Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2022 Earnings 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 star then one on your touchtone phone. You will hear a tone indicating that you have been placed in queue. You may remove yourself from the queue at any time by pressing star then two. If you are 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 conference over to our host, Head of Investor Relations, Ms. Kerri Bernstein. Thank you. Please go ahead.
Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains certain 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 from these statements are included in today's presentation slides and in our reports on file with the SEC. The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discuss. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results.
Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Jeff. With that, let me turn it over to Steve.
Thanks, Kerri. Welcome to the IR team and your first earnings call. Good morning, everyone. Thanks for joining us for our second quarter call. We had an outstanding quarter. Revenues were up 31%, reaching a record high, and earnings per share were $2.57. Cardmember spending was at record levels. Billed business was up 30% from a year earlier on an FX-adjusted basis, led by a vigorous rebound in travel and entertainment spending and continued strong growth in goods and services. We added 3.2 million new proprietary cards in the quarter, driven by continued strong demand for our fee-based premium products. Acquisitions of our U.S. Consumer Platinum, Gold, and Delta co-brand cards were all at record highs. Customer retention and credit quality both remain at exceptionally strong levels.
While our strong growth may be somewhat surprising given the uncertainties in the external environment, there are a number of reasons for our continued momentum. First, the decisions we made through the pandemic continue to pay dividends. At the outset, we made it a priority to be there for our customers, focusing on delivering great service, providing financial relief programs, expanding our Shop Small initiatives, and injecting new value into our premium consumer and business products with benefits that were relevant to the times. We then ramped up investments early in the recovery to rebuild our momentum and grow our customer base, refreshing our premium products with a series of new benefits that enhanced our generational relevance, and we accelerated our acquisition engine. These decisions laid the foundation for the strength in customer retention, engagement, and acquisitions that you've seen over the past year in our results today.
Other key factors driving our performance include the many competitive advantages that we have that differentiate us, as well as several structural shifts, some near-term recovery tailwinds, which you'll remember we discussed at our Investor Day. A critical competitive advantage is our global premium customer base, which is, at scale, unrivaled in the industry, with millions of high-spending, super prime, loyal consumer and business customers across generations and geographies. Importantly, millennials and Gen Z consumers are a large part of our existing customer base and our fastest-growing age cohort, making up 60% of all new consumer cardmembers we're acquiring and around 75% of new U.S. Consumer Platinum and Gold Card members.
Our new customers have excellent credit profiles, are highly engaged in the premium benefits that come with American Express membership, and are spending more from the start of their relationship with us than previous newcomers, giving us a long runway for growth. In fact, spending by this age group grew 48% in the second quarter, significantly outpacing other generations. Our momentum is also being aided by several structural shifts, which we believe give us significant opportunities to sustain our growth across all lines of business over the longer term. These include the growth of the premium consumer card space around the world, the ongoing increase in online commerce and digital engagement among consumers, the strong pace of small business creation, and the acceleration in the digitization of commercial payments.
Finally, in the near term, we're benefiting from recovery tailwinds in our businesses outside the U.S., in the large and global corporate space, and in travel and entertainment. The travel rebound, in particular, has been faster and stronger than anyone expected. Total T&E spending exceeded pre-pandemic levels in April for the first time. It was at 108% of 2019 levels for the quarter, led by strong growth in global consumer and SME spending and a significant uptick in large and global corporate travel. We don't see demand in the T&E categories declining significantly anytime soon based on the strength of future bookings coming through our consumer travel agency and the trends our partners in the travel industry like Delta are experiencing, particularly in the premium space.
Of course, we are wary of the uncertainties in the current economic environment and the impact it's having on our business. The historically low unemployment rate is a positive factor, as it's helping to drive our strong credit metrics, and we continue to see no significant signs of stress in our consumer base. Inflation is a bit of a mixed bag. It's a modest contributor to our strong growth in volumes, but inflation, when combined with low unemployment, also puts pressure on operating costs. For example, like everyone else, we're seeing intense competition for the best talent. Because our colleagues are a key driver of our success, we're continuing to invest in talent, which is having an impact on our operating expenses. Looking forward, as I've emphasized many times before, we run the company for the long term, and our investment strategy is grounded in this principle.
As we sit here today, we have an abundance of great opportunities, and we will continue to make our decisions with a longer-term view like we did during the pandemic. That means we will continue to invest at high levels in those areas that will drive sustainable growth, including our brand, value propositions, customers, colleagues, technology, and coverage. We remain confident that the successful execution of this strategy will position us well as we seek to achieve our long-term growth plan aspirations of revenue growth in excess of 10% and mid-teens EPS growth in 2024 and beyond. Thank you. I'll now turn it over to Jeff.
Well, thank you, Steve, and good morning, everyone. It's good to be here to talk about our second quarter results, which reflect another strong quarter and great progress against our multi-year growth plan. Starting with our summary financials on slide two, most importantly, our second quarter revenues were $13.4 billion, up 33% on an FX-adjusted basis, strengthening sequentially from last quarter's already strong 31% year-over-year growth rate. Our reported second quarter net income was $2 billion, with earnings per share of $2.57.
Now, as I said last quarter, given that year-over-year comparisons of net income have been challenging due to the volatility that the pandemic caused in credit reserve adjustments, we are including pre-tax, pre-provision income as a supplemental disclosure again this quarter, which we believe gives you additional insight into the trends of our underlying earnings. On this basis, second quarter pre-tax, pre-provision income was $3 billion, up 27% versus the same time period last year. Now let's get into a more detailed look at our results, beginning with volumes. Starting on slide three, you can see the continued momentum in spending from our strong customer base that Steve noted earlier. Billed business and total network volumes were up around 30% year-over-year on an FX-adjusted basis in the second quarter. We feel really good about both our year-over-year growth as well as our sequential growth.
The second quarter saw us achieving our highest-ever level of quarterly billed business. If you were to compare to 2019, the first quarter grew 19%, while the second quarter growth rate accelerated even further to 28%. Importantly, our spending volumes strengthened as we went through the quarter, with the month of June also reaching a new monthly record high. As we sit here today, this momentum has continued into early July. Now, I would point out that when you think about year-over-year growth rates, volumes in 2021 were of course, in a steep phase of recovery as the year progressed. I do expect that our year-over-year growth rates will moderate as we progress through the rest of 2022.
Our spending metrics are being driven by both sustained growth in goods and services spending and by an acceleration in T&E recovery in the second quarter. Starting first with goods and services spending on slide four, we saw year-over-year growth of 18% in the second quarter. We are now multiple quarters into seeing the effects of the structural shift in online commerce spending patterns, which was accelerated by the pandemic, with our growth rates remaining steady. Specifically, online and card-not-present spending grew 15% in the second quarter. In contrast, total T&E spending, as you see on slide five, showed an acceleration in its recovery this quarter, even more than we and many others would have expected, reaching 108% 2019 levels. The high demand for travel drove a steep recovery across all customer types.
This strength in both goods and services and T&E spending is also evident as we break spending trends down across our consumer and commercial businesses with a few other key points that I'd suggest you take away. First, beginning on slide six, millennial and Gen Z customers continue to drive our highest global consumer bill business growth with their spending of 48% year-over-year. I'd also call out that this quarter, all other age cohorts have now reached pre-pandemic levels of T&E spending, including baby boomers who had been slower to recover. In our commercial business on slide seven, spending from our small and medium-sized enterprise clients continues to drive our overall growth, with spending up 25% year-over-year.
While a smaller part of our business, it is worth noting the significant acceleration in growth of 58% of the large and global corporate customers, significantly above last quarter's growth rate. This is a sign of a more meaningful business travel recovery. Overall, we are pleased that our strength in spending volumes has exceeded our original expectations for the year. Again, this quarter, the majority of our high level of growth was driven by the number of transactions flowing through our network, with some modest additional impact from inflation. This positions us well for our long-term growth aspirations. Moving on now to receivable and loan balances on slide eight.
We saw good sequential growth in our loan balances, which are now well above pre-pandemic levels this quarter. The interest-bearing portion of our loan balances also continues to consistently increase quarter-over-quarter, but remains a bit below 2019 levels as paydown rates have remained elevated. As you then turn to credit and provision on slides nine through 11, the high credit quality of our customer base continues to show through in our extremely strong credit performance. Card member loans and receivables write-off and delinquency rates remain well below pre-pandemic levels. Though they did continue to tick up slightly overall this quarter, as we expected, they are trending a bit better than our expectations when we started the year. Turning to the accounting for this credit performance on slide 10. As you know, there are a couple of key drivers of provision expense.
First, actual credit performance, which as we just discussed, is extremely strong. Second, changes in credit reserves under the CECL methodology. We built a small amount of reserves this quarter as our loan balances grew and the macroeconomic outlook that we flowed through our CECL models got slightly worse relative to the outlook back in Q1, both partially offset by improved portfolio quality. This reserve build, combined with our low net write-offs, drove $410 million of provision expense for the second quarter. As you see on slide 11, we ended the second quarter with $3.2 billion of reserves, representing 3.1% of our loan balances and 0.2% of our card member receivable balances, respectively. This remains well below the reserve levels we had pre-pandemic.
Going forward, we continue to expect delinquency and loss rates to move up slowly over time, but to remain well below pre-pandemic levels this year. I do expect to end the year with a higher level of reserves on our balance sheet than where we ended this quarter, given our expected loan growth. The overall range and timing of reserve adjustments will be heavily influenced by how the macroeconomic outlook evolves between now and the end of the year. Moving next to revenue on slide 12. Total revenues were up 31% year-over-year in the second quarter, or 33% on an FX-adjusted basis as we continue to see a stronger U.S. dollar relative to most of the major currencies in which we operate. Overall, these results were above our original expectations.
Before I get into more details about our largest revenue drivers in the next few slides, I would note that service fees and other revenue was up sharply at 79% growth year-over-year, largely driven by the uptick in travel-related revenues that accelerated this quarter with cross-border spend, in particular, surpassing pre-pandemic levels. Our largest revenue line, discount revenue, grew 32% year-over-year in Q2 on an FX-adjusted basis. As you can see on slide 13, driven by both our sustained growth in goods and services spending and the accelerated T&E recovery that you saw in our spending trends.
Net card fee revenues were up 19% year-over-year in the second quarter on an FX-adjusted basis, with growth continuing to accelerate, as you can see on slide 14, largely driven by the continued attractiveness to both prospects and existing customers of our fee-paying products as a result of the investments we've made in our premium value propositions. This quarter, we acquired 3.2 million new cards, with acquisitions of U.S. Consumer Platinum Card members again reaching a record high and increasing 20% above last quarter's record levels, demonstrating the great demand we're seeing, especially for our premium fee-based products. Moving on to net interest income on slide 15, you can see that it was up 31% year-over-year on an FX-adjusted basis, accelerating above last quarter's growth rate due to the continued recovery of our revolving loan balances.
Looking forward, while I would expect our loan balances to continue to recover at higher growth rates, the rising rate environment will likely cause our net interest income growth rate to slow given our sizable non-interest-bearing charge balances. To sum up on revenues on slide 16, we're seeing continued strong results and sustained momentum across the board. Looking forward, we now expect to see revenue growth of 23%-25% for the full year of 2022. The revenue momentum we just discussed has been driven by the investments we've made in our brand, value propositions, customers, colleagues, technology, and coverage. Those investments show up across the expense lines you see on slide 17.
Starting with variable customer engagement expenses, these costs came in as expected at 42% of total revenues for the quarter and are tracking with our expectation for variable customer engagement costs to run at around 42% of total revenues on a full year basis. On the marketing line, we invested $1.5 billion in the second quarter. We feel really good about the strong demand for new card acquisitions, as we showed on slide 14. More importantly, we feel good about the spend, credit, and revenue profiles of the customers we are bringing in to American Express membership, which continue to look strong relative to what we saw pre-pandemic. I would now expect to spend a little over $5 billion on marketing in 2022.
Moving to the bottom of slide 17 brings us to operating expenses, which were $3.3 billion in the second quarter. There's often some quarterly volatility in this number due to the varied timing of certain accruals and entries. This quarter, for example, we see the impact of the prior year, including a sizable benefit from net mark-to-market gains in our Amex Ventures strategic investment portfolio. As I said last quarter, and as Steve discussed earlier, inflation, while driving some modest positive impact on volumes, is also putting pressure on our operating expenses, particularly in our compensation costs. Taking everything into account, we now expect our full-year operating expenses to be around $13 billion as we invest in our talented colleague base, technology, and other key underpinnings of our growth, given our tremendously high levels of revenue growth.
Turning next to capital on slide 18, we returned $1 billion of capital to our shareholders in the second quarter, including common stock repurchases of $611 million and $394 million in common stock dividends on the back of strong earnings generation. Our CET1 ratio was 10.3% at the end of the second quarter, within our target range of 10%-11%. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth.
Given the concerns about the macroeconomy in the market, it is worth noting that in the Fed's CCAR stress test results released last month, American Express was again one of the few firms that remained cumulatively profitable under the Fed's macroeconomic stress scenario, and we had the highest profit margin as a percentage of assets of any participating bank. That brings me to our growth plan and 2022 guidance on slide 19. Our performance year-to-date and our full-year guidance reinforce several points that Steve and I have now both discussed. First, and most importantly, we clearly have momentum across all of the areas critical for us to drive sustained high levels of revenue growth, including customer acquisition, engagement, and retention, evidenced by our strong Q2 results. Inflation is additionally providing some modest benefit to our revenues.
The combination of all these things led us to increase our expectations for full-year revenue growth to 23%-25%, up from our original range of 18%-20%. For now, though, our EPS guidance remains unchanged from between $9.25 and $9.65. Let me walk you through our thinking here. As I talked about earlier, we feel really good about the strong results generated by our marketing investments this year, and that's why we now expect to spend a little over $5 billion for the full year, modestly above our original expectations. Both Steve and I also talked about the fact that there are some pressures on our operating expenses, particularly around compensation and partially fueled by inflation, and therefore, we now expect our operating expenses to be around $13 billion this year.
Lastly, and most importantly, as we think about our EPS this year, as I talked about in the credit section, while our credit performance and metrics remain extremely healthy, we can't predict how the macroeconomic outlook will evolve. That makes it difficult sitting here today to predict a precise range of outcomes for any potential CECL reserve adjustments for the balance of the year. That said, should the macroeconomic outlook not change meaningfully between now and the end of the year, and therefore not have a large impact on credit reserves in the balance of the year, we would expect to be at or even a bit above the high end of our EPS guidance range.
In any environment, we remain committed to executing against our growth plan and running the company with a focus on achieving our aspiration of delivering revenue growth in excess of 10% and mid-teens EPS growth on a sustainable basis in 2024 and beyond. With that, I'll turn the call back over to Kerri to open up the call for your questions.
Thanks, Jeff. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation, and 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 star then one on your touch tone phone. You'll hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing star then two. If you're using a speakerphone, please pick up the handset before pressing the numbers. One moment, please, while we poll for the first question. Our first question comes from Ryan Nash of Goldman Sachs. Please go ahead.
Hey, good morning, everyone.
Ryan.
You know, maybe just to start on revenue growth, Steve. It's obviously coming in much better than expected and you're choosing to invest more to propel future growth. I was just hoping maybe you could just talk a little bit about the additional investments that you're making across the company, whether it's in OpEx or in card member engagements, how much of this is offensive versus, you know, to drive revenue growth versus defensive. Then given the acceleration of investments that we're seeing through 2022, could this position us for better revenue growth in the intermediate timeframe? Thanks.
You know, I think everything that we're doing here is offensive. I mean, you could argue that raising compensation is defensive, but I think you've seen compensation being raised across. If I break out the categories, you know, you're gonna see OpEx up, and you see an OpEx up for two reasons. Number one, we are investing a little bit more in, from an operating perspective, but that investment, the main investment from an operating expense perspective is you can't grow your billings 30% and with the majority of those billings being grown by 30% by more transactions without having more people to be able to serve your customers, to be able to engage with them from a travel perspective.
You have to remember, one of the huge differentiating factors that we have in our business model is our ability to serve our customers when and where they need to be served. As you get more and more transactions, as you get more and more customers, you do have a function increase. A lot of our operating expense growth has been to the addition of people, you know, which is not maybe a popular topic right now that people are talking about, but we're adding people. We're not subtracting people from our business, and we're adding people to make sure that we can continue the level of service that we had. I don't mind doing that, especially in a growth environment, which is what we're expecting.
Look, you're also seeing, you know, wage increase, and you have to pay more to keep your best talent. We will do that. That is shortsighted not to do that, and we will continue to do that. From a marketing perspective, you know, I've been doing this for a number of years now, and, you know, one of the things that you hear us say is we have lots and lots of good investment opportunities. To let those investment opportunities go by the board because, well, we thought we might have spent $5 billion, but maybe it'll be $5.2 billion, whatever. That's shortsighted because we're running the company for the longer term.
I would say that the investments that we're making and additional investments in technology are truly all, you know, all thinking about the long term here. As far as revenue goes for next year, look, we're building up momentum. You know, I think when we came out and said we were gonna grow 18%-20% this year, there was probably some skepticism. Now we're coming out and saying we're gonna go 23%-25%, which is gonna put the level of revenue at the end of this year, obviously higher than what we thought. We have a plan to get us to, you know, in 2024 at 10%+ revenue growth on a sustainable basis, which means in 2023, we'll certainly exceed 10%.
What that number will actually be, I don't know sitting here right now. I don't know. I can tell you it'll be on our growth trajectory. As long as we have good revenue opportunities and as long as we can continue to grow this business, I will continue to invest. That's where we are. As Jeff said, you know, we've decided not to. I think it's really important. We've decided not to raise our EPS guidance, you know, because of the uncertainty with CECL, which quite honestly, we don't have a lot of control over. For us to sit here today and say, "Hey, look, let's just raise it," to then come back in the third quarter or the fourth quarter and say, "Hey, we had to drop it," it's just foolhardy.
The revenue, it's what we see. When we're asked questions about, you know, what do you think about the economy and you see a slowdown, if I was thinking there was a slowdown in the next couple of quarters, I wouldn't be sitting here raising revenue to 23%-25%. That's how I think about it.
Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.
Thanks. Good morning. T&E was a big driver of the upside, and I think, Jeff, you mentioned there's been further strength in July, which makes sense given we're moving into the heart of the summer months. Are you guys concerned this is sort of a pull forward and you see a slowdown thereafter? Maybe that ties into what we saw in corporate T&E because that also moved up quite a bit. Where do you think the new normal shakes out? Thank you.
All right. If you look at where we are right now, and yeah, you know, we're at 8% growth over 2019. And that's not really a big number when you think about it. When you think about 8% growth over 2019 from a T&E perspective, and you think about sort of airline prices, you think about some of the inflation built in, I'd say there's more room to run on T&E.
When you disaggregate sort of T&E and you look at it and you see that the consumer is running, you know, sort of 38% above, and you got international consumer running only 8% above, and you got SME running probably 8% above, and, you know, corporate travel is only 60% of what it was in 2019, I wouldn't call that a pull forward. Then when I look at my bookings, my future bookings in my consumer business, they're strong. When you sort of disaggregate and you go below those numbers and you look and you say, "Okay, what's really driving it?" You see a tremendous growth, right? We're seeing a tremendous growth, like 48% growth in restaurant. Lodging is huge. Airline is way up. Lodging and airline are still below 2019 levels in aggregate.
You know, the airline industry is probably only about 85%-90% of their capacity, and you know, they have some staffing issues and what have you, and they're sort of canceling. I don't think this is a pull forward at all. I think there's a huge pent-up demand, obviously, to get out and travel and see the world or see anybody at this particular point in time. No, I'm not really concerned about a pullback because I don't think we've gotten to a normal level yet. I really don't believe we've gotten to a normal level of T&E. Now to see 90% year-over-year growth rates? No. I look at absolute aggregate numbers, and I can't get too focused on just the growth rates. We're not at a normal level of T&E yet in our business.
Thank you. The next question is coming from Betsy Graseck of Morgan Stanley. Please go ahead.
Hi. Good morning. Yeah, it's really great results here. Wanted to dig in a little bit on how you're thinking about the loan growth on the SME side. I know that's been accelerating here. Just give us a sense as to where pockets of opportunity are and how you would flex if there was a slowdown. Thanks.
Look, you know, our stated goal for our SME business is to be the working capital provider for small businesses. You know, I think that what we're trying to do is to be able to, you know, provide liquidity to them using cards. We've got some short-term working capital loans. We've got some, you know, shorter-term term loans, and they're taking advantage of it. I'll send you back to the pandemic. I mean, you know, when you look at our small business base, I think everybody was really concerned about how stressed this was because or how stressed this could be because of what the perception is of the makeup of small businesses. I've said this over and over again.
When people think about small businesses, they think about restaurants, they think about small retail, you know, on Main Street, and it's much more than that. I think that, you know, and you saw how we performed. I mean, our credit metrics performed brilliantly through the pandemic. You know, we've always grown in the last few years a little bit, well, pre-pandemic. We've always grown faster than the market. We have a very low share of our small businesses lending volume relative to their spending volume. I mean, you know, we probably have over 40% of their spending volume, but 40% of the spending volume, but we have less than maybe 20% of the lend.
There is opportunity, and we will go after this opportunity the same way we go after everything else, in a very measured, analytical, and, you know, risk-adjusted way. We're not trying to grow crazily. We are just providing our customers with what they need. Having said that, I think you've seen our ability to pivot, and if need be, we will pivot again. What I do really love about our small business base, not only that it continues to grow, but it is so diverse across so many different types of industries. That's really important.
Thank you. Our next question is coming from Bob Napoli of William Blair. Please go ahead.
Thank you. Good morning. Also, congratulate you on super strong numbers. Really great to see. I guess maybe a question on network coverage, one of your key areas of focus and incremental investment. Just maybe any update on how you're performing versus your plan on network expansion. You know, obviously international seems like where you have the most opportunity from a network expansion. You know, any thoughts on or any metrics you can give on international and your thoughts on, you know, where your coverage should be internationally over the long term?
Yeah. I mean, look, from a U.S. perspective, we continue to remain at virtual parity coverage. As we said, it doesn't mean you're not gonna run into somebody that, you know, doesn't accept a card now and again. Usually it's when we do that, we're able to sign them up because it's, you know, sort of old news in terms of what the rates are and how we, you know, and so forth. I shouldn't say I'm not concerned about the U.S., but I like where we are in the U.S., and I like our approach to the U.S. From international, I think we've been really, really, really clear.
We've been focusing on, you know, priority cities and continuing to drive those numbers higher, and those continue to do well. We've probably signed, you know, well over 3 million merchants, you know, this year, which is, you know, I think we're on pace to sign as many as we did last year from an international perspective. You know, we'll continue to provide information, you know, not on a quarterly basis, but on a as-needed basis to show you that the progress that we're making. We're really pleased with the progress that we're making, you know, in our priority cities. That doesn't mean we're not focused on signing every merchant that, you know, doesn't accept a card. We do, but we think it's more important to sign those merchants where card members actually are.
That's why the priority cities and the priority countries are so important for us. We feel really good about it. You only have to look at the international spending to say, you know, "Is it really working?" When you look at sort of our international, you know, spending this year, it's up higher than our consumer spending year over year for this quarter. It's a big driver for growth for us.
Thank you. The next question is coming from Mark DeVries of Barclays. Please go ahead.
Thanks. I had a question for Steve about the 48% growth in Millennials and Gen Zs. I assume it's normal for the younger generations to have stronger growth, just as a combination of what I assume are kind of stronger new account acquisitions and also just the ramping of spend as they age and their incomes grow. Can you give us a sense of you know what the breakdown is in that 48% between new account acquisition and then actual organic spend on an individual account basis. I know you indicated that they are spending more than previous newcomers, but any sense of kind of dimensionalizing that, how that compares.
Just finally on, you know, comparing across the different cohorts, kind of, you know, what your market share is for these newer cohorts compared to Gen X and boomers at comparable points in their age?
Yeah. We don't really get into all of that either in our release or talk. Let me give you a couple of points. You know, when we look at sort of how we're getting card member spending, we really look at share of wallet. Share of wallet's really important for us. From millennials and Gen Z, we're getting a higher share of their wallets off the bat. That's key. Because what happens is, you know, with a lot of our boomers and so forth and especially our boomers, they were used to an American Express that was accepted in a limited universe. Our Gen Z and our millennials are used to an American Express that's really accepted everywhere.
We're able to penetrate their wallets more right out of the gate because, number one, they're more card savvy, and they tend to use no cash. They're more value proposition savvy, and they tend to figure out how to utilize the card in the best way for them. We're getting a higher percentage of their wallet. As they grow, as their wallets grow, as they progress through life, you know, our aim is to continue to keep that wallet share. That's a big deal. Plus, as you acquire Gen Zs and millennials, they tend to have a longer runway for tenure with the card product. As far as the 48% growth and breaking it out.
I mean, really what you're asking for is same-store sales versus new store sales. I don't really have that at the tip of my fingertips here.
Yeah. We don't disclose the exact numbers, Mark. We do pull it apart, just like you described. We certainly have made the point that a disproportionate share of our new account acquisitions are going to that millennial and Gen Z demographic. Then when you break out, just to use Steve's phrase, the same-store sales, it is also the fastest-growing demographic on a same-store sales basis. Both contribute, both the same-store sales effect and the fact that they are disproportionate in our new customers.
Thank you. The next question is coming from Dominick Gabriele of Oppenheimer. Please go ahead.
Hey. Great. Thank you so much. You know, obviously you're reporting incredibly strong recovery spending numbers. If you just think about the spending cycle and inflation boosting nominal PCE versus real PCE, you know, how should we think about the effects on your high-end consumer base versus the average U.S. consumer in terms of their susceptibility to a spending slowdown? Perhaps why could this customer base that you have act differently versus the average consumer in the next spending cycle? I'm just talking about, you know, total spending, if that works. Thanks so much.
Well, I think the simple answer is they have more money. You know, when you look at sort of what's going on in the economy and the stock market going up and down, we've never really been tied to that. I mean, I've been here for forever, right? 35 years or so, and I've never seen a correlation between that. What I have seen a correlation between is, you know, sort of unemployment and people losing their jobs and not being able to pay their bills. That's potentially an issue down the road. We're in a very crazy, you know, sort of environment, and Jeff called this out in his own remarks.
I mean, you know, we've got high inflation and low unemployment, and it's actually hard to hire people right now. Yes, you're seeing some layoffs and, you know, some companies talking about slowing down their hiring and things like that, but it's not broad-based and it's not broad scale at this particular point in time. I think, you know, as far as I look at this, the cohort that we have, which is, you know, a small segment, right, of the U.S. population, but a very powerful segment of the U.S. population, you would have to see, you know, a huge credit crunch, you know, driven by unemployment, I think for this cohort to be hit.
The other thing I would say is, you know, when we pull apart our numbers, this spending is not inflation driven. That's not to say there's not inflation in these numbers. You have to remember that, you know, coming out at the end of last year when no one wanted to talk about it, we had inflation in those numbers last year. Whether you look at 8% or 9%, you know, sort of spending inflation out there in the environment, it's not an 8%, 8% or 9% benefit to our business because you do have a year-over. The most important thing for us is we're seeing an increase in transactions, and that's what's really driving our growth right now, is an increase in overall transactions in our business. You know, that's an important indicator for us.
We look at not only transactions, but we look at transaction size, and then we look at that transaction size a little bit on a normalized basis, as you take the effects of inflation out. You know, we've got real growth when you do that.
Yeah. The only thing I'd add is that we have said consistently a modest level of inflation, and I'd still use the word modest for where we are. Absent a spike in unemployment, like Steve said, is generally net a positive thing for our business. Helps revenues a little bit. It puts a little pressure on cost, but it nets to a positive. As long as the labor market stays where it is, that's why we feel pretty good about the guidance we've given you for the rest of the year.
Thank you. The next question is coming from Bill Carcache of Wolfe Research. Please go ahead.
Thank you. Good morning, Steve and Jeff.
Good morning, Bill.
Could you speak to how much the competitive environment for high-spending customers has intensified post-pandemic, particularly as other issuers look to compete beyond cash rewards to provide their customers with greater experiential value by investing in things like airline lounges, travel portals and the like? Then I guess more specifically on the acceleration in spending among large global corporates, could you discuss which products are enjoying the greatest uplift there? Thanks.
Yeah, I mean, you know, this environment has been a highly competitive environment since the financial crisis. You know, it hasn't really changed. Yeah, I mean, people invest in more things. I mean, we've all raised the price of poker here a little bit. You know, we figure our competitors will continue to invest. We figure that our competitors will copy what we're doing, and that's why it's important for us to stay ahead. Has it intensified? I mean we just work under the assumption it's a highly competitive environment and it will remain a highly competitive environment. You're really talking about the U.S. consumer segment. You know, you got high competition in small business, you got high competition in various markets, you got high competition in corporate cards.
What we strive to do is put the best products and services out there. You know, that's worked out pretty well for us. Yeah, it requires a little bit more investment. It requires investment across the board. You know, in the long run, I think you just have to look at the results. You know, right now we're acquiring more cards than we've ever acquired. You know, we've said this before, what's really important for us is that we're looking to acquire revenues, and we're looking to acquire build business. We talk in terms of cards, but those cards are generating new build business and generating revenue for us, obviously, because we're raising our revenue guidance.
As far as corporate, you know, I'm not sure I really understand the question all that much, but we only have a corporate card. Companies are spending, but we're only at 60%, you know, our T&E is only at 60%. Jeff, where are we overall on corporate card spending? I don't know.
It's a little higher because the travel never went down as much. The overall number is at about closer to 80% pre-pandemic.
You know, we're not back yet. You're seeing, you know, pockets of it. You know, consultants are back out there on the road, and bankers are back out there on the road. I think people are having a lot more meetings. I know we had one in June, and it was hard to get conference room space, you know, for like 100 or 150 people. Even looking to book for next year for the same type of meeting, boy, people are out there booking a year and a half in advance. You know, I think that's good for the lodging business. It's good for the airline business, and it's good for us. That's kind of where it is.
Thank you. The next question is coming from Lisa Ellis of MoffettNathanson. Please go ahead.
Hi. Good morning. Thanks for taking my question. Steve and Jeff, you commented earlier on some of the near-term investments that you're making given the strong growth and top line you're seeing in wages and marketing, et cetera. Can you also comment a bit perhaps on some of the longer term investments that you're leaning in on, you know, kind of taking advantage of the strong growth in the business to be able to lean in and position Amex even better for the next, you know, sort of three to five years? Thank you.
Yeah. Well, I mean, we're always making, you know, there's always a balance between long-term investments and short-term investments. We, you know, don't talk a lot about the long-term investments till they actually happen. You know, you have to invest in your technology, and we've done that. I've talked about that before because we've been one of the only companies that have said we're not taking step function changes in our technology investment because we've been investing in technology all along. We're constantly investing in value proposition. You know, when people look at that and we sit here on the phone here and we talk about it's like, "Okay, so what are you gonna do to the Platinum Card?" Well, it's not the Platinum Card.
It's you know, the 29 proprietary countries that we operate in, the small business cards that we operate in those countries, and the corporate cards we operate in those countries, and the co-brand cards we operate in those countries, and the personal cards, Green, Gold, Platinum, and Centurion. We're constantly investing, and I think, you know, we use the Platinum Card in the U.S., either business or personal, as a proxy for our overall investment, and that's not it. We're investing in all our card products across the globe on an ongoing basis. You can't have product refreshes by just snapping your fingers and saying, "Hey, we're gonna have a product refresh." This is, you know, months and months and months in the making and negotiations and partnerships and so forth. Look, we continue to, you know, continue to invest in our lounge program.
We continue to look at those things that, you know, add more value. I mean, you've seen, you know, the expansion of things that we've done, whether it's, you know, checking accounts and you know, what we're trying to do is to create more stickiness and more reason to interact with American Express on an ongoing basis. I mean, just look at sort of how the services around our card products have evolved over the last few years, whether that be from a small business perspective where we can meet a wide variety of your working capital needs, banking needs, and so forth.
Look at from a consumer perspective and look at what we've done with, you know, with Resy, with over, you know, 30 million, you know, registered users on Resy and we have cards on file, huge acquisition. We'll continue to make those longer term investments, but you'll continue to hear about them as they happen.
Thank you. The next question is coming from Moshe Orenbuch of Credit Suisse. Please go ahead.
Great. Thanks. Steve, certainly note in your comments that you're not anticipating a recession in the next couple of quarters given what you're seeing in your customer base. Could you just talk conceptually about how you think about account acquisition in terms of new accounts, a high level of new accounts? Obviously, industry as a whole is still doing that, but clearly, less seasoned accounts are the ones that always would carry somewhat more risk and maybe talk about things you do to kinda mitigate that or steps you would take if you saw that unemployment rate start to rise. Thanks.
Well, let me maybe start, Moshe, by just reminding everyone of the highly analytical process we have for determining who we bring in to membership in the franchise. It's based on searching for that premium customer, whether they're a consumer or a small business. It's based on the vast amounts of data and history we have. It's based on having very high financial cutoffs for who we allow into the franchise or not. When you look at the outcome of that process right now, we are on average bringing in new customers who have higher credit qualities than we saw pre-pandemic in 2019, who are showing much higher spending profiles, and who are also carrying balances at a greater rate. So we feel really good about the people we're bringing into the franchise.
As you've heard Steve and I and Doug and others talk about, we also always, when we bring people in, model their results, assuming there will be a recession. I don't know when there'll be a recession, but there will be. We build a through-the-cycle view of the economics right into our upfront calculation of whether we think it's a good idea or not to bring a given customer into the franchise at a given level of marketing spend.
Yeah. The other thing I'd say is, you know, that changes. That can change daily. That can change weekly. Those criteria could change monthly. It all depends on how we're looking at, you know, and what our models are showing and what we're feeling. You know, the other reality is we could lower our thresholds, spend even a lot more money. You know, there's that balance that you have, and that balance of making sure that, you know, we're growing the bottom line as in an appropriate fashion, and also making sure that we have a higher quality, consumer and small business as part of our franchise. It is something that has been developed over many years, and it's not static. I mean, I think that's the key point.
This thing is not static, and we continue to adjust it and modify it.
You know, Steve, the other thing I would add, and I'm gonna quote you, is we run the company for the long term. We make these decisions on a through-the-cycle basis. There will be a recession at some point. Don't know when. The thing about recessions is they're always followed by a recovery. We're running the company to achieve the highest possible sustainable level of long-term growth. We think that the process we have and the analytics we have for bringing people into the franchise are very consistent with that.
Thank you. The next question is coming from Chris Donat of Piper Sandler. Please go ahead.
Good morning. Thanks for taking my question. Wanted to try to dig a little deeper on the travel and entertainment recovery and the slide 23 you had and revisit the question of a possible pull forward. I heard the commentary around bookings and, you know, so that seems good for visibility for airlines and lodging. What I'm wondering about is, should there be any reason to be concerned around restaurant spending, which has been really strong? Is restaurant spending highly correlated with lodging and airlines, so maybe we don't need to worry about it? Or just if you're seeing anything that could be a cause for concern and maybe a future pullback in restaurants.
Well, the only thing I would say is that if restaurant spending is really highly correlated with lodging and airlines, you're gonna expect it to go up. I think, you know, look, I mean, anybody that's been to a restaurant, prices are a little bit higher, because they've got wages and food costs and so forth. You know, look, I you know, from my perspective, restaurants really sort of a lot of them changed their business models during the pandemic because restaurants that weren't doing takeout do takeout. People are eating out a lot more, and they're spending more time at restaurants and ordering from restaurants. No, I really don't think it's highly correlated at all.
In fact, if you took restaurant out and we just said travel, and travel being defined as car rental, lodging, and air, we're not there. We're not back yet, right? It's what's pulling T&E over the finish line here to go past that 2019 is truly restaurants. So if anything, as people travel more, you know, you might see more restaurant spending. Or the other side of that is, well, you won't see more restaurant spending because now they'll eat in a different location. I don't think a pullback here will really hurt restaurants all that much.
Thank you. The next question is coming from Rick Shane of JPMorgan. Please go ahead.
Thanks, guys, for taking my question. When I think about the numbers, two things stand out. One is the loan growth, and the other is obviously the strong penetration for Millennial and Gen Z card growth. I am curious if, as Millennials and Gen Z customers are taking cards, if those are being delivered with additional features enabled on Borrow or are there behavioral factors that are causing your younger demographic to borrow more?
Well, maybe I'll start, Steve. First, we have moved over the last couple of years, Rick, to add to the majority of our charge products, a Pay Over Time capability. For existing card members, that phases in in a variety of ways. For new card members, that capability is on as it is as they get the card. I do think that has some impact on our results. There also is a demographic feature, as I talked about earlier. If you look at who we're bringing into the franchise now, and there is a skew towards the Millennials and Gen Zs, they are higher spending, higher credit quality, and there is a propensity to carry balances that is a little higher than what we see in the older demographics.
Yeah. They also tend to use our pay and Plan It feature a little bit more, which is, and I'll use these words, buy now, pay later, but on the back, you know, on the back end as opposed to a point of sale. I mean, they can go on to their statement and, you know, decide, look, for this particular charge, I'm going to pay it in 6 installments, and I'm going to pay it at, you know, $100 a month, but I'm going to pay the rest of my balance in full.
I think that flexibility of, you know, looking at your statement, deciding which things you might wanna pay in an installment, deciding which thing you might want to use pay with points to pay, deciding which thing you may want to revolve, and then deciding which things you want to pay in full is a pretty good feature of the product. When you look at meeting somebody's entire payment needs, boy, that kind of does it in a one-stop shopping.
Thank you. The next question is coming from Mihir Bhatia of Bank of America. Please go ahead.
Good morning, and thank you for taking my questions.
Sure.
I wanted to ask a little bit about just longer term, right? I mean, I appreciate your comments about making investments now while the opportunity is available. I was wondering just, you know, longer term, for example, in 2023, you've guided to higher than longer term revenue growth in 2023. Will that also translate in higher than long term EPS growth or higher than long term PPNR growth? Or is there just so much white space available for you know, just the amount of growth opportunity that 2023 could also be another big investment year? Just trying to understand how you balance that, you know, all this revenue upside you see versus the investment opportunities available to you.
Well, I can't resist, Mihir. I started by pointing out that, yes, Steve and I talked a lot about the heavy investments that we're making this year. We're also growing our pre-tax, pre-provision profit by 27%. This quarter in line would be 31% revenue growth. Look, as Steve said earlier, we'll have to see. I think we feel really good about the revenue momentum we have. Just mathematically, given our long-term sustainable goals in a steady-state environment for 2024 and beyond, I expect to be above that, easily above the 10% level on revenue growth next year. How much? Don't know. We'll have to see. You know, and that provides a pretty darn good platform for good earnings growth. You know, all that said, it's only July 22nd.
We haven't given you specific guidance for next year. The wild card from a GAAP EPS perspective in all this is the volatility that you've seen so much of in the last 10 quarters in the CECL credit reserves because, you know, we have good, I think, visibility and beliefs about the trajectory of our own business. The consensus macroeconomic forecast and how it evolves is going to have a big influence on what we book for credit reserves.
Just about those two numbers that Jeff threw out, 31% revenue growth and 27% PPNR growth. Would you have felt better if it was 32% and we, you know, decided not to reinvest? I wouldn't. I you know, and I think what's really important, and I'll take you back to Investor Day. This is a flywheel. Scale is important. Scale begets more scale. Not crazy scale, but scale with premium card members from a small business perspective and a consumer perspective that merchants want to see and merchants want to provide value to, which continues that strength of the flywheel. That's one thing is, you know, we talked about do you see more competition?
You know, the one thing that is really, really hard to replicate, and we haven't used these words, but this closed cycle that we have, otherwise known as the famous closed loop, the ability to have those merchants and have those card members, and to be able to feed off one another from a value perspective is really, really critical. The value that we're able to provide merchants with high-spending card members and the value that those merchants are able to provide to our card members is really, really important. As we sit here and look at our business and look at it long term, what's really important is that growth and that sustainable growth. You know, again, throw all the noise out, you know, around CECL and credit reserve releases and builds and so forth.
If you focus on that number, boy, 31% and 27% is pretty good. We feel really good about the level of investment that we've made in the business, and quite honestly, don't necessarily focus on any of those individual line items, but focus on the aggregate in what it's driving and the value it's creating. If you're just gonna measure value through, you know, a quarterly EPS growth, you're missing the point. What you need to measure value is on how sustainable your business model is over the long term. All we're doing is enhancing our business model over the long term with these investments.
Thank you. Our final question will come from Donald Fandetti of Wells Fargo. Please go ahead.
Hi. Good morning. Can you provide an update on B2B progress? Are you seeing small businesses accelerate their automation of accounts payable and also large corporates on the supplier side? Are they accepting more cards?
The short answer is yes. You know, we're not sharing all the statistics, but, you know, small businesses continue. You know, when you look at our small business base, you know, probably over 80% of their spending is B2B spending versus T&E spending. And we continue to see Acompay, you know, Acompay pay go up for us. Our partnerships continue to yield more value. We're seeing, you know, when Jeff talked about it, you know, we're at about 80% of where we were from a corporate card perspective, but yet only 60% from a travel perspective, so that's driven by more B2B. But it's not. You know, when you look at that automation of B2B, some of it is automation of existing business, especially in the small businesses.
Some of it is growth, but it still continues to be a long-term play, but you're seeing more suppliers take it. We'll continue to work towards getting more acceptance and leveraging, you know, our flexible model here to be able to work with suppliers and our small businesses and our corporations to drive more acceptance and to drive more spend.
Great. With that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.
Ladies and gentlemen, the webcast replay will be available on our investor relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415, access code of 13729997, after 1 P.M. Eastern time on July 22nd through midnight July 30th. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.