Ladies and gentlemen, thank you for standing by, welcome to the American Express first quarter 2017 earnings call. At this time, all lines are in a listen-only mode, later we will conduct a question and answer session with instructions being given at that time. If you should require assistance during the call, please press star then zero and an operator will assist you offline. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Mr. Toby Willard. Please go ahead, sir.
Thanks, Gary. Welcome. We appreciate all of you joining us for today's call. The discussion contains certain forward-looking statements about the company's future financial performance and business prospects, which 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 forward-looking statements are set forth within today's presentation slides and in the company's reports on file with the Securities and Exchange Commission. The discussion today also contains certain non-GAAP financial measures. Information relating to comparable GAAP financial measures may be found in the first quarter 2017 earnings release and presentation slides, as well as the earnings materials for prior periods that may be discussed, all of which are posted on our website at ir.americanexpress.com. We encourage you to review that information in conjunction with today's discussion.
Today's discussion will begin with Jeff Campbell, Executive Vice President and Chief Financial Officer, who will review some key points related to the quarter's results through the series of presentation slides. Once Jeff completes his remarks, we'll move to a Q&A session. With that, let me turn the discussion over to Jeff.
Thanks Toby, good afternoon, everyone. We are off to a solid start to 2017. Our earnings per share for Q1 was $1.34, we are encouraged by the momentum we see in our revenue performance. As you know, accelerating revenue growth through capturing opportunities across our diversified business model has been a key priority for us. In addition, we are seeing the benefits of our cost reduction efforts and continue to return significant amounts of capital to shareholders through our dividend and share buyback programs. In many ways, our Q1 results show the steady progress we are making on the range of growth and cost initiatives that we have put in place over the last couple of years, that we reviewed at our Investor Day last month. These initiatives have been supported by the spending that we did over the last two years.
We expect that these efforts will all come together to help us produce steady results during 2017 and position us well for the longer term. Going forward, we remain focused on delivering improvement in EPS as we progress through 2017 and beyond this, we are equally focused on our strategies to generate sustainable revenue and earnings growth. While it is still early in the year, and we have work to do, our first quarter is a positive start to the year. With that, let me turn to the detailed results, starting with the summary financial performance on slide two. Revenue for the first quarter was down 2%, reflecting lower discount revenue and net interest income following the Costco portfolio sale in Q2 of last year. When excluding FX and Costco-related revenues in the prior year, our adjusted revenue growth accelerated modestly to 7% on a sequential basis.
The first quarter also included, as expected, given the volume growth we are seeing, a greater year-over-year increase in provision and rewards than we experienced in the fourth quarter. Net income was down 13% versus the prior year first quarter as we continue to grow over the co-brand exits from 2016. As we move through 2017, we expect net income and EPS to grow due to the benefits from our cost reduction initiatives and the seasonality of revenue. Of course, we expect a return to year-over-year net income and EPS growth as we get to the second half of 2017. Earnings per share of $1.34 reflects our net income performance and also the benefits of our strong capital position. Over the last year, we returned $4.1 billion of capital to shareholders through our share repurchase programs, which has resulted in a 6% reduction in average shares.
These results brought our ROE for the 12 months ended in March to 25%. With that as the summary, let me now turn to a more detailed review of our results, starting with billings. You can see on slide three that worldwide FX-adjusted billings were flat in the quarter versus the prior year. To get a better understanding of the underlying trends on slide four, as we have in recent quarters, we show billings growth adjusted for both changes in foreign exchange rates and the impact of Costco. Here you can see that adjusted billings growth accelerated modestly to 8% in the quarter. The acceleration was broad-based, as you can see in both the segment view of billings on slide five and the geographical view of billings on slide six. Across all of these views, I would point out a number of trends in our billings performance this quarter.
In the GCS segment, we continued to see strong growth in the small business and middle market customer segments. Adjusted volumes in the U.S. grew at 11% in the quarter, and outside the U.S., volume growth accelerated. In the large and global GCS customer segment, spending volumes were up a bit as compared to last year. As we have said for a while now, we would expect that this will remain a slower growth segment, absent an uptick in travel and entertainment spending by larger corporations, which we have not yet seen. The U.S. consumer segment growth rate was consistent with Q4 2016. We are pleased with the impact of the initial changes we made last October in our U.S. consumer Platinum product. It's too early to comment on the most recent changes to the product, as they just took effect at the end of the first quarter.
In the international consumer and network services segment, the billings growth rate improved sequentially to 8% on an FX-adjusted basis. Looking at the two parts of this segment, volumes from proprietary cards grew at 11%, reflecting continued strength in several international markets. In GNS, the FX-adjusted growth improved from 4% in Q4 to 6% in Q1, as we saw sequential improvements in all of EMEA, JAPA, and LACC. GNS plays an important role in strengthening our global network. I would remind you, though, that going forward, as we previously discussed, we do expect pressure on GNS volumes due to the changing regulatory environment, specifically in the EU, Australia, and China. Given the lower margins we earn in GNS, however, this will have less bottom-line impact.
Moving to international in total, you can see on slide six that our billings growth rates remain strong, as we saw our fourth consecutive quarter of double-digit in FX-adjusted terms growth and overall international accelerated to 13% FX-adjusted growth. The improvement in international is broad-based, with strength in both our corporate and consumer businesses. As we look at a few key markets, for example, we see continued strong FX-adjusted growth in the U.K., up 17%, in Mexico, up 15%, and in Japan, also up 15%. Finally, I would briefly note a couple of calendar impacts to growth rates in the quarter. As I mentioned at Investor Day, the leap day in February 2016 negatively impacts growth rates this quarter by about 1%. Offsetting that somewhat, we did see a benefit in March as the Easter holiday moved from Q1 last year to Q2 this year.
In many international markets, there is an extended holiday around Easter, which impacts volumes. Stepping back, we are encouraged by the momentum we see in the adjusted billings growth rate. The improvement is coming across our segments globally and reflects returns on the investments we have made over the last couple of years. We still have work to do, and the competitive environment, especially in U.S. consumer, remains intense. We are focused on driving more volume onto our network from our wide range of growth opportunities. Turning now to our worldwide lending performance on slide seven. Our total loans were up 12% versus the prior year on an FX-adjusted basis, slightly below the growth rate we saw in the fourth quarter of last year.
As we have for several years now, we continue to grow U.S. loans faster than the industry, driven primarily by our success in growing loans from existing customers. During the first quarter, more than 50% of the growth in U.S. consumer loans came from existing customers, consistent with the trend we described at our Investor Day. As we look forward, we believe that we can continue to grow loans above the industry rate given our unique growth opportunities while maintaining best-in-class credit performance. Looking at the right-hand side of the slide, you can see that net interest yield has been steadily expanding and rose again sequentially in Q1 to 10.3%.
Yields typically widen in the first quarter due to seasonality, but the steady trend we are seeing is driven by the impact of a number of factors, including a shift in mix to non-co-brand customers who are more likely to revolve, less revolving loans at introductory rates, some specific pricing actions, and of course, a benefit from increases in benchmark interest rates without an offsetting change to our personal savings deposit rate. We do expect deposit rates will move up over time, though it remains to be seen when that change will occur and how much rates will increase. Before turning to provision, let me touch on our credit metrics. Delinquency and loss metrics across our lending and charge card portfolios continue to be very strong.
In the worldwide loan portfolio, you can see that the delinquency rate was flat to Q4, and loss rates increased slightly, both sequentially and year-over-year. The modest increase in lending loss rates versus the prior year is in line with our expectations and consistent Our view that loss rates would begin to increase due to the seasoning of new accounts and the shift towards non-co-brand products, which have a slightly higher write-off rate but also generate greater yield. This quarter's lending results reflect that dynamic. The combination of continued strong loan and receivable growth and modestly higher year-over-year loss rates, including in certain charge card segments, has caused our provision, as expected, to grow well above the growth rate in loans, as you can see on slide nine.
As we look forward to the balance of the year, we expect that provision will continue to grow faster than loans, a trend that is fully contemplated in our earnings expectations. Turning to our revenue performance on slide 10. FX-adjusted revenues were down 2%. When we adjust for both FX and Costco-related revenues to get at the underlying trend, revenue grew at 7%. I will say that adjusted revenue growth in the quarter outperformed our own internal expectation as in the month of March, billings and revenue both came in above our plans. We are pleased with the momentum in our adjusted revenue growth rate, and we are encouraged to begin the year a bit above the full-year range we provided at Investor Day of 5%-6% adjusted revenue growth.
Looking at the components of revenue in more detail, discount revenue declined by 3% but increased by 6% on an adjusted basis. The discount rate in the quarter was 2.45%, up one basis point year-over-year due to lower rate volumes coming off the network more than offsetting the impact from merchant negotiations mix and the continued rollout of OptBlue in the U.S. While the discount rate increased year-over-year, the ratio of discount revenue to build business declined by four basis points, which I will come back to in just a minute. Net card fees grew by 7% in the quarter, reflecting continued strength in our premium U.S. portfolios, including Platinum, Gold, and Delta, as well as growth in key international markets like Japan and Australia.
The Platinum fee increases we announced in March are not yet impacting the results as the fee increase for existing customers does not go into effect until September. Other fees and commissions grew 5% in the quarter, while other revenue declined by 16%. Other revenue growth is impacted by the sale of a small business, which provided back-office systems to run third-party loyalty programs during December 2016. Net interest income is down 5% due to lower average loans, but increased 15% on an adjusted basis, driven by the 12% growth in adjusted loans and the higher net interest yield that I mentioned previously. Coming back now to the ratio of discount revenue to build business on slide 12, you can see that this ratio was down four basis points versus the prior year, while the reported discount rate was up one basis point.
The decline in the ratio of discount revenue to billings this quarter is driven by a shift in billings mix towards GNS and higher incentive payments to co-brand and corporate card partners as the volumes in those categories accelerate. Turning now to total expenses on slide 13. Our expenses were 1% higher than the prior year during the first quarter, though I'd note that performance trends varied across the different expense lines. At Investor Day, we highlighted that our spending on cardmember engagement is reflected across marketing and promotion, rewards, and card member services expenses. I'll discuss the changes in those P&L lines on the following slide. Moving to operating expenses, total operating costs during the quarter were down 3% versus the prior year.
I'd remind you that in the prior year, operating expenses were impacted by the $127 million gain from the JetBlue portfolio sale and an $84 million restructuring charge. We continue to make progress on our cost reduction initiatives and believe that we are on track to remove $1 billion from the company's cost base on a run-rate basis by the end of 2017. As we highlighted at Investor Day, we expect the year-over-year decline in operating expenses to be larger as we exit 2017 than what we saw in Q1. Our effective tax rate during the quarter was 31.9%, which is below our full year 2017 expectation of 33%-34%. The Q1 tax rate benefited from some discrete tax items, we continue to believe that our full-year rate will be more in line with our 33%-34% expectation.
Moving to the summary of our card member engagement spending on slide 14, total engagement spending in Q1 was $2.8 billion or 4% higher than the prior year. Looking at the components of that spending, as expected, M&P was down 4% versus the prior year. These results are consistent with our comments at Investor Day about anticipating a reduction in our M&P spending versus 2016 levels. We continue to focus on improving the efficiency of our marketing spend by using our scale to consistently drive cost savings from our ongoing marketing operations. We also continue to shift our focus towards existing card members and increase our use of digital channels, both of which can add efficiencies.
With all these efforts, despite a lower level of marketing spend, we acquired more new cards during the first quarter than we did during Q4, including 1.7 million cards across our U.S. issuing businesses, and 2.6 million on a worldwide basis. Over 60% of the global consumer cards we acquired in the quarter came through digital channels. Digital is particularly important, as you know, for acquiring new millennial card members. Going forward, we continue to anticipate that full-year 2017 M&P will be lower than 2016 and more similar to full-year 2015 levels. I'd note, however, that the ultimate level of marketing expenses will be influenced by our financial performance and the opportunities present in the marketplace. Moving to rewards. Consistent with our Investor Day expectations, rewards expense was up 6%, despite a small decline in proprietary billing volumes versus the prior year.
Adjusting for the Costco co-brand volumes in the prior year, rewards expense would've increased in the quarter by 20%, while adjusted proprietary billings grew by 6%. This growth in rewards resulted in a ratio of rewards cost to proprietary billings of 87 basis points. The greater year-over-year increase in reward expense during the quarter reflects the impact of the enhancements to our U.S. Platinum products that we implemented at the beginning of Q4 2016, as well as continued strong growth in our Delta co-brand portfolio. Cost of card member services increased 14%, reflecting higher engagement levels across our premium travel services, including airport lounge access and co-brand benefits, such as first bag free on Delta.
As we highlighted at Investor Day, this is an area where we can offer differentiated benefits and will continue to invest, as evidenced by the rollout of the new Uber benefit on our Platinum Cards a few weeks ago. Turning now to slide 15 and touching on capital. We continue to use our strong balance sheet position to return a significant amount of capital to shareholders. Over the last nine quarters, we have returned 101% of the capital we have generated. I think this shows the commitment we have over time to leveraging our business model and capital position to steadily create shareholder value. We of course just completed our submission for the 2017 CCAR process earlier this month. As I'm sure you're all aware, the process continues to evolve each year.
We remain confident in the strength of our business model and our ability to drive shareholder value through capital returns. Of course, we also use capital to support business-building activities, such as growth in our loan balances, potential M&A activity, in addition to returning capital through dividends and share buybacks. I'd also remind you that our capital plan for the upcoming year will be dependent upon the Fed's review, and we expect to hear back from them about our submission in June. Stepping back. Over the past several years, we have embarked on a series of initiatives to reposition the company and drive sustainable revenue growth.
Those efforts, which we covered in Investor Day, include, amongst others, focusing on further penetrating commercial payments by leveraging our small business and middle market assets in our global commercial segment, driving more organic growth through expanded engagement with existing customers, better leveraging our digital and big data capabilities for new customer acquisition and other targeting, growing our merchant network, and pursuing lending expansion opportunities. These actions were targeted to provide a mix of returns over the short, medium, and longer term. While the impact from those efforts will play out over time, we are encouraged with the trend that we have seen in our business metrics and revenue growth over the past several quarters and believe that these initiatives are driving real momentum.
We look out to the balance of the year, we believe that our outlook for the full year 2017 EPS to be between $5.60 and $5.80 remains appropriate. As we discussed at Investor Day, we anticipate that EPS will grow through the year. As we have in the past, we will continue to balance delivering earnings to the bottom line and investing for the moderate to long term. We do believe that our 2017 plans appropriately balance shorter-term profitability with the steps we need to take to generate sustainable revenue and earnings growth over the longer term. With that, let me turn it back over to Toby. We'll move to Q&A.
Thanks, Jeff. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. With that, the operator will now open the line for questions. Gary?
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your touch-tone phone. If you are using a speakerphone, please pick up the handset before pressing the numbers. Again, star one if you'd like to ask a question. Our first question comes from Sanjay Sakhrani from KBW. Please go ahead.
Thanks, good results. I guess I'm just making sure that the EPS outperformance in the first quarter relative to what you articulated at the Investor Day, was really a result of revenue outperformance as you mentioned, Jeff. I guess when we think about the difference between the $5.60 versus the $5.80 in your range, is the difference how much you'd spend on investments?
Well, a couple of comments, Sanjay, thank you for the question. You are correct that relative to our expectations early in March at Investor Day, what surprised us, frankly, in the month of March was how strong the revenue performance came in. That is the main driver of why our EPS for the quarter ended up being a little bit stronger than I would've expected back in that first week of March. On the margins, I'd also point out that we had a few tax-discrete items. You're always working on various tax audit settlements and things like that. They're a little bit hard to time, those came in and added a couple pennies as well. Although over the course of the year, that number is not particularly material. In terms of our guidance for the year.
I guess I'd come back to what I said in my earlier remarks. Sanjay, we feel really good about the start we're off to. Gosh, it's only one quarter, we have a lot of work to do as we go through the year. Certainly, we are encouraged by the revenue performance. I would say based on the first quarter, I certainly think it's much likelier that we will be at the higher end of the revenue range that I talked about at Investor Day, which was for adjusted revenue growth to be at 5%-6%. We'd like a little bit more time passed before we convert that into what that might mean for EPS. I would just conclude by saying we certainly feel very confident in the $5.60-$5.80 EPS guidance range that we have reconfirmed again today.
Thank you.
Great. Thanks, Sanjay.
Thank you. Now to the line of Eric Wasserstrom from Guggenheim Securities. Please go ahead.
Thanks very much. Just to follow up on Sanjay's line of questioning. You've in the past articulated various scenarios for revenue growth translating into certain levels of earnings growth. So given that you're now accelerating towards the high end of your range, which is really quite impressive given the competitive environment, how do we conceptualize that relationship between revenue growth and operating leverage as it relates to the earnings outlook?
Well, you're right, Eric, that we have a pretty simple financial model we like to talk about, which all starts with taking advantage of the range of revenue growth opportunities we have. To the extent we can get good revenue growth, the fixed cost nature of our business allows us to get pretty steady operating expense leverage. The fact that we're not overly capital-intensive in our business allows us to use our capital strength to add a little bit more to EPS growth. It's a pretty simple model, but it all starts with the revenue growth line. You heard us talk a lot at Investor Day in early March about how focused we are on the objective of getting to a sustainable 6% revenue growth rate.
When you look at the business model we have, if we can achieve that, we certainly are then confident we can get to EPS growth of more than 10% steadily. What I would say is this is one quarter. We feel really good about the quarter we're in. Certainly in 2017, I'd remind you that when you think about the prior year, including a big gain on a couple of portfolio sales, as well as a half a year of earnings from the partnership that we no longer have. Our EPS growth, if you consider those things in 2017, is of course quite high, way above the more than 10% level. That's because we're getting an unusual amount of operating expense leverage because of our efforts to take $1 billion out of the cost structure.
Because as we've built into our guidance and as we're off to a good start on, we have pretty good revenue growth in the projections we have for 2017. What all that translates into 2018 and beyond, we'll have to see, but I think we feel pretty positive about the start we're off to this year.
Okay, thanks very much.
Thanks, Eric.
Thank you. Now to the line of Craig Maurer from Autonomous Research. Please go ahead.
Hi, thanks. Looking to ask a question on a less glamorous subject. Could you comment on where attrition has been running and how that's trended over the last 12 months? The new account growth is very impressive, and I just was hoping to balance it with the other side of the equation. Thanks.
Sure. Thanks for the question. As you have heard us talk about probably in multiple forums, when you look across our geographies and our customer segments, our attrition rates are modest and actually remarkably stable. They just don't move that much. I think it certainly got a lot of attention when we talked about the fact, for a few weeks last year in the U.S. consumer premium segment, when you looked at our Platinum Card, you had a very modest uptick in attrition that quickly came back down. All of these numbers for attrition across all of our businesses are in the low single digits on an annualized basis. We really haven't seen any change when I look across the different businesses and the different geographies, Craig, in those numbers.
To just finish off the Platinum story, while we saw that one little blip for a few weeks, in fact, we ended 2016 with more Platinum Card members in the U.S. than we've ever had, and more spending on the Platinum Card than we've ever had in a year. We are always focused on providing great values to our customers. We very much try to target our value propositions at customers who want to build long-term relationships with the company. That's what we're all about. Right now, we don't see any signs of any change in our ability to do that. Thank you for the question.
Thanks, Jeff.
Thank you. Now to the line of Ryan Nash from Goldman Sachs. Please go ahead.
Hey, good evening, Jeff. I was wondering if I can ask a question on rewards. They were up 20% year-over-year. I believe last quarter you talked about something closer to 13. Is this really just the ramping up of the costs associated with the updated Platinum Card value proposition? Are you still expecting rewards to grow at that pace? Given the changes that you made, are you now expecting them to grow faster? Thanks.
Couple things. It's a good question, Ryan. If you go back probably a year, you heard us first say at our Investor Day in 2016 that when you just acknowledge the reality of the competitive environment, mostly in the U.S. consumer segment. We said at the time we expected our rewards costs to grow a little faster than billings. In fact, if you look at most of 2015 and 2016, they really weren't. They were growing roughly in line with billings. Our expectation for some time has been that you would, in select cases, see us change some value propositions. In early October of last year, we did make some more significant value proposition changes in both the business and consumer Platinum products in the U.S. We're pleased with the early results on both of those.
That step-up is what drove our rewards costs up in Q4 of 2016. I'd say you saw probably the full effect, because you probably didn't quite get the full effect in Q4 in this quarter. You will continue to see that ballpark level of year-over-year increase until we're done lapping those changes as you get to the last quarter of 2017. All that said, I would remind everyone, we feel good as a general matter about our value propositions today.
I think the mere fact that we had another really strong quarter of acquiring new card members is a demonstration that across the range of geographies and customer segments and products that we have, we think we have very competitive value propositions when you look at both what Doug Buckminster referred to at our Investor Day as the sort of real table stakes elements of the product, which are about rewards and pricing, as well as the experiential value that we work very hard to uniquely offer given the range of unique strengths we have. I would expect to see in some, the rewards cost continue to grow for the next 2 quarters. It is mostly Platinum, although there's also some really nice growth we're seeing in a few of our co-brand relationships like Delta that also push the number up a little bit.
It's mostly Platinum, and we should be done lapping it as we get to the end of the year. Thanks.
Thanks for the in-depth answer, Jeff.
Thank you. Now to the line of James Friedman from Susquehanna Financial. Please go ahead.
Hi. Thanks, Jeff. I just want to ask you, it's on slide 16 of the appendix. If you don't have it in front of you, I don't want to disorient you, the question is, the spending per card member did decline to $3,297 this quarter. I was just wondering if you could just give some context. In fairness, when you look at it does look seasonal. Any context that you can give, if you don't have that in front of you, that's fine. Is that $3,297, is that a good or bad number? Should that be going up or down? The context for that would be helpful. Thanks, Jeff.
I'll admit I'm paging through, James.
I'm sorry.
I guess I'd make a few comments. First off, remember when you look at average spend year-over-year, the sale of the Costco co-brand has caused some dislocations that tend to, on a year-over-year basis, actually go in the other direction because the average spend per card was a little lower. When you look sequentially, and Toby just handed me this. Yeah. If you look, have the page in front of me. You see that when you look year-over-year.
Yep
At the 7% increase. When you go sequentially by quarter, you are correct that in Q4, most of us, and I put myself in this camp, tend to spend a little bit more in Q4, given the holiday season, than you do in other times of the year. I don't particularly see anything in the sequential change that should be particularly meaningful. I think the more significant thing is to look at the year-over-year change, where you're taking the seasonality out. You do see it up a little bit, although, as I said, that is aided somewhat by the shift in the mix of cards because of the sale of the Costco co-brand portfolio.
Got it. Thanks for the Hail Mary there, Toby.
[inaudible]
Thank you. Now to line of Donald Fandetti from Citigroup. Please go ahead.
Yes, Jeff. I wanted to just shift gears to co-brands briefly. I think you have the Hilton deal that might be coming up. Can you talk about when that renews and size it, and also how you view sort of an airline hotel deal versus a retail deal?
I think, Don, as I'm sure you expect me to say, we really value all of our co-brand partners, and I would put Hilton in that category. You didn't ask, but it's probably on your mind. I would put SPG in that category. We work really hard every day to create value for our card members, for our partners, and for our shareholders. Beyond that, I can't comment on specific contract terms, or what might be the ultimate outcome of Marriott as they think about what to do with the two co-brands that are now offered to both Marriott Rewards and SPG card members, or what Hilton might choose to do as it thinks about its current two co-brand partners.
What I would say is that to the distinction you made, we do think that there are certain types of co-brand partners who are interested in building value and business together. Co-brand partners who are focused on some of the travel and entertainment-oriented strengths that we have. I would remind you that we run a big consumer travel agency, we have a joint venture to run a big business travel agency. We have a long legacy of being very strong in attracting a customer base that is very travel oriented.
We do think that allows us to bring some unique strengths to travel co-oriented co-brands that quite frankly, probably aren't there in certain retail co-brands, where often a retailer, as we've talked about on and off over the last couple of years, often the retailer is really after, in many ways, a payment vehicle that will allow their customers to do some level of borrowing. While, as you know, one of our strategic initiatives is trying to capture more of our own customers' borrowing behaviors, as a general matter, we remain a spend-centric oriented company, and we're less likely to be real focused on or real competitive on products where the economics are really driven 100% by lending. We'll have to see where things like Marriott and Hilton go going forward, but we're focused every day on providing value to those partners.
Thanks, Jeff.
Thank you. Now to line of Robert Napoli from William Blair. Please go ahead.
Thank you. Good afternoon. Jeff, 7% revenue growth in the quarter, and March was the strongest, and you had the leap year effect. I guess that would suggest that there's a possibility that you could have an acceleration in revenue growth. I know you're reiterating 5%-6%, I know you're only through one quarter, but looking at the trends, it seems like you might be able to go above the high end of that range. Then partly affecting that, I've covered this company a long time. The international business seems to have more momentum than I can remember. The spend growth accelerating each of the last three quarters. Is that helping to drive that acceleration? You're still just scratching the surface of the potential, but why is international, is it just more investment there? Sorry, it's kind of two questions, but related.
Well, thanks for the question, Bob. Certainly we are encouraged, as I said, by the momentum we see across our billings growth, our loan growth, and our revenue growth. It is early in the year, right? I guess I'd make just a few balancing comments. Yes, March came in stronger than we expected, and certainly revenue growth came in stronger than we expected. We do a little bit of rounding. I will point out to simplify on the slides, if you go calculate the precise numbers, you'll see that our Q4 revenue growth rate on an adjusted basis was about 6.4%, and in Q1 it was 6.6. It does round six to seven, but you have to put it into a little perspective. Leap Day certainly hurt us in Q1.
I will say, outside the U.S., and particularly in our business segment, Easter being into April probably helped us a little bit. Yeah, we feel really good about the momentum we have had built over international. You will see some modest headwinds, though, as you get later into the year for regulatory reasons I talked that's going to impact the network business. While that will have a bigger billings impact than revenue or profit impact, it has some small revenue impact. We're driving the management team on getting to as much revenue growth as we can get to. We are really pleased with the start we're off to. As I did say earlier, it does certainly make we should be at the higher end of that 5%-6% range that I talked about yesterday for the year for adjusted revenue growth.
I just think we'd like to see a little bit more time pass and a little bit more performance before we move beyond that number. Thank you for the comments.
Thank you.
Thank you. Now the line of David Ho from Deutsche Bank. Please go ahead.
I appreciate the comments on March. Just curious, there's been a lot of debate on the disconnect between rising consumer confidence in the U.S. and not translating to overall kind of consumer spend, but obviously you're seeing it in certain areas. Your T&E billings for the U.S. are still down year-over-year, but certainly trends are looking better. How much upside do you believe, based on your new rewards propositions in some of these service-oriented categories, travel and entertainment would you capture kind of in the next cycle if it were to play out? Obviously, it's not really in your numbers and your guidance so far.
There's probably a couple questions there, David. The first thing I'd say is that through March 31, as we look at our results, it's hard for us to see anything that's suggestive of a material uptick in consumer confidence or consumer or commercial spending. While we have been gaining momentum, as we look at the many different areas gaining momentum, we can see a change that we have made in how we're running the business and what value propositions we're offering, et cetera, that seems to be what is driving the change as opposed to us getting the benefit of just a generally stronger economic environment. Certainly we are as hopeful as anyone that there, in fact, is stronger economic growth to come in the future. I just can't say I see any evidence of it right now in our results.
As to your comments on T&E, certainly one aspect of the changes we've announced in the U.S. to our Platinum products is to position them both for the consumer and small business segment as being the go-to products for the premium travel-oriented card member. We do think that positions us even better than we already are or positions us to be in a good spot to benefit from any increase in consumer spending or commercial spending in those areas. As I say that, I would remind you that I think we still consider and go into that latest round of changes as a very strong player in the T&E segment. I think that is the company's heritage. It remains a tremendous strength of the company.
Certainly, we have broadened our offerings tremendously over the last couple of decades, but that T&E strength, we do think continues, and the latest moves we made are just the latest step in ensuring that we don't lose that positioning. We'll have to see. I certainly hope that we see an uptick in spending. I just can't say we've seen it yet. Thank you, David, for the question.
All right. Thank you.
Thank you. Again, star one if you'd like to ask a question. Now to the line of Rick Shane from JPMorgan. Please go ahead.
Hey, thanks for taking my question, Jeff. Just curious, it's been observed the strength in the international business. You talked about the decline. You pointed to some anomalies related to the tax rate. I am curious if one of the things that we're seeing here is the greater contribution from your international businesses on the tax rate and given potential tax reform something everybody should be thinking about.
You are correct, Rick. If you just think about the U.S. with the co-brand portfolio sales and really steady, nice growth in international, you are correct that we're generating a little bit more of our earnings outside the U.S., and that does have a positive impact on our tax run rate. That's actually why even for the year before any of the discrete items that came in this quarter, we gave slightly lower guidance for the tax run rate than what you've seen in the prior year results. Tax reform, boy, we'll have to see. As you've heard us say in other forums, due to the nature of our business, we have a pretty darn high effective tax rate, and if you dig through the details of our financial statements, you will realize we pretty much pay that full tax rate in cash to the U.S.
We are a very significant taxpayer. Any lowering corporate rates in the U.S., we are likely to be a significant winner on because we're not a particular beneficiary of any of the varied and many things that help other organizations, in fact, pay lower rates. We'll have to see. Certainly, we're not running a company counting on any changes in the tax area, it would be a great thing if it were to happen.
Hey, Jeff, just to follow up on that, given that you talk about the tax rate coming back up a little bit through the remainder of the year, not to read too much into the first quarter tax rate, does that suggest that you think that the business mix is going to shift a little bit? Is there an implication there that we should be considering?
It's really just the math, Rick, of if you take the size of the settlements that drove the discrete items in Q1. In a single quarter, they were enough to drag your tax rate out of our 33%-34% range. If we don't have other settlements, which I generally don't build them into my forward-looking comments because they're harder to forecast. Over the course of a full year, they aren't quite enough to pull you out of your range. They certainly would, I would expect, will pull us to the lower end of that range. Not necessarily out. There's no differential assumption I'm making about mix.
Great. Thank you.
Thanks, Rick.
Thank you. Now to the line of Arre n Cyganovich from D.A. Davidson. Please go ahead.
Thanks. I was surprised with the strength of the net interest yield. You mentioned that there's some seasonal benefit in the first quarter. I was just curious if you think that current mix shift that you're getting also as a benefit will continue, and maybe just your thoughts on the future trajectory of that net interest yield for the card loan business.
Well, you're correct, Arren. There is a seasonal element, but as I mentioned earlier, there's really quite a number of other factors that have helped us steadily drive the net interest yield up including some pricing actions we've taken, including the fact that with the funding mix we have right now, the personal savings rates we have on our deposits haven't really moved. In fact, the Fed's interest rates increases so far have been a net positive for the company including the mix of customers moving to one where there's a little bit more revolve, which of course helps the yield. We also, this is a benefit that will fade a bit over time. You're helped a little bit right now because we had in our efforts to win back co-brand card members over the last year or two.
We had a number of people who were on introductory or promotional offers who are flipping into paying regular rates now, and that's helping move the rate up a little bit right now. It's a lot of factors there. Seasonality fades a little bit and the one-time impact from winning back some of the co-brand card members will fade a bit over time. All the other things we think will hold, and we think this continues more broadly to be an area where there is a long, long runway for steady growth in net interest income, right? We've been growing our loans by having over 50% of the increase come from existing customers. Boy, those are people we know, we understand their risk profile. It's further cementing the broad customer relationship we have with them. We feel really good about what we're doing here.
Thank you.
All right, Gary. We'll take one more question. Thanks.
That comes from the line of Jason Harbes from Wells Fargo. Please go ahead.
Hey, guys. Thank you for squeezing me in here. Most of my questions were asked and answered already, but I did just want to follow up on a comment you made, Jeff, about some of the initiatives you're taking to attract millennials to the platform. Perhaps you can elaborate a little bit on what you're doing within the context of a recent The New York Times article on the topic.
Well, Jason, I appreciate the question. I think first off, it's important to maybe level set a little bit on the facts. If you look at the past year in our global consumer business. I'll get to B2B in a minute, but in our global consumer business, over 35% of new customers brought in were millennials. In fact, that number was up about 16% versus the prior year. If you look at the growing number of applications and new card members who are coming through mobile channels, as you would expect almost half of those new applicants and card members are millennials.
If you look at the things we do as a company in the digital sphere, we talk a lot about how the unique nature of our closed-loop network allows us to be particularly adept at working with companies in the social media and digital and payments field. We really feel like we have been at the forefront of how you bring those three worlds of digital, social media, and payments together, and the partnerships we've done with Airbnb, with Twitter, with Facebook. Working with Facebook to have an Amex bot. When you look at our Pay with Points program which is much broader than anyone else's in the industry, it is disproportionately used by our millennial customers. We feel really good about track record of attracting millennials to the franchise. We feel really good about the range of things we do using our unique assets to appeal to millennials.
Lastly, I'd say though, whether you're a millennial or a baby boomer or in any cohort, we are, however, about building long-term customer relationships. We build products, we build value propositions, we build service experiences that are trying to attract and retain people who are about long-term relationships, not necessarily people who are looking for the latest great thing, and they're going to swap out of it in six months. Look, you can never do enough in this area, so we're focused every day on trying to do better. I think our track record with millennials is strong, and I think our ability to leverage our unique assets is strong. I appreciate the question, but we feel pretty good about what we're doing there, so.
Thank you very much.
All right. Great, Gary. Thanks very much. That wraps it up for us.
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