Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2021 Earnings Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please press 1 then 0 on your touchtone phone.
You will hear a message indicating you've been placed in queue. You may remove yourself from queue at any time 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. Vivien Zhou. Please go ahead.
Thank you, Kevin, and thank you all for joining today's call. 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 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 discussed. 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 And then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we will move to a Q and A session on the results with both Steve and Jeff.
With that, let me turn it over to Steve.
Thanks, Vivien, and hello, everyone. Welcome to our Q2 earnings call. Earlier today, we reported 2nd quarter revenues of $10,200,000,000 and earnings per share of $2.80 These results reflect an acceleration of the momentum we've seen in our core business and a strengthening macro environment. Our improving performance is a clear indication that We're particularly pleased with the progress we're seeing in several key areas, including engaging and retaining our existing customers, acquiring new customers, Continued excellent credit performance and an acceleration in spending. Since the onset of the pandemic, We've been investing in short term value enhancements to several of our premium products, which has helped drive card member engagement and contributed to retention levels that remain higher than the last 2 years.
We've also ramped up our acquisition engine over the past several quarters, and we're really pleased to see that overall acquisitions of proprietary cards, which include our co brands have continued to increase with 2,400,000 new cards acquired in the quarter. In fact, demand for our premium fee based products This quarter with acquisitions of U. S. Consumer and Small Business Platinum and Gold Cards well above 2019 levels and exceeding prior quarters, contributing to the continued double digit growth in net card fees. Early spending on these new accounts is strong.
We're also pleased to see that acquisitions are increasing in many of our co brand portfolios. For example, as Ed Bastian mentioned on Delta's earnings call last week, Delta Co Brand Acquisitions Reached 90% of 2019 levels in Q2. Turning to credit, We continue to see excellent credit performance with both delinquency and write off rates improving further and reaching near historic lows in the quarter. We're also seeing continued improvements in card member spending. Spending recovery accelerated in Q2 with overall billed business volumes growing 51% in the quarter on an FX adjusted basis versus last year and exceeding pre pandemic levels in June.
Goods and services volumes continued to strengthen, increasing 16% globally on an FX adjusted basis versus Q2 2019. Travel and entertainment spending also accelerated in the quarter, particularly in the U. S, where a growing percentage of the population is now fully vaccinated. In fact, we saw a surge in spending by U. S.
Consumer Card Members across all T and E categories, With overall U. S. Consumer T and E spending reaching 98% of pre pandemic levels in June and continuing to grow into July. T and E spending outside the U. S.
Continues to recover more slowly due to lower overall vaccination rates and government imposed restrictions in some geographies. In our consumer business, the largest contributor to spending growth in goods and services came from millennial and Gen Z customers, and they are also leading the recovery in T and E spending, with total spending up over 30% on an FX adjusted basis versus 2019 levels in Q2 for this age cohort. In our commercial business, overall small and midsize enterprise volumes pre pandemic levels in Q2, driven by continued strong growth globally in B2B spending on goods and services, which was up 18% on an FX adjusted basis versus 2019. While the T and E recovery also accelerated with the fastest total growth coming from smaller sized businesses in the U. S.
We're also seeing solid spending growth in key travel related co brand portfolios. Volumes on both Delta and Hilton co brand cards increased by double digits versus pre pandemic levels in the quarter, driven by the same trends of continued strong growth in goods and services spending and an acceleration in the recovery of teen east spending. In addition to investing in retention and acquisition activities as a customer focused company led by innovation, A key part of our investment strategy is geared toward delivering a continuous stream of differentiated products, services and capabilities that provide additional value to our current customers and attract new ones to the franchise. We invest in innovation in a number of ways through internal development, Acquisitions, co brand relationships and partnerships with both digital startups and large well known brands across a range of industries. A great example of our approach to innovation is our strategy for regularly refreshing our unique value propositions by leveraging our digital ecosystem and our diverse network of partners.
On July 1, we marked the restart of this strategy with the launch of our new enhanced Platinum Card for consumers in the U. S. The American Express Platinum card created the premium card category nearly 40 years ago and has continued to define the category ever since. We intend to make sure it remains a competitive standard for many years to come. The reason for Platinum's success over the years, I believe, is twofold.
First is our continual focus on knowing our customers and delivering value that meets their evolving needs and preferences. And second is our willingness to change our value propositions even as our products are at the peak of their performance. And that's the case with our most recent refresh. Despite just coming off our best quarter ever for U. S.
Platinum account acquisitions, we introduced our new U. S. Consumer Platinum Card, featuring a broader set of lifestyle benefits while doubling down on travel related benefits. The new benefits are enabled by working with an expanded range of partners as well as the continued integration of our growing portfolio of digital assets, such as Resi and LoungeBuddy. I would note At the last time we refreshed our U.
S. Platinum card, we doubled the customer base, bringing in a larger number of younger card members, and our intent with our current refresh is to attract an even broader pool of customers to the franchise. In developing the new Platinum Card, we listened to our card members and gleaned insights Some of the spending patterns on certain everyday goods and services categories that emerged during the pandemic, such as streaming services and personal fitness, have continued into the recovery. This led us to add a series of annual credits for digital entertainment services and Equinox club memberships or digital subscriptions to their on demand app. Our Platinum Card members have always cared a lot about travel and entertainment.
And as our recent quarterly results demonstrate, our U. S.-based customers are eagerly returning to travel and in person dining. So we added a series of new travel related benefits to the refreshed product on top of those Platinum Card already offers, including a significant expansion of our proprietary Centurion Lounge network and a new global dining access program powered by Resi, our online reservation platform that provides exclusive access to some of the world's best restaurants and premium dining experiences. The enhancements we've made to the U. S.
Platinum Card represent a significant increase in Which we believe will be very attractive to both current and new customers, even with an increase in its annual fee. As we have seen from previous refreshes, Customers are willing to pay more for what they see as Platinum's unique value, and we believe it will be no different in this case. In fact, The very early indications are encouraging. Applications and acquisitions have outpaced our expectations in the 1st 2 weeks since the new Platinum card became available. The U.
S. Platinum refresh is just one example of how we're leveraging partnerships in our digital ecosystem to innovate and add differentiated value to our products and services. We'll be refreshing other products and rolling out new digital capabilities for both consumer and commercial customers throughout the remainder of the year and beyond. We're really excited about the new U. S.
Platinum card and the potential that it and other innovations we have in the pipeline represent. And there are many other reasons why I feel very good about where we are at the halfway point in the year, including the progress we're making to rebuild momentum in our core business is Accelerating and better than we expected at the beginning of the year. The improvements we're seeing across many of our key metrics are a sign that our strategy for managing through the pandemic and investing in activities to rebuild our growth momentum is working. We're particularly pleased with the strength we're seeing in customer retention, New account acquisitions, credit performance and overall spending volumes with goods and services volumes now well above pre pandemic levels globally and travel and entertainment spending recovering faster than we expected, driven by significant improvement in the United States. Taking all of these factors together, we are increasingly optimistic that the strength we've seen in our core business through the first half will continue, particularly in the U.
S, even as the pace of recovery remains uneven in different regions around the world. With this in mind, we remain committed to to be within the high end of the range of EPS expectations we had for 2020 beyond 2022. Now I'll turn it over to Jeff, who will discuss our Q2 results in detail, and then we'll take your questions. Thank you.
Well, thank you, Steve, and good morning, everyone. It's good to be here today to talk about our 2nd quarter results, which reflect Strong momentum in the recovery of our core business and great progress towards our 2022 financial objectives. Starting with our summary financials on Slide 2, 2nd quarter revenues of $10,200,000,000 were up 31% year over year on an FX adjusted basis As we lapped the trough of the billings and revenue declines that occurred during the most significant pandemic lockdowns in Q2 of last year. Our 2nd quarter net income was $2,300,000,000 and earnings per share was $2.80 These strong results were, of In part driven by an $866,000,000 credit reserve release as we saw continued strong credit performance and some improvements in the macroeconomic outlook. Now as I turn to a more detailed look at our results, I'll again focus on what we see as the key drivers of our great progress towards our 2022 financial objectives, volumes, credit trends and the marketing investments we are making to build growth momentum.
As we've said all year, 2021 itself is a transition year, Positioning us for 2022 and beyond. So let's now get into the first key driver to watch as we measure our progress this year, Volumes, which you will see several views of on Slides 3 through 9. You will note that we have shown 2nd quarter volume trends on both A year over year basis and relative to 2019, as we find this provides a clearer picture of how spending is recovering on the way to our 2022 financial objectives. And that clear picture On Slide 3 shows an acceleration in the pace of recovery across all of our volumes in the 2nd quarter, with total network volumes and build business volumes up around 50% year over year as we lapped the trough of the billings declines from Q2 2020. Importantly, relative to 2019, total network volumes, build business and process volumes were all down just 2% on an FX adjusted basis and surpassed pre COVID levels for the month of June.
The acceleration in billed business is being driven by both Spending on goods and services, which was up 16% versus 2019, as you can see on Slide 4, and And by a notable improvement in spending on travel and entertainment in the 2nd quarter, overall T and E spending reached nearly 70% of 2019 levels as we exited Q2. This is a level we originally expected we would not reach until the Q4 of this year. So to see it recovering more quickly than we had expected and without it coming at the cost of any slowing in the growth in goods and services spending is a positive indicator for us. Turning to Slide 5, you do see that the build business volume recovery is being led by the U. S, which surpassed 2019 levels and was up 3% in the quarter.
The recovery in total build business volumes side of the U. S. Is weaker. Interestingly though, you see on the top right of Slide 5 The growth in goods and services spending has been strong in both the U. S.
And outside of the U. S. Overall spend is weaker outside the U. S. Because historically we have more travel related spending in our international regions And international T and E is recovering more slowly due to lower vaccination rates and continued government restrictions in certain geographies.
Focusing in then on just our consumer business on Slide 6, you see that overall spending was 4% Above 2019 levels in the quarter as growth in goods and services volumes accelerated to 18% versus 2019. And we continue to see strong online and card not present spend growth, demonstrating the lasting effect Of the behavioral changes we've seen during the pandemic, even as offline spending recovered to pre pandemic levels. In our commercial business, as you can see on Slide 7, global SME spending, which represents the bulk of our commercial build business, Remains the most resilient across all of our customer types, with spend up 6% versus 2019 for the quarter. This performance was supported by continued growth in B2B spending on goods and services, which was up 18% versus 2019. In contrast, on Slide 8, large and global corporate card spending, which historically has been primarily for travel and entertainment, Continued to show fewer signs of recovery.
We have said all along that we expect this will be the last customer type to see travel recover. Finally, putting all customer types T and E spending together on Slide 9, you do see improvement across the board in the 2nd quarter, with total T and E spending reaching nearly 70% of 2019 levels in the month of June. As I said earlier, this recovery has been faster than we expected, led by a sharp recovery in U. S. Consumer T and E spending, which reached 98% are pre pandemic levels in June and has continued to grow in July.
Looking ahead, We now assume that overall T and E spending globally will have recovered to around 80% of 2019 levels by the Q4 of 2021. We also expect continued steady growth in goods and services spending for the remaining 2021. So all in all, a really good story on spending volumes. Moving to our other volume metric, receivable and loan balances on Slide 10. You'll see a slightly different set of charts here and in a few other places throughout this presentation where we thought it would be helpful to show comparisons for the first and Q2 relative to both 2020 2019 to help you better evaluate the rate of recovery.
Loan balances began to slowly recover in the 2nd quarter and were up 7% sequentially and 4% year over year. Relative to 2019 though, loan balances remained down 11% more than spending volumes. We continue to see the liquidity and strength amongst our customer base leading to higher pay down rates, which is also driving the very strong credit performance I'll talk about in a moment. Looking forward, I would expect the recovery in loan balances to continue to lag the recovery in spending volumes. This leads then to the 2nd key driver to watch this year, credit and provision on Slides 11 through 14.
As you flip through these slides, there are a few key points I'd like you to take away. Most importantly, we continue to see extremely strong credit performance With card member loans and receivables write off and delinquency rates remaining around historical lows, although we would expect Loss rates to slowly return to more normal levels eventually. Given how low delinquency rates are today, we don't expect to see a material increase in write off rates anytime this year. This strong credit performance Combined with some improvement in our macroeconomic outlook drove a $606,000,000 provision expense benefit in the 2nd quarter As the low write offs were fully offset by the reserve release as shown on Slide 12. That said, The balances enrolled in our financial relief programs are still $1,100,000,000 higher than they were pre pandemic, as you can see on Slide 13.
We are closely monitoring how the card members exiting our financial relief programs are performing and early performance of recent exits has looked Quite strong. But we are mindful that the last of the government stimulus and industry forbearance programs have yet to roll off And there are remaining uncertainties in the medical and macroeconomic environment around the world, including in the U. S. So we continue to hold a significant amount of reserves. As you see on Slide 14, we ended the 2nd quarter with $4,000,000,000 of reserves, representing 5% of loan balances and 0.2% of our card member receivable balances, respectively.
Moving on to our 3rd key driver, marketing investments to build long term growth momentum on Slide We invested $1,300,000,000 in marketing in the second quarter as we continue to ramp up new card acquisitions while maintaining some of our value injection efforts. We acquired 2,400,000 new cards, up around 20% sequentially. More importantly than just the total number of cards, we've seen great demand for our premium fee based products With new accounts acquired on these products up 30% versus the prior quarter and up almost 4 times year over year. As Steve mentioned, as some great examples, acquisitions of new U. S.
Consumer and Small Business Platinum and gold cards all reached well above 2019 levels this quarter. Based on the momentum we've seen in the first After this year, we would now expect to see around $5,000,000,000 in marketing spend this year. Ultimately though, our marketing levels will be governed by the universe of Tractive investment opportunities we see and the pace at which we finish winding down our value injection efforts in the remainder of the year. So what does all this mean for revenues on Slide 16? Total revenues were up 33% year over year in the Q2 and we had double digit growth In almost every one of our revenue lines except for net interest income, which only accounts for 18% of our revenues.
Before I get into more details about our largest revenue drivers in the next few slides, I would note that Other fees and commissions and other revenue were both up sharply year over year in the Q2, primarily driven by the uptick and Travel related revenues. Our largest revenue line, discount revenue led the recovery though, as it was up 56% on an FX adjusted basis year over year as shown on Slide 17. This recovery This is primarily driven by the strong growth in goods and services spending that we've seen over the past few quarters. Net card fee revenues grew 10% year over year in the quarter. Importantly, these revenues have been our most resilient revenue line throughout the pandemic as you can see on Slide '18.
They are now $300,000,000 or 30% higher than they were back in the Q2 of 2019, demonstrating the impact of the continued attractiveness of our premium value propositions to both prospects and existing customers. The one revenue line showing a slower recovery is net interest income on Slide 19, which as I mentioned accounts for only 18% of our revenues. For us though the driver here is the Strong liquidity demonstrated by our customers, which is leading to both our historically low credit costs and to higher pay down rates that are driving lower net interest yields and a slower recovery in our revolving loan balances. Looking ahead, I continue to expect the recovery in net interest income to lag the recovery in loan volumes. So to sum up on revenues, The momentum of our revenue recovery strengthened in Q2, as you can see on Slide 20.
While revenues remained 6% below pre pandemic levels on an FX Adjusted basis, they were up 31% year over year. Looking forward, with the momentum in goods and services spend growth we've seen in the first half of the year and our updated assumption that we now expect overall T and E to recover to 80% of 2019 levels by the Q4 of the year, Full year revenue growth could be around 12% to 14%, assuming current trends continue. Moving on to expenses, we're continuing to break out on Slide 21 our variable customer engagement expenses, which move with spend volumes and benefits usage And marketing and OpEx, which are driven by management decisions. Variable customer engagement expenses in total were up 85% year over year driven by Higher spending and usage of travel related benefits. Looking forward, a good way to think about these variable customer engagement expenses is that I'd expect them to be about 40% of our total revenues for the remainder of the year.
Moving on to operating expenses, you can see that they were down 1% year over year in the Q2, primarily driven by a few sizable gains in our Amex Ventures Equity Investment portfolio. In 2021 full year, given the year to date gains we've seen in our equity investment portfolio, I'd now expect our full year OpEx to be a bit below the $11,500,000,000 we originally expected As we continue to keep tight control over our operating expenses, while also investing to build growth momentum in our business. Turning next to capital on Slide 22, our capital position remains tremendously strong. Our Q2 CET1 ratio of 14.2% remains Far above our target levels driven by the shrinkage in our balance sheet over the past year and growth in our capital base from earnings that have exceeded distributions. We returned $1,300,000,000 in total to shareholders this quarter, including common stock repurchases of $908,000,000 $346,000,000 in common Looking forward, we remain committed to our long term CET1 target ratio of 10% to 11%.
Given the Federal Reserve's latest guidance, we plan to increase the pace of share repurchases to migrate towards our CET1 ratio target over the next few quarters. So let's close by talking about what the Signs of momentum we saw in the first half of the year might mean for the future. In January and again in April, I laid out two scenarios of potential outcomes for 2021 that were primarily based on what happens with credit reserves. As a reminder, our scenario 1 or low scenario assumed a much worse medical and economic environment sharing that we would not release any credit reserves in the subsequent quarters. Now halfway into the year, the macro outlook has improved somewhat And our actual credit performance has remained incredibly strong.
So we've already released $1,900,000,000 of reserves. That still leaves us, however, with a reserve ratio that is above pre pandemic levels due to the remaining uncertainties. So our updated scenario 1 on Slide 23 assumes that this uncertainty persists that the medical environment and economic outlook And that we therefore don't release any additional credit reserves this year. Such an economic Would likely put some pressure on our current assumption of an 80% overall T and E recovery by Q4 And likely drive a somewhat weaker revenue recovery. The combination of these things could lead to an EPS outcome as low as around $7.50 for share.
Our updated scenario 2 in contrast assumes that we continue to see strong credit performance And a steady improvement in the economic outlook, leading to less uncertainty and in all likelihood, a lower level of credit reserves. This sort of economic outcome would also likely drive a somewhat stronger revenue recovery in line with the 12% to 14% revenue growth assumption I I spoke about earlier. In this scenario, our 2021 EPS could be as high as around $8.75 More important though than these 2021 numbers is our focus on managing the company to further build growth momentum. Our progress this quarter around our key drivers, volumes, credit performance and marketing was very strong. And this gives us confidence That our strategies are working.
Based on all these current trends, we are confident in our ability in 2022 To be within the high end of the range of EPS expectations we originally had before the pandemic for 2020 of $8.85 to $9.25 And we are confident in our ability to resume our financial growth algorithm beyond 2022. And with that, I'll turn the call back over to Vivien.
Thank you, Jeff. Before we open up the lines for Q and 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 the line for questions. Kevin?
Our first question will come from the line of Sanjay Sakhrani, KBW. Please go ahead.
Thanks. Good morning. Obviously, very strong spending growth. I guess when we look inside the build business growth, How much of that strength is coming from pent up demand versus some of the new account growth? I'm just curious, Trying to figure out how long this can last, obviously, knowing that TNE volume is still on the come.
And just a quick clarification, Jeff, on the value injections. Should we assume that as T and E comes back, those value injections slow? Thanks.
Maybe I'll start Steve just because your last part of your question is quick, Sanjay, and then you can talk Steve about the broader Pent up demand trends. On value injection, Sanjay, certainly with what we're seeing in the world now, we would expect that to continue to go down each And be completely gone by the end of the year. And so that's one of the reasons as you think about 2022, Our overall marketing line dollars should be down a little bit in 2022 from 2021 because value injection We'll be at 0. Steve, you probably want to talk a little bit about the demand issues.
Yes. So Sanjay, I think it's a really good question. And if you look at it, we didn't acquire anywhere near the amount of cards that we normally acquire last year. And if you look at this year, We're still ramping up and we're still not at overall levels of acquisition that we want to be at. And the reason for that is You've got international, which is not opened up.
And so acquisition levels from an international perspective, both From an SME side of it, from a consumer side of it is not there. You've got corporate card acquisition, not a lot of companies are adding a lot of people. And so you don't have that. So when you really start to dig into this, A lot of this is really the pent up demand. And so just take a look at what we're looking at and we look at Hilton Co brand cards, if you look at Delta Co brand cards, we continue to see them sequentially month over month Add more volume and what you're now seeing is you're seeing volume being added in T and E, but you are seeing sustained Volume growth in goods and services.
And so we think we've done a really good job with the value injection in pivoting So to people how they thought about these cards. And so looking back years from now, we may find that One of the sort of the bright spots of this for us from a spending perspective is people found other ways to use their cards and we actually improved Our goods and services mix. So I think you're seeing that pent up demand coming from existing cardholders. And yet we're not back to travel levels in any way, shape or form. The other thing, if you start to sort of dig into our Spending by sort of age group, we mentioned that our millennial spending is up 30% Over 2019, well, then you just take that and you go to the boomers and you go to Our next level of people in, that spending is still building up.
So we believe there's still a lot of spending within our existing base. You look at corporate spending, which is about half of what it was. Small business, while doing very well from a goods and services Perspective is still challenged from a T and E perspective. And so we believe that a lot of the growth that we've had has come from the existing base, And I think there's more to come from that existing base. And as we get more and more card members on board, you're going to see more spending there as well.
So Hopefully, it gives you a little bit of color.
Next question is from Betsy Graseck, Morgan Stanley. Please go ahead.
Good morning. Thanks for taking my question. I did want to dig in a little bit on the commentary around the marketing And the value injection that you just indicated, on the Slide 15, you go through and indicate the degree of value injection quarter by quarter. And just wanted to understand how you think about that value injection and how that has Impacted the retention as well as the acquisition with the question as you move into next year, Do you think that acquisition and retention rate will be able to remain at levels that you're seeing this year even without that value injection? Thanks.
So the short answer is yes, but you probably want a little more color than that. So If you think about let's go back to why. So why did we do the value injection? So we did the value injection To make sure that the value propositions that were challenged at the time, which were predominantly travel based value propositions People wouldn't look at it and say I'm not getting value from the card. And that was I think that we'll look back on that as a very important decision because What it said to our customers is that, look, we know that you are you bought the product for a specific reason.
You cannot use that product to We always talk about experiences and access and you can't get that. And so what we did was and I give Our teams, our marketing teams a tremendous amount of credit here is we look for categories that people were going to really double down on. And streaming services, wireless services, more shipping services, even dining on some of our Our co brand cards and we invested a lot of money in value injection. The other thing that we did is we also at the top end on our Platinum and our Centurion Is put credits in for travel, okay, which is one of the reasons I think our TLS bookings are You know, now above 2019 levels in June. And we continue that at the beginning of the year because the beginning of the year, we were Still unsure, but we changed the value injection.
So on Platinum Card, we went to a PayPal credit and that PayPal credit was to get more embedding Within that ecosystem, so that you have more cards on file. But our plan has been and always has been is that the value that we have in our products Stands on its own. And once we got to the point where people could take advantage of the existing product. And this is predominantly more of a U. S.
Phenomenon at this particular point in time. You didn't need that value injection. And so then we get back to, okay, what did we learn? And then you look at the Platinum Refresh. And if you look at the Platinum Refresh, what does that have?
Well, it has a wider variety of components to it in terms of streaming. It has digital credits, whether it's Sirius or Peacock or New York Times or what have you. And it also has another travel credit within there. And so We don't believe we need to rely on value injection at all. And so as you look at the high marketing going forward, we believe the value of the products will stand for themselves.
Having said that, we're also going to go back on our quest to continue to refresh our product portfolio. And you're seeing that you I just started with the platinum card and we're not going to stop at the platinum card, but I'll stop at that comment at this point. And so When you look at the $5,000,000,000 in spending, what we made the decision this year is we weren't going to cap that spending. So at the beginning of the year, You're seeing a lot of value injection, but we also made decisions beginning to go in with more customer acquisition. And so we'll continue to do that, which will drive us closer to the $5,000,000,000 But the bottom line on this is that our products We're resilient through this.
We propped them up a little bit. We learned a lot. And what we're seeing with our consumers right now Is that they are utilizing these value propositions, and they're utilizing these value propositions with Lounge visits with bookings by using the travel credits and all the benefits that come with gold and platinum. We talk a lot about platinum, Well, the Gold Card, too, is another premium product that we have, and that has been positioned a lot more as a dining product. And that has taken off as restaurants, especially in the United States, have come back.
So the short answer, I guess, is We don't believe we need value injection anymore. We believe the value in the products will continue to sustain the spending.
Our next question is from the line of David Togut, Evercore. Please go ahead.
Thank you. Good morning. What is your expected timeline and trajectory of the international T and E billings recovery? And as a related question on international, when will domestic China American Express become material to
overall revenue and earnings? All
right. So the first one, if anybody on the call can tell me that would be good because I don't know. I think You've got a situation in Europe. Look at Japan with the Olympics, right? I mean, everybody's expecting spectators to be there.
There's no spectators there. You've got Australia, which is still closed, you've got the UK, which is battling the Delta variant. And So I don't know what's going to happen with international. Having said that, our billings continue to improve in international. People, Much like they were in the U.
S, are looking for ways to travel, whether that be car trips, whether that be more restaurant and so forth. And so I don't really expect international to come back this year and hopefully at some point next year, but that's really all going to be driven By vaccination and the efficacy of vaccinations and remember, the vaccines that are available in different in other countries are not the same vaccines that are available in the United States. And there's different efficacy on all different types of vaccines, whether that's AstraZeneca, which has like a 67% efficacy or it's Moderna or Pfizer, which is up at 88. And so what you're seeing in the UK now is vaccinated people actually Get COVID, not being hospitalized or dying, but still getting COVID. So I don't think we're going to see international come back This year, I think it's not really in our it's we look at it as a tailwind for sort of 20222023 for us.
As far as China goes, look, China is we're really pleased with what's going on in China. And part of The China story is continuing to build a network and continuing to build a card base and we continue month over month To build that network and to build that card base and as we move into other quarters, we'll provide more insight into what's going on. But I'm not I wouldn't say you're going to expect China to be a material part of our revenue base or our earnings base In the near term future, more medium to long term, but I'd also like to remind everybody of the model that we have in China. The model that we have in China is a network based model. And a way to think about a network based model is to think about that model Much like Visa, Mastercard's normal model is, we're not taking card fees.
We're not getting a discount rate. We're getting network fees. And that's the way that's working. But we are building China. We believe it will add more scale, not only for us and more presence in China For both our card members that travel there, but it will also add scale for us as people travel as Chinese card members travel Outside of China and add more scale and add more volume to the overall network.
So China will not be material in the near term.
Steve, I would just emphasize one point back on the international spending, which is it is important to go back To Slide 5 of the deck and realize that outside the U. S, spending on goods and services actually has recovered just as strongly as it has in the U. S. And we expect that will continue. The other thing to remember is that as we express our confidence in our ability to get to our 2022 Financial objectives.
We're really not counting on international T and E coming back In any meaningful way next year. We are confident it will at some point. And whenever it does, that will be a tailwind. But it's not A key element of our confidence about 2022. So next question, operator.
And that's from the line of Ryan Nash, Goldman Sachs. Please go ahead.
Hey, good morning, Steve. Good morning, Jeff.
Hey, Ryan.
So I maybe just wanted to flush out the 2022 expectations a little bit further. So Jeff, you talked about 12% to 14% revenue growth this year. I think that would put you back at 2019 level. So can you maybe explain to us what's incorporated for the high end in terms of spend and top line? Are you assuming that G and S could continue to run elevated or are you assuming some sort of a handoff to T and E given all the pent up demand?
And Secondly, Jeff, can you maybe just clarify the capital comments, how quickly can you get back to 10% to 11%? It seems like there could be a pretty big buyback over the next few quarters.
Well, maybe we'll work backwards, Steve, because I think the Capital One is simpler than the first one. On capital, Ryan, you should As I said in my remarks, look, we're going to increase the pace of our share repurchases and we will get back within our CET1 target range of 10% to 11% over the next few quarters. In many ways, the governor on that is as we increase the size of our share repurchases, we want to be mindful of overall volumes in the market and we're not Trying to do anything that is in the near term going to drive the stock price. So we'll get there in the next few quarters. Exactly When will be a little bit of a function of what kind of volumes in trading we see in the overall market.
But we're committed to being in that 10% to 11% range and that means we got a lot of capital to return to shareholders.
So as we think about next year And now, look, we went from comments of our aspiration was to be in the range to comments today of Our anticipation is we'll be at the high end of the range. So what's driving that? The first thing I want to So to clearly state is, given that the recovery is uneven, we will continue to invest as we've been investing. And I think we have pulled back in our international card investment right now because it just doesn't make a lot of sense To continue to double down on that. And so we will continue as we move into next year to invest in not only our U.
S. Card What are the assumptions behind So the next year's getting to that high end, well, look, we need consumer T and E to fully recover in 2022, and it's on a path to do that. So That is, I think, good. Obviously, like a reasonably healthy economy as well. And so all things being equal, things continue the way they are in the U.
S, we feel really What's not in those financial objectives is the following: a full recovery of net interest income and you can look at our revenue and you See where we are from a net interest income perspective. Corporate T and E is not factored in there, which we don't believe that will come back until 2023. Cross border T and E, we believe will continue to be challenged. And the comments that Jeff just made about international, While goods and services we think will continue to grow, I think consumer T and A and corporate T and A and international We'll continue to be challenged. So if that comes back, obviously, that provides upside and they will be tailwinds For 2022, but we'd more be counting on those as tailwinds for 2023.
But again, it's really hard to predict, but that's a positive for us. The one thing I will have people keep in mind though is that we have we've had some big reserve releases. And as Jeff mentioned, when we talk about sort of $750,000,000 to $875,000,000 the $875,000,000 would anticipate some more Releases, which have made even bigger reserve releases. And so you have to grow over that. And part of those reserve releases is The extraordinary build that we did last year, but I'd like to point out the other part of those reserve releases is the extraordinary job our credit team is doing.
And That's the other piece of it that we take into account. All that being said, we feel really good about how we're tracking for this year And that's why we feel good about saying the high end of the range for 2022. And I just gave you a bunch of upside possibilities and I just gave you the grow over possibility as well with the also notion is We're not going to get there marketing cutting. We're not going to cut marketing to get there. We're not going to be at $5,000,000,000 because we will not have value injection there, But we will continue to invest in marketing because I think it has proven for us to be a great source of revenue growth.
Our next question is from the line of Chris Donat, Piper Sandler. Please go ahead.
Good morning, gentlemen. I had one question about net card fees, Jeff. When I look Pre pandemic, they've been growing, and this is Slide 18, growing around 20% and then with the pandemic and the Lower issues going on there, growth decelerated for the net card fees. As we think about The remainder of 'twenty one and 'twenty two and what you've got going on with retention and the value injections And it sounds like a ton of good things going on, on the acquisition side. Should we expect an acceleration in net card fee Growth over coming quarters?
So, Chris, as I said in my remarks, we feel really good about the Net card fee growth. In fact, I'd like to point out that the dollars that we have grown net card fees by about More than $300,000,000 a quarter since 2019. Interestingly, kind of offsets the drop in net interest income and we have a lot Further to go. All that said, as most of you know, the accounting for card fees is a little complicated because we amortize People's card fee payments over 12 months after they pay them. And so that causes the trends to move Slowly.
So I've said through much of this year that I expected card fee growth because we weren't acquiring a lot of new card members last year To slow quite significantly in the back half of the year. I will tell you now that with the tremendous progress on bringing new Fee paying card members into the franchise, I think you might see a little bit of slowing in the next couple of quarters before it reaccelerates Sure. But boy, it's a lot less than we originally anticipated. The other thing I would remind people of is it's really Bringing new fee paying card members into the franchise that drives that card fee growth. And in fact, when you think, Steve, about the platinum refresh You talked about while we raised the fee for existing card members that fee actually doesn't hit until their Anniversary date next year and then once it hits we'll amortize it over 12 months.
So it's a lovely long Tailwind, but it's not going to be the driver of the next couple of quarters.
And the only point I'd make is, if you look at that net card fees, the absolute dollars Continue to grow. And so and that's a direct result of the retention efforts.
Next question is from the line of Moshe Orenbuch, Credit Suisse. Please go ahead.
Thanks. And Wanted to kind of talk a little bit about the 40% of variable customer engagement costs and how to think about that in the coming years. One of the things that you've obviously had tremendous success, you alluded to them in the prepared remarks in terms of the spending on the co brand cards, But some of those contracts have kind of both volume levels and accelerators. If I recall, the Delta Co brand was supposed to accelerate into 2023 in terms of the payments. Can you talk a little bit about that, your views on that 40%?
Well, a couple of comments, Moshe. First, because of the effects of the pandemic, the Variable customer engagement costs sort of have been flowing with revenues. But if you go back a year, You had our card members suddenly not redeeming travel related benefits, not traveling around and that caused some unusual declines. Boy, the good news now is they're back traveling and that recovery means that now we're back incurring some of those costs and that makes So year over year, when you look at it just for the quarter, look a little unusual. That's why for simplicity purposes, We've said, look, we're running at about 40% of total revenues.
I'd expect that to be the case for the next few quarters. Next year, we'll have to see how all parts of the business are performing. I guess, If I step back from all the math though, I would just say it's a very good thing to see our members Back engaged with our travel related benefits. We feel really good about the value propositions we have in the marketplace given the kind of acquisition and retention numbers You've talked about and it's those card member engagement costs that drive that tremendous attachment for our existing customers and the ability to attract New customers. So I think the 40% is a good number for the next few quarters and we'll have to see where it ends up next year.
We'll give you an update.
Our next question is from the line of Lisa Ellis, Moffett, Nathanson. Please go ahead.
Hi, thanks. I had a question about retention. You've been highlighting the strength in retention throughout the pandemic. And just Taking a peek at the supplementals, it looks like you're up $2,100,000 in cards in force on $2,400,000 in cards acquired. So that is in fact Very good retention.
Can you just talk a bit about what's been driving that and whether or not you think it will persist after the pandemic? And so can we expect Sustained growth in cards and floors going forward? Thank you.
Well, look, I think As I said, I think some of the decisions that we made around value injection, some of the decisions we made around Providing relief. But I will tell you, I think the largest thing that drove retention at the beginning of this pandemic, Not a lot of companies were answering the phone. And our customer satisfaction scores From a servicing perspective, it really went through the roof for us during the pandemic. We pivoted people To home very, very quickly, we had equipment at the ready for them and they felt safe, They felt secure and they were able to take care of our customers. And so at that time, people called American Express.
We were there to help them. And if you think about the help that we provided to people, it was I'm not taking I can't take my trip. I'm canceled. I had tickets to this. I had to whatever it might have been, and we were able to help.
And when you help somebody one time, That's a lifetime savior because they'll always remember it. And the reality is, I think it was the combination of outstanding customer service because more people needed customer service during this pandemic Than they ever did before, especially with cancellations of events. And I think we stood out. I think we stood out among everybody else once again. And I think the value injection in the financial relief programs.
And we have Continually look to engage with our customers throughout the pandemic and meet their needs. Our hope is, and we're seeing it persist right now, is that we'll continue to Retain these customers and build their loyalty, but I wouldn't I would not downplay customer service's role In this retention, I can't tell you how many emails and letters I got That people were calling out to say, look, I was on hold with somebody for 5 hours and I went to you and you guys were able to handle it. You answered the call in 4 or 5 minutes. So I think that really helped a lot, Lisa. I really do.
Our next question is from the line of Rick Shane of JPMorgan. Please go ahead.
Hey, thanks for taking my questions this morning. I'm curious when you think about the 80% recovery of T and E in the 4th quarter, how important Corporate travel is to that recovery. And the reason that I raise that is, I think there's an important distinction between Leisure travel, which has a long planning cycle and business travel, which tends to have a much shorter planning cycle. And I'm assuming that that short planning cycle creates volatility in terms of your Expectations and I'm curious how much upside downside there is associated with that corporate travel?
Yes. I would say very little downside because we're assuming we're not assuming very much. And we're just using ourselves as an example. There are a lot of companies that are still not even back yet, right. And it's hard to travel when you're not back.
That's and it's hard to travel when When there's nobody to travel to. I think New York is a little bit different phenomenon in financial services here. But the reality is, we're not assuming very much from a corporate travel perspective, minimal improvement from really where we are. So The downside volatility, I think, is negligible. The upside is pretty positive.
But again, we're not anticipating a lot of travel. Having said that, corporate travel will come back. Anybody that believes that Zoom, WebEx Sure. Google Meets or Microsoft Teams or what have you is going to take the place of face to face. It's crazy.
It's not. I think it's a great supplement, but ultimately people will get back. But people are still antsy about getting out there, But not so much for consumer travel. They're pretty willing to get out for consumer travel, but they are a little bit again, I think for corporate travel, It's a different thing. But reality is, it will come back and I think there is nothing like face to face interaction and business And doing business that way.
And so but I see it more as upside, Rick, and not a volatile downside. Now having said that, If it does come back and then goes down, that's when the volatility comes in. But I think behavior once it Shifts back to corporate travel, I believe will stay there.
And Rick, the only numbers I'd add to that is, yes, we expect Q4 to be at about 80% overall, led by consumer though to Steve's point. So I'd expect global consumer to be at 95% probably of 2019 levels, the U. S. Consumer at Or above 2019 levels. And of course, the other thing, Steve, is that's interesting is small businesses Even now are traveling more than the large businesses.
It's the large businesses where you really don't see any signs of life right now and we're not counting on any.
Our next question is from the line of Mark DeVries, Barclays. Please go ahead.
Yes, thanks. Just a quick clarification and a bigger picture question. On the higher end guidance for 2021, does that contemplate reserve releases that get you down around kind of the CECL Day 1 level. And then kind of big picture for Steve, what's your experience been historically on the impact of wealth effects on spend, because obviously, if you look at since the beginning of last year, there have been some pretty significant wealth effects for a lot of your cardholders and what implications that may have for kind of where spend levels can recover to once your customers don't have the same
Yes. So wealth I've said this many times, consumers like to consume. And so giving opportunities to consume, they will start consuming. And I've been here a long time and I remember after 9eleven, People sort of didn't travel and sort of hoarded a little bit and then all of a sudden it And if you look back historically, you saw tremendous growth for us after 9eleven. And It wasn't in travel.
I mean, people started to spend on their homes, spend on other lifestyle choices and things like that. And then eventually travel came back. And so I think the wealth if you look at the savings that has accumulated within the United States And the wealth that is accumulated from stock appreciation and what have you, I think that only bodes well for us For people to continue to spend. And so I would anticipate and again, we saw this right After nineeleven, we saw this after the financial crisis as well. I've been just tells you, I've been around for a long time.
And I think that will actually happen. But we've never seen, I haven't seen wealth accumulation like this across the continuum when you look at the overall savings rate and then just look at where the stock market is obviously At an all time high. So I think that really bodes well for us as we think about spending going forward and that's why We're bullish on 'twenty two and beyond.
And on the credit reserves, Mark, I'd point out on Slide 14, in dollar terms, We are actually already below the dollar reserves that we had day 1 of CECL, $4,000,000,000 now versus $4,300,000,000 What's still above, however, day 1 is the percent of the actual Loans outstanding that the reserves represent. If you think about that $8.75 scenario, certainly, I would anticipate that, that includes Some reserve releases that bring that percentage below the day 1 CECL percentage. The unknowable question at this point is how far below. But when you think about the credit metrics right now, It would suggest that your reserve levels, once all the various kinds of uncertainty work themselves through, It would suggest that your reserves as a percentage of loans outstanding should be significantly lower.
And next question is from the line of Bill Carcache, Wolfe Research. Please go ahead.
Thanks. Good morning, Steve and Jeff.
Hey, Bill.
Your Lendcenter competitors have been very focused on elevated payment rates. Is Amex at all focused on stepping in Captured greater share balance growth as payment rates normalize. I know capturing your fair share of balances that Amex customers carry with competitors was a big focus pre pandemic, But I would appreciate any color on whether this is an opportunity that you're actively looking to pursue now?
Well, I think obviously during the pandemic that obviously slowed down, but we're back at it. And the reality is We can be back at it, but if they're not going to revolve balances, it really doesn't matter. But We have opened up again, obviously. We tightened up just to remind everybody, we tightened up our credit controls pre pandemic, And that allowed us to go in pretty quickly and I think do a lot of really good things for our customers and for ourselves. But we've opened it up this year, and we're out there looking to acquire balances.
We're not going to do crazy stuff, But we're looking at acquiring balances where it makes sense. I mean acquiring balances, I'm not talking about Fee free, 0 interest rate, things like that. What I'm talking about is engaging with our customers to see what their revolve needs are And to see if we can meet those needs, whether it be through a Pay at Planet or whether it be through a consumer personal loan Or whether it just be through a normal card Revolve product. So that's how we're thinking about it.
Our next question is from the line of Don Fendetti, Wells Fargo, please go ahead.
Steve, could you provide an update on the Amazon Small Business Co Brand Partnership And also whether it would make sense to look at the consumer co brand if that were to come to market soon, it's like a deal you don't necessarily need, but Maybe it makes sense in some areas.
Well, look, here's what I would say. We are really happy with our overall Amazon relationship, and that is a multifaceted relationship. Not only do we buy Amazon Services from them, but small business has been I think has been a good thing for both of us. I think So that's worked. I think our pay with points efforts with Amazon has really worked.
And what I would say about co brand opportunities, look, we look at them all. That makes sense. And we look at predominantly, we've had a lot of travel co brands, obviously. We've also had other co brands and people will remember the Costco co brand, but we've also have a Lowe's co brand for For small business, obviously, we have the Amazon co brand for small business as well and not just in the United States, but in a couple of other markets. And we look at the opportunities and what we do is we look at those opportunities and can we provide a value proposition that makes sense To our customers and can we do that in economical way?
In an economical way may not just be the economics of the co brand deal itself. It may also be the economics of what a co brand could do to the overall portfolio, Well, positively and negatively. And so there's a lot of things you look at when you evaluate a co brand. So And we'll do what's right for our customers and our shareholders.
And our next question is from the line of Bob Napoli with William Blair. Please go ahead.
Good morning, Steve and Jeff. A question on the related, I guess, the SMB market itself and the competitive environment you've seen new Players coming into that market, whether it's somebody like Square or there are a number of Fintechs that are doing charge cards with Spend management attached to it. Maybe just some thoughts on the importance of the growth of SMB, What you're doing and how you view that any change in the competitive environment and what new value injections that maybe not in that term, but products or services You're looking to add and maybe U. S. And international?
Yes. Well, I think, let me just I'll just mention international. International right now, certainly different competitive environment internationally than in the United States. There's not one competitor, it's competitors by market, but I would say at the moment not a hotbed of activity. Small businesses, the viability of a number of small businesses in international markets, not a lot of people have line Tied into those right now, and we're not growing anywhere near like we used to grow.
If you remember, Small Business International, High double digits, high double digit teens for 2, 3 years in a row. And so and we think we can get back to that. We just don't we don't see that Happening this year and we're not counting on it for next year. But internationally, you're competing with local banks and so forth. And Again, we've done Amazon deals in multiple countries, and I think that has helped, and we continue to look for partnerships where they make sense.
In the United States, we continue to grow. In fact, June was one of our best acquisition months In the history of our small business card in the United States. So we're really pleased with that. There is a lot of competition. There's a lot of fintechs.
There are banks out there. Capital One is aggressive, U. S. Bank is aggressive, JP, everybody is aggressive in And ultimately it comes down to value and we continue to grow. And again here from a small business perspective, I I think we did a nice job with value injection.
I think you will see us continue our strategy of product refreshes over the coming year. But I think one of the big things that we've done obviously is the Kabbage acquisition. And just last month, we launched the Kabbage Checking account, the working capital, cash flow analysis and so forth. And what you'll see ultimately is that Kabbage Being the landing point for our small businesses. And the way you want to think about this is, is FinTech with scale.
And so when you think about Kabbage, which is a pure play FinTech in the small business space and you think about American Express and The small businesses and you combine that together, you have a FinTech at scale, not a FinTech growing at scale, a FinTech growing from scale, From scale with the balance sheet. And so that has always been the vision of Kabbage. We've made As you bring Cabbage into the bank holding company structure, you have to do some other things To future proof it, if you will, and that's what we've been doing. But that's what you will see ultimately what you will see is a FinTech With traditional bank scale and a very strong balance sheet and We'll continue to add products as we move along onto that platform. And that was the vision, right?
I mean, we see a lot of other people out there Doing those kinds of things, but to be able to do that at scale from the get go, I think, is a big win for us. So that's the longer term that's the Vision in the medium term here for Cabbage and we just launched that platform from an Amex perspective just last month with those other products on it.
And our final question will come from the line of Craig Moore, Autonomous Research. Please go ahead.
Yes. Hi. Thanks for taking the questions and squeezing me in. I really wanted to ask about the competitive environment In high end U. S.
Consumer, considering we just saw Citi shut down their platinum competitor Going forward, has the U. S. Premium consumer race really just boiled down now to Two competitors, Amex and Chase. Thanks.
Yes. So I don't know. That's the best way to answer it. Look, I don't know what Citi's strategy is. I don't know if it's a it's just a pullback for now from a to a reentry.
That's a possibility. I know Wells is looking to get stronger in this space. And so what we really focus in on, Craig, is We focus in on is developing the best product possible and to make sure we can take on all comers. And some may say in the middle of pandemic, you're relaunching your Platinum card and you're raising the fee. Yes, we are.
Why? Because that was part of the strategy. We learned a lot during the pandemic as well. We were able to enhance the product. When you look at it, we added $1400 worth of additional value for $140 worth of additional cost.
And as a great example of leveraging our partnerships, leveraging our know how, leveraging the digital assets that we have, whether that It'll be resi or LoungeBuddy or what have you within that overall collection. And so, yes, maybe it might look like right now, it's Chase and American Express and Chase is a very formidable competitor with very smart people who are working really hard To beat us and we're working really hard to beat them. So, but I'm not assuming it's going to be just us and Chase for long. I think You will see other people I think try and get in this game and our platinum refresh is another shot across the bow And anybody that really wants to come in and play with us and play in this game, we're ready. And we'll continue to up our game and up our service and provide even more and more value to our card members.
And look, as I said in my remarks, the platinum refresh last time worked And that was in the face of JPMorgan Chase entering in with a strong product. And we believe it's going to work this Time and early results and obviously we're only in for 3 weeks here. But if you just do the value calculation, it is a really strong product and we're really proud of of what we put out in the marketplace.
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. Kevin, 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 the digital replay of the call at 866-207 1041 or 402-nine seventy-eight forty seven with the access code of 905 8,079 after 1 pm Eastern Time on July 23 through midnight July 30. Now this will conclude our conference for today. Thank you for your participation.