Ladies and gentlemen, thank you for standing by. Welcome to the American Express Investor Update Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, please press one then zero on your touch-tone phone. You will hear a message indicating you've been placed in queue. If you do not hear the message, you are not in queue and will need to try again. You may remove yourself from the queue at any time by pressing one then zero again.
If you're using a speakerphone, please pick up the handset before pressing the numbers. Should you require assistance during the call, please press star then zero. As a reminder, today's call is being recorded. I would now like to turn the call over to our host, Head of Investor Relations, Ms. Rosie Perez . Please go ahead.
Thank you, Alan. Good morning, everyone. I'll turn it over to Steve to take you through the agenda. As a reminder before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance. These are based on management's current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially are included in today's presentation and in our reports on file with the SEC. The discussion also contains non-GAAP financial measures. The comparable GAAP financial measures are included in the materials we posted today and the materials for prior periods, all of which are posted on our website at ir.americanexpress.com. With that, let me turn it over to Steve Squeri, Chairman and CEO.
Thanks, Rosie. Good morning, everyone, and thank you for dialing into the call today. Before I begin my remarks in the investor call today, I thought I would open just with a few thoughts. I think it's fair to say that we are in uncharted waters. What we're all experiencing is probably nothing any of us ever imagined. The scope of what is happening and the speed with which it has developed has made it almost impossible to know what each day will bring. What I'd like to point out, I think the most important thing for all of us during this time is to take care of one another and try to work together to contain and ultimately cut off this threat to our normal and everyday lives.
What I'd like to do is thank each of you for joining us today, and my hope is that you and your families are healthy and will continue to be so. At American Express, our colleagues and our local teams around the world are working day and night to ensure that we can continue to serve our customers, keep our people safe, and we're grateful for their leadership and perseverance during these challenging times. As a company, we've had our customers' backs for over 170 years, and our service ethos really has been the key to our success, and it will not change. We recognize what we're seeing here is incredibly fast-moving, so fluid, and we really don't know what the next hours or days will bring. I think you've all experienced that.
What we're trying to do here is we're going to manage through the short term, but we're also focusing on making decisions that are best in the long-term interest of American Express so that we can meet our customers' needs. With that, let me move over to the agenda on slide two. Look, despite the rapidly evolving situation, we thought it was important to go ahead with this session by phone so we could give you an update about our business. Let me just take a second here to talk about what we've been thinking about and how fluid this has been. We decided to do this Investor Day, which is now an investor call, months ago. I'll tell you, we had a great Investor Day planned for you.
I was gonna get up and do 30, 35 minutes, and talking about all the good things the company's doing now and where we're headed. We had three great spotlights where we were gonna highlight some of our talent and talk about how we're making so much great progress on coverage and what we're doing in B2B and what we're doing to really meld our digital assets. Then Jeff was gonna come up and take you through where we are today and what to look for over the next couple of years. Then that started to change. Then it was, okay, we'll have Investor Day, but we'll cut out the spotlights. Then we'll have Investor Day, but we'll cut out a lot of Steve's presentation. Finally, we went down to this investor call.
Look, the reality is, if we would've scheduled this last week, we probably wouldn't be doing an investor call today. I don't know a lot of people that are doing investor calls at this particular point in time. The reason is, I don't think a lot of us know exactly what's gonna happen. So we had committed to doing this, and I thought it was important to do it. We'll tell you what we know. We'll try and answer as many questions as we can. You'll probably have a lot more unanswered questions than you would answered questions, and you'll be talking about guidance and when we're gonna get back to normal. To be honest, if any of you have those answers, you could tell me, because I don't know exactly what normal is.
What I do know is that we are here to serve our customers, and we are here for the long term. That's what we'll talk a little bit about today. I've really pared down my remarks. Jeff has pared down his remarks as well. As I said, we'll answer, as we always do, whatever questions that you may have. I think in the weeks, and actually, the hours and days and weeks ahead, I think hopefully things will become a lot more clearer, and we'll get back to a state of normalcy. That's what our hope is. Our hopes that's for our business, for the economy in general, and certainly for our people and for our way of life. It's not just a way of life here in the United States; it's our way of life around the world.
This is a global issue that we are facing. With that, let me go to the transcript here that you'll see at some point. Look, I know many of you are interested in the immediate trends we're seeing as a result of the coronavirus. There are a number of you that are really interested in our longer-term prospects. I want to take this opportunity to briefly discuss our strategy for growth over the longer term in an abbreviated fashion. As well as give you the opportunity to ask questions that are certainly on your mind. Let me move you to slide three. Here are the main points I'd like you to take away. We've talked about this over the past two years. We've sustained strong and consistent results driven by our differentiated business model and our focus on strategic imperatives.
Looking ahead, we have a long runway for growth by continuing to execute against this strategy. While we are managing through the near-term challenges right now, we are really focused on running the company for the long term. On slide four, as we've reported, we've had over two years of consistently solid performance that demonstrates the strength of our business model. We've delivered 10 consecutive quarters of FX-adjusted revenue growth of 8% or better, which has driven double-digit EPS growth, adjusted EPS growth. These results clearly demonstrate that our strategy investing in scale, in share scale and relevance in normal times really does work. Our differentiated business model depicted on slide five is the foundation on which our strategy is and will continue to be built upon.
This model includes one of the world's most trusted brands, a very attractive customer base, global scale, an integrated payments platform, world-class service and lifestyle assets, and an enviable partner base. An industry-leading talent that has and knows how to continue to monetize these assets. I'd like to just spend a minute talking about sort of two of these assets, which is our trusted brand and our attractive customer base. As I talk to our largest shareholder, Warren Buffett, and I've talked to him during this time, the one thing he has and will continue to always point out to us is that the brand is special. That brand needs to be cared for, the brand needs to be invested in, and we will continue to do so through tough times and through the good times. Our customer base is special.
I'm gonna talk about our customer base in a minute, but it is so important that we take care of our customers during this time that some of them are going through stressful situations. The combination of all of these assets gives us the competitive advantage that makes us confident that we can continue our growth over the longer term. Slide six drills down on one of our more critical elements of our business model, our diverse, high-spending global customer base. We have over 114 million cards globally, and our card members spend an average of three times more than cardholders of other cards. Our card members account for approximately 35% of spending that's done on all consumer credit and charge cards in the U.S., both Amex and non-Amex, and about 30% of all the borrowing done on credit cards in the U.S.
We're the number one commercial card issuer in the world and the number one small business card issuer in the U.S. We have corporate card relationships with over 60% of the Fortune 500. The breadth and diversity of our customer base is a significant competitive advantage, one that will continue to drive our growth going forward. Turning to slide seven. To capitalize on the large opportunities that exist in the payment space, two years ago, we shared with you our four Strategic Imperatives, and last year I also set out three Enterprise-Wide Initiatives to accelerate our progress against all our imperatives, and those are on the slide. Turning to slide eight. We've seen good progress in all these areas. Just a few highlights. We reached virtual parity coverage in the U.S. and signed over 2 million merchants across international in 2019.
Nearly 70% of our new proprietary cards acquired were on fee-based products. We finalized an unprecedented 11-year agreement with Delta. Turning to slide nine. What's next? We'll continue our emphasis on the four imperatives and the three enterprise initiatives with an overall focus on continuing to create deeper and more enduring relationships with our customers. To do that, we're taking all the assets, capabilities, and partnerships in our business model and leveraging them across the enterprise to support our growth. Simply put, we want to be the brand that our customers won't live their lives without or do business without. We're introducing new services and capabilities that provide more flexibility, functionality, touch points, and solutions to meet more of our customers' lifestyle and work style needs.
By giving our customers more reasons and more places to do business with us, over time, we expect to increase their engagement and retention, deliver a consistent stream of subscription-like fee revenues, and provide additional value for our partners. All of this in turn should help us continue to fuel our financial model and sustain our growth across our businesses. Turning to slide 10. We're applying this customer focus across all of our imperatives. In consumer, we're taking a holistic approach to enhancing value by continuing our strategy of refreshing our product line by adding more capabilities, experiential benefits, and partner value, thereby increasing both our relevance and differentiation. Moving to our commercial business on slide 11.
Our primary focus is to continue expanding relationships with small and mid-size enterprise business customers, both on and beyond the card, as well as continuing to build on our strengths in the large corporate segment with a refreshed corporate card program that focuses on delivering more benefits and services to end user employees. On slide 12, our network is the backbone that connects our merchants and card members. We'll support growth across the enterprise through a focus on global coverage and perception of coverage, as well as continue to build network capabilities.
Turning to digital on slide 13, we've been adding digital capabilities across all aspects of our businesses for a number of years now, and we'll continue to do so, anchoring more and more of our customer experience around our digital channels with our app at the core. Moving to slide 14, let me leave you with some closing thoughts.
As I started, these are unprecedented times in many ways. At American Express, we've been through other moments in the past that were also unprecedented at the time. Our leadership team has an average of 25 years' experience, and over their tenure, the team has successfully managed through a number of challenges, including 9/11, when the business stopped, and the 2009 financial crisis, when liquidity dried up, and the financial system was close to collapse. Each time, we focused on what we could control in the short term while keeping an eye on the long term, and each time we came back stronger than before. This situation is no different. My executive team and I are meeting multiple times a day to help navigate our colleagues and our customers through this crisis.
Our business is strong financially, and our capital and liquidity position give us the strength to weather the current challenges. Our teams are working day and night all over the world to make decisions in real time that will take care of our colleagues and ensure they can continue to serve our customers just as we have done for 170 years. I don't know when the coronavirus pandemic will end, and we'll get back to business as usual. I do know that it will end. When it does, we intend to be in a position of strength, ready to capitalize on the opportunities ahead because we've managed the short-term challenges while remaining focused on investing for growth over the longer term. Thank you for your time, and now let me turn it over to Jeff.
Thank you, Steve. Good morning, everyone. Steve just walked you through our long-term strategy, while I will get to, quickly, the implications of the current environment for our near-term performance. I still want to take just one minute to remind you of the financial implications of our long-term strategy. Our financial growth algorithm starts with our focus on growing share, scale, and relevance as providing the best foundation for creating long-term value for our shareholders. The other points laid out on slide 16 are the key financial components and outcomes of the strategies that Steve just took you through. We have always said that our financial growth algorithm applies in a stable economic environment, we are clearly not in such an environment today. Let me begin now to talk about what we are seeing in recent days.
A mere two weeks ago, I said publicly at a conference that we had ended 2019 with tremendous momentum, 10 consecutive quarters of 8%+ FX-adjusted revenue growth and two straight years of double-digit earnings growth, and that we had begun 2020 with that same momentum. January and February were strong months for us, and on slide 17, you can see the actual numbers. Billings, revenue, and credit performance were all strong and consistent with both our 2019 performance and our plans for 2020. I also said two weeks ago that we had seen material reductions in spending in the regions in Asia that were initially the most impacted by COVID-19, but these regions were not material to the overall company or to our January and February results.
The big question was whether the kinds of impacts we had seen in those materially impacted regions in Asia were going to spread into Europe and into the U.S. Just two weeks on, the obvious answer is now yes. I've also said that as we close the books on the March quarter, we will, as will the entire industry, begin using, for the first time, the new CECL credit reserving methodology, which puts much more weight on future economic forecasts as opposed to what we have actually experienced thus far on credit. The impact that this will have on the first quarter remains uncertain. Before I talk about the impact of these two things on Q1, I would like to ground you in some of the key aspects of our business model that influence our performance in different environments.
You see these key aspects laid out on slide 19. I want to briefly touch on each of them, beginning on slide 20. First, while we run a global business and operate in over 170 countries, the U.S. remains the primary material driver of our financial performance. Second, the majority of the spending on our network is in Non-T&E categories. This is the case on both the consumer and commercial side, as is detailed in an appendix back on slides 33-34. Importantly, as I'll come back to later, thus far, Non-T&E spending has been somewhat less volatile in the current environment. When you move to what this billings and spending mix means for revenues, you see on slide 21 that our revenue growth is broad-based.
Discount revenue will clearly follow billings trends. However, other revenue lines, such as net card fees, tend to be more sticky in a slowdown of limited duration. In fact, we have roughly $2 billion of deferred card fee revenue sitting on the balance sheet today, waiting to be amortized. Net interest income, which has been growing in the double digits, driven in part by the share gains we are making in our own customers' borrowing wallets, would tend to be less impacted by a slowdown in billings in the short term. Last, as a reminder, in our business model, cross-border revenues represent only a small and immaterial part of our overall revenue. That brings us in today's environment to the question of expense flexibility and our approach to prudent investment management. Slide 22 is a version of a slide I first shared at our Investor Day last year.
We've been very clear that we are running the company for the long term and are focused on building share, scale, and relevance. At times, I think some investors overlook the fact that there is natural flexibility and variability in our expense base. Marketing investment levels are flexible and can be pulled back as well as redeployed quickly if market conditions and the universe of attractive opportunities change. Other expenses, such as rewards and certain card member services, naturally vary based on changes in volumes, as well as customer behavior and usage. Certain operating expenses in areas like sales force, technology, servicing, coverage are ones where we are constantly adjusting and balancing our decisions between our short, medium, and long-term priorities.
We have been clear that our philosophy is not to necessarily maximize profitability at the trough of a slowdown, but rather to make decisions that position us to win on the rebound. This does not mean, however, that we do not have flexibility in our expenses, and we are always prudently managing our expenses across our short- and longer-term horizons. As I say this, we have included slide 23 as a reminder of our long track record of disciplined expense management, generating operating expense leverage by growing our operating expenses slower than revenues. That then brings us to our other big expense provision, where you see some history laid out on slide 24. You can see in our historical results that in a stable environment, the majority of our provision expense is driven by write-off dollars, and that there is some seasonality in reserve builds between Q4 and Q1.
You also see that our credit metrics have remained best in class, even as we have grown our lending a bit faster than the industry for years. As I mentioned earlier, we've continued to see solid performance in our credit metrics thus far in 2020. I would expect our Q1 write-offs to be in line with our recent trends. However, at the end of this first quarter, we, and the rest of our peers, will be building reserves under the new CECL accounting methodology for the first time. As you know, under CECL, economic forecasts of the future play a much more material role here. Obviously, economic forecasts are now in great flux and are likely to be much more pessimistic as we close the quarter than they were when we closed the last quarter of 2019.
This could potentially drive a reserve build somewhat larger than any that you see on slide 24, even though our actual credit metrics remain stable for now and do not yet reflect some of the obvious stresses suddenly being put on some of our consumers and businesses. I've said for some time now that CECL accounting will likely create more quarter-to-quarter volatility, and we are likely to see that right out of the gate in Q1. Despite this potential volatility in CECL credit reserves, slide 25 reminds you of the many things we have talked about over the past few years around our approach to risk management and through-the-cycle planning. Our industry-leading credit metrics and the fact that our loan book is much more robust than it was leading into the prior recession are all outcomes of our prudent approach to risk management.
We prudently manage our capital funding and liquidity positions so that we can be resilient across different operating and macroeconomic environments, as you see on slide 26. Our capital funding and liquidity positions are strong, and we have significant flexibility to maintain a strong balance sheet in periods of uncertainty or stress. What might all of this mean for Q1 and beyond? Sitting here today, the volumes we'll ultimately see for all of March are still uncertain. A lot has changed, and we have more data points than we did just two weeks ago. As you recall, at the beginning of March, we said we were starting to see a bit of softness in T&E volumes outside of Asia. Since then, we've seen that softness accelerate dramatically into more significant declines in T&E spending in all markets, importantly, including the U.S. and Europe.
In contrast, Non-T&E spending has thus far remained somewhat more stable in our largest markets, particularly in the U.S. In fact, we're actually seeing some significant spend increases in certain Non-T&E categories in the U.S., particularly around parts of e-commerce and certain retailers. Though it is uncertain whether this trend will sustain itself going forward. More generally, I want to emphasize that we are giving you the latest data that we have in the interest of transparency, but the trends have not yet stabilized and continue to decline. In addition, our data only goes through last Friday, and so it does not include the impact of the many changes in the world in just the last three days.
That said, taking what we saw in the first two weeks of March, and then assuming things continue to get materially worse in the coming days, our Q1 revenue growth could be as low as 2% on an FX-adjusted basis. If things only get modestly worse from here in the coming days, our Q1 adjusted revenue growth could be closer to 4%. In addition, as I discussed earlier, it's not possible to estimate today the impact the changing macroeconomic forecasts will have on our Q1 credit reserve levels under CECL. Putting all of this together, and excluding any impact from reserve builds in the quarter, I would expect our EPS in the first quarter to be in the range of $1.90-$2.10.
What happens in the rest of the year remains to be seen and will be highly dependent on the severity, duration, and geographic reach of the COVID-19 impact. Given this uncertainty, we are not able to accurately forecast our future financial results past the first quarter at this time. The situation remains fluid, and we will provide a further update on our Q1 earnings call in April. These are uncertain times, but history has shown us that these things do end, and we feel good about the strength and resiliency of our model and our long-term strategic outlook. Now, before we get to Q&A, I do need to take just a minute to talk about two routine changes that are completely unrelated to the items we discussed today.
First, as you can see on slide 29, we will be making a few reporting changes to our segment allocations starting in the first quarter this year. These reporting changes have no impact to our GAAP financials at a consolidated AXP level. They do change some of the segment numbers, however, so we will issue an 8-K a few days from now that will provide further historical details on these reporting changes. Second, one final point about our investor relations team here at American Express. Anna Marrs has been leading our team for the past year and has been a remarkably steady, insightful and confident partner for me, for Steve, and for the investment community. Steve and I also have a whole bunch of other critical roles where we want to see Rosie's keen insights helping to drive the company forward.
We are moving Rosie to one of these roles, leading our finance organization in our global commercial segment and being Anna Marrs' key partner in moving that segment forward. I want to thank Rosie for her contributions in IR, but more importantly, I want to thank her for being such a key leader at our company. Luckily for us, we do have a great replacement, and so effective today, Vivian Zhou will be our new Head of Investor Relations. Vivian has had a long career at American Express, and most recently was in our treasury team, leading our funding strategy and running our personal savings program. I know you will appreciate her calm insights in these challenging times. With that, I will turn the call back over to Rosie.
Thank you, Jeff. Thank you for your cooperation with the queue, those on the phone. With that, the operator will now open up the line for questions. Operator?
Ladies and gentlemen, if you wish to ask a question, please press one, then zero on your touch-tone phone. You'll hear a message indicating that you've been placed in queue, and you may remove yourself from the queue by pressing the one, then zero command again. If you're using a speakerphone, please pick up the handset before pressing the buttons. One moment please, for our first question. Our first question will come from the line of Craig Maurer with Autonomous Research. One moment please while we open your line. Your line is open, Mr. Maurer. Go ahead.
Good morning. Thanks for hosting this call. Thanks for hosting the call in what's difficult times. I'll keep it brief because I know you're going to have a long queue, but I was hoping you could drill down a little bit more in terms of the trends you're seeing in cross-border. I know you had about $982 million last year in currency conversion fees. If you can help us understand a little bit more on what's happening in that particular part of your business. Thanks.
I do think, Craig, it's important to emphasize what I said in my script, which is certainly relative to the networks; for example, cross-border business and cross-border revenues are not an overly material part of our business model. They are there, and you just very quickly, and I'm impressed, found the number in our 10-K, but in the context of our $40 billion plus of revenue, it's fairly modest. Certainly, cross-border traffic has declined significantly. It's also fair to say you haven't yet seen the impact of the changes that have gone on in Europe and in the U.S. just in the most recent days.
We have, as I said a few weeks ago, some interesting data points because we can look at our Asia Pacific businesses, and certainly, if you look at a Hong Kong or a Taiwan, you saw cross-border travel, cross-border spending go down to extremely low levels. I'd expect that you'll see things trending in that direction, certainly in Europe, and potentially in the U.S. in the coming days.
Thanks. Congrats, Rosie.
Thanks, Craig.
Our next question will be from the line of Rick Shane with JP Morgan. Go ahead, please. Mr. Shane, we seem to have taken you out of queue. If you would press one then zero again at this time. Mr. Shane, your line is open. Go ahead, please.
Can you hear me now?
Yes, very clearly, Rick.
Excellent. Good morning, and thank you guys for doing this. Jeff, or Steve, I apologize. You had spoken about.
Rick, we lost you.
One moment please, while we try to open his line one more time. Rick, we'll try to reopen your line once again. Go ahead.
Can you hear me now, guys?
Now we can.
Crystal clear.
Okay. Let's hope it holds. Steve, you had spoken about strength in certain pockets of the U.S. consumer. Can you just sort of elaborate on that a little bit more? Is that continuing? What types of retailers are experiencing that?
Yeah, I think what you're seeing is a lot of the Non-T&E is pretty strong, and it's both e-commerce, particularly e-commerce. Obviously, look at the grocery industry. I think Walmart has said they've had some record sales for them. Target, Walgreens, all of these, the grocery and drug, and not to pick out any individual, the grocery and drug industry and the supermarkets and things like that, I think, are doing well. They're not only doing well from a financial perspective, I think they're doing a good job serving their customers as well. Having been in both Target and Walmart over the weekend, their people are really just doing a fantastic job and trying to keep inventory on the shelves. We're seeing a lot of activity there. We're also seeing small businesses as well, which has held up very well for us.
Obviously T&E is down. T&E's down and it's not going to get any better anytime soon. You just have to look not only in the U.S., but just around the world with restaurant closing, gathering closing, flying, staying in hotels and so forth. We'll be there to meet our customers' needs as it relates to everything they need from an e-commerce perspective and from a grocery and retail perspective. More to come. That's what we've seen, and that's what we've also seen in other markets as this hit. What you saw is obviously inbound travel came down. You saw outbound travel come down, but you saw this spike up in non T&E. It does level off because there's only so much food and toilet paper and what have you, that any one household can have at any given point in time.
We'll just have to see how it continues. The issue in projecting this is you just don't know how long it's going to continue, and you'll have various quarantines, I think, that pop up city by city over the next couple of weeks, if not couple of days.
Our next question will be from the line of Bill Carcache with Nomura. Go ahead, please.
Thanks. Good morning, Steve and Jeff. I'd like to add my thanks for proceeding with this call. As you've said, we're in unprecedented times, but I was hoping that you could offer your thoughts on a hypothetical scenario. If we think about the virus peaking by the end of April and social distancing coming to an end by, say, the June or July timeframe, as some medical experts have suggested. It's possible that the worst will be behind us before you've actually experienced any coronavirus-related losses, given that credit card accounts that go delinquent, say, in April, wouldn't likely charge off until October. Under that scenario, would it be reasonable to expect reserve builds in the first half of the year, followed potentially by reserve releases as early as Q4, particularly if Washington passes legislation that mitigates the economic impact of the coronavirus?
Thank you, Bill, for the question. Maybe we'll tag-team it because let me comment for a second, Steve, about CECL, and then you might comment more broadly. I do want to emphasize what I said in my earlier remarks, which is we're going to close the books in two weeks because things have developed so rapidly in the last few weeks. The reality is our credit metrics, the things we actually see, haven't changed. Clearly, we fully understand there's all kinds of challenges going on as each day goes by with our consumers and small businesses in particular, but we don't see it in the data.
Under CECL, we will need to bake in a view of future economic forecasts. Those forecasts are all over the place. As you know, we don't have in-house economists, so we'll look at a consensus of others and what we get from other providers. Certainly, that's going to be undoubtedly a much more negative view of the economy than anybody had three months ago. That will cause us, even though everything else is the same, to take a big reserve build. It's not driven by actual facts that we see in our portfolio. It will be driven by that broader economic view. If several months later, as you close the books in a future quarter, that view of the future has not come to pass, then you're correct. The way CECL would work is you would suddenly find yourself over-reserved, and you have reserve relief.
All I can commit to at the moment is that we will be extremely transparent about what we do and why as we close the books in the first quarter. I do want to maybe take this chance to emphasize, so it's crystal clear, that in the EPS guidance I provided, what we're saying is that includes the write-off number, which I'd expect to be just in line with recent trends. Since I just cannot estimate what the reserve build would be, I'm just taking it out of the guidance that we provided for Q1 EPS. Steve, maybe you want to comment more broadly.
Let me make a couple of comments. Look, certainly that's a hypothetical situation, Bill, what you talked about. Jeff's response is, at the moment, hypothetical as well. Here's what we do know. We do know it'll end, and we also do know how our card members react when it does end. When you look at what happened in the financial crisis, when you look at what happened with 9/11, billings came down, and billing started to come up. Why? There will be a pent-up demand. There will be a pent-up demand for non-discretionary items. Malls will be back open. People will be back to buying the things that they were buying. Travel will continue to incur. We saw that bump up pretty quickly in the past. The other thing I'll comment on is sort of the quality of our portfolio.
Jeff talked about on slide 25, and we've been talking about this. We've talked about this for the last couple of years, how different the portfolio is. We've also talked about the actions that we've been taking over the last 18 months to ensure the portfolio is as good as it can be. One of the things that people pushed back a little bit on us for was sort of the slower AR growth. We tightened the guardrails. We tightened the guardrails around acquisition quality. We've done some repricing. We've done lots of line management. Loan originations are only to our existing customers, and our credit models continue to improve.
The other thing that we do during these times are when we need to, we implement the same kinds of programs that we do when we have natural disasters, whether it be Hurricane Sandy, whether it be Katrina, whatever it might be. Hardship programs, workaround programs, and things like that. We have many more hardship programs across a broad variety of segments than we did, say, for example, during the financial crisis. All of those things taken together, either from when we do come back or from how we manage our credit during this, I think it bodes well for us going forward.
Our next question will come from the line of Eric Wasserstrom. Please go ahead.
Great. Thanks. Can you hear me okay?
Yes. Very clear, Eric.
All right. Great. Thanks. Again, let me add my thanks to continuing with this call. I'm sure it's a very difficult time to be public with judgments. I appreciate that very much. I just wanted to follow up, Steve. I think everyone absolutely concurs with your view that we are in completely unprecedented circumstances. Obviously, history is the only thing we've got, I suppose, right? I think the circumstance that our economists have been using as an analogy is the one that you just mentioned, which was 9/11, I guess. In their view, you had this very rapid and terrible event in terms of the social cost and the social impact. It reverberated into an economic event over the next several periods. Of course, thankfully, there was a recovery.
I'm hoping that maybe you can just remind us, perhaps a bit more specifically, about the cadence of events as American Express experienced them through that period. What actions you took in terms of mitigation, and then ultimately, your recollection of the timeframe to recovery?
Yeah. Well, I was there. I was here, not there. I was actually here for 9/11, here for the financial crisis. Let's go back to 9/11. You have to also realize 9/11, you were coming off the internet bubble. The economy was just really starting to come back. What you saw from September down to probably the fourth quarter of that year, you saw a drop-off. The drop-off wasn't the same as it was during the financial crisis. The drop-off in spending, peak spending in the financial crisis, was worse than 9/11. What I would say is, the way I've been thinking about this, having lived through both in pretty senior positions in this company. I was running the merchant business during 9/11, and a bunch of businesses for Ken during the financial crisis.
It's a little bit of a combination of both, I think. I think the psychological and the social impacts. The psychological impacts during 9/11 were, you didn't know what was going to happen next. You sort of went around your daily routine. In a financial crisis, you had huge economic impact to sort of everybody. I think it's going to be a combination of the both of them and the actions that we took. I have to tell you, the actions that we took back in 9/11, that's like the Stone Ages compared to where we are now from a credit quality perspective, lever perspective, and so forth. The fact that as you think about how you handle customers now, you handle them digitally, you've got machine learning, you've got AI, and we're even beyond the financial crisis from that.
Our capabilities are so much better than they were during either time. What I would say is this. The way we handled customers in 9/11, during the financial crisis, we always try and put our customers first. We may not have had the same tools that we have today, but at the heart of every decision that we made was our customers. Our customers are, by and large, a resilient bunch, and they will come back, and they will remember how we treated them. That's why when you look historically, our attrition levels for our fee-paying customers did not really change during either 9/11 nor the financial crisis in any statistical way. We have a lot more fee-paying customers now than we did during either one of those times.
Look, what we'll do is we'll just continue to do the right things with our customers. Obviously, thinking about their shareholder implications to some of those decisions. As I've said many times, we're running this business for the long term, and we're going to manage through this short term. We want to manage through this. Just to remind everybody, during the financial crisis, we made money, we paid our dividend, and we had all the liquidity that we needed. We did become a bank holding company during that time, but we went through this. To remind everybody else as well, when you look at CCAR stress scenarios, we do, on a relative basis, pretty much better than anybody else.
We feel comfortable about where we are from a liquidity and a capital position, and we believe that will continue, and we will continue to serve our customers. As I said in my opening remarks, the decisions that we make through this period of time, I believe will help us come out of this in a much stronger fashion than we entered.
Steve, I might just add one comment since I was an airline chief financial officer in the aftermath of 9/11. The only caution, Eric, I would give you thinking about 9/11 as a point of comparison is that the public capacity pulldowns by the U.S. and global airlines significantly exceed anything that happened post-9/11. Duration, we'll have to see. I'd be a little cautious about that analogy.
For our next question, we'll go to the line of Bob Napoli with William Blair. Go ahead, please.
Thank you. Good morning, and thank you for this call. Rosie, congratulations. Vivian, look forward to working with you. Steve and Jeff, just in line with looking through the current pandemic or working through the current pandemic and coming out stronger, if you would. I think if we go back to the financial crisis, I do think, if I recall correctly, American Express provided some support to Delta, to some of its customers. If you could just talk about capital levels, your relationship with Delta, which is so important, and how you're managing that capital. Have you stopped your buyback? Levels of stress the company can take, and then support of key customers.
Sure. Again, Bob, thank you for the question. Maybe we'll tag-team this one as well. I'll make a few comments just about capital. We, of course, I'd remind everyone, have a return on equity that is unlike anyone else in financial services. We generate tremendous amounts of capital, and we'll continue to, and that puts us in a very strong capital position as we enter this period of uncertainty. We are not buying back shares at this point. If and when we were to resume, that would be a function of how the world evolves. We don't have any, just to be clear, formal commitments or lending arrangements, because I saw a few questions coming in over text and email with Delta.
They are clearly a really broad partner, and we have many aspects to that relationship, including the fact that they're a big corporate card customer, and they use that relationship for both T&E as well as Non-T&E purposes from a B2B perspective. They are a very important partner, and we will work with them closely as we will work with all of our partners to manage in the best way we all can through this period of uncertainty.
Yeah. Look, one of the assets that we do have is we have enviable partnerships. Partners are there for each other when they need each other. We will do what we can to support our partners and our customers. We'll cross those bridges when and if they occur. We certainly will do what we can to help all of our partners.
For our next question, we'll go to the line of Betsy Graseck with Morgan Stanley. Go ahead, please.
Hi. Good morning.
Hi, Betsy.
Morning.
Okay. I just wanted to clarify, did you just say you did not have any lending to Delta? Is that correct?
That's correct, Betsy. I just want to be clear, they are a corporate card customer. Just like many of our large corporate card customers, they use that relationship for T&E purposes and also for some B2B spending kind of purposes.
Can you just, Jeff, help us understand. I understand that CECL, it's hard to know what's going to happen on March 31st. The kind of questions that we're getting from people is, does CECL depend on how the world looks on March 31st, or is there a different day that you ping it off of? Also, what kind of indicators are in your modeling for CECL that we should be looking to? Is it things like unemployment, home prices, the yield curve, or is it your expectation for how those are going to migrate over the course of the next year? One is a known, and one is an uncertainty. Just wanted to understand how.
Yeah
Today's environment versus your expectations factors into the size that CECL could end up being.
Well, let me try to make a complex subject as simple as I can. You've all heard me say that, in fact, Betsy, we have over 150 different variables built into over 150 different customer segment models that we use to calculate CECL. The interesting thing is because our metrics haven't changed and won't change over the next two weeks, the models will produce a kind of BAU result. You'll have to overlay based on future economic forecasts as of March 31. How things might behave in a world where you will clearly have, in the economic models, higher forecasts of unemployment. In some ways, I probably just simplify; there are lots of variables, focusing mainly on that one, right?
More than anything else, if I had to simplify the unemployment rate, assumptions about the future would cause us to drive a higher reserve build than we had when we initially implemented CECL on January 1. You can all watch the evolution in economic consensus forecasts in the next two weeks. That is the biggest thing I would focus on, and that's the biggest thing that'll drive whatever result. We'll try to, as I said earlier, be as transparent as we possibly can be on the April earnings call about what we did and why.
We'll go now to the line of Mark DeVries with Barclays. Go ahead, please.
Yeah. Let me thank you also for hosting the call. When I think about your customer segment, I'm most concerned here about the kind of small business customers, whether it's the local gym owner or the restaurant that doesn't have a takeout business or even a retailer that doesn't have a robust e-commerce channel. Can you just talk about what kind of conversations you're having with them at this stage, what you can do to support them, and what you can also do to mitigate the risks?
Yeah. Well, let me make two comments. From a small business perspective, when you look at there's two risks that we face. We face the merchant acquirer risk, and you face a small business card risk. From a merchant acquirer risk perspective, basically all of those merchants are OptBlue merchants, where we do not carry the credit risk at all. There is zero credit risk. Not that we want to see any of them go out of business. We want to see them all be viable and what have you. There is zero credit risk. From a portfolio perspective, our businesses tend to be a little bit bigger than that from a card perspective, versus a lot of the one-off sort of shops. We're a little bit bigger than that, not really as concentrated, where you've seen a lot more growth over the years.
Having said that, the conversations that we do have are what can we do to help? I talked about sort of hardship programs and things like that. We certainly don't want to force people into situations that will push them into a bankruptcy situation. We will work with them on an individual basis based upon our best guess of how they will come out through this cycle. Again, the one-off kinds of places tend not to be where our concentration really is.
The only thing I might add, Steve, is, again, I'm going to caveat this by saying our data is through Friday.
Right.
It doesn't include the latest round of U.S. restaurants and small business closings. The data for small business in the U.S. was surprisingly strong through Friday. That's just a data point. That's not a forecast. I want to be very clear. Just in the interest of transparency, we're just telling you what we know.
Got it. Thank you.
We'll move on to the line of David Togut with Evercore ISI. Your line is open.
Thank you. Good morning. Recognizing that at some point we're going to exit this difficult economic situation, what are your thoughts about stepping up important long-term investments that perhaps can make American Express a faster-growing company exiting this economic crisis? For example, in the past, you've talked about higher growth flows in B2B, fast ACH. If we look out maybe one and a half plus years, what investments could you be making today to make sure you exit this crisis as a faster-growing company over the long term?
It's a great question. I think that one of the things that I have said from day one is that if we were to enter sort of a situation like this, we would continue to invest in those kinds of things that made sense from a long-term perspective. I don't think the answer is sort of what else we can necessarily invest in. I think strategically we're where we want to be. I think the risk during this time is to stop investing in those things that make sense. Many times what I have said is, it doesn't make a lot of sense for me to pull back on adding additional network capabilities or additional payment capabilities or flexibility in our infrastructure or even coverage. Because these are things I'm going to need coming out of the crisis.
The things that we are investing in today that will make a difference, we're going to continue to invest in those. In some of those, we will actually double down a little bit more. Potentially in more digital, in more servicing, which will help us reduce even some more costs and be able to invest even more. We're continuing to look at other payment capabilities as well as B2B. You will see us continue to make those investments. What you will not see us do is stop those investments, because I think stopping those investments will not materially change our bottom line, but it will materially change our trajectory coming out of this crisis. My steer with my executive committee and with the team is, let's make sure we continue to invest in those things that will make a difference. If we can accelerate those things, let's do that as well.
We'll go next to the line of Ryan Cary with Bank of America. Go ahead, please.
Good morning, guys. I appreciate you doing the call. Jeff, I know you called out a number of scenarios for the first quarter guidance. I was hoping you could maybe provide a little more on what you've embedded in that materially worse scenario versus the modestly worse scenario. Thank you.
Yeah. Thank you for the question, Ryan. Let me first level-set again, because I think some of you may have had a little trouble getting in on the first part of the call. We're looking at trends we see all over the world. We're informed that, we have Asian markets where they're farther along, if you will, than the U.S. and Europe. We look at those trends. We're informed by what we see in the U.S. and Europe in the daily trends through Friday. I was clear in my earlier remarks that when you look at those daily trends through Friday, the trends have not stabilized. They're continuing to decline. Boy, a lot has changed in the U.S. and Europe just in the last 72 hours.
That's why for the low end of the revenue growth guidance range of 2%, we said, let's look at the trends we've seen in the first days of March, and let's assume they continue to get materially worse. That's trending much closer towards the levels that we have seen in some of the Asian markets that are much further along, or if you will. Those trends , frankly, have stabilized. They're not getting worse. Whereas when we say they only get modestly better, certainly our position, the types of spending our customers use the product for, the nature of the economies in the U.S. in particular, are very, very different from what our businesses are in places like Hong Kong, Taiwan, and Japan. Our 4% range assumes continued declines from what we've seen in the early days of March, but at a more modest level.
I just want to come back to where Steve started. We're trying to give you everything we know on this call and be as transparent as we can. No one can exactly know how the coming days, weeks, or months are going to play out. That's as transparent as I can be, Ryan, on what we've done.
Next question will come from the line of Chris Donat with Piper Sandler. Go ahead, please.
Good morning. Thanks for taking my question. Jeff, I wanted to follow up on your comments about the flexibility and variability of expenses. I'm looking at slide 38 in the appendix of the presentation, where you break out the marketing and business development spend. I'm just trying to understand. I would imagine there's a chunk of advertising that's just not a productive spend right now; it's not going to cause them to take out new cards or spend more or anything else. Can you comment on sort of what part of the advertising, or what part of that pie, is likely to fade away just because it won't be a productive use of your resources in this kind of environment?
Yeah. Well, very sharp eye, by the way, to go all the way back to slide 38. I pull slide 38 up here. Really, you can almost go around the wheel that's on the left-hand side of that page. In traditional marketing, sure. Are we liable to run less TV advertising and do a little less kind of digital advertising in today's environment because it might clang with the environment? Absolutely. Do you also find that your universe of attractive new card member opportunities, where we pay various incentives that run through the P&L initially, is that universe going to shrink? Yeah, absolutely. Do some of the payments we make to certain partners, which have to do with new card member acquisitions, kind of naturally go down because some of their card member acquisitions are going to go down as they have less business? Absolutely.
Are our GNS partners, to continue around the wheel, gonna see some declines in volume just like we are, and therefore we balance? Yes. Are our corporate clients traveling? Yes, they are. It also means they're not earning some of the incentives and rebates. All of those things happen very naturally. That, I think, is a little bit of the point I was trying to make earlier, Chris. That at times I do think sometimes people misinterpret our remarks about running the company for the long term, even through a slowdown, as being nothing changes in our expense buckets, and that's just not the case.
We'll go to the line of Vincent Caintic with Stephens. Go ahead with your question, please.
Hey, thanks. Good morning. Thank you for hosting this call. I was curious if you could talk about what you're seeing in spend trends in different geographies, given your global footprint. I think you mentioned actually that Asia has stabilized. There have been other reports too of China and Asia stabilizing. Travel has resumed for some of the flights, and people are going back to restaurants. I'm kind of curious if you actually have seen it broadly stabilized and maybe even inflecting to the upside. If you could talk about maybe how spend has evolved in Asia since the start of the COVID-19 to today, and maybe if you could think about that as a playbook for what might be a read-through to Europe and the U.S.
Well, yeah, that's a really good question, Vincent. What I'd say is certainly we are informed by our experience in every market around the globe and the calls we do every couple of days with our country managers from all over the globe, and those are very informative calls. That said, you have to be a little careful about analogizing any of our non-U.S. markets back to our biggest market, the U.S., because there's nowhere else where we have the kind of strength of franchise, breadth of customer base spending on the breadth of things we have in the U.S. With those caveats, if you look at Asia, I'm going to kind of generalize across Taiwan, Japan, Hong Kong, and Singapore, which for us are probably the significant impacted markets. What you see is an initial strong drop in T&E.
You do see, as Steve mentioned earlier, an initial increase in Non-T&E spending that then as time goes on, begins to fade to very modest declines in Non-T&E spend. You see T&E spending, though, continues to decline for some time, reaching very, very low levels consistent with the kind of airline capacity reductions that you've seen airlines announce. I'm going to sound like the old airline guy I am again. Airlines kind of lead the travel industry. If people aren't getting on planes, they're probably not staying in hotels, and they're probably not renting cars. In those countries, the trend stabilized some time ago, meaning they stopped getting worse. Whether they've turned up, I think if you ask six people in this building who are staring at the trends, frankly, we might all have slightly different views. They're certainly not getting worse at this point.
From a colleague's perspective, back to the calls we do every few days with our country managers, there you actually do hear more positive things, and you see people coming back into the office in some of those countries. You see them talking about people on the streets again. Those are green shoots, and it tells us that there is a cycle here. I think, Steve, I would go back to where you started the call. About the only thing that we are completely sure of is, this will end. When it ends, our brand will be strong, and we want to make sure our customer relationships are strong, and we want to be there for the rebound. Steve, I don't know if you want to add.
Yeah, no, I think if you chunk this up with Asia, Europe, and in the United States, you're seeing it sort of swing over this way towards us. Europe, in a lot of ways, is ahead of us. It started with Italy, and you saw that precipitous decline. Again, more working from home, people not allowed on the street, so forth and so on.
They're still going through that. It hasn't got to the stable situation yet. I think in the U.S., a little bit different. It's really a city-by-city approach. New York has really just started to really get into it this weekend, right? With de Blasio's announcement of closing the schools and then more and more companies, including American Express, would work from home. Bars closed, restaurants closed, and so forth. Jeff just pointed out we're not at home.
Everyone else is.
Everybody else is. It'll take some time. The question is how long that goes. It will hit a trough, and then it'll stabilize, and then you'll start to see it come back. What we don't know, though, is how low that trough does actually go at this point. You can't really compare the trough in any one country because our business is a little bit different. We have a lot more inbound as it relates to a number of our countries, especially in Europe. While we do have very strong proprietary businesses, there are others where it depends much more on inbound.
Whereas in the U.S., not as much inbound, and not as much outbound travel. You would think that that would come back because of that quicker. We'll have to see. It was a little bit, I think the takeaway is it does stabilize, but it is hard then to make a judgment that says, oh, it started to go up this way because the dynamics of every country are so different.
We will go next to the line of Sanjay Sakhrani with KBW. Go ahead, please.
All right. Thank you.
Go ahead, Sanjay.
Good morning. Thank you for the call again, and stay healthy. I guess I have a follow-up on expenses as well. Steve, you obviously have a lot of experience in cost management. I'm just trying to think about how to dimensionalize how you would think about the propensity to cut back on costs given a slowdown, and maybe contextualize it relative to past cycles. I know you've said a lot about expenses and investing for the long term, but if we go down a path where you have more weakness in the economy, how should we think about how American Express will behave relative to the past? Jeff, just to follow up on credit quality, because I get this question a lot. How do you think the portfolio behaves in a downturn relative to the past cycle? Thank you.
You're right. I've had a lot of experience, and I've led pretty much all the initiatives over the last three times that we've done this to cut expenses. The typical go-to move would be to reduce a number of sales and client management positions. Looking back, I wouldn't do that again. I wouldn't do that again because I think it's a really short-term answer, and it doesn't help you get out of the chute really quickly. I can tell you what I'm not going to do. What I'm not going to do is really institute layoffs here. That's one thing that I'm definitely not going to do.
My sales organization, my client management organization, the people that are going after products and so forth, and developing our products, we will continue to stay focused because I think we need to be there for our customers, and there'll be opportunities to sign lots of new customers, whether they be merchant customers, small business customers, or corporate card customers. Where you will see expense reduction, though, is you will see expense reductions. Obviously, you see it in T&E. That's a no-brainer. You will see it in sort of consulting expenses, contract expenses. You will see a sort of hiring freezes where you will only do selective hiring. You'll see some open jobs that'll come up, and we'll do that.
You will see us really focus in on our technology spending and really look to continue to make those investments that'll play out for the longer term, but also those ones that will make a difference from a cost perspective. You might accelerate some of those. The only other thing I would say in terms of just not to make a blanket statement on layoffs, it is a very good time to think about what any paradigm shifts may be. If you think coming out of a cycle, a particular function or organization can be replaced by a technology, AI, what have you would make those moves. Those moves we think about on an ongoing basis, and those are moves that we would certainly make. You would see, as Jeff said, you have a lot of expenses that do come down.
The one thing that I did learn from all those expenses, and we've been doing this right along. We have just gone through exercises on an ongoing basis on the last two years to reduce and reposition our headcount . What I learned, Sanjay, is that there is an economic level that we have to hit, but does that extra $500 million, and I'm throwing that out as an example, not as a definitive number. When you're talking about the size and scale of our company, does an extra $500 million make all that much difference in the world if I'm only going to have to put that expense back in six months later? When I put that expense back in, I then have to put that expense back in in an untrained, have to hit the learning curve sort of mode.
If I've learned anything over my expense reduction initiatives over this time, is do not cut those expenses that you will have to put back in just to sort of chase a number. We're not talking about the ultimate profitability of this company. The reality is, even during the financial crisis, when the worst year we had, we made $2.2 billion. How bad would it would've been if we made $1.8 billion and I had more of my sales organization to get out and hit the ground running even faster?
That just gives you a sense of how I'm thinking about it. There are a number of levers to pull, and we will continue to pull those. The nice part about it is that one of the things we've done is we've been pulling those on a consistent basis as we've gone through over the last few years.
Then Sanjay, on your credit question and how we look versus pre-financial crisis, I'd point everyone to two slides, actually, in our presentation, 25, and then appendix slide 35. I would actually preface these two slides by saying while during the financial crisis, I was a healthcare chief financial officer. It's striking to me how the lessons of that experience are just seared into the brains of all of my colleagues here at Amex who did go through that crisis here at Amex. It colors our behavior every day. It has caused us for years to sit every month with Steve and go through what does our portfolio look like today versus what it looked like in 2007? What do our risk management practices look like? You see just a few of those stats on the two slides I called out.
Our mix of low FICO AR is much, much lower. Our mix of low tenure customers is much, much lower. Our focus on what we call revenue loss coverage, in other words, how much worse would our write-off rates have to get before we begin to actually go underwater on customers? Much, much stronger. Of course, the stat that we are so focused on growing our lending by getting more of our existing customers' borrowing behaviors. I think all of those things, Sanjay, leave us, look, not saying if things go on as they have for the last two weeks for a while, that there won't be some credit losses. There will. There will be stress on our consumer and small businesses. Relative to where we were in the great financial crisis, we feel really good about where we are.
We have one more question.
Our final question will come from the line of Don Fandetti. Go ahead, please.
Yes. You guys covered most of the territory. Jeff, just real quick question. I'd heard there was a potential proposal around CECL relief. Have you heard about that at all?
Well, there's all kinds of proposals floating around. We're focused on running the business, and in some ways, Don, well, I'm pretty public about not being a fan of CECL. We're focused on the real things that are gonna impact our customers , our colleagues and our business. I just gave EPS guidance excluding any reserve build because the write-offs will be real, and the reserve build will be whatever it's gonna be, and we'll explain it. I wanna keep our efforts focused around things that are gonna impact the business, and we'll let the accounting go where it goes.
Just before we end, I just wanna thank all of you for being on the call. Appreciate, and Rosie will say this as well, but we appreciate your continued interest in the company. Look, we are here for the long term. We have gone through multiple crisis like this, as I said earlier. The management team that I had, and while Jeff wasn't here with us, he went through his own crisis in the airline industry. The team is feeling good about our ability to handle it. Most importantly, we are really feeling good about our ability to handle our customers. We will get through this. As I said earlier, it's not if, it's when. Hopefully, we'll see most of you in person, and the next Investor Day that we do will not be via the telephone.
We'll be on stage, and maybe we'll put a couple of extra spotlights in for you next year and keep you a little longer. Maybe even feed you. The main thing is just for you and your families, be safe and take care of yourselves, and hopefully see you when this is all over.
With that, we'll bring the call to an end. Thank you, Steve. Thank you, Jeff. Thank you all for joining the call today and for your continued interest in American Express. As always, the IR team will be available for any follow-up questions you have after the call. Now, operator, back to you.
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