Financial Data and Key Metrics Changes - Revenues reached a record $17.9 billion, up 9% year over year [5] - Earnings per share (EPS) was $4.8, up 17% excluding last year's gain from the sale of Certify [5][14] - Total card member spending increased by 7%, consistent with previous patterns [6][15] - The company reaffirmed its full-year revenue growth and EPS guidance provided in January [6] Business Line Data and Key Metrics Changes - Spending in travel categories like airlines and lodging was softer overall, while restaurant spending was strong, up 8% FX adjusted [15] - The U.S. Consumer business saw millennial spending up 10% and Gen Z spending growing around 40% [16] - New card acquisitions totaled 3.1 million in Q2, with 1.5 million in the U.S. Consumer business [18] Market Data and Key Metrics Changes - International business continued to grow in double digits, up 12% FX adjusted [16] - The premium products drove around 80% of growth in card member revolving loans [19] - Delinquency rates remained low, with U.S. millennial and Gen Z customers showing better credit performance than older age groups [20] Company Strategy and Development Direction - The company is focusing on refreshing its U.S. Consumer and Business Platinum cards this fall to maintain leadership in the premium card space [7][12] - The strategy includes enriching value propositions with more benefits and offerings, attracting premier partners to enhance customer value [10][12] - The competitive landscape has shifted towards partner-rated value, access, experiences, and superior customer service [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model despite macroeconomic uncertainties [15] - The company anticipates continued strong performance in the premium card segment, supported by a growing addressable market [12][28] - Management acknowledged the competitive environment but emphasized the importance of delivering value to maintain pricing power [46][67] Other Important Information - The company returned $2 billion of capital to shareholders, including $600 million in dividends and $1.4 billion in share repurchases [27] - The CET1 ratio was 10.6%, within the target range of 10% to 11% [26] Q&A Session Summary Question: How does the company plan for intermediate term spending trends? - Management expects spending trends to remain consistent, with some softness in airline and lodging but resilience in goods and services [31][32] Question: How does the company view competition in the premium card space? - Management believes that competition has been beneficial for customers and that as long as value is delivered, pricing power will remain intact [46][67] Question: What is the outlook for international growth and acceptance? - Management is optimistic about international growth, noting double-digit growth and ongoing improvements in merchant acceptance [58][60] Question: How does the company address concerns about lounge access and overcrowding? - Management is expanding lounge sizes and innovating with new concepts to manage demand effectively [77][78] Question: How does the company view the dynamics of net card fee growth? - Management expects some moderation in card fee growth rates in the second half of the year, with potential acceleration in 2026 [105][106]

Financial Performance - Revenue growth was 9%, reaching $17.856 billion, compared to $16.333 billion in the prior year [7] - Adjusted EPS increased by 17% to $4.08, up from $3.49 in Q2'24, excluding the Accertify gain [5, 7] - Net income decreased by 4% to $2.885 billion [7] - The company reaffirmed its full-year guidance of 8-10% revenue growth and $15.00-$15.50 EPS [5] Billed Business - Total billed business grew by 7% year-over-year (FX-adjusted) [9] - U S Consumer Services billed business also increased by 7% year-over-year [12] - International Card Services billed business grew by 12% year-over-year (FX-adjusted) [17] - Commercial Services billed business increased by 2% year-over-year (FX-adjusted) [14] Credit Metrics - The net write-off rate for Card Member Loans was 2.2% [67] - The net write-off rate for Card Member Receivables was 1.4% [67] - Total provision increased by 11% year-over-year, driven by a larger net reserve build and higher net write-offs [77] Capital and Guidance - The company's CET1 ratio was 10.6% [53] - The company projects an EPS of $15.00 - $15.50 for 2025 [56]

Investment Recommendation - The author recommends Capital One Financial, citing a 28% increase since the Chapel Trust's purchase on March 6 [2] - The author believes Capital One has significant growth potential [2] Acquisition of Discover Financial - Capital One is acquiring Discover Financial in an all-stock deal valued at $353 billion [2] - The acquisition provides Capital One with one of the four major payment networks, alongside Visa, Mastercard, and American Express [3] - The acquisition allows Capital One to scale up to become a truly global payments platform [4] - The acquisition helps Capital One reduce its reliance on Mastercard and Visa by owning its own payment network and collecting transaction fees directly [5] Competitive Landscape - Discover, combined with Capital One, can better compete with Visa, Mastercard, and American Express [6] - Visa and Mastercard operate by collecting tolls for running their payment networks without taking credit risk [4] - Discover, like American Express, issues its own cards and processes payments [3]

Whenever the average is near their all-time highs, even after today's pullback, all sorts of people come out of the woodwork to claim that great stocks have become overvalued. But sometimes these stocks have a lot more room to run. Take Capital One Financial, the bank with a huge credit card business that we own for the Chapel Trust, which you can join by uh with you can follow along by joining the CBC Investing Club.Now, since we first bought this one for the trust on March 6, we're already up over 28%. Bu ...

Core Points - The Chase Sapphire Reserve® has increased its annual fee from $550 to $795 while introducing new benefits that could provide over $2,700 in potential annual value [1][62] - The value derived from the card's benefits varies significantly based on individual usage and preferences, making it essential for potential cardholders to assess their own needs [33][56] Summary by Category Annual Fee and Value Proposition - The new annual fee for the Chase Sapphire Reserve is $795, with a claimed potential value of over $2,700 from various benefits [1][62] - The card offers over $1,200 in annual travel value and over $1,500 in annual lifestyle value, although actual value will depend on individual usage [8] Benefits Overview - Key benefits include a $300 annual travel credit, airport lounge access valued at over $450, and complimentary IHG One Rewards Platinum Elite status [9][12][13] - Additional benefits include up to $300 in dining credits, $500 in statement credits for The Edit hotel bookings, and various subscription services like Apple TV+ and Apple Music [20][21][22][16] Usage and Alignment - Cardholders are encouraged to evaluate the benefits against their travel and lifestyle preferences to determine if the card is worth the fee [7][33] - The card's value can be maximized by utilizing specific credits and benefits that align with personal spending habits [33][56] Comparison with Other Cards - The Chase Sapphire Reserve is compared to other premium cards like the Amex Platinum and Capital One Venture X, highlighting differences in benefits and annual fees [48][51] - The Sapphire Reserve's benefits may not be suitable for everyone, particularly those who prefer simpler cards with lower fees [39][40] Conclusion on Worthiness - The card can offset its $795 annual fee through various credits, but this depends on the cardholder's ability to utilize the benefits effectively [33][56] - Frequent travelers are likely to find more value in the card due to its travel-related perks [57]

Core Viewpoint - Focusing solely on high dividend yields can lead to overlooking strong investment opportunities with lower yields but significant dividend growth potential [1] Group 1: Eli Lilly - Eli Lilly's sales increased from $28.5 billion in 2022 to over $45 billion in the past year [4] - The company offers a low yield of 0.8%, attributed to a stock price increase of over 370% in five years [5] - Eli Lilly has raised its dividend by an average of 15% annually for seven years, with a current quarterly dividend of $1.50, up from $0.74 in 2020 [6][7] Group 2: TJX Companies - TJX Companies provides a dividend yield of 1.4%, slightly above the S&P 500 average of 1.2% [8] - The company's revenue for the first quarter of fiscal 2026 rose by 5% year-over-year, totaling $13.1 billion [9] - TJX has increased its dividend by 13% this year, marking the 28th increase in 29 years, with an average annual increase of 20% [10][11] Group 3: American Express - American Express has a modest dividend yield of 1%, with revenue net of interest expense reaching nearly $17 billion, a 7% year-over-year increase [12] - The company raised its quarterly dividend by 17% in March, with the current dividend at $0.82, which is 91% higher than the $0.43 paid five years ago, reflecting a compounded annual growth rate of 13.8% [13][14]

Credit Card Industry Trends - JP Morgan disrupted the credit card industry a decade ago with Sapphire Reserve [1] - JP Morgan is pushing further upstream with a new credit card [2] - Competitor cards like Capital One carry a $395 fee [7] New Credit Card Details - The new credit card has a $795 annual fee, 45% higher than before [2] - The company hopes to attract customers with about $2,700 in annual benefits [2] - Benefits include fine dining and resort stays, Apple TV and Apple Music subscriptions [3] - Credits may only be applicable at selected restaurants or resorts [4][6][7] - A $500 hotel credit requires a two-night stay at a hotel within their fine resorts network [6] - A $300 dining credit is only valid at restaurants selected by JP Morgan Chase [7] Potential Risks and Customer Behavior - Customers may downgrade to lower-fee cards or switch to competitors [7] - Customers are sophisticated and may maximize credit card benefits using spreadsheets [5] - The bank previously incurred a $300 million charge due to customers gaming the system [4]

Financial Data and Key Metrics Changes - The company is targeting growth above historical levels at 8% to 10%, with the total addressable market (TAM) growing at approximately 6% to 7% [5][6] - Card fees have been growing at 20% in the last quarter and have consistently increased in double digits over the past five years [6] - Consumer growth was noted at 7%, with billings remaining above 2024 levels [7] Business Line Data and Key Metrics Changes - Spending trends have shown consistency with Q1, with some softness in airline and lodging spend, while restaurant spend remains strong [9][10] - Credit performance remains strong, with write-offs below pre-pandemic levels, indicating a structural shift in credit quality [26][31] Market Data and Key Metrics Changes - International business is growing faster than domestic, now accounting for 20% of the overall business, with a higher cross-border volume compared to the U.S. [40][43] - Gen Z billing is about 5% of U.S. consumer billing but is growing at over 40%, making it the fastest-growing segment [25] Company Strategy and Development Direction - The company is focused on premium products and younger demographics, with 60% of new account acquisitions coming from millennials and Gen Z [20] - The strategy includes enhancing product offerings to resonate with younger consumers, such as incorporating benefits like Uber credits and streaming services [22] Management's Comments on Operating Environment and Future Outlook - A modest level of inflation is viewed as beneficial, supporting revenue growth while expenses do not rise at the same pace [13][14] - Competition is seen as a positive force, expanding the total addressable market for premium products [64][65] Other Important Information - The company has made significant investments in technology, particularly in enhancing customer service through AI and digital engagement [52][56] - The company has a strong emotional connection with its card members, which is difficult for competitors to replicate [17][18] Q&A Session Summary Question: What is the growth outlook for American Express? - The company expects growth above historical levels at 8% to 10%, driven by a growing total addressable market [5][6] Question: How is spending trending? - Spending trends are consistent with Q1, with strong performance in restaurant spending and some softness in airline and lodging [9][10] Question: How does inflation impact American Express? - A modest level of inflation is beneficial, supporting revenue growth while expenses do not rise as quickly [13][14] Question: What is the strategy for attracting younger consumers? - The company focuses on premium products and evolving offerings to resonate with younger demographics, including benefits that appeal to them [20][22] Question: How does American Express differentiate itself from competitors? - The company has a strong emotional connection with card members and a unique value proposition that is difficult for competitors to replicate [17][18]

Group 1: American Express - American Express has become Berkshire Hathaway's second-biggest holding, with 151.6 million shares valued at $44.5 billion, making up 16% of Berkshire's stock portfolio [2][6] - The company focuses on a higher-income demographic, which is less affected by macroeconomic challenges, evidenced by a 6% year-over-year growth in total billed business and an 8% increase in currency-adjusted revenue [5][6] - American Express maintains its full-year profit outlook, expecting revenue growth of 8% to 10% and earnings per share between $15 and $15.50, reflecting a 14% increase from last year's earnings of $13.35 per share [6] Group 2: Capital One Financial - Capital One Financial caters to a broader consumer base, including those looking to build or rebuild credit, and has recently completed an acquisition of Discover, enhancing its market position [7][12] - The merger with Discover could challenge the dominance of Mastercard and Visa in the credit card payments network market [8][10] - Berkshire Hathaway established a 7.1 million share stake in Capital One worth about $1.3 billion, and Goldman Sachs has added it to its list of undervalued stocks [12] Group 3: Occidental Petroleum - Occidental Petroleum remains a significant investment for Berkshire Hathaway, with a 264.9 million share position valued at approximately $13 billion, representing nearly 6% of Berkshire's stock portfolio [18] - Despite the shift towards renewable energy, oil demand is projected to continue growing, with estimates suggesting peak oil consumption may not occur until 2034 or later [14][15] - Occidental is advancing in carbon-capture technology, which is expected to grow at an annualized rate of over 21% through 2034, positioning the company well for future opportunities [16]

The burden of credit card debt is high for many Americans. In the first quarter of 2023, credit card balances nationwide surpassed $1 trillion for the first time and have remained above that amount since — the most recent Federal Reserve data puts outstanding balances at a total amount of $1.18 trillion. On an individual scale, balances are high too. TransUnion data shows the average credit card debt per borrower is $6,580, while Experian data puts average balances at $6,730. With today’s very high credi ...