美國運通 (AXP) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the American Express Q4 2019 Earnings Call.

(Operator Instructions) As a reminder, today's call is being recorded.

I would now like to turn the conference over to our host, Head of Investor Relations, Ms. Rosie Perez.

Please go ahead.

Thank you, Lea, and thank you all for joining today's call.

As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance.

These are based on management's current expectations and are subject to risks and uncertainties.

Factors that could cause actual results to differ materially are included in today's presentation slides and in our reports on file with the SEC.

The discussion today also contains non-GAAP financial measures.

The comparable GAAP financial measures are included in this quarter's earnings materials as well as the materials for the prior periods we discussed.

All of these are posted on our website at ir.americanexpress.com.

We'll begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results.

And then Jeff Campbell, Chief Financial Officer, will provide a more detailed review of our performance.

After that, we'll move to a Q&A session on the results with both Steve and Jeff.

With that, let me turn it over to Steve.

Thanks, Rosie.

Good morning.

I'm pleased to report that our 2019 fourth quarter and full year results continued the steady, consistent performance that we've delivered over the past 2 years.

Our strong top line growth continued with revenues growing 9% in the quarter.

This marked our tenth straight quarter of FX-adjusted revenue growth at or above 8%.

Once again, our revenue growth was broad-based driven by well-balanced mix of fees, spend and lend.

We added 11.5 million new proprietary cards in 2019, delivered solid billings growth and continued to grow loans while maintaining industry-leading credit metrics.

These results show that our strategy of investing in share, scale and relevance is working.

This strategy is the heart of our financial model, and it gives us confidence that in today's economic environment, we can sustain high levels of revenue growth, which is the foundation for steady double-digit earnings growth.

My confidence in our ability to generate consistent, solid results over the longer term is based on several factors: the fundamental strengths we derive from our differentiated business model, the significant growth opportunities we see across our business and our demonstrated success in executing our investment strategy against the 4 strategic imperatives I laid out 2 years ago.

Let me take a few minutes to share some of the highlights of the progress we made on each of these strategic imperatives in 2019.

We expanded our leadership in the premium consumer space by continuing our disciplined, strategic approach of refreshing our premium charge products and upgrading our co-brand portfolios globally.

In all these cases, we've added features that our Card Members value.

Acquisitions remained strong and approximately 70% of our new Card Members are choosing fee-based products, which helped to drive 17% growth in subscription-like fee revenues for the year.

Our new Card Members are skewing younger and are more digitally engaged.

Our refreshed products are also enabling us to reengage with our existing customer base where we're seeing increased organic spend, all-time high Net Promoter Scores and steady retention.

In our commercial business, we've taken our successful approach to strategic product refreshes and applied it to our business card portfolio in the U.S. and select markets around the world.

In addition to the refreshes, we've expanded our commercial card offerings with the introduction of several new products for business customers of all sizes.

And to deepen our relationships with our business customers, we continued our focus on growing our noncard product offerings by expanding our AP Automation solutions as well as offering a variety of lending and flexible payment programs to help our business customers manage cash flow and grow their businesses.

In total, over the past 2 years, we've refreshed and launched over 50 proprietary products across both our commercial and consumer businesses around the world, resulting in greater customer engagement and strong new card acquisitions, which are driving our revenue growth.

Turning to the network business.

In 2016, we set an ambitious goal of achieving virtual parity coverage in the United States by the end of 2019.

Setting this goal was a recognition of the fundamental importance that our merchant network plays in driving growth across our businesses, and it galvanized our organization's focus on achieving it.

I'm very pleased to report that as of year-end 2019, based on our internal tracking and our understanding of the latest industry data, we have achieved virtual parity coverage with approximately 99% of credit card-accepting merchants in the U.S. now able to accept the American Express Card.

Of course, we recognize that virtual parity coverage will always be a moving target.

The merchant landscape is dynamic with hundreds of thousands of U.S. businesses opening and closing every year.

Therefore, we will continue to focus on maintaining virtual parity coverage in the U.S. in 2020 and beyond.

We're also making good progress to increase coverage across our international markets where our Card Members live, work and travel to the most, and this will continue to be a focus for us.

Going forward, as we continue to grow our network, we'll work with our merchant partners in the U.S. and around the world to ensure that our Card Members are warmly welcomed and encouraged to spend in the millions of places where their Amex cards are accepted.

Finally, I'm also pleased to report that the People's Bank of China officially accepted our network application, an important next step in our plan to build the network business in China.

On the digital front, we've been hard at work integrating the acquisitions we've made over the last few years into our mobile app to provide our Card Members with premium access and experiences across a wide range of travel, dining and lifestyle services that differentiate us from our competitors.

We're also working with our partners and our internal development teams to deliver a wide range of new online and mobile features, capabilities and services to help our customers manage their life and their business efficiently and securely.

Our goal in these initiatives is to deepen the digital ties we have with our customers so that American Express becomes an indispensable part of their lives.

And we're seeing good results as customer engagement with our digital channels is strong and growing.

Today, 81% of our active Card Members are digitally engaged with us via our app and our website, and we've seen a 26% increase year-over-year in the customers who use our mobile app daily.

Those are just some of the highlights of our accomplishments in 2019.

As I've reported each quarter for the past 2 years, the progress we've made in each of these areas is driving our performance and shows that our financial model and investment strategy has generated sustainable growth.

That's why we'll continue this strategic approach and why we're confident that we have a long runway for steady growth over the long term.

With that in mind, we expect to deliver revenue growth in 2020 of 8% to 10%, on an FX-adjusted basis and earnings of $8.85 to $9.25.

Looking ahead, our business is strong, and our focus is clear.

We have an incredibly talented team at all levels and strong relationships with a wide array of outstanding business partners from our co-brand and digital partners to our millions of merchant partners around the globe, all working together to deliver the best products and services for our customers.

I'm excited about the opportunities that lie ahead in 2020 and beyond, and I'm confident in our ability to continue to deliver sustainable growth for our shareholders.

Now let me turn it over to Jeff.

Well, thank you, Steve, and good morning, everyone.

It's good to be here today to talk about the fourth quarter in what was a solid year for American Express and to lay out our expectations for 2020.

I'll discuss both our quarterly and full year results this morning, since it is our year-end call and since looking at our performance on an annual basis is both more in line with how we actually manage the business and also gives us a better sense of the underlying trends.

Turning to our summary financials on Slide 3. Fourth quarter revenues of $11.4 billion grew 9% on an FX-adjusted basis, and full year revenues of $43.6 billion also grew 9% on an FX-adjusted basis.

This growth, as it has been all year, continues to be driven by a well-balanced mix of growth in fee, spend and lend revenues and was consistent with the high levels of revenue growth we've delivered for over 2 years.

This strong top line performance drove net income of $6.8 billion for the full year and $1.7 billion for the fourth quarter.

In understanding our year-over-year results, I do need to spend a minute on some discrete impacts in our reported results this year and last year.

As a reminder, the fourth quarter of 2018 contained $0.58 of positive adjustments for discrete tax items related to the Tax Act of 2017 and certain tax audits.

In addition, as you remember, in the first quarter of this year, we had a $0.21 charge from the resolution of certain merchant litigation.

If you adjust for these 2 impacts, as we have done on Slide 3, full year 2019 adjusted EPS was $8.20, up $0.12 versus the prior year adjusted EPS of $7.33, including the $2.03 of EPS in the fourth quarter, which was up 17% versus the prior year.

Turning now to the details of our performance.

I'll start with billed business, which you see several views of on Slides 4 through 6. Starting on Slide 4. Total FX-adjusted billed business growth was up 6% in the fourth quarter and for the full year.

We do think it is important to continue to break out the billings growth between our proprietary and network businesses due to the differing trends as we continue to see the impact of exiting our network business in Europe and Australia due to regulatory changes.

The 13% of our overall billings that comes from our network business, GNS, was down 1% in the fourth quarter and down 2% for the full year on an FX-adjusted basis as a result of the market exits.

We do expect to fully lap the billings impact from these exits in the latter part of 2020 and return to positive levels of growth.

Our proprietary business, which makes up 87% of total billings and drives most of our financial results, was up 7% in the fourth quarter and 8% for the full year on an FX-adjusted basis.

Turning to Slide 5, as we have said throughout 2019, the proprietary billed business growth trends are consistent with the economic environment: solid growth, but slower than the very robust growth we saw in 2018.

You see this as you turn to Slide 6 to look at the billings by customer type for the fourth quarter.

Starting with U.S. consumer, which made up 33% of the company's billings in the fourth quarter and remains our largest customer segment, billings were up 7%, in line with the 7% to 8% growth we have seen all year.

This growth reflects continued strong acquisition performance and solid underlying spend growth from existing customers.

These trends also highlight the relative strength of the consumer in the U.S.

Moving to the right, international consumer growth remained in the double digits at 11% on an FX-adjusted basis, despite the mixed macroeconomic and geopolitical environment.

In the fourth quarter, we saw growth moderate in Mexico and the U.K. sequentially driven by external factors, though growth in the U.K. remained in the mid-teens.

And we continue to see strong growth in the mid-teens in our top markets across the European Union as well as in Japan.

Spending from our U.S. small and midsize enterprise Card Members, or SMEs, grew a solid 6% in the fourth quarter, in line with the third quarter.

We continue to feel good about the steady acquisition results we are seeing in our U.S. SME customers and importantly, as we think about 2020, we saw stabilization in this key customer segment in Q4.

International SME remains our highest-growing customer type with 15% FX-adjusted billings growth in the fourth quarter.

We feel great about the strong growth we saw throughout 2019, coming off of even higher levels of growth in 2018.

Given our focus on this segment and the low penetration we have in the top countries where we offer international small business products, we continue to believe we have a long runway to sustain strong growth going forward.

And then for the relatively small part of our volumes, 9% this quarter, that come from large and global corporate card billings, we saw a decline of 1% on the fourth quarter on an FX-adjusted basis, similar to what we saw last quarter.

As we've said for years now, this is not a growth segment for us, but it is an important part of our merchant value development.

Finally, on the far right, Global Network Services was down 1% on an FX-adjusted basis driven by the market exits that I mentioned earlier.

And if you were to adjust for those impacts, the remaining portion of GNS was up 3% on an FX-adjusted basis in line with Q3.

Overall, we continue to feel good about the breadth of our billings growth and the opportunities we see across the range of geographies and customer segments in which we operate.

Turning now to loan performance on Slide 7. Total loan growth was 8% in the fourth quarter, with about 60% of our growth for the year coming from our existing customers.

We continue to focus on taking advantage of the unique opportunity we have to deepen our share of our existing customers' borrowing.

At the same time, as we've been saying all year, we have increased our investments in premium products.

And that shift in portfolio mix, coupled with some steady tightening we have done on the risk management side over the past several years, has led to lower loan growth.

The shift towards more premium products has also led to lower loan balances on promotional offers, which, along with continued positive impacts from pricing for risk, contributed to the 50 basis point year-over-year increase in net interest yield in the fourth quarter, as you see on the right-hand side of Slide 7. So the combination of loan growth and yield increases drove the 12% growth in net interest income that we delivered this quarter.

Ultimately, we are focused on driving profitable revenue growth as the financial outcome of our lending strategy, and so we are pleased with the stability in net interest income growth that we saw in 2019.

Turning next to the credit metrics on Slide 8. If you were to take an average for the year to smooth out the quarterly volatility, lending write-off rates were up 22 basis points and charge rates were up 14 basis points on average for the full year.

This level of modest write-off rate increases in a BAU environment is consistent with the expectations we have talked about for several years now.

And as you can see on the bottom of the slide, delinquency rates have been relatively stable all year.

And the GCP loss ratio continued to actually be down year-over-year.

These trends reflect both the credit implications of our strategy as well as the relatively stable economy and low unemployment rate.

We continue to expect modest increases in our loss rates in 2020, consistent with the trends we've now seen for several years.

Importantly, we still do not see anything in our portfolios that would suggest a significant change in the credit environment, both on the consumer and commercial side.

In fact, all of these portfolios performed much better in 2019 than we expected at the beginning of the year.

This brings us to provision expense, which grew 7% in the fourth quarter and for the full year.

The business decisions we've made to shift more towards premium products, along with tightening things a bit on the risk management side, both contributed to the loan growth, credit metrics and provision trends we saw in 2019.

Moving forward, while there may be some variability in the monthly trends, we expect relatively steady loan growth in 2020.

And as I mentioned a few moments ago, from a credit perspective, we expect the kind of modest increases in loss rates year-over-year that we've been seeing to continue.

As a result of these dynamics, we do expect higher provision expense growth in 2020 than we saw in 2019.

While we're on the subject of provision, yes, let me touch on CECL.

As you know, the CECL accounting changes went into effect on January 1, 2020, for us as well as the rest of the industry.

In our first quarter results, we'll report the implementation or day 1 impact, which we will -- which we estimate will increase credit reserves by about $1.2 billion.

The increase will run net of tax through equity with no impact to earnings.

I would remind you that a unique aspect of American Express is our charge card portfolio.

So although our card and other lending reserves will go up by approximately $1.7 billion, we will have an offset from the approximately $0.5 billion decrease in charge reserves, given the short life of those receivables.

Now as a reminder, this increase will not have a material impact on our capital ratios or our ability to return capital to shareholders, given our 30% plus return on equity in the multi-year phase-in period for regulatory capital purposes.

Then we get to the ongoing or, as some would say, the day 2 impact of accounting for CECL and our ongoing provision expense starting in the first quarter of 2020.

Under our current outlook, we expect a relatively modest increase to our annual 2020 provision expense from the implementation of CECL.

More significantly, I do expect that there will be more quarter-to-quarter volatility under CECL compared to the previous methodology, though some of this volatility should net out over the course of the year, making our long-standing focus on annual results rather than quarterly results even more pronounced in 2020.

Now let's get back to our results and turn to revenues on Slide 10.

FX-adjusted revenue growth was 9% in the fourth quarter and for the full year.

The focused execution of our strategy has delivered strong top line revenue growth of 8% or more for the last 10 quarters on an FX-adjusted basis.

This consistent revenue performance has occurred in both the robust economic environment of 2018 and the somewhat slower growth environment of 2019 and continues to be supported by a well-balanced mix of growth in fee spend and lend revenues, as you see on Slide 11.

Net card fees remained the fastest-growing revenue line, up 17% for the full year and accelerating to 20% in the fourth quarter.

We are really pleased by the confidence that our customers place in our value propositions when they choose to pay these subscription-like fees.

And we continue to see that the majority of our new Card Members, around 70%, are choosing our fee-based products as well.

Supported by the continued execution of our product refreshment strategy and our focus on premium value propositions, we expect card fee revenues will remain the fastest-growing revenue line in 2020.

We are confident in our ability to maintain strong card fee growth, given the breadth of products that are driving this momentum across geographies and customer segments as well as the high levels of engagement we see with new and existing Card Members.

These high levels of engagement, supported by the progress we've made around coverage, continue to drive steady growth in our largest and most important revenue line, discount revenue, which was up 6% for the full year and in the fourth quarter, broadly in line with billings.

And net interest income grew at 12% for the full year and in the fourth quarter driven by the growth in loans and net yield that I mentioned a few moments ago.

Looking ahead, I expect net interest income growth to continue to be a bit higher than loan growth driven by continued benefits from pricing and mix as well as a modest tailwind from 2019 rate cuts.

Importantly, the portion of our revenue coming from fee and spend revenues remained at 80% for the full year and the fourth quarter, in line with history, and we expect that revenue composition to continue given our differentiated spend and fee-centric model.

Moving on to expenses.

On Slide 13, overall expenses grew 9% in the fourth quarter and for the full year.

There are 3 important items, though, impacting the quarter here that more or less offset but are important to understand.

First, there were a few positive income tax and other tax-related developments in the quarter that show up in the low effective tax rate as well as in the operating expense line.

We then, as we often do, took the opportunity to reinvest the upside we saw relative to our original plans to do 2 important things for the long-term health of the business.

First, we accelerated the funding of some incremental business growth initiatives, similar to what we did in last year's fourth quarter.

And second, we accelerated some of the things we are doing to evolve our organization for the future and improve operating efficiencies.

And as a result, we took a restructuring charge in the fourth quarter, which is included in the salary and benefits line in the tables that accompany our earnings release.

As I mentioned before, the impact of these 3 items roughly offset one another.

And you see the impacts across OpEx, marketing and business development, and the lower effective tax rates at the bottom of the page.

Looking at the full year, our OpEx growth of 8% was also impacted by the litigation-related charge we took in the first quarter of 2019 that I mentioned earlier in my remarks.

And as I've said previously, some of the investments we are making to deliver continued strong revenue growth, growth in sales force, growth in premium servicing and enhancements in digital capabilities, caused us in 2019 to see more growth in operating expenses than we have seen in recent years, or importantly, than we expect to see going forward.

We have a long track record of generating operating expense leverage by growing OpEx more slowly than revenues.

And going forward, we are confident that we have a long runway to continue to do so.

Turning now to Slide 14 to look at the trend in customer engagement expenses.

Overall customer engagement expenses for the full year grew 10% as a result of our investment strategy.

Starting at the bottom, marketing and business development costs were up 10% for the full year due to our continued focus on funding growth initiatives and, in part, the incremental impact of the 11-year extension of our long-standing partnership with Delta that we signed earlier this year.

Moving on to rewards expense, you can see that it grew 8% and was broadly in line with proprietary billed business growth for the full year.

And as we continue to evolve our value propositions and see high engagement with our premium benefits, Card Member services grew 25% for the full year.

While there were some adjustments that caused slower growth in Card Member services in the fourth quarter, we continue to expect this line to be our fastest-growing expense category as it includes the cost of many components of our differentiated value propositions, such as airport lounge access and other travel benefits, which we believe are difficult for others to replicate and help support the strong acquisition and engagement we are seeing on our fee-based products.

Going forward, we continue to expect total customer engagement expenses to grow a bit faster than revenues as we continue to invest in share, scale and relevance.

Turning to capital on Slide 15.

We ended the year with a CET1 ratio of 10.7%, which is near the top of our 10% to 11% target range.

During the year, we increased our dividend by 10% and returned $6 billion of capital to our shareholders.

This outcome is a testament to the 30%-plus return on equity that our financial model generates as well as our focus on maintaining capital strength while consistently returning excess capital to our shareholders.

As we've said, our primary focus is on maintaining our CET1 ratio within our 10% to 11% target range as the governor of our capital distribution plans, and we do not believe that CECL will have a material impact on those plans.

To sum up, we feel really good about our steady and consistent performance throughout 2019.

Looking ahead, we see a long runway to sustain high levels of revenue growth and double-digit EPS growth in today's economic environment.

That brings me to our outlook for 2020, and then we'll open the call for your questions.

Our guidance for 2020 is consistent with our financial growth augur.

As Steve mentioned at the start of our call, we are introducing our 2020 earnings per share guidance at a range of $8.85 to $9.25.

Our guidance does assume an economy that looks somewhat similar to 2019 and reflects what we know today about the regulatory and competitive environment.

Consistent with the performance we've been delivering for over 2 years, this guidance includes revenue growth of 8% to 10% on an FX-adjusted basis.

And at current exchange rates, we'd expect a more modest headwind from FX in our reported growth than we saw in 2019.

And as I mentioned earlier, we will continue to invest to drive those high levels of revenue growth, and so we expect customer engagement expenses to grow a bit faster than revenues again in 2020.

And we are committed to generating operating expense leverage by growing our 2020 OpEx at a slower pace than revenues and slower than the pace we saw in 2019.

Looking at the drivers of our financial results, there are a few other key planning assumptions I'd highlight.

As I mentioned earlier, we expect provision growth to be higher in 2020 than it was in 2019, including a relatively modest increase from CECL.

We do expect CECL to drive more volatility quarter-to-quarter, and so focusing on the full year results will be even more critical in 2020.

In addition, we expect that our effective tax rate will be around 21% next year.

In summary, we remain focused on sustaining high levels of revenue growth and in today's environment, double-digit EPS growth.

As I look at our performance over the past 2 years and our expectations for 2020, they clearly demonstrate consistent execution against our strategy as well as our financial growth algorithm.

With that, I'll turn the call back over to Rosie.

Thank you, Jeff.

(Operator Instructions) Thanks for your cooperation.

And with that, operator, we'll now open up the line for questions.

Operator?

(Operator Instructions) Our first question comes from Don Fandetti with Wells Fargo.

Good to see the solid guide for '20.

Jeff, wanted to confirm, does the EPS guidance include the negative impact of CECL?

Yes, absolutely.

So when you think about the range we provided this year, Don, I would say the normal thing of you have to think about a little stronger economy pushes us towards the higher end, a little weaker economy is why our lower end range is there.

And CECL is the other uncertainty.

But absolutely, we are contemplating what I call the relatively modest impact of CECL in there, so you should go with that as full GAAP guidance.

And are you in your guidance, I mean, I assume we're sort of at the kind of trough of billed business here as you're lapping some tougher comps.

Do you have an acceleration built in?

And can you talk about the discount rate, LTR knowing that you're sort of willing to scale that up and down?

Well, I think what I would actually point you to is the remarks Steve started with.

We've had 10 straight quarters now, Don, of revenue growth, which is ultimately what we're focused on in the 8% to 10% range.

And the fourth quarter was another strong quarter of revenue growth.

So actually, when we look at that metric, which ultimately is the end goal of the mixture of everything we're doing with card fees, with pricing, loan growth, with billings, with the discount rate, we actually see a lot of stability in the momentum that we're entering in terms of revenue growth.

Yes.

I think the other point is that if you look over these 10 quarters, we've shown that there's an elasticity to our billed business that still continues to drive the high revenue growth.

And so given the high card fees, the higher growth in card fees, the consistent performance we've had from a net interest income perspective, billings can fluctuate up and down.

The other thing I would point out is not all billings are created equally.

So we feel really comfortable with where we wound up and how we entered the year from a billings perspective.

Next question is from Mark DeVries with Barclays.

Steve, I have a question for you just on what inning you guys are in in this kind of product launch and refresh cycle.

I'm assuming, given you've done 50 already, that it's pretty late innings.

And the reason I'm asking is, as you pointed out, it's been a big contributor to adding new customers, reengaging with existing ones and presumably been really helpful in generating that strong revenue growth.

And if we are in kind of later innings, what are you looking to as kind of the levers to continue to sustain that revenue growth?

Yes.

The interesting thing is I wouldn't equate this to innings.

I would equate this to baseball seasons because the way you got to think about this is that product refreshes can happen on a 3- to 4-year basis.

And so we get to play a season all over again.

And so if you look at 50 refreshes over the last 2 years, there are still more to do within the existing portfolio.

And by the time you get done, guess what?

Some of your products are 3 and 4 years old now.

So I wouldn't think about this as a onetime thing.

And I think you have to think about this as continuous refreshment.

Because, look, the reality is our customer base constantly changes, we're looking to appeal to new customers in all -- on all aspects.

If you look at Platinum before we did the refresh, Platinum was not as attractive to millennials as it is today.

And if you look at the value and the benefits that we put on it, it's become a much more attractive product, and most of our growth has come from millennial uptake.

Look, we have -- since the refresh, we have 60% more Platinum cards than we did prior to that refresh, and over 50% of the new cards acquired to millennials.

So I wouldn't think about this as an innings game.

I think about this is we constantly play the baseball season.

And there's going to be another season and another season and another season.

It's just going to be different.

It's going to be different card products.

And when you look at our portfolio of card products, it's in the hundreds.

So we have ways to go.

Next, we go to Betsy Graseck with Morgan Stanley.

I was hoping that you could talk a little bit about the network opportunities outside the U.S. I know you mentioned, Steve, that you've essentially achieved parity in the U.S. now.

And maybe you could give us a sense, because I know that was a 3-year outlook that you gave, I think, last year.

And where are we there?

And should we expect acceleration?

Yes.

So look, from a -- from an outside the U.S. perspective, obviously, we're nowhere near where we are in the U.S. We identified a strategy that we wanted to increase overall coverage internationally by 20% over a 3-year period.

We talked about that at Investor Day.

I'd say, without giving specific metrics on this, we've made progress.

We expect to hit that 20% growth target over that 3-year period.

It's a very focused strategy in that we're looking at key cities.

We're looking at the key cities that our Card Members travel to and that are -- that we have large card bases in.

And we're also working with our network partners in markets that we do not have proprietary businesses to continue to grow that.

And let's not forget our efforts in China.

We are -- our license has been accepted.

We are waiting for the final approval.

And hopefully, sometime this year, we will launch the network, and that will increase not only coverage in China, but what it will do is it will put more cards on the network as we engage with the Chinese banks to have more Chinese travelers as they go into -- and the reality is they're going to go into a lot of our European and Asian cities, which is going to put more demand and will actually then help drive more coverage.

So we're still committed to it, and we continue to invest in it.

And the other point I would make out is the U.S. is not done.

From a U.S. perspective, as I said in my remarks, it is a moving feast.

And so what we need to do is to continue to sign those merchants that come into business.

And what we also need to do is to continue our efforts to have warm acceptance.

And from a warm acceptance perspective, what we mean is decals on the doors.

We put up over 1 million decals this year just in the United States alone.

And it's an education process as well.

It's an education process for the merchants, and it's an education process for our Card Members that, in fact, the card is accepted.

So while we've laid what we would call technical acceptance, there's some more work to be done from a warm acceptance perspective and our Card Members realizing now that the coverage is there.

So you'll see a lot of work in those areas as well.

Next, we go to Bob Napoli with William Blair.

Just the -- your competitors have been making some significant acquisitions, Visa acquiring Plaid ; I mean Mastercard, several acquisitions; I mean, PayPal buying Honey.

American Express has done some interesting tuck-in acquisitions.

But first of all, is there any concern about some of the acquisitions from a competitive perspective, like a Visa Plaid?

And is -- Amex, seems like there are so many opportunities to leverage your brand and your network with all of this innovation in the fintech and software space.

Is there areas that you would like to leverage or invest more into, whether it's security or other areas?

Look, I mean, we're not going to get into, obviously, specific acquisitions.

But what you've seen our focus over the last sort of 24 months has really been from some of our digital capabilities, whether that be Mezi or Resy or Cake and obviously, LoungeBuddy, and we did acompay.

And so what we're trying to do is build out the organic footprint that we have with our existing Card Members.

We're trying to engage with them more digitally.

And look, I think that our competitors, Visa, Mastercard PayPal -- PayPal is really a partner more than a competitor.

When you look at what they're doing, they're doing things that are smart for them.

They're run by really smart people, and they've got their strategies.

And their main focus is connectivity and bringing more and more different types of transactions across those rails.

And I think that the acquisitions that they've done to build out from a network perspective are smart acquisitions for them.

But when we look at what we're trying to do from a Card Member and a merchant perspective, we feel really comfortable with what we've done.

And I think just looking at the Plaid acquisition, which I think is a good acquisition by Visa, it allows them to provide connectivity from their bank partners into fintech.

In fact, we use Plaid today.

We have an investment in Plaid, and we'll make a little bit on that as well.

And so that's a more sensible acquisition for them than it would be for us, not only from an economic perspective, but certainly from a strategic perspective, and I think just a customer perspective.

So we look at everything.

We have our own target list of things that we want to do and things that, quite honestly, just don't make sense for us, where we're positioned with our model.

Next, we go to Moshe Orenbuch with Crédit Suisse.

You guys highlighted the -- being with -- between that 8% and 10% revenue growth kind of for a long string of quarters and pretty much right in the middle of that over the course of 2019.

As you look into 2020, you talked a little bit maybe of a little bit of a slowdown on the net interest income.

Are there any other things that you'd be looking at to accelerate from where they were here?

Well, Moshe, I guess, I -- we look at the stability we've seen overall in revenue growth, 10 quarters in the 8% to 10%, and see tremendous momentum to continue to meet that same target in 2020.

When you look at acceleration, I would actually point you to card fee growth.

The card fee growth has been our fastest-growing revenue line and actually accelerated in Q4.

And for all the reasons Steve described, we're pretty bullish on our ability to keep that as our fastest-growing revenue line.

I'd also point out to everyone that, of course, you have a large -- because of the way we do the accounting for this, as you would know, Moshe, we have a large portion of next year's card fees just sitting on the balance sheet, waiting to be amortized.

So we feel really good about that line.

And net interest income, I would point out, actually, has been very steady sequentially, Moshe.

Because while our booked loan growth rate has moderated a little bit, that part of that is just us being a little bit tighter about things like promotional offers, and that's why your yield is going up and net interest income growth has actually been pretty flat.

So gosh, we would look at the 2020 revenue guidance and say it's a continuation of what we've been putting up for about 2.5 years.

And we feel pretty good about the stability we see in the economy, the stability we see in our credit performance and the tremendous strength, frankly, of the U.S. consumer.

Next, we go to a question from Sanjay Sakhrani with KBW.

Sounds like the guidance ranges are more related to execution than anything else.

But last year, Jeff, you guys have talked about a scenario where there was macroeconomic weakening.

To the extent that there was any weakness, how should we think about this guidance, especially on the EPS side?

Well, look, I think the results we posted, Sanjay, in 2019 demonstrate that we've got a model that produced steady results in the really robust economic environment of 2018 and continue to produce those same results in the more modest growth environment of 2019.

So there is clearly a range of economic outcomes around where we are, where our model is flexible enough or resistant enough to change.

I'll go back to the card fee point I just made to Moshe, where our card fee growth is actually pretty resilient in different economic environments.

So we feel good about our guidance across any reasonable range of economic outcomes that anyone is forecasting right now.

Now if there's a sudden dramatic shift upwards or downwards, that's the kind of thing that it would take to probably cause us to move off that range.

Next, we go to Jason Kupferberg with Bank of America.

So I just wanted to start on the enterprise commercial side.

I know it's still only 9% of billings, but I think last quarter, we were expecting maybe a little bit of an uptick.

We got instead a little bit of a downtick there on a constant currency basis.

So I was just wondering, I know last quarter you had a couple of specific customers that were call-outs as driving some of the softness.

Were those continuing to be headwinds in Q4?

Was there more of a malaise in corporate T&E?

Do you still think we get back to, call it, low single digit in 2020?

And then just on a quick side note, can you size that restructuring charge for us in the quarter?

So let me quickly do the facts on the 2, and then Steve will probably add a little bit of color.

On the large and global, I guess, we look at it and we say, sequentially, it's about the same as it was last quarter.

Yes, you do have the same 2 large customers where there's some things unique to those customers going on.

But look, we've said for a long time this isn't a growth segment for us.

These are big companies doing T&E.

It's an important part of the franchise.

So we're not, frankly, particularly overly focused on that rate.

We're focused on other parts of commercial.

On the restructuring charge, the point I would make to everyone is, this is just an example of what we've done for many, many years, which is we had some very good developments on the tax side.

We used that to accelerate some spending around a range of growth initiatives.

You see some of that in the marketing line, some of that in some of the other customer engagement lines.

And yes, we did take a restructuring charge.

It's a little bit more than $100 million.

Look, we've been growing expenses.

We've added over 5,000 colleagues in the last year.

We will continue to grow expenses in 2020.

Frankly, we're going to continue that to add colleagues.

But we got to make sure we have the right people in the right place so that we can continue, as we have for many, many years, to scale our company as we grow our volumes.

Yes.

And so as far as restructuring, I think Jeff hit all that.

Look, I think with the large and global, it's -- from a company perspective, not a lot of companies are looking to grow their T&E.

So you don't have sort of the organic growth that you would have.

And then you have a couple of companies that pull back or you have a loss here or there, and you feel that in the numbers.

But it is 9% of the overall billings.

But from a profit perspective, it's a lot less than that.

This is an important part of our business from a network perspective, and it allows us to utilize our scale and infrastructure to really support our middle market business and our small business.

And so it plays an important role, and I think where that -- where we are from a perspective of overall billings, we're comfortable with.

It would be great if it would grow, but if it grows, it's not going to make that much of a difference from a profitability perspective, which gets back to my point about not all billings are created equally.

Some billings have a lot more profitability than others.

And so I think you'll probably see this sort of flatness continue as we move into next year.

And it's something that we're doing in our own company as well.

I mean, we're not looking to grow our T&E expenses.

It's not -- I don't sit around with my staff and say, let's see how we can grow more T&E.

I wouldn't mind sitting around with a lot of my customers' staff and saying that, but we don't do that.

And so -- and I think companies are doing that, and you're looking at T&E and looking at some more video conferencing and things like that and reducing some of the travel, and you see that in the numbers.

Next, we go to Rick Shane with JPMorgan.

Look, given the maturity of the business -- and it's really impressive to see your U.S. consumer business, which is 1/3 of your business growing at the rate that it is.

I'm curious to sort of understand what you think is driving that.

Is there an increase in discretionary spending among your legacy customers?

Or when you cite particularly the growth of millennials in the portfolio, is the ramp in their spending?

Well, Rick, the interesting thing about our business is it's probably not mature yet.

And I think one of the reasons after the financial crisis everybody jumped into this business, especially the banks in a big way, is because this is a business that just continues to grow.

When you look at the consumer business in the United States, it's sort of 8%, 8%, 8%, 8%.

And you see that -- you'll see that continuing.

And I think when we look at our business and from a maturity perspective, look, it's a mix of new customers.

It's a mix of what we would call same-store sales, if you're thinking about this from a retail perspective.

It's a mix of organic spending as well.

But we're bringing in new customers to the franchise.

And our brand is playing a lot more with millennials, which is over half of our customers that we're acquiring at this particular point in time.

And the reach that we're getting with some of our co-brand partners is getting us new customers as well.

So I don't really look at this business as really mature.

I look at this business as having a -- and I'm not just talking about our business.

I'm talking about the card business in general.

I think about this as a business that still has a lot of legs and a lot of growth.

And you see a lot of the technological changes, whether it's sort of tap and go and making it easy to buy online and so forth.

I mean, just with contactless, you're going to see more and more smaller dollar transactions coming on to card products, whether that be vending machines transactions, which is the next thing that's going to happen.

You're seeing this with transit.

Obviously, now in New York City, you can use tap and go through the New York City transit system.

So we don't really look at this as a mature business at all.

And we think there's expansion opportunities for us, not only with new customers, but also with our existing customers as we have less than half their share of wallet.

And we have, as we said for a long time, we only have about 23% of their share of lending.

So we think there's still a lot of upside in this business.

Next, we go to David Togut with Evercore ISI.

International consumer and international SME continue to be your fastest growth businesses.

And particularly, you've called out strength in the U.K. and the European continent.

Given the regulatory changes with Payment Services Directive 2 in Europe and U.K., Visa and MasterCard have both acquired fast ACH rails, both to address PSD2, consumer ACH payments and also to complement their B2B payment capability.

So my question really is, does fast ACH need to play a role in American Express's future?

And if so, where would you have an interest geographically, potentially to acquire fast ACH rails?

Yes.

So what's -- a couple of things.

Number one, I think from a consumer perspective, we see this sort of fast payments, we see as really looking to cannibalize some debit, looking to cannibalize some ACH, some check and things like that.

So from a consumer perspective, and we have an open banking test right now from a consumer perspective ourselves, where we're offering some of our noncustomers the ability to pay out of their bank accounts.

So that could be an opportunity for us.

But I don't see that really impacting credit and charge growth.

Look, I think they're -- what's interesting for fast payments ACH from a B2B perspective, and I've said this multiple times on calls like this and in meetings, they will play a role in B2B payments and it will play a role in procurement spending as well.

The reality is that we believe we can achieve the same things with the network that we have today and the connectivity that we have as we are -- we have the flexibility in pricing.

Look, I don't -- I'm not constrained by interchange.

I could price from a transaction perspective, and one of the advantages we do have in Europe in particular is we're a 3-party system.

We're not a 4-party system.

And so the relationships that we have with Card Members and merchants, which with that direct connectivity, we believe we can accomplish the same things without acquiring either a Vocalink or an Earthport or something like that.

But make no mistake, it will play a role in procurement.

The other thing that I've said on these calls before is, from a procurement perspective, fast ACH is really not sort of the be all, end all, given that most of these payments occur in 60 to 90 days.

The bigger opportunity is really integrating the payment process within the procurement process and marrying the procurer to pay.

And so -- and that takes a long, long time.

And that's why you do partnerships with people like SAP and people like Ariba to try and integrate the payment in.

Companies are much -- look, from my perspective, having to run procurement here as well, companies are much more focused on how you merge the 2 than sort of paying their vendor in 20 minutes.

The last thing I want to do is really pay a vendor in 20 minutes.

But what I really want to do is integrate the 2 together.

So I think there's a place for these acquisitions for -- again, for Visa and Mastercard, it goes back, I think, a little bit to the Plaid acquisition.

But I think we can accomplish the same thing with the capabilities that we have at the current moment.

Next, we go to James Friedman with Susquehanna.

So Steve, I did -- in follow-up to the previous question and the previous -- before that, I did want to ask about the large and global corporate again.

And I know it's a little like playing Twister, but I'm looking at the appendix in terms of the volumes from T&E, and the T&E actually grew 6%.

So that seems pretty good and consistent with the way that it's been.

But I realize not all T&E lands in large and corporate, I assume some of that's in -- so anyway, any context about how the T&Es grow, but the large and corporate was down?

Yes.

Well, T&E -- think about our consumer travel business and think about -- just think about the expansion that we've had in small business international and the expansion that we've had in Consumer International.

And when you think about small business international, it's not as mature as small businesses in the United States.

And so if you go back in history, what happened from a small business perspective in the United States, that started as a T&E card, and now has morphed much more into a B2B card and so the mix of volume that we have.

And the reality is, when you think about sort of the T&E aspects as it relates to outside the U.S. small business international that we have, there is a higher percentage of T&E that occurs on that card.

Because that's the first thing that small businesses will put on internationally.

And then, obviously, our consumer business is growing in leaps and bounds internationally.

And again, that has a much more T&E focus than it does retail focused.

The only math point I would add is, in our tables, that stat is a U.S. stat, but it just goes to the point -- the large and global segment is a small part of our total billings.

So the T&E trends get dwarfed in terms of the global company by what consumers and small business are doing.

Next, we go to a question from Chris Donat with Piper Sandler.

Steve, I want to ask kind of a longer-term history question about your card fee strategy.

Because when you go back a few years, there really wasn't that much growth or low single-digit growth in card fees.

And I'm wondering if your view is -- what's changed more Amex's approach or more the consumer appetite for fee-based cards?

No, it's been our approach that has changed.

And -- which is why if you go back for the last couple of years, we have started to refresh products.

We were not in the business of refreshing products.

If you do not refresh a product, it is really hard to increase the fee.

Adding value enables you to increase the fee.

If you're not adding value, you can't do that.

We had a fundamental shift in sort of how we've approached the business over the last few years.

You've seen a lot more focus on coverage.

You've seen a lot more focus on -- you've seen a lot more focus on a focused international strategy.

And you've also seen a major focus on card refreshment.

And card refreshment, remember, is it's not just about fees.

It's to get people to spend, which then gets people to revolve that spend.

So it really is more about engagement.

And the fees come along as you add value.

Our final question will come from Craig Maurer with Autonomous Research.

I wanted to get a little clarity on your thoughts for billed business growth trends in 2020.

With comps getting easier, and we're starting to lap some of the issues in corporate and certainly in GNS, can we see an inflection point in 2020 where billed business growth starts to reaccelerate?

And just a housekeeping item.

Are there going to be any unique quarterly trends in marketing spend this year due to the 2020 Olympics?

Well, I think the short answer on the second one, Craig, is no.

Obviously, the Olympics is an important event from a lot of perspectives, and we have a fabulous franchise in Japan, and it's benefiting from the prime minister's incentives that he's providing in the country to encourage more card use.

All good stuff for us, but not big enough for you to see in our global results.

On the inflection point on billed business, I'd really go back, Craig, to the theme Steve and I have both talked a lot about over the last hour, which is our revenue momentum has been very stable for 10 quarters.

And that's because of the breadth of sources, it's because of the way we're focused on being thoughtful about things like card fees, which Steve just touched on, or how we're pricing for risk in our lending portfolio.

And so we feel good about the trends on billed business, but we feel -- but more importantly, we're focused on the trends and stability on revenue that make us very comfortable with the guidance we've provided for another year of 8% to 10% revenue growth.

And it is not counting on a big inflection upwards on billed business.

If that happens, great.

But that is not a planning assumption, if you will, that underlies the guidance we've provided.

With that, we'll bring the call to an end.

Thank you, Steve.

Thank you, Jeff.

Thank you again for joining the call and for your continued interest in American Express.

As usual, the IR team will be available for any follow-up questions, and we look forward to seeing you at our Investor Day, which will be held on March 17 this year at 9 a.m.

Operator, back to you.

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