American Express Company
Q4 2020 Earnings Call Transcript

Published: 26 Jan 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q4 2020 Earnings Call. 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. Vivian Zhou. Please go ahead.

[Vivian Zhou:]

Thank you, Alan, 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 from these statements are included in today’s presentation slides, 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 earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com.

[Steve Squeri:]

Thanks, Vivian. Good morning and belated Happy New Year to everyone and hope you and your families are healthy and safe. As you saw, we earned $1.76 per share or $9.35 billion in revenues in the fourth quarter. And while we’re still seeing the impacts of the COVID pandemic on our business, the trends have steadily improved as the year went on. At the beginning of the pandemic, we had little visibility into the future, but we did have a plan for managing the company through this period of uncertainty focusing on four priorities; supporting our colleagues, protecting our customers and our brands, remaining financially strong, and at the same time taking steps to structure our company for longer-term growth. We’ve made substantial progress against each of these priorities. As I talked about last quarter, we see this cycle playing out in three phases. Phase 1 has been about managing through the peak of the uncertainty, which is what we focused on for most of 2020. We are now solidly in phase 2, which is about investing to rebuild our growth momentum. Our goal in phase 2 is to prepare us for phase 3, a return to pre-COVID levels of earnings and our financial growth algorithm. Our progress in managing through phase 1 confirms the strength and resilience of our differentiated business model. Key elements of this model, such as the diversity and scale of our customer base, our brand, our global merchant network, and our integrated payments platform have given us a solid foundation to build on as we move into the next phase. As we’ve seen throughout this period, our customers have been resilient and adaptive since the lows in mid April, overall Card Member spending has steadily improved. Our Card Members quickly adapted to the current environment with an acceleration in their shift to online and card-not-present spending. Non-T&E spending recovered to pre-COVID levels in Q3 and continued to grow throughout the holiday season in Q4. Consumer holiday spending was up 11% globally year-over-year, exhibiting particularly strong online growth of 40%. In addition, our value propositions and brand continue to resonate with our customers. Attrition rates in our proprietary products remain lower than last year and our customer satisfaction levels remain above pre-COVID levels. We again ranked number one in J.D. Power’s Annual Credit Card Satisfaction Study of U.S. consumers for the 10th time in the 14 years the study has been conducted.

[Jeff Campbell:]

Well, thank you, Steve, and good morning, everyone. Today, I'll discuss our fourth quarter results in the context of what was clearly an unprecedented full year 2020. I'll also provide you a sense of how we're thinking about the future with some scenarios, potential outcomes for 2021.

[Vivian Zhou:]

Thank you, Jeff. Before we open up the line for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Operator?

[Operator:]

Our first question will come from the line of Sanjay Sakhrani with KBW. Go ahead please.

[Sanjay Sakhrani:]

Thanks. Good morning. I appreciate...

[Steve Squeri:]

Hi, Sanjay.

[Sanjay Sakhrani:]

How are you? I appreciate all the context for 2021 and 2022, because I know it’s pretty fluid. But I guess as we think about the assumptions you’ve outlined, how confident are you on the 70% T&E rebound in the fourth quarter of 2021? I mean, do you need a broad scale reopening or do you think just naturally the behaviors will be better this year versus last year when we were in shock kind of post-COVID? And then I’m just wondering how much of an uptake are you assuming from the new customer acquisitions that started last quarter, could that be additive to your guidance? And then last one on the assumptions, just the reserve releases, like how much of that are you assuming in your $7 number in this year versus 2022? Thank you.

[Steve Squeri:]

Well, we’ll try those three questions.

[Sanjay Sakhrani:]

It’s all around one beam.

[Steve Squeri:]

Yes. Yes. Well, the first thing I will say is there was no real guidance. I mean, we gave sort of some scenarios, but let’s talk about the first part of the string here, and then I think Jeff can jump in at the end with the releases. But we’re in a completely different spot than we were sort of last year. I mean, when we were talking last year at any given point in time, we didn’t have a vaccine. And so, while the vaccine right now is – what I would call it fits and starts, I mean, is there enough – at the beginning there wasn’t enough places to sort of – to do vaccine distribution. Now, we have vaccine distribution points, but you don’t have enough vaccine to distribute, hard to get appointments, so there’s a lot of disconnect, that will sort itself out. And it’ll sort itself out over a period of a couple of months, not over a couple of years. And so, we believe that by June or so, you will either have sort of herd immunity or a perceived herd immunity. The other thing that we believe is that there is a huge pent-up demand for travel. I guess probably – and nobody on this call that doesn’t want to travel or go someplace or don’t know their friends or family that want to do the same thing. And so, when we look at it, I don’t think you’ll see a widespread international travel, but you will see domestic travel and domestic travel being – domestic travel here in the United States, domestic travel sort of within the European Union, things like that. You’re probably not going to see a lot of long haul this year. And so look, I’m fairly confident that we will see the predictions that we have come through as it relates to travel. I mean, we’re talking about consumer travel potentially being back about 80% would overall travel being back about 70%, business travel will come back a little bit slower, but I’d be shocked if we’re sitting here at this time next year and we say, geez, you know what we really missed it on travel. I just don’t see that happening. I have a lot of confidence in the vaccines, but again these vaccines are going to take some time to get into the marketplace. I mean, what do you have, like 20 million people in the United States at this point sort of vaccinated or something like that, and it’s only January. And so, I believe that as we get into this summer season, these June, July, August, and September, you will see a rush for people to travel, especially air travel. I think cruise lines you know that’s more of a 2022 phenomenon. So, we feel, really good about consumer – consumer travel coming back. I think, our airline partner with Delta, Ed said the same thing on his earnings call. So, we feel real confident about that. And as far as new cards, I mean, look, new cards take a while to get back to get into the mix, but what we have booked in our sort of our own internal forecast, not the scenarios is that the cards that we booked last year will behave probably slightly slower than normal cards would behave just because you’re not going to have those Card Members traveling right out of the gate, they’ll probably be more of a second half phenomenon. And so, their spending may ramp a little bit slower than normal. Having said that, we are really focused on getting – we don’t talk a lot about cards, but cards lead to build business acquired, which we do talk a lot about. We are really focused on ramping up our acquisition engine, and we believe there are a lot of good cards – a lot of good opportunities out there for us to acquire cards.

[Jeff Campbell:]

Sanjay, I’ll add two things on cards and then talk about reserves. I would point out on cards we were really pleased in the fourth quarter to see in the U.S. consumer business, our Platinum and Gold new Card Member acquisition numbers were essentially at 2019 levels. That’s a really good sign to us. The other point I’d make is just to reiterate what Steve said, is that it’s really a 2022 impact to a great extent. 2021 is about rebuilding new card acquisition numbers. It won’t affect the 2021 results that much, because the 2021 results then to go to your last question are all about what happens, its credit. And I guess I’d encourage everyone to think about two numbers. So, I cited in my script that relative to the beginning of the year, we now end the year with $1.5 billion more in credit reserves. We also, relative to the beginning of the year, ended the year with $1.2 billion more in delinquent accounts and accounts in our financial relief programs. And yet, I also pointed out that historically 80% of the dollars that go into our financial relief programs, we end up collecting and doing fine with. So, what that should tell you is that our credit reserves assume a very conservative economic outlook. And so, you have to see more bad stuff happen in the economy, small businesses going bankrupt, lots of consumers being laid off. You have to expect more bad things like that to happen for all of those reserves to be needed. So, we’re not making an economic call, Sanjay. We’re saying, well, if all that bad stuff happens, like in the real downside scenario of our economic forecast, then we’re going to need all those reserves we have on the books, and you’re probably – that sort of where the low scenario comes from. Conversely, if Wall Rocky, there is a fairly steady recovery, we have a lot of excess reserves that you probably are going to release, and that sort of leads you towards the high scenario. So, we’ll have to see, but either way our focus remains rebuilding growth momentum this year, because it’s all about 2022.

[Operator:]

For our next question we’ll go to the line of Betsy Graseck with Morgan Stanley.

[Betsy Graseck:]

Hi, good morning.

[Steve Squeri:]

Hi, Betsy.

[Betsy Graseck:]

Okay. So, this question I had was around your proprietary card acquisition trends, which you put in the deck, and I just wanted to get an understanding as to which programs are you seeing drive this kind of…

[Steve Squeri:]

Betsy? Operator?

[Operator:]

Ms. Graseck, your line is still open. Please check your mute feature.

[Jeff Campbell:]

Well, should we just go ahead and answer what we think Betsy was in the middle of asking Steve for our new card acquisition?

[Steve Squeri:]

Yes. And I think Jeff just really answered it. I mean, when we look at new card acquisition, our platinum and our gold levels are, we’re at levels of 2019. And so we feel really good about that. I think our cash back cards were actually doing quite well as well. What we have not seen and this makes all the sense in the world is our co-brand, our co-brand acquisition. And our co-brand acquisition, I mean, look, the reason you do co-brand cards, you do that to combine value propositions between us and our partners, but you also get tremendous distribution. And right now, not a lot of people stay in hotels, not a lot of people taking flights, so you lose those distribution opportunities. Having said that, what our co-brand cards though are performing either in the United States or in other markets at or better than our proprietary cards from a spending perspective, because as I’ve said, all along people spend to gather those points to take that – to take those trips because they have such a pent-up demand for travel. And our retention numbers on our co-brand cards are at the same levels they were in 2019. So, we feel good about proprietary acquisition, which again is being driven by platinum and gold and some cash back. Our co-brand acquisition is not as ramped up because we depend on our – the co-brand channels. But having said that, our co-brand performance is really, really good and Ed made that comment, Ed Bastian made that comment in his earnings remarks as well. So, hopefully, Betsy, we provided a little bit of somewhere around the answer – quite answered the question you were trying to ask before you got cut off.

[Operator:]

Our next question will come from the line of Mark DeVries with Barclays. Go ahead.

[Mark DeVries:]

Yes. Thanks. I had some questions about the scenarios. Just clarifying the 2021 scenario, the Scenario 2, essentially, Jeff, all the things you kind of outlined for your expectations such as the 70% rebound in T&E spend in the 8% - or 9% to 10% revenue growth and everything from marketing and OpEx as well as benign credit. And then second part of that is just 2022 aspiration, kind of what do you guys need to see to get there?

[Jeff Campbell:]

Well, maybe I’ll take the first part, Steve and you should take the second. So on 2021 Mark, I guess the point is the overwhelming driver of a low scenario or a high scenario are what happens or is going to be what happens with credit, as I said a few minutes ago. Now sure, if credit turns out to be really strong, your revenue is going to be a little on the strong side and vice versa. But what we’re trying to do, if you go throughout my remarks just give you a very clear sense of how we’re going to manage the company this year. And that’s why I told you we’re going to manage OpEx too and what we might spend on marketing. And we’re going to do those things because we’re all about rebuilding growth momentum this year, the ultimate credit outcome and just how quickly discount revenues come back is going to be driven by the external environment. And that’s why you have a low and a high scenario, but it really is not going to impact how we run the company this year, which of those two scenarios comes out. So that’s what we’re trying to communicate by calling these scenarios as opposed to a guidance range. And then Steve, maybe you want to talk about 2022?

[Steve Squeri:]

I think 2020 two top-line assumptions, you have a consumer T&E fully recovered and you have a reasonably healthy economy in 2022. So we’re not expecting corporate travel to come back. I don’t think that’s going to be a driver of it. And so if you have that as your baseline, then I think we’re right within where we want to be. And the key thing that we need to do is, and we’ve said this as we went through both our remarks, our investment levels will be higher than they’ve ever been. That’s our plan. We are planning for what do we have and we have light to – we see light at the end of the tunnel in terms of investment opportunities, we will continue to invest and take advantage of all those investment opportunities that are available to us. If they’re not there, we’ll pull back. But we believe they will be there. We will look to ramp up our Card acquisition. We will look at value injection early on in the year. We’ll look at value proposition refreshes throughout the year. We’re going to focus on welcome acceptance and keeping parity coverage in the United States. We’re going to drive really hard at international acceptance. I mean, look, we signed 3.7 million merchants internationally last year, not including China, take China off the table for a second. We’re going to drive international acceptance, as we’ve said. We’re going to continue to work and invest in our network, we’re going to launch Kabbage in our small business checking account and get more primacy with our small business customers. And we’re going to get some traction in China as well. So, we are really focused in 2021 in investing across all dimensions of our – each one of our business lines and preparing ourselves for 2022, by building that strong foundation of retaining Card Members, acquiring new ones and building merchant network and continuing to build up network capabilities and digital capabilities. We believe with the healthy economy and T&E consumer spending, just about fully recovered will be within our range.

[Operator:]

We’ll go next to the line of Rick Shane with JPMorgan. Go ahead.

[Rick Shane:]

Hey guys, thanks for taking my questions this morning. I’d like to start with a question about non-marketing, non-rewards expense. In Q4, that was literally the only line item that was comparable to 2019 levels. I’m curious if you think that there’s going to be better opportunity for operating leverage on that metric and what sort of drove the normal rate there versus everything else we saw in the business?

[Jeff Campbell:]

Well, let me – Rick, take it up one level and then come back if you don’t think this is responsive. I mean, what we are focused on overall is managing the operating expenses of the company, which is everything other than the variable customer engagement costs and marketing. And we have a very clear plan in 2021 to manage those to about $11.5 billion that is below 2019 levels. If we’re to look at some businesses we’ve sold over the years, it’s frankly about where the number was a decade ago in 2012 and 2013. So we think we have a very long track record of being very disciplined about managing what I think of as the infrastructure costs of the company, which means that as revenues and billings recover and grow, there’s tremendous leverage from holding that a little below 2019 level. There’s always a little bit of quarterly noise, particularly the Q4 some of the lines in OpEx you’ll see every year, if you go back and look at history, go up a little bit. But that’s the disciplined approach that we’re taking here. So I don’t know if I got to the number of your question, Rick, but that’s probably how we think about it.

[Steve Squeri:]

Yes. The other thing I would add is that, if you look at this number on the face of it, it’s pretty much the same number we’ve had in 2012 from an operating expense perspective. But yet the business is very different than it was in 2012. We’re focused on different things. We’ve acquired a bunch of companies, which are in here and our focus has been completely different. So I think, the team has done a really good job of on an ongoing basis taking expense out and then putting in investment back in. And so, as you think about this, what you need to do is constantly look at this operating base and when we look at it, that’s providing us leverage. So if we think about the core business that we had, we’re getting enough leverage out that to fund other opportunities within the business, whether that be Kabbage, whether that be the acquisition of a Mezi or a Resy or a LoungeBuddy so forth and so on. And yet you go back 10 years, we’re at the same place. And so we believe, when we look it as managers of the business, we’re getting tremendous operating leverage because we’re able to add these things on without layering on a lot of operating costs. And that’s how we look at it.

[Operator:]

We’ll go next to the line of Ryan Nash with Goldman Sachs. Go ahead.

[Ryan Nash:]

Good morning, Jeff. Good morning, Steve.

[Steve Squeri:]

Good morning.

[Jeff Campbell:]

Good morning, Ryan.

[Ryan Nash:]

So maybe a two-part question. So Steve, you noted in your color that for 2022, you expect T&E to be – on the consumer side to be fully recovered and a healthy economy. So maybe first, can you maybe just talk about what some of the drivers would be in terms of the shortfall from lower corporate travel and then potentially higher spending, you outlined the OpEx and marking this year could be $4.5 billion. Will there be a pullback in spending? Or could we see revenues accelerating as Card Member growth picks up? And then secondly, you talked earlier in your remarks about attrition being below pre-COVID levels. We’re in this kind of weird transition period right here where consumers have pent-up demand like myself, but can’t leverage anything in the near-term. So can you maybe just expand on the comments about injecting greater value in and how you’re thinking about product refreshes? And does the pandemic at all change the way you approach refreshes in terms of what’s included in the value proposition? Thanks.

[Steve Squeri:]

Yes. So I think, let’s talk about the second one first, and if I remember the first question, I’ll come back to it. It seems like a couple of minutes ago, just teasing you Ryan. But when we look at sort of value injection, I think because people couldn’t travel, what we tried to do was to do two things, to not only provide them value in the short-term, but to sort of shift their mindset on how they use the card. And so when you look at what we did with platinum and with open-platinum and centurion, by putting in things like streaming credits and wireless credits and some shipping credits, we had 78% of our U.S. platinum Card Members take advantage of those – of that value injection. We had about 50% of our small business customers take advantage of that. But the really interesting point in consumer platinum, 17% of our base was not putting wireless on their card. They are now. So we had a uptick of 17%. Now this is something that any of you who have embedded your card in a payment stream to try and get it out is very difficult. Recurring billing is probably the stickiest thing you have. And so for the first time, 17% of our platinum card base actually put wireless on the card, which is, you might think surprising, but people put spending in compartments. And 10% put streaming on the card. So the value injection is meant for us to do two things. Number one, steer people where we want them to go, and number two, provide real value to them. And we did that. And I think that that has really helped us from a retention perspective because obviously people want – we’ll continue to do that and then we’ll look at our overall value propositions just as we’ve had over the course of the last three years and continue to refresh those. And I think you’ll see those refreshed and we’ll expand the aperture of that. So you will expand beyond traditional T&E value proposition enhancements. We’ll look at other T&E value proposition enhancements because safety and traveling will become even more important I think to our premium card holders and we’ll work with our partners. A lot of the value we put in is either co-funded or merchant funded, and we’ll continue to work with our partners to do that. So we have – we feel really good about the retention that we saw, and we feel really good about the value injection, because it’s a behavioral shifts that it drove, and we believe that that will be sticky, which is why you see an increase in our non-T&E spending on a sequential basis. And we believe that will continue. So that’s the first part. As far as the second part of the question, look, we do believe that the first question was, we believe that consumer travel will be back because it is the pent-up demand. I see the vaccines working, we see herd immunity coming, and we certainly see that happening by the fourth quarter. If God forbid the vaccines, the efficacy proves it doesn't work, we got a whole different issue for the entire economy, and we're not talking about American Express traveling, we're talking about different things at this particular point. But all indications on vaccine will work. It will be distributed and off will go. As far as corporate spending, look, our corporate card business, which is near and dear to all of us, drives about 9% of our overall billings and about 60% of that is T&E. There are companies that are still traveling and the T&E piece of corporate spending is across multiple disciplines. It's across lodging, it's across restaurants, it's across car rental and it's across air as well. And so we have pharmaceutical sales reps they travel by car, they stay in hotels and they spend for food. That's still going on, where you see not a lot of T&E spending as consultants who cannot go actually to their clients. But when you think about industrials and manufacturing, that is still going on. And you think about local salespeople that still need to get out to some of their accounts. But having said that, we don't anticipate that coming back, but we don't believe that's a big driver of our overall profitability. As we've said, it's not a big driver of our revenue that 9% billings does not equate to either 9% revenue or 9% profitability and we believe that what we will gain from a consumer and our small business perspective will more than make up for any shortfall that would occur in our corporate card business.

[Jeff Campbell:]

And I'd just add two other things, Ryan, sort of the other leg of the stool is small business, where travel just isn't that big a piece of their spending. And those small businesses are already going strong and we just need them to continue the steady recovery. The other thing, I just want to clarify for everyone is reminding you that, when we went into 2020, 12 months ago on a January call, seems like years ago, we gave you guidance for 2020 of $8.85 to $9.25. And that's the kind of targets that we're aspiring to achieve in 2022.

[Operator:]

Our next question will come from the line of Chris Donat with Piper Sandler. Go ahead.

[Chris Donat:]

Good morning. Thanks for taking my question. In terms of the merchant discount rate, Jeff, you said that it would depend on the T&E spending. I'm just wondering where we are taking a longer-term view on OptBlue and some of the downward pressure you'd seen on the MDR in recent years. Are we basically through that and can we expect maybe the more likely scenarios that you see an increase in MDRs, you see more T&E spend, or is there any downside risk to the…?

[Jeff Campbell:]

So two things, we're completely through any downward pressure from OptBlue. That's in the rear view mirror. And obviously, if you look at what's happened at discount rate, discount rate has been driven down by mix. And it's like, I've always said, I always focus on discount rate by industry and mix overall, because if you look at sort of where we are right now is 2.25% or – I think that that's where we are right now is 2.25%, is, oh my god, you were at 2.25%, but you're at 2.25% with 65% T&E decline. And so as T&E comes back that MDR will move back up. But OptBlue will not have any pressure at all and at discount rates. So we expect as T&E moves up overall, overall discount rate will go up. But having said that, if non-T&E winds up, going through the roof and that puts pressure on MDR, that's fine. We're okay with that. Because again, we manage this industry-by-industry and I can't control mix, but if in fact our non-T&E which has a lower MDR on average than T&E if that continues to grow and grow, I think everybody would be happy with that.

[Operator:]

We'll go next to the line of Mihir Bhatia with Bank of America.

[Mihir Bhatia:]

Good morning. Thank you for taking my questions. It did want to – I appreciate 2021, you're looking at it as a little bit about investment view and repositioning, maybe positioning the company for growth. So EPS is not that much of a focus maybe in 2021, but is there another metric that maybe we should focus on, whether it's billings growth, new card acquisitions, something like that as we go through the year, I guess, how will you – or do you think investors should judge American Express's progress through the year towards the 2022 the goal getting back to, call it $9 a share. Is there a book you could provide maybe on card acquisitions or something else maybe, is that a $2 million before throwing in new acquisition, something like that, anything you could talk about that? Thank you.

[Jeff Campbell:]

Well, I think it all comes back, Mihir, as you pointed out to rebuilding growth moment. And so that's a function of watch our success in bringing new customers into the franchise and in putting new products into the hands of our existing customers. And we'll talk about that every quarter. Watch our success on some of the longer term things that Steve talked about, how we're doing with China, how we're doing with the Kabbage acquisition, watch externally what's happening with credit, and what's happening with the recovery in T&E spending. And those are the key things that I think you want to watch, and it's what we're managing the company for and what we'll give you an update on each quarter.

[Steve Squeri:]

And we'll continue to update on those things as well as merchant acquisition, which is also going to be important. So sort of the things that I talked about in my first answer exactly what Jeff just said, again, as we said, we don't – I think as you see more card acquisition momentum, that is a good sign. You see us put more value propositions in there. But also take a look at our merchant network as well, and in the macroeconomic and the sort of the health – the state of health not only in the United States, but in the world in general.

[Operator:]

We'll move on to the line of Lisa Ellis with MoffettNathanson. Go ahead.

[Lisa Ellis:]

Good morning. I'm glad to be joining this call. My question is, on the Biden administration, in two areas, stimulus and regulation. On stimulus, just given your overall experience with 2020, how would you expect kind of the proposed next round of stimulus to affect 2021, meaning overall, like good because of the boost in spending and reduction in delinquencies, or more bad because consumers are using a lot of these funds for debt reduction. And then second on regulation, Biden has indicated an increased focus on consumer protection and other aspects of banking regulation. So what are his policy areas are you most focused on keeping an eye out for? Thank you.

[Jeff Campbell:]

Well, it's kind of hard to figure out at this point, what they will do, what will be done from a consumer regulation perspective. You don't know if that's going to be done on debt collection. You don't know where that will be. But look, we've been around 170 years through lots and lots of administrations. We started this sort of regulatory journey, I guess, over the last – really focused on our industry over the last 15 years or so. And it all started, I think, what UDAP and look we'll comply. We will comply and we will do what we need to do. And I don't think, it's going to be a major deterrent to us running our business in any way. I mean, look, have we added more compliance people over the years? Yes. Do we spend more time with regulators? Yes. Could that be more? Yes, it could probably be more, but when you think about the underlying economics of our business, I really don't think it's going to impact our spend, and if you think about our model, our model is a, get the card, have a fee spend, and then we have lend. We're not as dependent on lending revenues or lending profits as our competitors are, which is probably where a lot of regulation will come in. If it does come in, so we'll see – we'll just see how that all plays out. And we've been through – I've been through many administrations since I've been at American Express, we'll do what's required and we've moved on. We've demonstrated we can have success under all scenarios. And what they're not talking about is, they're talking about consumer protection, we're really not talking about discount rate regulation that has not been broached at all in any of these conversations.

[Steve Squeri:]

The only comment Lisa, I would add on stimulus is given the demographic of our customer base, clearly we are not – what we want, our healthy consumers and healthy small businesses who are spending, lending is not as a big part of our business model. So if the system being awash in liquidity results in higher pay down rates, well that's, we're happy to take that trade for a healthier economy and for more spending and for more recovery. So we feel good about the credit performance and the spend performance we've had thus far and more stimulus. Should that be the political outcome here? I have to view as a good thing for us.

[Operator:]

We'll move on to the line of Bob Napoli with William Blair.

[Bob Napoli:]

Thank you, and good morning. Very good call. On the 2022 targets, I think a couple of the keys are the reacceleration of international that was your highest growing segment, I guess geographically prior to the pandemic. And then also, I mean, I think the B2B payments Kabbage, I think some comments Steve about watching Kabbage. So just some commentary around your confidence that – and what you’re seeing internationally. I know you’re adding locations, but are you confident that you’re at least maintaining market share or gaining share?

[Steve Squeri:]

Well, here’s what I would say. What’s interesting, Bob, is that we are adding a lot of locations. Obviously international is being a little bit more challenged than the U.S., our international spending. Our international cards tend to be a lot more T&E focused. And so, they’re down a little bit more, but we believe that will come back. And so, we haven’t run the numbers on sort of market share at this particular point, but as you know we were certainly gaining market share in – like eight of the key markets that we – where we participate in. And we believe, again that there’s that pent-up demand for travel. Our attrition numbers are the same, showing the same sort of signs that they show in the United States. When we talk about attrition, we talk about global attrition and there really is no difference between international, how international is performing versus how the U.S. is performing. So, we feel good that that’ll come back in both small business and consumer international were two of the fastest growing areas. As far as Kabbage goes, I think, the thing that we’re really excited about as Kabbage is it gives us a platform that we can interact with our small businesses. And so to be able to go to one platform to not only get a working capital loan, to get a term loan, to have now a business checking account, to be able to have your card product, to do cash flow analysis on the platform, it gives us sort of an all in one platform to serve the needs of small businesses, which is why we did that and what we have been shooting for over the last couple of years. It was just a very fortuitous time and a very fortuitous acquisition for us and that’ll be – we’ll be rolling that out, end of Q1, into Q2 and continuing to make enhancements on Kabbage. So, we’re really excited about it and the opportunities that it brings from a small business perspective.

[Operator:]

We’ll go next to the line of Bill Carcache with Wolf Research. Go ahead, please.

[Bill Carcache:]

Thanks. Good morning, Steve and Jeff.

[Steve Squeri:]

Hey, Bill.

[Bill Carcache:]

Can you discuss how the return on each dollar of investment spending today is trending versus pre-pandemic levels on the consumer side? How did the acquisition costs and IRR of new accounts you’re acquiring today compare versus historical levels? And on the commercial side, how are you assessing the profitability of those investments?

[Jeff Campbell:]

Well, I think what I’d say overall, Bill, is, I take you right back to our comments that our investment levels in 2021 are going to be driven by that universe of attractive opportunities, not necessarily by a particular budget. So, we were really pleased with what we saw in Q4 citing the example of the U.S. consumer platinum and gold progress we talked about earlier, and we also have some non-travel co-brands on the business side that have been very strong. So, we feel good about the returns. I think you’ve heard, Steve and I say for many years, that we always generally have more good investment opportunities or marketing opportunities with positive returns than we can fund and we’re setting off in 2021 to aggressively rebuild our growth momentum.

[Operator:]

We’ll go next to the line of Don Fandetti with Wells Fargo. Your line is open.

[Don Fandetti:]

Good morning. Steve, on competition, you’ve weaned pretty hard into offense. Are you seeing the same thing from Chase? And then, is there any significance to their cxLoyalty acquisition? My sense was maybe it was just like playing catch up, but was there anything more strategic to that competitively?

[Steve Squeri:]

Look, I think, when we think about competition, you got to think about competition across a wide range of places that we compete. And there’s no more competitive space than the consumer space in the United States. I mean, there is – obviously, we’ve got competition in the UK. We’ve got some competition obviously for small business here, corporate competition and so forth. So, I think it’s just important to understand you compete on many, many fronts and while the consumer businesses is a large piece of it and probably the most highly competitive and it has been for probably 10 years. Look, we anticipate that not only JPMorgan, but Bank of America, Citi Capital, everybody is going be out there looking to get Card Members to bring more into the fold and to drive top-line revenues. So, I don’t think there’s been a step down in competition. I think you will see a – I think, Jamie said on his call, he is stepping up his investments and I think just pretty much every CEO would say the same thing. So, we anticipate that it’s going to be just as competitive as it’s been as we have seen over the last few years. And look we look forward to it and we look forward to competing and we believe our value propositions will continue to stand up well to our competitors. Look, as I don’t know about their acquisition and what it is that they’re trying to achieve, they got a lot of smart people over at JPMorgan and I think they do a really great job running their business, and we get a lot of respect for them. And so, I’m sure they’ll figure out how to integrate this into their value propositions to compete in the most effective way that they deem is the right way to go about it. And we’ll continue to do what we do, and we feel good about the hand that we hold and awful going, we’ll see what happens, but I think for more color on that, I would ask Jamie and Gordon.

[Operator:]

And our final question will come from the line of Craig Maurer with Autonomous Research. Go ahead, please.

[Craig Maurer:]

Yes. Good morning. Hi, everybody.

[Steve Squeri:]

Hi, Craig.

[Jeff Campbell:]

Hi, Craig.

[Craig Maurer:]

I wanted to ask quickly about trends you’re seeing. UK, can you discuss how their lockdowns impacted volume at the end of the quarter and into first quarter? And secondly, what type of rebound do you see in Australia? Is that country now become relatively COVID free? Thanks.

[Steve Squeri:]

Well, two comments. In the UK and Europe more generally, as you would expect, Craig, you saw in December and now into January, some significant declines in restaurants and other T&E. But what you continue to see stability in though is the non-T&E spending. So, it’s an interesting observation that as Europe has locked down more, it has the expected impact on restaurants and lodging that people were doing locally, but it doesn’t have an impact on non-T&E. And to go to Australia, Australia, like many of our non-U.S. markets was heavily, heavily or more heavily than the U.S. driven by T&E. And of course, T&E that country has completely shut itself off from the world in terms of cross border travel and there are also many restrictions on cross state travel within Australia. So, non-T&E spending in Australia as it does around the world looks good. But the T&E spending while restaurants are a little stronger there than you might see elsewhere in the world, that’s not where the bigger dollars are. The bigger dollars is on other parts travel. And that’s going to be slower to come back and it’s going to a lessening of the government lockdowns.

[Vivian Zhou:]

With that we will bring the call to an end. Thank you, Steve. Thank you, Jeff. Thank you again for joining today’s call, and thank you for your continued interest in American Express. The IR team will be available for any follow-up questions. Operator, back to you.

[Operator:]

Ladies and gentlemen, the webcast replay will be available on our investor relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the conference call by dialing 866-207-1041 or 402-970-0847. Access code 7773895 after 12