American Express - Morgan Stanley Conference Key Takeaways: Outlook And Analyst Questions


Takeaways from American Express AXP presentation at Morgan Stanley conference

Event Summary:

  • Christophe Le Caillec, CFO of American Express (Amex), attended a conference hosted by Morgan Stanley.
  • The discussion covered Amex's performance, strategy, and outlook, with a focus on consumer spending trends, premium card segment growth, technology investments, and credit quality.

Segment Performance:

  • Consumer Spending: Amex sees continued strength in consumer spending, particularly among high-income consumers, both in the U.S. (8% growth in Q1) and internationally (13% growth in Q1).
  • SME Space: There is softness in the SME space with low single-digit growth.
  • Premium Card Segment: Amex has increased its share in the U.S. premium card segment from 20% to 25%. The strategy to focus on premium cards is working despite competition.
  • Card Fees: Card fee growth has been in double digits for the past six years, with a focus on acquiring premium card members, ensuring renewals, and periodically refreshing products to add value and justify fee increases.
  • Loan Growth: Amex's loan growth has been robust, driven by existing customers and the Pay Over Time feature, which is attached to premium products and offers short-term revolving credit for big-ticket purchases.

Outlook and Inflection Points:

  • Revenue Growth: Amex maintains a full-year revenue growth guidance of 9% to 11%. Q2 trends are similar to Q1, with billing growth around 6%.
  • Card Fee Growth: Expected to accelerate towards the end of the year, with 40 product refreshes planned to maintain momentum.
  • Loan Growth: While strong, the growth rate is moderating post-COVID normalization. Amex will continue to focus on premium customers and avoid balance transfers at acquisition.
  • Credit Quality: Amex expects a gradual normalization of low write-off rates (2.1% last quarter), starting from a strong position relative to peers.

Specific Products and Inventory Changes:

  • Product Refreshes: Amex is on track to deliver on 40 product refreshes, which is part of the strategy to maintain momentum and attract new card members.
  • Pay Over Time: This feature is a significant contributor to asset growth, offering flexibility to premium card members to revolve short-term credit for large purchases.

Insights from Analyst Questions:

  • eBay Relationship: Amex's loss of eBay as a merchant is not materially significant (less than 20 basis points of network volumes) and is seen as a rare event in Amex's one-on-one merchant negotiations.
  • Millennials and Gen Z: Amex has successfully attracted younger card members, who typically have high FICO scores (average north of 750) and are young professionals.
  • Technology Investment: Amex is investing heavily in technology, with a projected spend of over $2 billion by the end of the year, focusing on improving customer experience and leveraging data science.
  • Capital Proposals: Amex is prepared for various scenarios regarding Basel III endgame capital proposals, leveraging its strong ROE to manage capital requirements.
  • Market Multiple: CFO Christophe Le Caillec believes that if investors have confidence in Amex's strategy and execution, the company's trading multiple could rationalize a higher valuation, returning to a premium to the S&P 500 as in the past.

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