All right, we'll get started. Thank you, everybody, for joining. Welcome. Very pleased to have on stage Christophe Le Caillec, CFO of American Express. Welcome.
Good morning. Thank you for having me.
Yeah, we'll just jump right into it. 2026 has been a strong year for Amex, with 10% FX adjusted revenue growth and mid-teen EPS growth through the first half. As you reflect on the year so far, what have been the biggest drivers of performance, and how are you thinking about the outlook for the second half?
Yeah. Good morning, everyone. If you go back over the last three, four quarters, you see a lot of strength in our billing numbers, 8%, 9% billing growth, a bit stronger in Q2. Despite the headlines, despite all the noise about inflation, the wars, we see a lot of strength in the spend of our card members, so feel very strong about that. Card fees was up 16% year to date. NII was in double digits. The building blocks of our financial model, if you want, are working really well. In Q2, we raised a little bit our guidance when it comes to revenue. We got it towards 10%, and we reaffirm our EPS range. Which, by the way, does not include the gain that we expect to make on the sale of our GBT shares, or how we're going to use the proceeds.
We'll come back to you later in the year to address that. The business is doing really well. You've seen the credit metrics that we published recently, very strong, very stable, very much within expectations. Billing, spend, NII, credit, all looking good.
Great. You touched on this. Revenue expectations have moved higher, but you kept the EPS outlook unchanged. You indicated you will continue to invest in customer acquisition, technology, and AI. Where are you investing the most aggressively today, and how are you measuring the returns on those investments?
I was just saying that the business is performing a bit better than what we had expected at the beginning of the year. Where that happens, consistent with what we've done in the past, we have a decision to make. Do we want to spend this, reinvest in future growth, or do we want to drop this over-performance to the bottom line, tax affected, and buy back a few shares? What we've done, and we've done it on a regular basis, if you study American Express over the last at least nine years since Steve is their Chief Executive Officer. We've decided to reinvest, which means for us to spend those dollars in two broad categories, right? As you said, new card member acquisition to keep the momentum going, and technology, because there is a huge demand for technology development.
When it comes to those card member acquisition expenses that are reported on the marketing line, these are more marketing campaigns, more activity. We have a very disciplined and robust process to measure those returns. We measure them with accuracy. We're very confident in terms of what it will yield, and we also monitor the actual performance, right? When something is not working, we actually move the money towards those channels, those products that are generating better returns. I feel really good about that. When it comes to technology, we invest a lot in technology, just like any financial institution. Just to give you example, I think yesterday we went public about the release of a new product, their Business Savings account.
You're familiar as well, maybe we're going to get to it, about the development we're making in terms of expense management and developing an expense management solution for our mid-size customers. It's those two things broadly, right? Technology and marketing. The question that we get from investors as well is about how profitable is it, how confident it is that those marginal kind of investments are just going to be profitable. I want to bring you back to maybe the ultimate measure of profitability, which is the return on equity. If you go back 10 years ago, this company was generating return on equity in the range of, like, 25%, 28%. Fast-forward to where we are now, and we are north of 30%, 32%, 33%, 34%. That's with a company that is just much bigger.
All these investments that we've made over the last 10 years with that marketing discipline, with that discipline around technology, is kind of manifesting itself in the ROE, which is getting stronger. I feel very strong about this decision. If we had to do it again, I would do the same. I think it's the right thing in terms of value creation for the shareholders and the wrong one.
Got it. Helpful. Several years ago, you laid out aspirational targets of 10% revenue growth and mid-teens EPS growth. Certainly tracking on to that right now. Given the progress you've made, do you believe that level of performance is sustainable over the long term, and what will be the most important drivers to delivering that consistently?
Yeah. We did not put this ambition lightly. It is an ambition. It is not a forecast, let alone a guidance. But we wanted the 75,000 colleagues that we have at American Express to wake up every morning and think about what is it that I can do to support that growth ambition. The way it manifests itself is in the acceleration of product refreshes, maybe more innovation in those products. Accelerating the pace of technology development as we talked about, accelerating various projects. You've seen clearly the business accelerate. We used to grow in that 5%, 6%. We're now growing in that 10% range. For the last three years, we've been in that 10%. It's real, and it's creating a lot of momentum to the company. This ambition is sitting on our TAM, which is growing and expanding.
Remember that we are focused on the fastest-growing parts of the TAM, the younger card members, the fee-paying card members, call them premium card members, as well as international. All the building blocks, if you want, that lead to that 10% are in place. Let me be clear as well. There are many ways you can get to 10% plus revenue growth. One is actually to open up your credit box if you want. It is not something we did. We did just the opposite. Because we said we want to generate that growth in the premium space. That's the constraint in the system. But it's a very powerful model if you think about it, because we're growing, and you've seen what happened to card fees, 15%, 16%, 17% CAGR since 2019.
We made comments that it's going to pick up momentum in the balance of this year. So it's a remarkable story in terms of value creation that we've been able to do. I think that with the strength of the TAM, with the building blocks in place, we know exactly what we need to do. I feel confident and comfortable that it's the right aspiration for American Express.
Got it. Maybe just touch on the mid-teens EPS growth as well.
Listen, the first thing is to get the revenue right. If you get the revenue, EPS, I'm not going to say follows, but it's a lot easier to get to mid-teens EPS when you get 10% revenue growth. Remember this as well. We buy back, given the very strong ROE we talked about, we buy back about 3% of the share count every year. It's a function of the share price, but it's about 3% on average. So we need the net income to grow 12% every year to deliver on that mid-teens EPS. That's exactly what we're targeting. I feel, with the strength of the credit profile of our card members, that mid-teens EPS is also the right aspiration for us, and it will flow if you want from the strength of the revenue growth.
Got it. That's helpful. Maybe just talking about billings growth, that's remained remarkably strong this year, increasing by 9% FX adjusted in the first half. Where have you seen the strongest spending by category and customer cohort, and how confident are you that this momentum can sustain through third quarter and beyond?
Yeah. As I said earlier, billing has been in that 8%-9%. It was a bit stronger in Q2. When you look at where the strength is coming from, one of the source of the strength was the timing of some promotional activities by some very large retailers in the U.S. And the thing that I found the most remarkable and to some extent unexpected is actually the strength of the T&E spend, travel and entertainment. And we see the same thing in the numbers quarter to date. We've seen billing at about 8% quarter to date, so July and August. And what's remarkable in that 8% is the strength of the T&E spend, especially airlines. So what that means is that our card members feel confident to travel, to entertain themselves despite the price, despite all the noise. They're spending a lot.
And I would say as well, something that is just not directly linked to billing, but it's a good proxy, I think. It's a good indicator of how our card members are feeling. It's like when you look at the pay down rate, so how much of their spend are they paying down at the end of the month? It's actually quite high, which usually is a good sign in terms of credit performance. It's a good sign as well in terms of how confident they are in their own finances. So billing stable, strong, a lot of discretionary spend, a lot of signals about confidence and about credit quality, which gives me confidence about the balance of the year and how to think about it.
Okay. What about international? That's about 26% of bill business. Growth continues to outpace the other segments. What differentiates Amex internationally, and where do you see the greatest runway for growth over the next several years?
I'm glad you're asking a question about international because it is a big area of growth and opportunity for American Express, and we talk a lot about what's happening in the U.S., a bit less about what's happening in international. Maybe we should rebalance this a bit. There's a lot of growth happening outside of the United States, and the compounding effect is remarkable. If you look at over the last three years, the billing is actually bigger by about 50%. When you grow at like 12%-ish three years in a row, it really transforms your business. First thing, a ton of momentum in international. There's a lot of things that are similar between the U.S. and international. We rely on very similar product lineup. I'm thinking about the Gold Card, the Platinum Card, the Centurion Card, of course.
What we do, though, is that we also adjust or tweak those to the local players. We have co-brand partnerships with British Airways in the U.K., with Air France in France, with KLM in the Netherlands. What we try to do is like you have the same basis, if you want, for the products, but it is customized to the local needs. It's true for the partners, it's true for the value proposition as well. What we're seeing in terms of results is that when you contrast the U.S. business with the international business, if anything, the international business outside of more momentum is also more premium. Card fees are typically higher. Their percentage of travel and entertainment spend is also a little bit higher. Cross-currency transactions are more frequent. It's a very, very attractive business.
What I like as well about our cards out there in international is the fact that we leverage the globalness of American Express to deliver outstanding value proposition. Think about our global lounge network. We have lounges in the U.S., we have lounges as well in international. The card members can benefit from that. That is true as well for things like sponsorships, right? We have a sponsorship with Formula One, which enables us to activate those sponsorships and create unique experience for our card members in the U.S., but also outside of the U.S. Most of the Grands Prix are actually outside of the U.S. The team in Canada works really hard to activate this and create unique experiences for our card members.
We feel that we have the strength of the global American Express presence and brand and capacity just to create original and powerful experiences for our card members. That works really well. I'm going to leave you with one number. Despite the very strong growth that we have seen in international, we're still a very small share, single-digit share in terms of market share. Our estimate across the lead five market is about 6%. Great momentum, great potential, and great economics as well for us out there.
Got it. Sounds like there's a long runway for growth there. Maybe just turning to commercial now. Amex launched its new Graphite Business Cash Unlimited Card in the first quarter. Recently also launched Center's expense management capabilities. What's been the early feedback so far from those products, and what do you need to see change before billings growth re-accelerates?
First, I need to say that this business receives probably a lot more attention than it has ever received in its entire life at American Express. We talked about, I think, announcing something like eight new product refreshes or capabilities this year. It started last year with their Business Platinum Card refresh, which is doing really well. You talked about Graphite, which is also doing very well, and it's performing better than what we expected. Just mentioned that yesterday we announced the Business Savings account. So, it's a very important group of customer for us. We're very focused on that. You mentioned the acquisition of Center, specifically for the mid-market customers. Center, for those who are not familiar, is an expense management.
It's a software company, expense management software, and we bought them over a year ago, and we have spent the last year integrating it with our core platforms. Right now, we're in market. It's more like a pilot than anything. We're not scaling it yet. We want to make sure that we are ready before we scale it. It's performing as expected, and there are a lot of learnings. If you take a step back, our strategy here is to combine three things which we believe are going to be powerful to win in the marketplace. The first thing is to have a no preset spending limit card, which is critical for small businesses and especially mid-market customers who need to have a very high spending limit. So having a no preset spend limit is critical. So combine that together with the outstanding service that you're all familiar with.
Now the third part of the strategy is to add expense management solutions. We think that we're going to have those three connected in one ecosystem, one experience. We're going to be able to compete effectively in the marketplace. We were missing this third element, the expense management solution. We're working really hard, as I said, to get ready and to scale it in the market. We're going to get there. I'm optimistic, and I know that this is going to be a long game, right? I know that in the long run, the service, the quality of the product are also going to speak for themselves, and we're going to turn around that business. How long is it going to take? It's going to take time. The numbers are not going to jump given the magnitude of this portfolio.
You should not expect a turnaround in those billing numbers for commercial businesses this year. It will happen down the road.
Got it. That's helpful. Maybe just to switch gears. American Express has focused on building a suite of differentiated member services, which has been a key to its leading position in the premium space. Can you just talk about how you expect to continue to expand those suite of services and offering over time?
Yeah. Membership is the starting point of all our strategic thinking. If you think about American Express as investors, do not think of us as a payment company, as a financial institution. The heart of American Express is in that membership. There's a reason why we call our card members, members, is because from the very beginning, we view ourselves as a membership company. What I mean by that is that all the series of benefits and assets that we have in the dining space, in the travel space, in their entertainment space, in their banking space now with more and more products. What we want to do is just combine all these experiences to be able to deliver unique experiences and value to our card members that are going to differentiate ourselves from our competitors.
What we do not want to do is compete on points. To give you an example, we refreshed the Platinum Card, and we haven't changed the value proposition when it comes to point. All the energy, all the efforts that we put in this product refresh were in that membership benefit. These are critical assets that we have built over the years that are very different from what our competitors can offer. They claim, of course, that they have lounges, they claim they have travel benefits, but when you really analyze it's just very different scale. To give you an idea on the lounges, we have 32, 33, depending on the day. I think we have 33 now, proprietary lounges. Plus, we have the partnership with Delta. They have 50, 60 lounges.
When I read what our competitors are saying, they have this, they have lounges, but they have single-digit number of proprietary lounges. So it's a very different experience. In the travel space, hotels, we have this efficient program, Fine Hotels + Resorts. When you get, as you know, as a card member, as a Platinum or Gold Card member, you get benefits such as early check-in, late check-out, free breakfast. We have now 3,400 properties and hotels in this program, right? A lot of card members can enjoy those benefits. Our competitors offer similar programs, but they have a few hundreds in them. So it's a very different experience. The point that I want to make here, because I think it's a critical point, is that this is meant to work for our card members, but also for the partners.
To give you an idea, because I was talking about the Fine Hotels + Resorts program, this year alone, we received 1,400 requests from hotels and resorts to be part of this program, to have access to our card member base, and to have the pleasure of offering early check-in, late check-out, upgrade if it's available, and a free breakfast. In this 1,400 requests, we approved 300. So we're very selective about who we get in the program. The point here is that I want to bring to life for you this circle, this virtual circle where given the attractiveness of our card member base, more and more partners want to be partner with us. That, of course, has a big advantage in terms of differentiated value proposition and also economics for American Express and the shareholders. The last thing that I'm going to say is this.
We have extended this concept, if you want, to the sponsorships. We do a lot of sponsorships. I was talking about Formula One a minute ago. As you know, we also are one of the main sponsors for the US Open. We do that not really to put our logo on these properties, although we do that, but more importantly, to create experiences for our card members. To give you an idea, during the first week of the US Open, we actually touched 500,000 card members who went to the US Open and could have access to the lounge we prepared for them to have a drink or refreshment. So this is very much what we're trying to do here with this membership concept.
Bring unique experiences that are going to be key differentiators and that money cannot buy to our card members and scale it, not only in the U.S., but globally for our premium card members. We think that this is the secret sauce of American Express, and we can compete much more effectively than multiplying the number of points every time you spend in that given industry.
Got it. That is very detailed. Helpful color.
Sorry. Maybe too long.
No, that was good.
Okay.
More is better.
Okay.
We just talked about product refreshes. They do involve a meaningful amount of investment. The VCE outlook for 2026 was recently raised from around 44% to between 44% and 45%. It doesn't sound like much, but as American Express continues to grow its premium and fee-paying portfolio, how do we think about the trajectory of VCE moving forward?
Yeah.
How do you balance enhancing customer value with maintaining attractive returns?
Yeah. VCE, Variable Customer Engagement expenses, there are three broad categories. The biggest one is the points I just talked about. Those benefits which we booked on the cost of card member services line that I just spent a long time giving you the details here. The third component is payments to partner. The biggest component here is the co-brand partners that we have and how we share the economics of the co-brand cards with our partners. It's a very large expense base, something in the neighborhood when you do 44%-45% of revenue, something in the neighborhood of $35 billion. As you said, we expressed it as a ratio to revenue. This has been going up, and there was a step-up in that ratio.
You can track it back very much to the product refresh that we did, the Platinum product refresh, which we did exactly a year ago. That created a step up. It creates a step up because the way we refresh products is we make those benefits, the new value proposition, available to our card members before we raise the card fee. We're going to wait until the card member reach their renewal anniversary to raise the card fee, and before actually they themselves kind of consolidate their spend with us. If you want, we front that, and that what created the step up. One of the big drivers, probably the biggest driver in terms of why we actually adjusted up a little bit that VCE ratio is because of the strength of the spend. That was your first question. It drives the cost of points.
And given the fact that billing was strong, especially in the T&E industry where there are some accelerators, that drove a little bit of an increase there. Now, it is super important when you think about this, to take a step back and look at what is the role of this VCE in the American Express economics. It plays a critical role beyond the value proposition that is given to card members. The first thing is that it creates a very powerful effect in terms of selecting card members or applicants with a very good credit profile. The positive selection that Amex relies on to maintain stellar credit performance can be traced back to the richness of the value proposition that we put out there.
So, VCE is expensive, but you get a lot of your money back in terms of the quality of the applicants, the very low credit cost, the stability of this credit performance under stress. The other thing that it does is that the quality of the product generates a demand, which make our marketing dollars work much, much better. The way to think about it is complete kind of like P&L, as opposed to just looking at the VCE to revenue ratio. If you take a giant step back and think about what is that doing to our margins, I will go back to what I was saying earlier on. If you look at the return on equity of American Express, it has drifted up over the years.
Which is a function of very strong credit quality, the very strong growth that these rich products can generate, which gives us economy of scale when it comes to operating expenses, for instance. As I said, the stability of the credit performance. So all of that is compounding and adding up in this very strong return on equity, which is like 33%, 34%, even 35%. That is the role of VCE. That is the way we think about it. I will say this as well. There is a lot of people at American Express who work on innovating within this $35 billion expense base to create redemption opportunities such as amount-based redemption. We just announced that you can now redeem your MR points as well with Apple Pay. All these initiatives are helping us in terms of controlling that cost, if you want.
So it is a very sophisticated kind of machine behind that VCE ratio.
Okay. That's helpful. You touched on credit performance a little bit. American Express's credit performance remains best in class, with Millennials and Gen Z cohorts accounting for 65% of new accounts. What gives you confidence in the resilience of those customers and the broader strength of the portfolio?
First, those younger card members expanded our TAM. Either cracking that nut and having American Express being relevant to this very large and growing population was a major breakthrough for us to keep on that double-digit revenue growth. Those Gen Z customers today, they represent about 30% of the global new accounts acquired in the consumer space, so it's very meaningful numbers. I understand the question about the credit profile of this, and at a previous conference, we shared a more detailed set of numbers around these credit profiles. I invite you to go back. You'll find it on the investor relations website, and it was the delinquency rate by age cohort. There were a few things that were remarkable in those numbers.
The first thing is that we are doing, like our Gen Z have a delinquency rate that is a lot lower than the rest of the Gen Z industry. I mean, the spread between the two delinquency rate is like something 2.5% worse for the industry versus us. For me, the biggest insight, the one that I think is the most relevant to you, is the fact that our Gen Z customers and Millennial customers combined have a delinquency rate that is 40% below the industry, Gen X and baby boomer combined. So our young card members are 40% better than the best of the rest of the industry. That speaks about how selective we are with who we are issuing cards to, as well as that positive selection process that I was talking about a few minutes ago.
What I like about these younger card members, because we are a momentum business, and we are also like a very long-term business. The P&L that you see this quarter was built with card members who joined American Express last year, five years, 10 years, 25 years ago. So it takes a long time just to get into the P&L. When I look at how these Gen Z customers are behaving, I love what I'm seeing. They're typically giving us a bigger share of their wallet. They're very engaged with the products, the value proposition. Most of them join us on a fee-paying product. The Gold Card is like their favorite product for this generation. Their loyalty, their retention rate over time, now that we have visibility, is better than the older generations.
If you think about us, if you would model American Express looking at vintages and project that Gen Z vintage over time, beside the credit strength, you would see a lot of revenue growth that is embedded in their behavior. We know we are going to get it, because if there is one thing that is very stable at American Express, it is the renewal rate, the loyalty rate, as we call it, over time. When we have Card Members, they stay with us for decades, and I am sure that many of you in the room had an American Express card for 10 years, 15 years, 20 years. It is going to be the same thing here.
Got it. We have about seven or eight minutes left. I will open it up to the audience for any questions. One up front. I will repeat it after you say it. The question was, you managed to crack the code on younger people, that there will be a time where the economy enters a recession. This time may be more white-collar focused. How do you think about reserves?
Yeah. I will put two different parts in your question. Maybe let me address the white-collar theme first. First, the tone has changed a lot around that, versus what people were saying a few months ago. We tend to think about premium versus non-premium when it comes to white collar. Including recently, there was a great article in The Economist about what might happen with AI, and it was very positive. I invite you to read that article. I am sure you will find it in The Economist easily. That white collar employment, especially at the high end of white collar, is just not only going to not be impacted by AI, but if anything, it is just going to grow. When it comes specifically to CECL and credit reserve, we do not isolate them differently. We do not treat them differently.
We look at their spend behavior, their delinquency rate, and that is what is going to drive our CECL reserve. It is not because you are a 30-year-old or 28-year-old that we are just going to book a higher reserve versus someone who is 40 year old. There is no differentiation in the way we treat it from a CECL standpoint. But what we do in coordination with the Fed, and that is the CCAR process. We stress-test the portfolio under pretty strict and pretty bad credit economic assumption. There are 2008, 2009 kind of credit stress. I invite you to look at those results because the Federal Reserve published them. You are going to see that the credit losses that is projected for American Express is by far the lowest across the industry.
You have to think about those younger Card Members as young urban professionals that are dining out, that are quite comfortable paying a card fee with us, that are employed. I would say a younger version of many of us here. These are the people that are in our portfolio, and I am not concerned about their credit profile. As I said, I like everything that I see. We measured actually the lifetime value of those Card Members, and it is about 2x the lifetime value of a 40 or 45-year-old, like a Gen X Platinum Card. It is super attractive. I am not concerned about the credit performance. You have seen, despite all the noise about AI recently, if anything, our credit numbers have been incredibly stable, if not improving over the last quarters.
Great. One question over here.
I am looking at Kartik from IR because I do not want to say something wrong here, but I think it is like a third of the balances are from Card Members, but they represent something like 50%. Is that right? Yes, so 50% are from our existing Card Members. Yes. Of dollars, right, Kartik? Get in touch with IR. But it is a significant part. The other way to think about it, which is on the flip side, is to look at how many of our Card Members have a High Yield Savings Account with us, and it is only in the low double digits, like 10%-ish percent. The growth opportunity is super high.
Great. Just a few minutes left. Maybe just in closing, Christophe, looking ahead, where do you see American Express heading over the next three to five years, and what will be the outcome for shareholders?
Yeah. As I said, we are a momentum business. I like what I am seeing in terms of product innovation, what I am seeing in terms of demand for the products, what I am seeing in terms of growing in the premium space. I love our TAM and how it is growing and evolving. What you should expect from us is more of the same, and the continuation of what we have done in the past years. There is something incredibly powerful for the shareholders when you compound that double-digit, like 10% revenue growth with mid-teen EPS growth and a disciplined capital management, dividend increase, very strong capital share repo program. I was saying we buy back about on average 3% of the share count every year.
The compounding effect of all of this creates a lot of value for shareholders, and that is what we are going to do, and that is what we are going to keep doing. I feel confident every time I look at the growth we are having with the younger generation, when I look at the credit profile, when I look at the card fee trend, which captures the premium-ness of the portfolio and the momentum that we have. You should expect more of the same going forward. It has been a good run for us, and I am thinking that it is going to be a good run going forward as well.
Great. I think we will end it there on a good note. Thank you.
Thank you.