American Express Company (AXP) The Bank of America Securities 2023 Financial Services Conference (Transcript)

Summary of American Express Company Conference Call Company Overview - Company: American Express Company (NYSE: AXP) - Event: Bank of America Securities 2023 Financial Services Conference Call - Date: January 15, 2023 Key Points Industry and Market Trends - Sales Data: January sales data across the industry has shown positive trends, consistent with previous earnings guidance for 2023 [3][4] - Economic Outlook: There is a growing optimism in parts of the economy, particularly among premium consumers and small businesses [5] - Travel and Entertainment (T&E) Spending: Year-over-year comparisons indicate stronger spending trends in Q1 2023 compared to Q4 2022, particularly due to the Omicron variant's impact last year [4][8] Company Performance - Billings Update: American Express has experienced strong year-over-year growth in billings across segments and geographies [3][4] - Small Business Segment: The U.S. small business segment is performing well, although digital advertising spending remains soft [7][8] - Premiumization Strategy: Over 70% of new card members in 2022 were on premium cards, with a 25% growth in card fee revenue driven primarily by attracting high-fee-paying customers [14][15] Customer Base and Premiumization - Target Demographic: American Express focuses on premium consumers and select small businesses, maintaining a strong brand appeal [10][11] - Younger Consumers: A significant portion of new premium cardholders are younger individuals, indicating a successful pivot in strategy to attract this demographic [17][18] - Credit Quality: The company has a higher FICO mix and better credit quality among its customers compared to pre-pandemic levels [29] Credit and Risk Management - Credit Metrics: While credit metrics are expected to rise from historically low levels, they are not anticipated to reach pre-pandemic levels in 2023 [29][30] - Credit Reserves: The company ended 2022 with credit reserves at 2.4%, below pre-pandemic levels, with expectations for a slight increase in 2023 [30] B2B Payments and Non-Card Initiatives - B2B Payments: American Express is focused on both card and non-card B2B payment solutions, with a steady growth outlook rather than a breakout opportunity [40][42] - Digital Checking Accounts: The company has introduced consumer and small business digital checking accounts, with plans for more aggressive marketing in the future [44][45] Strategic Insights - Product Range: American Express offers a broad product line to cater to diverse customer needs, maintaining a focus on premium offerings [21][22] - Market Position: The premium consumer market is the fastest-growing segment in the U.S., with strong small business formation trends [19] Conclusion - Growth Confidence: American Express remains confident in its growth trajectory, supported by a premium customer base and strategic initiatives aimed at enhancing customer relationships and expanding product offerings [19][45]