AMERICAN EXPRESS CO Q3 FY2026 earnings call

• Financial Results: Reported EPS of $5.42 ($4.68 adjusted). Reaffirmed revenue growth guidance of 10% and raised EPS guidance to $18.30–$18.60 (reported) or $17.60–$17.90 (adjusted).
• Strategic Restructuring: Took a $336 million restructuring charge to eliminate ~5% of global positions, aiming for greater agility and efficiency to accelerate innovation.
• AI and Agentic Commerce: Highlighted AI as an accelerator across five areas: Value Propositions (personalized dining/travel via Rezzy/OpenAI), Customer Acquisition (LLM integration), Engagement (ChatGPT plugin, Perplexity partnership), Payments (ACE developer kit for agent transactions), and Servicing (conversational AI voice agents).
• Partnerships and Benefits: Announced exclusive Airbnb partnership adding 1 million listings to Amex Travel; expanded Centurion Lounge access; launched corporate cashback card and integrated expense management tools.
• Credit Performance: Delinquency rate remained stable at 1.2–1.3% for 15 quarters. Write-offs grew only 3% while balances grew 8%, indicating high credit quality. Provision expense included a $211 million reserve release due to CECL model enhancements.
• Capital Returns: Returned $2.2 billion to shareholders via $1.6 billion in buybacks and $0.6 billion in dividends. CET1 ratio ended at 10.9%.
• OCC Consent Order: Addressed OCC civil money penalty; costs are not expected to impact 2027 guidance. Emphasized accountability and remediation efforts.

American Express reported total revenue of $20.1 billion, representing a 9% year-over-year increase. Net card fees grew by 17% (FX-adjusted), marking the fastest growth in this revenue line. Net interest income increased by 10%, outpacing balance sheet growth. The company's premium customer base drove strong performance, with U.S. consumer spending up 9.4% and international spend up 11%. Commercial spend was up 3% overall, but excluding co-brand exits, it grew 5%. Discretionary spending categories showed robust growth, with Travel & Entertainment (T&E) up 10%, Airline spending up 13%, and Restaurant spending up 9%.

• Revenue Growth: Reaffirmed four-year revenue growth guidance of 10%.
• EPS Guidance: Raised full-year 2026 EPS guidance to $18.30–$18.60 on a reported basis, or $17.60–$17.90 on an adjusted basis.
• VCE Moderation: Expected Value Card Expense (VCE) growth to moderate significantly in Q4 as Platinum Refresh benefits lock in, returning to pre-refresh growth rates.
• 2027 Outlook: No specific quantitative guidance provided for 2027 EPS or card fee growth; investors to wait for January update.

• Regulatory Compliance: Recent OCC consent order and civil money penalty highlight operational deficiencies; management emphasized accountability and thorough remediation to maintain trust.
• Rewards Gamification: Potential for customers to optimize rewards allocation or 'game' the system; management noted levers exist to adjust thresholds and control abuse.
• Competitive Pressure: Intense competition in the premium segment from banks like Capital One, Citi, and Chase; potential for surcharging changes if Visa/Mastercard settlement is approved.
• AI Implementation Risks: Need to manage AI agent interactions to prevent partner disruption (e.g., excessive pinging) and ensure security/privacy standards are met.

Q: Sanjay Sakrani (KBW) asked how Amex will handle customers 'gamifying' rewards by optimizing spend for highest benefits.

A: Steve Squeri explained that Amex’s model is based on access, service, and security, not just points. They do not rely on breakage. Levers such as spend thresholds for benefits (e.g., Platinum Card) help mitigate gaming. AI will also help manage value propositions dynamically to ensure fairness and engagement.

Q: Ryan Nash (Goldman Sachs) asked about sustaining current spend levels and the path to meeting EPS targets given VCE moderation.

A: Christophe Le Caillec noted VCE ratios will stabilize post-Platinum Refresh, aiding EPS goals. Spend growth remains strong (9.4% US consumer, 3rd highest in 3 years) despite Amazon Prime Day timing headwinds. T&E and airline spending are particularly robust.

Q: Erica Najarian (UBS) asked if Amex will allow AI agents to maximize rewards and what the financial impact might be.

A: Squeri stated Amex will take a risk-based approach, allowing only approved agents via APIs/MCPs to protect customers and partners. While AI may increase rewards optimization, it also enhances engagement and share of wallet. Impact on VCE is too early to quantify, but engagement drives better credit outcomes.

Q: Rob Wilde (Hudson Square Research) asked about the allowance-to-coverage ratio (2.6x) and conservatism in CECL models.

A: Le Caillec attributed the low ratio to portfolio premiumization. New vintages have better credit metrics, with 76% joining on fee-paying products. Delinquencies remain stable at 1.2-1.3%. Conservative economic scenarios (peak unemployment ~8%) are used, but improving credit quality drives lower reserves.

Q: John Pancari (Evercore ISI) asked about the trajectory of card fee growth and expectations for 2027.

A: Le Caillec confirmed the inflection point seen in Q3 (17% FX-adjusted growth) aligns with prior guidance for H2 acceleration. Card fees are the fastest-growing P&L line. Specific 2027 guidance will be provided in January. The focus remains on premium product innovation and fee-paying experiences.