GDP Growth* % 10% 8% 9% 6% 8% 4% 7% 2% 6% 5% 0% 4% (2%) 3% (4%) 2% 1% (6%) 0% (8%) Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q4'23 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4
Slide 27: Funding Mix
Funding Mix Funding Mix ($ in billions) $148 $135 1% Short-term Funding 2% $121 2% 54% 70% Deposits 69% 15% 8% Card ABS* 7% 29% 21% Unsecured 21% Term** Q3'19 Q3'21 Q3'22 Note: % of total may not foot due to rounding. * Reflects face amount of Card ABS, net of securities retained by the Company. Inc
Slide 28: FX Impact on Network Volumes and Revenue Growth
FX Impact on Network Volumes and Revenue Growth Network Volumes Revenue Net of Interest Expense % Increase/(decrease) vs. Prior year: % Increase/(decrease) vs. Prior year: 50% 50% (15%) (15%) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Reported FX Adj. Reporte
Slide 29: Additional Commentary – Variance Analysis
Additional Commentary – Variance Analysis The following summary provides selected variance information for the three months ended September 30, 2022 compared to the same period in the prior year. It should be read in conjunction with the statistical tables for Q3’22, available at ir.americanexpress.
Slide 30: Additional Commentary – Variance Analysis
Additional Commentary – Variance Analysis • Card Member Rewards Expense: Increased 18% versus Q3’21, driven by increases in Membership Rewards, cash back rewards and cobrand rewards expenses, all of which were primarily driven by higher billed business. The increase in Membership Rewards expense was
Slide 31: Annex 1: Pretax Pre-Provision Income
Annex 1 Pretax Pre-Provision Income ($ in millions) YoY% Q3’22 Q3’21 Inc/(Dec) Pretax income $2,459 $2,450 0% Provisions for credit losses $778 ($191) # Pretax pre-provision income $3,237 $2,259 43% 31 Note: # Denotes a variance of 100% or more.
Slide 32: Annex 2 (1 of 4): Network Volumes
Annex 2 (1 of 4) Network Volumes – Reported & FX-Adjusted* % Increase/(decrease) vs. Prior year Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Billed Business Reported (7%) 53% 31% 32% 34% 27% 21% FX-Adjusted (9%) 51% 31% 33% 35% 30% 24% Processed Volumes Reported 3% 33% 20% 13% 12% 12% 10% FX-Adjusted
Slide 33: Annex 2 (2 of 4): Network Volumes
Annex 2 (2 of 4) Network Volumes – Reported & FX-Adjusted* % Increase/(decrease) vs. 2019 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 vs vs vs vs vs vs vs Q1’19 Q2’19 Q3’19 Q4’19 Q1’19 Q2’19 Q3’19 Billed Business Reported (11%) (1%) 5% 12% 19% 27% 27% FX-Adjusted (12%) (2%) 4% 12% 19% 28% 30% Proces
Slide 34: Annex 2 (3 of 4): Network Volumes
Annex 2 (3 of 4) Network Volumes – Reported & FX-Adjusted* % Increase/(decrease) vs. Prior year Q3’22 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 vs Q3’19 US Large and Global Corp Reported (41%) 38% 26% 34% 41% 53% 42% (14%) FX-Adjusted (41%) 36% 26% 34% 42% 55% 43% (13%) Commercial Services Reporte
Slide 35: Annex 2 (4 of 4): Network Volumes
Annex 2 (4 of 4) Network Volumes – Reported & FX-Adjusted* % Increase/(decrease) vs. Prior year Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 International Consumer Reported (10%) 59% 27% 28% 36% 28% 18% FX-Adjusted (17%) 46% 24% 32% 43% 42% 34% International SME & Large Corp Reported (13%) 48% 28% 27
Slide 36: Annex 3: Discount Revenue
Annex 3 Discount Revenue – Reported & FX-Adjusted* ($ in billions) Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 GAAP Discount Revenue $5.6 $3.8 $4.8 $5.3 $5.0 $6.0 $6.4 $7.1 $6.8 $7.9 $7.8 FX-Adjusted Discount Revenue* $5.6 $3.8 $4.8 $5.3 $5.0 $6.0 $6.2 YoY% Inc/(Dec) in GAAP
Slide 37: Annex 4: Net Card Fees
Annex 4 Net Card Fees – Reported & FX-Adjusted* ($ in billions) Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 GAAP Net Card Fees $1.1 $1.1 $1.2 $1.2 $1.3 $1.3 $1.3 $1.3 $1.4 $1.5 $1.5 FX-Adjusted Net Card Fees* $1.1 $1.2 $1.2 $1.2 $1.2 $1.2 $1.3 YoY% Inc/(Dec) in GAAP Net Card
Slide 38: Annex 5: Net Interest Income
Annex 5 Net Interest Income – Reported & FX-Adjusted* ($ in billions) Q3’18 Q3’19 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 GAAP Net Interest Income $2.0 $2.2 $1.9 $1.9 $1.8 $1.8 $2.0 $2.1 $2.2 $2.4 $2.6 FX-Adjusted Net Interest Income* $1.9 $2.2 $1.9 $1.9 $1.8 $1.8 $2.0 YoY% Inc/(Dec)
Slide 39: Annex 6: Net Interest Yield on Average Card Member Loans
Annex 6 Consolidated Net Interest Yield on Average Card Member Loans ($ in millions, except percentages and where indicated) Q3’19 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Net interest income $2,203 $1,994 $2,108 $2,199 $2,360 $2,578 Exclude: Interest expense not attributable to our Card Member loan portfoli
Slide 40: Annex 7: Revenues Net of Interest Expense
Annex 7 Revenues Net of Interest Expense – Reported & FX-Adjusted* ($ in billions) Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 GAAP Revenues Net of Interest $10.3 $7.7 $8.8 $9.4 $9.1 $10.2 $10.9 $12.1 $11.7 $13.4 $13.6 Expense FX-Adjusted Revenues Net of $10.5 $7.8 $8.8 $9.3
Slide 41: 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 42: Forward Looking Statements
Forward Looking Statements • the company’s ability to achieve its 2022 revenue growth outlook, its revenue growth expectations for 2023 and its revenue growth aspirations for 2024 and beyond, which could be impacted by, among other things, the factors identified above and in the subsequent paragraph
Slide 43: Forward Looking Statements
Forward Looking Statements • future credit performance, the level of future delinquency and write-off rates and the amount and timing of future reserve builds and releases, which will depend in part on changes in consumer behavior that affect loan and receivable balances (such as paydown and revolve
Slide 44: Forward Looking Statements
Forward Looking Statements • the company’s tax rate not remaining consistent with current levels, which could be impacted by, among other things, changes in tax laws and regulation, the company’s geographic mix of income, unfavorable tax audits and other unanticipated tax items; • changes affecting
Slide 45: American Express
AMERICAN EXPRESS
American Express Company — Q3 2022 Earnings Presentation on 6ix