American Express Company (NYSE:AXP) Q4 2022 Earnings Call Transcript

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Betsy Graseck: So another kind of subtext on this theme. I wanted to understand a little bit about how I should be triangulating the revenue growth outlook, which is very clear with the comments around normalization of credit, should I be expecting that you’re underwriting to that pre-pandemic level of was it 2.3 on the slide, with marketing spend being flat and the proprietary net acquired accounts here coming down a little bit in the quarter. So when I see all that, I’m thinking that your bubble of account acquisitions is through, I suppose, and you don’t need that marketing dollars to drive that incremental rev growth at the same time as you’re underwriting to a group, a credit pool that’s similar to pre-pandemic so we should have that NCO trajectory move back up towards pre pandemic? Or is there something that I’m missing in pulling that all together? Thanks.

Steve Squeri: Well, there is a lot there, but let me try and talk about marketing, and Jeff can pick up on other components. But €“ so look, the $5.5 billion of marketing spend was all-time record high. And the 12.5 million cards that we acquired. The fact that you saw a 300,000 card decrease sort of sequentially quarter-over-quarter is not something that we’re concerned about at all. And some of the comped timing of when you do your acquisition and so forth. And so €“ but the key point here is that we’re all looking at marketing efficiencies. And we continuously raise the bar on who we are bringing into the franchise. So we’re not €“ I wouldn’t say we’re at a bubble in terms of card acquisition. We don’t project card acquisition.

We provide the card acquisition numbers, but for us, and probably we need to do a better job going forward from a metrics perspective, but we really look at revenue. I mean we look at the cards that we acquire in terms of how much revenue we can acquire. It’s the same thing with billings. I mean, not all billings are created equal. I mean there is billings that you have that don’t have a lot of value to it within the industry, we look at profitable billings, we look at card fees and we look at that, as Jeff said, interest income. So I wouldn’t take away from this that we were at an inflection point or a bubble or anything like that. I think the $5.5 billion is a tremendous amount of money to go out there and acquire with, and we’re pushing the organization to even be more efficient and more effective with that money.

So we are looking at the same kind of acquisition levels that we’ve had in the past with higher underwriting standards as well. As far as operating expenses go, and as you start to think about that, we had a big step-up in operating expenses as we had tremendous growth. And having had a lot of experience running the components of this organization from both a technology perspective and an operating perspective, travel and what have you, as you see those volume increases, you need to manage and to get to that next level of scale. And we believe that we have gotten to that next level of scale, and we will get back to normal operating expense growth. And the other part of it just like everybody else look rates increased there was some inflationary pressure within there, but make no mistake about it, there was €“ we had to get to another scale.

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