Welcome to the American Express Q2 2026 earnings call. At this time, all participants are in listen-only mode until we conduct a question-and-answer session later on. As a reminder, today's call is being recorded. I will now turn the call over to Kartik Ramachandran, Head of Investor Relations. Please go ahead.

Thank you, Dana, and thank you all for joining today's call. 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 from these statements are included in today's presentation slides and in our reports on file with the SEC. Today's discussion also contains non-GAAP financial measures. Comparable GAAP financial measures are included in this quarter's earnings materials, as well as the prior period earnings materials discussed today. All of these are posted on our website at ir.americanexpress.com. We'll begin today with Steve Squirey, Chairman and CEO, followed by Christophe Lekayak, Chief Financial Officer. After their remarks, we'll move to Q&A. With that, I'll turn it over to Steve.

Thank you, Karthit. Good morning, and thanks for joining us today. We delivered another excellent course at EPS at $4.53. cents. Our results continue the momentum we've seen over the last few quarters and reinforce the confidence that we have in our strategy for sustaining long-term growth. Based on our better than expected performance year to date, we are raising our full-year revenue growth guidance to 10%, and we plan to reinvest this outperformance in growth initiatives across our business. We continue to expect full-year EPS of $17.30 to $17.90. I'm sure the question on your expectations and you are raising your revenue guidance, why aren't you all? We have a choice. We can either drop the overperformance to the bottom line and buy back more shares through the wide range of attractive growth opportunities, both in the U.S. and international. We've chosen the latter because in the long run it is the one that creates the most value for our shareholders as demonstrated by our high that is what we have consistently done over the past several years as we're at the halfway point of the year let me take a step back and how our results reflect the strength of our business model and the strategic decisions we've made to position the company for long-term success over a year ago consistent with our strategic focus on strengthening our leadership in the premium made the decision to make a significant investment in enhancing our flagship platinum products in the U.S. While I've said this before, it's worth repeating. When we invest in a product refresh, we expect to realize the full benefits a year or two after launch. We anticipate increased customer engagement, as well as strong demand and spend growth. Then, As we lap the investments, we expect fee revenues to increase and VCE expense. And by focusing on bringing in high credit quality premium customers, strong credit performance, we enter 2020, make the upfront investments in the platinum value proposition to drive the high pace of revenue growth, maintain strong credit risk management, and drive operating levels. The combination of high were key elements of our plan for driving mid-teens EPS growth for the fourth consecutive year. Six months into the year, we're seeing stronger momentum than we expected. The investments we made in our value propositions have driven accelerated spend and revenue growth, and our platinum portfolio is now to fast-track the large number of high-credit-worthy customers with 65% of new consumer accounts coming from millennials and Gen Zs. Importantly, we've continued to deliver strong revenue and earnings growth, while at the same time being able to invest more in customer acquisition and technology over the course of the year as we capitalize on the growth opportunities that position the company for long-term success. In looking to the second half of the year, we have great momentum. We expect card fee growth to accelerate and variable card member engagement growth. As the Platinum Refresh has shown, the key to our growth momentum has been our focus on investing in innovating our members. is not just about reward points. It's about enabling restaurant booking dining network. It's also why we've added new sports sponsorships, like the NFL and Fanatics, and provide access to deepening the engagement with our premium customers is also why we continue to introduce new digital payment capabilities, such as the recent announcement that card members can redeem membership reward points directly within Apple Pay, giving them greater flexibility. A core element in designing our value propositions is working with world-class partners who value the opportunity to reach our high-spending premium card members. We're expanding partnerships with many of the premier companies in the world across a range of industries that further enrich the value of membership and drive customer engagement. So we announced a new global partnership with All Accord, the booking and loyalty platform of worldwide hotel brands, which include Raffles. Likewise, for example, in the second quarter, we've been executing the same strategy internationally has served us well. Up and bottom lines. A more premium. I'll now turn it over to Christoph.

Thanks, Steve, and good morning, everyone. We had another strong quarter with revenue growth of 10% and EPS up 11% year-over-year. Pre-tax income was up 15%, while net income was up 8% due to prior-year tax discreets. The strength of our premium customer base, combined with the success of our product strategy, has driven accelerated momentum in the first half of the year. Spend growth stepped up to the highest level we've seen in three years, up 9% effects adjusted in both Q1 and Q2. And balanced growth continued to keep pace with spending. Demand for our premium products remained strong, with over 70% of new accounts acquired on fee-based products this year. And card fees have now grown at a double-digit rate for 32 consecutive quarters. Importantly, our focus on premium products continues to drive improvements in credit performance. The strengthening we have seen in our credit performance is a deliberate outcome of our strategy to invest in value prepositions that attract customers with high credit quality. As a result of that strategy, both delinquency and write-off rates remain below 2019 levels, and delinquency rates have been between 1.2% and 1.3% for over three years. The combination of top-line momentum, excellent credit, and disciplined expense management have together supported 11% revenue growth and 14% EPS growth through the first half of the year, even as we have invested in our U.S. Platinum value propositions. These results demonstrate the strength of our model and give us confidence in our ability to drive sustainable growth in line with our long-term aspiration. Turning to build business trends for the quarter on slide 4, overall spend was up 9.4% effects adjusted, almost a point higher than Q1. Growth was broad days across categories, with goods and services spending up 9% and T&E up 10%. Retail spending continued to be very strong, up 13% effects adjusted in the quarter. Restaurant spending, our largest T&E category, was up 10%. Endline spending, picked up further from the strong growth we saw in Q1, also up 10% year-over-year. Our customers are showing strong demand for travel, with global MX travel bookings up 22% year-over-year in the quarter. U.S. consumer spending was up 11%, the highest level of growth since Q1 2018, excluding periods impacted by the pandemic. And we continue to see good engagement from our younger customers. Millennial and Gen Z, which make up the largest share of U.S. consumer spending, remained our fastest-growing cohorts this quarter. Commercial spending picked up to 5%, with both U.S. SME and large and global customers growing at the same pace. We are still in the early stages of our commercial product roadmap, but we are encouraged by recent trends. At the same time, we do expect to see impacts from the sale of the small business co-brand portfolios in the balance of year, which I will get to a bit later when I discuss our outlook. International also delivered another strong quarter, with spin-up 12% effects adjusted. growth remains broad based across consumer and business customers and across geographies with four of our tough five countries growing at a double digit rate. Turning to new card acquisitions we acquired three million new cards in the quarter with continued momentum in acquiring younger customers and attracting new customers onto our fee paying products. Looking at balanced growth and credit, total balance increased 9% year-over-year effects adjusted in line with bill business. We have now lapped the roughly one percentage point impact on balance growth from when the small business co-grant portfolios were classified as held for sale over a year ago. As a reminder, although these two portfolios were classified as held for sale, we continue to earn economics until the transfer of the portfolios to the new issuers. One portfolio transfer happened in April this year and the second one is expected in Q3. Credit performance continues to be very strong. The Q2 write-off rate was flat versus last quarter while the delinquency rate declined. Provision expense of 1.1 billion included a reserve release of 191 million dollars, mostly reflecting further strengthening of portfolio credit performance. The strength of our model also holds in a stressed environment as demonstrated by the Fed's recently released CCAR results, which show that under a severely adverse scenario, we have the lowest projected credit card loss rate across all banks and a pre-tax ROA of 3.8% over nine quarters. Turning to revenue on slide 13, revenue was up 10%, marking our fourth consecutive quarter of double-digit revenue growth. Net card fees reached record levels in once again our fastest growing line up 15.4 percent. We continue to see good momentum in attracting customers onto our premium products with 75% of new accounts acquired on fee paying products in the quarter, the highest level we have seen since we increase our focus on premium products. Net interest income was up 11% this quarter. We saw around a one percentage point impact to year-over-year NII growth from the sale of one of the small business co-brand portfolios. We continue to grow balances largely in line with spending while driving higher NII growth by expanding the margin earned on balances. We are also seeing demand for our deposit products with balances from our U.S. consumer and small business banking deposit products up 9% year-over-year. The majority of deposits come from our con members, deepening their engagement with our membership model. And with around 10% of our U.S. con members currently holding a deposit account with us, we see a long runway for growth. Turning to expenses on slide 18, marketing and opex each grew 6% in the quarter. and the VCE to revenue ratio was 44.6%. The step-up versus the first half of last year reflects the investment we made in the value propositions of our U.S. Platinum cards when we refreshed these products in September last year. As we discussed at the start of the year, the VCE to revenue ratio is linked to the level of card member spending. Through the first half of the year, we have seen stronger spend than we expected coming into the year. including in categories like airlines, where customers earn and use rewards. These factors are contributing to a slightly higher VCE ratio than we originally expected. Moving on to capital, we return $2.9 billion of capital to our shareholders, including $0.6 billion of dividends and $2.2 billion of share repurchases. Our business continues to generate very strong returns, with an ROE of 36% this quarter. Our strong ROE enables us to return high levels of earnings to our shareholders over 75% over the past three years. Turning to our 2026 outlook, let me spend a few minutes on how we're thinking about the balance of year. Starting with billings and revenue, we expect to see impacts from the sale of the two small business core brand portfolios. the transfer of the portfolios are staggered across Q2 and Q3, building to the full impact by Q4. Starting in Q4, we expect a quarterly impact of around 1 percentage point to spend growth and around 2.5 percentage point impact to net interest income until we lap the portfolio sales. Put together, the impact of revenue to total revenue is about a 1 percentage point. I would note that the portfolio sales will have a negligible impact to pre-tax income, and these impacts were incorporated in the guidance we provided for the year. On card fees, we expect growth to accelerate in Q3 and to exit the year in the high teens. And we continue to expect credit metrics to be generally stable throughout the year. Turning to expenses, we expect marketing to be up by around 10% year-over-year in the second half of the year, driven by increased investments in customer acquisition. We continue to expect operating expenses to grow in the mid-single digits for the full year, including the additional investment in technology we previously discussed. On the VCE ratio, given the higher level of spendings we have seen this year, we now expect the ratio to be between 44% and 45% for the full year. We will lab the impacts of the platinum refresh starting in Q4, resulting in lower growth in VCE expenses. We feel really good about our momentum and our results halfway through the year, having delivered 11% revenue growth and 14% EPS growth, as well as the opportunities for continued growth ahead. Given the momentum in the business, we are raising our revenue guidance and now expect full year revenue growth of 10 percent and as we increase investments in new customer acquisition and technology development we are maintaining our full year eps guidance of 1730 to 1790. the guidance does not include the potential impact from the sale of our equity interest in global business travel group that we previously announced we expect the transaction to close in the second half of the year and we'll provide more detail then with that i'll turn the call back over to karthik and we'll take your questions thank you christoph we will now start the q a session we

ask that you please limit yourself to just one question thank you for your cooperation operator ladies and gentlemen if you wish to ask a question please press star then one on your touch tone phone you'll hear a tone indicating that you've been placed in queue you may remove yourself from the queue at any time by pressing star then two if you're using a speakerphone please pick up the handset before pressing the numbers our first question today is coming from sanjay sakrani of kbw please go ahead thank you good morning um so i'm curious if there versus like your core

mature customers spending more on the card i'm just trying to think about the sustainability of that outperformance and then also it's really impressive this is happening despite all the geopolitical impacts and and obviously the contagion to the economy i'm just curious if you're seeing anything on that front whether it's in uscs or in other areas thanks hey good morning sanjay so on uscs billing so you're absolutely correct so it's at 11.4 percent it's uh we went back in time to see when was the last time we saw either such a growth and you know if you strip out the discontinuity of covid you have to go back to q1 2018 so it's truly an impressive performance you know one of the biggest contributor to the acceleration is the platinum refresh it is by far the biggest product we have it has the fastest growth rate there's truly a lot of momentum we see that momentum coming from new card member acquisition as well as either tenured card members that are increasing their spend as well as either people who had either another card in their wallet and upgrading to platinum card right and and so platinum is definitely pulling a lot of a lot here in the acceleration you know if you go back to q1 we quantified that acceleration and i talked about, it wasn't a Q1 number, but we talked about a 600 basis point acceleration across, you know, the entire platinum portfolio in U.S. consumer. So it's truly coming from a lot of tenured con members that are just consolidating their spend because they enjoy the new value proposition.

Yeah. Hi, Sanjay. Let me just add a couple of points. I think with the refresh, cash engagement has been really accelerated, and that's driving a lot of the spend. When you start to dig into the numbers, we saw a 22% increase in travel bookings, and we put that into the value proposition. You look at restaurant spend was up 10%, but when you look at resi restaurant spend, it's double that. So again, I think what we've hit on really, I think well here with this you know we're stepping up engagement so i think it's you know it's a kind as christophe said it's a combination of you know new acquisition but it's also it's also the engagement that we're getting with existing card members and it it is it is very impressive um to be at 11. and to the second part of your question about the geopolitical you know you know events out there so when you look at a granular data you do see right you do see gas

spend you know increasing significantly now it's around 2% of the total billing so it's not meaningful in terms of impact to the overall numbers you do see as well you know travel to the Middle East go through the Middle East you know like an impact as you would expect but travel globally is up 10 percent and you know this is the highest number oh headline is up 10 and this is the highest number we've seen in the last six quarters right so so there is you know there is like some impacts but there is no you know evidence of a general slowdown and people are offsetting these transactions with you know all the transactions in other categories. So, you know, it's not really visible at a macro level.

Thank you. The next question is coming from Ryan Nash of Goldman Sachs. Please go ahead.

Hey, good morning, guys. Good morning, Ryan. So, Steve, you know, you noted the decision to reinvest the upside in revenue growth. Maybe just talk a little bit more about the areas that you're investing in. I know you referenced customer acquisition and technology. And maybe just talk a little bit about what you think this will do in terms of your ability to sustain these types of top-line growth levels into 2027?

Thank you. Okay. Thanks for the question. Look, I think, you know, we've gotten to a point where, you know, the company's got quite large. And to continue the revenue growth, it requires us to continue to invest. And those investments come across a wide range. The one thing that I did call out was, obviously, we're going to acquire the fork all things you know working out the way we hope they work out and that will look you'll be deal cost integration cost things like that um you know we're investing uh in technology and when you think about our company um you know we've got us business uh corporate card business small business we operate in so many different countries we have a merchant acquiring business and a network business. There is no shortage of technology investments or enhancements or refreshes that need to occur. And so across a wide range of technology platforms, we're able to pull some of those investments into the second half of the year. And so to be able to get to things quicker is a huge advantage for us because we're going to have to make these investments over time. And why not make those investments sooner rather than later to update the platforms and so forth? The other thing that is still out there is there are still card acquisition opportunities. And to my point about sustaining the growth, you need to continue to invest in acquiring high-revenue-generating cardholders and high-spending cardholders to continue the really good revenue growth that we've seen over the last few years. And so that's where you can think about these investments occurring. It's in technology, a little bit in the fork, and also in card acquisition. And then you've seen, we've announced a number of things that we're participating in from an agentic commerce perspective, and, you know, that requires investment as well. And those things weren't on the, you know, weren't on the docket at the beginning of the year. So, you know, it's not a stagnant business, and it's not a business that you don't need to put gas in the tank. And so that's what we're doing. And I think it's a strategy we've employed for a number of years. I think it's really served us well. I mean, we've been consistently growing the last four years, double-digit revenue growth, mid-teens EPS growth, and, you know, we don't look at just a year. We look at it the medium to long term, and we think this is the best strategy for us and for our shareholders.

Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.

Hi, good morning. Steve, it sounds like, you know, you're feeling a little bit better about SME launched a pilot on the expense management software. where I guess I'm trying to understand, is this more of a discussion around, like, the pace of built business growth? Or could we see some type of middle market customers moving away to the fintechs where there could be some lumpiness? And then my follow-up is just to touch on the advantage of the closed loop around agentic commerce.

Okay. Thanks for the question, Don. Look, I think, you know, we announced a very aggressive, you know, commercial card roadmap earlier in the year. I think you're seeing a little bit of a bounce back. I mean, we were at, you know, 5% from an SME perspective, 5% from a large and global perspective. And look, I mean, from a middle market space, you know, Ramp and Brex have been out there. and Center, which is our expense management system, which we just launched, I think this will help us not only retain business, but actually win new business as well. It's middle market where we have seen the softness. Small business has been very strong and large and global and corporate has been moving along, I believe, very nicely. So, you know, my perspective is we've seen an uptick in SME billings over the last two quarters. And, you know, I think the roadmap that we have and this financial, you know, the launch of the middle market expense management software will certainly help us. As far as agentic, I think, you know, the closed loop, we've talked about the closed loop for many, many years. We've talked about it from a physical perspective, and then we talked about it from an e-commerce perspective, and I think we're even more advantaged from an e-commerce perspective, both from a fraud and data. But when you think about agentic commerce and you think about just how potentially fraught it is with not only, I think, by understanding what a card market wants to have and being able to go out and then match that purchase data will enable us to provide and back our customers a lot better, which is why we announced, you know, months ago now the agentic insurance product where I think we're going to have a huge advantage from a trust, service, and security perspective over our competitors, you know, in the marketplace because we have the data from both sides. We know what the customer wants. We'll know what the customer wanted to do. And we'll also know, you know, what the merchant delivered. And I think, you know, people, look, we're in the, you know, people say in the early, we didn't get to the early innings of the regular season yet. And I think people are, you know, a little bit nervous. They're nervous about interacting in the, of both, they will shoot out the advantage.

Thank you. The next question is coming from Craig Moore of FT Partners. Please go ahead.

Yeah, thanks. Good morning. I wanted to ask about the adjustment in the URR and how material the benefit was in the quarter, and that helps us gauge the rest of the year and when you grow over it next year. And additionally, you talked about higher client incentives and business development expense. Can you talk about those trends, considering the big wins you've had recently with the NFL, fanatics, and so on?

Okay, I'll take the URR question. So, you know, the URR, for those who are not familiar, is part of the key element of our membership rewards program. We evaluate and quantify the ultimate rate of redemption. From an accounting standpoint, you know, we book, we expense the cost of those rewards when they are earned, and we make an assumption about how many of those points ultimately are going to be redeemed. So it's a fairly complex calculation. So on a regular basis, we update the models. We try to make it better. we improve the data that feeds the model to be more accurate and as you can imagine there's a lot of you know reviews and you know a lot of you know work that goes into any revision of that of that assumption and so when we did that we came up with a slightly lower ultimate rate of redemption but it really hasn't changed it much I think you know we report externally the ultimate rate of redemption is like 96% rate and it really hasn't changed that much so it has a small benefit in the quarter uh in terms of the mr uh cost but at the foodier

level it's just going to be like mean it's going to be the minimum so you know it's not it's more hygiene and making sure that we have the right accounting process more than anything else yeah um thanks for the question greg when when we think about the nfl fanatics and you know Look, the other sponsorships that we have, the NBA, Formula One, the USGA, Wimbledon, and, you know, U.S. Open Tennis, sponsorships we can do, which is also why we have, you know, our event stadium benefits that we have as well with over 50 different locations around the world. And so what we're trying to do there is package up a group of experiences that our card members really like, and you can throw music and direct-to-artists things that we do as well. Well, specifically with, you know, the NFL, I think with the NFL, NBA, Formula One, it gives us global basis, card members to events and to venues that they want to go to. And Fanatics sort of ties it all together for us, not only from an experience perspective when we have Fanatics special, but also the various things that we will do with fanatics at the NFL Draft, NBA All-Star Game, Super Bowl, et cetera, and a collectible, things like that. So I think you tie that whole experience together. From a cost perspective, both fanatics and the NFL, when you think about our entire marketing, but we talk about increased investments, that's not – but we really like how they work together. Thank you.

The next question is coming from Rick Shane of JPMorgan. Please go ahead.

Thanks for taking my questions this morning. Look, you guys have talked a lot about customer acquisition. Can we talk a little bit about attrition, both quantitatively and qualitatively? Can we sort of think through what the one to two year retention rates are on new customers versus what you've seen historically, and also to the extent you get feedback when customers don't renew the card, what are the reasons that a customer might walk away?

Hey, good morning, Rick. Either the executive summary to you, like the answer to your question is we're not seeing anything on attrition. And I will send you back to a slide that we showed in Q1 that was actually pretty detailed on the platinum card where we raised the fee by $200. And either by the end of Q1, we had repriced, if you want, about a quarter of the U.S. platinum portfolio. And the retention rate were not only through the roof, they were like flat year over year. And last year, there was like no price increase. So we're not seeing anything on the attrition level, they remain very high. In terms of, you know, why the people are trying or downgrading, sometimes people say, you know, I'm not, you know, I just retired, I just don't need, you know, that kind of benefit anymore, and I'm just going to downgrade. Vice versa, as a matter of fact, I was saying earlier on that we've seen on the platinum card as a result of the introduction of the new value proposition a lot of con members upgrading so either but in general attrition levels remain very consistent with what we've seen in the past and we've been as you know you know refreshing a lot of our new products and we've been you know repricing a lot of the new con members and the end result is that attrition level have remained very very constant and very low for, you know, the past few years.

The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.

Thank you. Steve, how should we think about the longer-term return on investment and platforms like Resi for – there's benefits that, like you cited, the lift to spend in the revenue category, but the less obvious benefits, and we may not see, like, just the revenues from the platforms, and also kind of the higher loyalty, both with the merchants on those platforms and with customers from engaging, and then also any longer-term plans to integrate those platforms and maybe rebrand?

Thanks for all those questions, Mark. Now, so I think that, you know, what's interesting here with Resi, with Toc and The Fork, you know, what we've really tried to do with Resi and Talk in the Fork is to create mini closed loops within our closed loop, right? So what we've done here is we're connecting our card members and we're connecting merchants. But what's also really important is to remember that Resi, Talk in the Fork are open platforms. So they're open also to non-card members. And that becomes useful for us from an acquisition perspective, because what we'll do within those platforms is special offers for card members, table access for card members, and so forth. So it's an opportunity for us to acquire card members in a cheaper way, and also for them to experience the potential benefits of being a card member. When you look at Resi top of the fork on a standalone P&L basis, we don't look at it that way, because it's part of the value proposition. That's how we look at it. It's a benefit. And I think when a restaurant looks at Resi, the top or, and again, we'll look at the fork, they will look at it from a perspective of, I now have access to some of the best and the ones that are gonna spend more money at my restaurant. And, you know, the proof is in the pudding. I mean, it's 2X the spending at Resi restaurants And our ticket prices are higher for card members versus non-card members in all restaurants. I mean, we have a higher ticket. As far as the plans, Resi and TOC will come together from a user experience perspective, especially from a front-end user experience perspective. And so that will give us a broader, more integrated look. And the fork, given it is European-focused at this point, will stay as a standalone entity. And I think that that works out. But importantly, our travel representatives will have access to both. So when you book travel, you book your hotel, you book your airline, you will be able to – they'll be able to also book restaurants for you. And restaurants in Europe is the highest, one of the highest demand things that we have in that area. So we don't look at, you know, the P&L per se of resi talk, and we won't look at it at the fork. I mean, we manage it aggressively, but it's not a revenue maker or profit maker in itself. What it is, though, is it does help card member retention, customer acquisition, merchant satisfaction, and it drives spend. And that's what's really important. And it integrates very, very well with our travel business as it adds the capability for our travel representatives to just have that at their fingertips.

The next question is coming from Terry Ma of Barclays. Please go ahead.

Hey, thank you. Good morning. Morning, Terry.

Hey, good morning.

Can you maybe just give a little bit more color on your net card fee growth guidance in the back half this year, kind of what's contemplated in that, whether it's just from a step up of the annual fee from the back book, or are you contemplating more acquisitions? And maybe, like, just taking a step back, I think historically you've seen more of a notable acceleration after a refresh, and you just haven't seen this thus far at Platinum.

Hey, good morning. Terry. So let me explain what's what's happening here. So we're growing card fee at 15%. What I said in my prepared remark is that we expect that card fee growth rate to accelerate in Q3 and to exit in Q4 in high teens. The key driver of that acceleration you can track it back to the platinum refresh that they're they're you know of course like a lot of things that are impacting that number across the world but the single biggest contributor to that inflection point is platinum the reason why it takes a while to hit the pnl is because as you know we started you know repricing card members from january uh only and when we move card members to the new price point, we amortize it over 12 months. So it's kind of like a slow process. And that's why the impact, if you want, is delayed. It is also because of that delayed impact that you've seen this kind of declining momentum, because you have to go back to the refresh of the delta card and the gold card and you'll see that kind of like acceleration on the car key line and we now in the declining kind of like growth rate as a result of that so you know there is inertia in that in that number in that growth rate any it takes you know from beginning to end something like two years to find its way into the P&L that's why you have this kind of like cycle but to be clear because that's the most important thing, we expect that, you know, card fees are going to exist this year with a growth rate in the high teens.

Thank you. The next question is coming from Rob Wilde, Hack of Autonomous Research. Please go ahead.

Morning, guys. A question on NII growth. First, in the quarter, you know, growth there slowed 150 bits from 1Q to 2Q, so just wondering if there's anything to call out there. And then going forward, I know you said to grow faster than Billings, but wondering if you could unpack that a little bit more.

You have the commercial portfolios that are drags, but on the positive side, you have the really strong credit outcomes, which might be a reason to continue to lean into NII growth. So, just curious how that all comes together in terms of growth in that line and then in the context of the higher revenue guide too.

Yeah. Hi. So, let me clarify this because there is indeed a bit of a you know, Norris in those numbers. First, let me start with the balance sheet and the growth of balances, right? We're reporting this quarter growth rate of 9%, which is in line with the billing growth of 9%. Last quarter, the balance growth rate was 7%. So their step up, you know, the biggest contributor, the roundings doesn't help here, but the step up is a function of the classification of those two small business co-brand portfolios that we reclassified as health to sale over a year ago. And we just let that kind of like reclass. And that's why you see a step up in the balance growth. Now, from a P&L standpoint and the NII line specifically, despite the fact that those two portfolios were classified as sale-to-sale, the economics were flowing through our P&L. But in Q2, specifically in the month of April, we transferred one of these portfolios, the Lowe's portfolio, to be specific. It's not a large portfolio, but it was large enough to impact the NII growth rate by about one percentage point. So the decline you see in the growth rate from 12% to 11% is largely attributable to the transfer of that portfolio to the new issuer. And as you think about the balance of year, there will be another transfer, the Amazon portfolio in Q3. And so by the time you get to Q4, both portfolio will be out of our system, if you want. And the impact to the NII line is going to be 2.5%. And, you know, this would be a headwind until we lap it. Now, what's important to understand is that although it impacts NII, the impact to net income and earnings is really negligible. And so it's not only negligible, it's also completely baked in in the original guidance that we gave at the beginning of the year because this was a slow trend coming. We knew exactly what would happen. So no impact to guidance, no impact to earnings, but it does create some discontinuity both in terms of the balance sheet balance growth and in terms of the NII growth rate. Hope that was useful.

Thank you. The next question is coming from Darren Peller of Wolf Research. Please go ahead.

Hey, guys. Thanks. I just want to touch on the operating leverage for a minute. I know that You've obviously said you're going to be reinvesting quite a bit of the top line upside between tech and customer acquisition. But just thinking for a minute about deploying AI within both your customer service and internal functions, I know that's still a considerable opportunity for operating leverage to offset some of the reinvestment. So just where are you seeing in terms of pacing on that right now? And when would you expect us to see some of the incremental benefits start to show up in a more material way?

Yeah, all right, Darren. Thanks for the question. And let me ask Christoph to talk about sort of what we look at for the rest of the year from an operating leverage perspective. And then I'll talk about I'll come back and talk about AI.

Yeah. So, you know, the way we define operating leverage, just to be clear, because I don't know whether we got the same definition, But we look at OPEX as a ratio to revenue. And either OPEX for us analyzed is like between $16 and $17 billion. And as you can imagine, there's a variety of things that hit that line. And the one thing I will say is just to be very careful that looking at a quarter specific OPEX number because there's always discrete item, one-off, you know, that hit that line. But if you take a step back, and I know you know this, but I think it's worth repeating, if you take like a giant step back and look at over many years, you know that we've been very effective at driving operating leverage in terms of that ratio of OPEX to revenue. And we are committed to doing that again. And AI is going to play a critical role in that. And it's part of the reason as well that we are investing so much in strategy. And so in terms of how and what to expect in the balance of year, we are expecting operating expense this year to be in the mid-teens, mid-single-digit, sorry. Oh, sorry, not mid-teens, mid-single-digit this year. And we're tracking well against that. I think this quarter is at 6%, and either we're going to be in that range by the time we get to the end of the year. In terms of the specific, maybe I'll let Steve talk about what we're working on.

Yeah, so let me talk a little bit about AI. And, you know, I think every company out there is engaged with this at this particular point I'm not so sure how many companies have really committed to actual in-P&L savings. I think when we look at it, one of the first places that we have deployed it, and we've deployed it in multiple places in the business right now, is technology. And from a technology perspective, what we're seeing is anywhere from a 30% to 40% decrease in cycle time from a coding perspective. Now, travel agents with AI that we had servicing our customers, that number really hasn't grown. that number to a marketing perspective to streamline some of our marketing campaigns so that we're getting out the marketing campaigns I'll get a lot easier on representatives come on this I mean we have high hopes that more productive line revenue growth and thank you the next question is coming from

Bill Karkachi of Piper Sandler please go ahead thank you good morning Steve and Christophe morning good morning Bill and welcome back thank you you've both been with amex for many years and you know as investors debate um you know amex's valuation versus history it would be helpful to get your thoughts on you know sort of as you reflect on your years with the company what has fundamentally changed about amex's product flywheel that makes the growth algorithm more durable today than it was historically and maybe if you could also touch on what gives you confidence that the rebuilt product flywheel can compound beyond the current

refresh cycle rather than just requiring repeated reinvestment to sustain growth thank you well thank you so um i'm finishing up 41 years um so i've been around a little bit longer than christophe um but i think you know when we when we take a step back um i think what's changed is I think we've committed truly understanding what our customer needs and where our customer is going. I think that's fundamental, is that we've done, I think, a much better job as a team understanding the customer. Because this business is all about the customer. And the customer doesn't stay stagnant. The customer continues to evolve. And so that's why product refreshes are so critically important, because customer needs are changing, one could argue, on a daily basis. We can't change products on a daily basis. I think the other thing that we have done is really we have expanded our aperture of who our customer is. And fundamentally, we believe, and we've always believed, but we still believe that our customer is high spending, high credit worthy, premium. We've pivoted is that we define that, and the reality is whether you're a boomer, a Gen X, a millennial, or a Gen Z, there are those types of customers in every single durability perspective. is a flywheel and an ecosystem that we can adapt to the next that come through the pipeline versus attempting to fit our one-size-fits-all product into multiple customer sets, we now are able to modify that product so the product is very expandable because if you look at it just look at the platinum product that's a product that can that can play well with boomers gen x and gen z and the next generation along because we'll continue to add value to it that'll have applicability across a wider set. I think the other thing that we've done and what we've really leaned into here is we work a lot more with partners, not only from a co-brand perspective where we create specific co-brand opportunities that allow us to go into a joint customer base, But I also believe our premium partners to provide benefits to our cardholders. And so if you look at not only the value propositions that we have, but if you look at the limited time offers that we offer, the ability for our partners to access this base, I think that's been critically important. The other thing that I would say, and I'm sorry for going on, but you have opened up the door here, is that our focus on international has completely changed. From an international perspective, we've really leaned into coverage. We've really leaned into premium. And what we've also done is we're not treating all of the countries we operate from a proprietary perspective the same. We've leaned into the UK, Mexico, and Japan, and that has played out really, really well for us. And so when you think about this, and I've only talked about the consumer side here, but when you think about this durability from a consumer, you now have a machine that is able to go after different types of cohorts, offers that make sense to them, with various products that make sense to them and also to integrate with our premium customers extra value you then do that on a global basis which we've done which is why the fork acquisition is going to be so important for us because it brings in we already have travel now it brings in restaurants and then so you look at that and then you bring the experience layer that we have and then the investment that we've made in lounges and in fine hotels and resorts and so you create this premium ecosystem that our customers are going to live in, and it's durable. And the durability is by the growth that we continue to have, whether it be lounges, whether it be restaurants, whether it be fine hotels and resorts, because our partners want to play in here. And look, I think that that's what makes it different. And when we look at the flywheel, and we look at the opportunity to reinvest some of our over-delivery that we've had this year, we feel confident because we know we can access the type of customer we need to access on a global basis, and there are more out there for us to access, and we think that's going to continue into the future. So, again, I could speak hours on how I think the company is different and how, you know, we approach sort of product development and what have you and how innovation is. We've really integrated technology. But I think that's what's different. And part of that is because our scale is so much bigger. You know, if I go back just to 2017, we're a $30 billion revenue company. And now, you know, we're $70 billion this year and we're looking at 10% revenue growth. So almost an $80 billion revenue company, potentially by the end of the year, you have more scale, and you have more ability to operate in the environment. So I think that's what's different.

Yeah, maybe I'll add, you know, it was a long answer, but, you know, I'll add a quick finance overlay on top of that. First, I'm going to say, since I'm younger than Steve, I'm only getting to 30 years with the company. But the key point that I wanted to make are this. There is a lot more momentum now than, say, 10, 15 years ago. You see that in the pace of the product refreshes. you see that as well in the revenue momentum, billing growth. Many of our metrics are moving at a faster clip today than there were 10, 15 years ago. The second thing, when I look at the balance sheet, the resilience of the portfolio is much, much stronger now. One piece of evidence that you can go to is when you look at the reserve rate that we have just between the end of 2019 and where we now, we lowered the credit reserve rate from 2.9% to 2.7%. That's, you know, an outcome of focusing on premium con members. The other proof point is you look at some metrics that prove that the con member base is getting more premium. You look at the role of car fees. That line has grown at 17% over the last kind of like seven years, right? And that's because there's just like a lot more con members paying fees. And the final point I'm going to make on this is that when you, you know, when you look at, you know, the stress testing that the Fed did, you can see as well that through the cycle, one day there will be an economic cycle, we have, you know, much lower right-off rate, peak right-off rate than any of our competitors, and we have, we remain profitable through the cycle. And finally, sorry, the last thing is that the focus on a younger card member gives us a lot of confidence in our ability to sustain growth going forward. They come with a lower income initially, but we're going to grow with them, and they're going to grow with us, and there's a lot of embedded growth that comes with the focus on younger card members.

Thank you. Our final question today is coming from Mihir Bhatia of Bank of America. Please go ahead.

Hi, good morning. Thanks for squeezing me in here. I wanted to ask about billing trends a little bit more, if you would mind. I think, Kristoff, you had mentioned billings were particularly strong early in Tupu, and it seems like that continued into June. but anything you can share on July or quarterly date trends and maybe just more broadly what is the billing skills assumption you have embedded in the raised 10% revenue guide are you underwriting billings to hold at this level does it assume some kind of deceleration from here I know you have the co-brand headwind of course so yeah so thank you Mihir for for the question so we're not going to get into trying to guide on billing going forward.

But we are a momentum business, right? And so you can expect that a lot of the good momentum we've seen is going to continue in the balance of year. And the investments we're making, the increase in the investments we're making, the goal is to support that momentum. Now, it's not significant enough to kind of like move the needle in the balance of year but but we expect that momentum to continue bear in mind though that as we transfer those two small business portfolios they're not very large they're not contributing to earnings but there was a lot of there was some bill business associated with those with those cards and that will put about a one percent headwind to to those billing numbers. So you're going to see a little bit of a slowdown as a result of that. But, you know, expect or, you know, that's our expectation is that the momentum is going to keep going in the balance of you.

With that, we will bring the call to an end. Thank you for joining us and for your interest in American Express.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.