American Express(AXP)2024-02-08 16:00Financial Performance - For the year ended December 31, 2023, worldwide billed business was 220.5 billion, with 61.0 million cards-in-force issued by third parties[14]. - The Delta cobrand portfolio represented approximately 10% of worldwide network volumes and about 21% of worldwide Card Member loans as of December 31, 2023[19]. - Travel and entertainment (T&E) expenditures accounted for approximately 28% of the company's worldwide billed business in 2023, indicating sensitivity to economic conditions[105]. - Small business and corporate client spending represented about 43% of the company's worldwide billed business in 2023, highlighting dependence on a favorable economic environment[105]. - Approximately 22% of total revenues net of interest expense were generated from activities outside the United States during 2023[145]. - The interest expense for the year ended December 31, 2023, was approximately $6.8 billion[143]. - Higher delinquency and write-off rates were experienced for the year ended December 31, 2023, compared to the previous year, with expectations for continued increases[141]. - Rising delinquencies and bankruptcy rates may require the company to increase its reserve for credit losses, adversely affecting profitability[141]. Business Strategy and Market Position - American Express focuses on a "spend-centric" business model, generating revenues primarily from card spending, which is higher on average per card compared to network competitors[21]. - The company aims to broaden the appeal of its products to attract Millennial and Gen Z customers, as well as expand its position with small and mid-sized enterprise customers[11]. - American Express aims to expand its leadership in the premium consumer space by enhancing membership benefits and developing experiences for high-spending customers[25]. - The company focuses on evolving its card value propositions and differentiating its corporate card and accounts payable expense management solutions[26]. - The company has developed a wide range of partner relationships, including cobrand arrangements with major corporations like Delta Air Lines and Marriott International[18]. - The Membership Rewards program is crucial for customer value, with major redemption partners being Amazon and Delta[115]. - The company has been investing in growth initiatives to attract new Card Members and retain existing ones, but there is no assurance of continued effectiveness[114]. Workforce and Diversity - As of December 31, 2023, American Express employed approximately 74,600 colleagues, with 26,000 in the United States and 48,600 outside the United States[29]. - In 2023, 91% of colleagues who participated in the annual Colleague Experience Survey recommended American Express as a great place to work[29]. - Women represented 53.2% of the global workforce, while Asian, Black/African American, and Hispanic/Latinx individuals represented 20.6%, 15.6%, and 14.3% of the U.S. workforce, respectively[34]. - The company maintained 100% pay equity in 2023 across genders globally and across races and ethnicities in the United States[34]. Regulatory and Compliance - The Company is subject to comprehensive consolidated supervision and regulation by the Federal Reserve and the Office of the Comptroller of the Currency (OCC)[52]. - The company is cooperating with governmental investigations related to certain historical sales practices, which may lead to increased regulatory scrutiny and potential fines[49]. - The company is subject to significant anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations, with heightened scrutiny in certain EU Member States[96]. - Compliance with various international economic sanctions is critical, as failure to adhere could lead to serious legal and reputational consequences[98]. - The company faces complex anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, which could expose it to severe penalties for non-compliance[99]. - The company is subject to evolving and extensive government regulation and supervision, with substantial compliance costs[48]. - Recent regulatory scrutiny has increased, particularly regarding capital levels and liquidity standards, which may affect the company's financial condition[127]. Technology and Cybersecurity - American Express leverages technology to enhance product differentiation and improve service capabilities, ensuring a high-quality customer experience[10]. - The Technology Risk and Information Security (TRIS) program is designed to ensure the security, confidentiality, integrity, and availability of information systems, employing advanced security technology and a highly trained team[148]. - The company has experienced a significant increase in information security and cybersecurity risk in recent years, similar to other global financial institutions, and continues to invest in enhancements to its cybersecurity capabilities[150]. - The company maintains cyber insurance, but there is no assurance that liabilities or losses will be adequately covered[124]. - Cybersecurity risks related to third parties are managed through a Third Party Management Policy, which includes guidelines for identifying, measuring, and monitoring risks associated with third-party relationships[150]. Economic and Market Conditions - The ongoing geopolitical tensions, including the Russia-Ukraine conflict and Israel-Hamas war, have created economic uncertainty and market disruptions, potentially impacting the company's operations[106]. - The company suspended business operations in Russia and Belarus following the Russian invasion of Ukraine, reflecting the impact of geopolitical events on its business strategy[106]. - Economic factors such as inflation, unemployment rates, and consumer confidence are critical drivers of the company's profitability and operational results[105]. - The impact of the COVID-19 pandemic continues to create uncertainty in the macroeconomic outlook, influencing consumer and business behaviors[106]. - Adverse market conditions could significantly affect the company's access to capital and liquidity needs[144]. Environmental, Social, and Governance (ESG) - The company has an Environmental, Social and Governance (ESG) strategy focusing on building financial confidence, advancing climate solutions, and promoting diversity, equity, and inclusion[27]. - Climate change poses physical risks that could disrupt operations and negatively impact customer spending behaviors, leading to potential market volatility[138]. - The company may face increased expenses and reputational harm due to climate-related obligations and regulatory scrutiny as part of its ESG strategy[139]. - Increased scrutiny related to ESG goals could result in litigation and other adverse consequences for the company[118]. Competitive Landscape - The company faces intense competition in the premium space and for cobrand relationships, targeting high-spending customers with attractive value propositions[44]. - The company competes with various payment mechanisms, including digital payments, mobile wallets, and alternative financing solutions[43]. - The company is impacted by the rapid growth of alternative payment mechanisms, including digital currencies and buy now, pay later products[45]. - The principal competitive factors include product features, brand recognition, customer spending characteristics, and the quality of establishments where cards can be used[45].