American Express (AXP) Q3 2023 Earnings Call Transcript

American Express (AXP -0.62%)
Q3 2023 Earnings Call
Oct 20, 2023, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q3 2023 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

[Operator instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, head of investor relations, Ms. Kerri Bernstein. Thank you.

Please go ahead.

Kerri Bernstein -- Head of Investor Relations

Thank you, Donna, 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 and in our reports on file with the SEC.

The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarters earnings materials, as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at American Express. We'll begin today with Steve Squeri, chairman and CEO, who will start with some remarks about the company's progress and results.

And then, Christophe Le Caillec, chief financial officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe. With that, let me turn it over to Steve.

Steve Squeri -- Chairman and Chief Executive Officer

Thank you, Kerri. Good morning, and thanks for joining us today for our third quarter earnings call. Q3 was our seventh consecutive quarter of strong performance, continuing the momentum we've built over the last few years and aligned with the growth plan we announced in 2022. It was the sixth consecutive quarter of record revenues, which reached 15.4 billion, up 13% year over year.

Earnings per share of $3.30 was also a new quarterly record. Based on our performance to date, we remain confident in our ability to achieve full year revenue growth and EPS growth that is consistent with the annual guidance we provided at the beginning of the year. And we are well positioned as we seek to achieve our growth plan aspirations of annual revenue growth in excess of 10% and mid-teens EPS growth in 2024 and beyond in a steady-state macro environment. My confidence is based on several factors, including the many attractive opportunities available to us because of the businesses and geographies we operate in; our unique membership model, which powers a virtuous cycle of growth; the success of the strategic investments we've been making in key areas of our business; and our ability to leverage our differentiated business model, which includes our premium global customer base, integrated payments platform, strong partner relationships, and trusted brand.

Together, these factors have driven our strong performance over the past two years, including the continued momentum we saw in the third quarter. In the quarter, cardmember spending remained strong, up 7% year over year on an FX-adjusted basis. Spending was strongest in our U.S. consumer segment, up 9%; and international card services segment, up 15%, on an FX-adjusted basis; and U.S.

small business spending increased slightly from a year ago. Millennial and Gen Z consumers continue to be the fastest-growing portion of our cardmember base with spending from this demographic in the U.S. up 18% year over year, and they accounted for more than 60% of all new consumer account acquisitions globally in the quarter. Demand for our products remain robust, particularly for fee-based products, which represented more than 70% of the new accounts acquired in the quarter.

Customers continue to be highly satisfied with our products and services which drives high levels of engagement and retention. We were rated the No. 1 U.S. credit card company for customer satisfaction by J.D.

Power for the fourth consecutive year and the 13th time in 17 years of the study. And our credit metrics remain best in class as we continue our focus on growing with discipline and a strong focus on risk management across the portfolio. A key reason for the momentum we're seeing is the investments we've been making in innovating our value propositions to deliver generational relevance across all age groups. Resy is a good example of some of the ways we're doing this.

We acquired Resy and continue to invest in building out the platform because we know that dining is something that all generations of cardmembers care about. We've seen that in our results as restaurants continue to be the largest and one of the fastest growing T&E categories in the third quarter. The number of Resy users, restaurants on the platform, and reservations booked all continue to grow significantly. In Q3, reservations on the platform set another quarterly record.

Over the last few years, we've also ramped up the number of exclusive lifestyle experiences, sponsorships, and access to events we offer that appeal to our cardmembers across generations and geographies and reinforce the unique value of membership. Our highly popular experiences cut across entertainment, sports, food, art, and fashion. They generate strong onsite engagement with our branded activities and offers, and they help drive interest among prospects. They also continue to attract world-class partners who work with us to add new ways for our cardmembers and prospects to experience the power of Amex membership.

Earlier this week, we announced our latest sponsorship, an exclusive multiyear agreement with Formula 1 to be the official payments partner of Formula 1 in the Americas. This sponsorship is our first new sports vertical in over 10 years, and it represents a great opportunity to build on the rapidly growing popularity of Formula 1 racing around the world. Another way we're delivering generational relevance is by regularly refreshing and adding value to our products on a global basis. These product enhancements are tailored to the interest and spending patterns of our customers of all age groups in each local market.

So far, this year, we've made enhancements to over 20 premium products across the company. Some of the latest of which were refreshes of our platinum card products in Japan, our business gold card in the U.S., and just yesterday, our Hilton co-branded consumer cards. These examples and many others like them are further enriching our membership model, which helps us attract new premium customers, drive retention, and deepen engagement with current customers, and add more merchants and partners who provide offers and experiences that deliver additional value. Looking ahead, I feel very good about where we are and where we're going.

We'll continue our strategy of investing for growth and adding more differentiated value to our membership model to deliver generational relevance while continuing to leverage the strengths of our business model, all of which gives us a competitive advantage. I'll now hand the call over to Christophe Le Caillec for additional detail on our quarterly results.

Christophe Le Caillec -- Chief Financial Officer

Thank you, Steve, and good morning, everyone. I'm excited to have my first earnings call, be one where we discuss our continued strong momentum, which is reflected in our record revenue and EPS in the third quarter. I would like to take a minute at the outset to share my perspective on the company as someone who has been here for a long time and through various business environments. The company is very focused on driving high levels of profitable revenue growth.

The key enabler of that growth has been the discipline we use to deploy our resources. As a result, the underlying quality of our business is very strong, and I have confidence in the sustainability of the growth drivers that we are seeing. We have accelerated the pace of our revenue and EPS growth since before the pandemic. That acceleration is a direct result of the strategy that underpins our growth plan which Steve described.

In the quarter, that strategy has driven 27 billion more in billings versus last quarter. The company is also generating almost 2 billion more in revenue and about 600 million more in net income compared to a year ago. This demonstrates the earnings power of our business model. Now, let's take a look at the details of this quarter's performance.

Starting with our summary financials on Slide 2, third quarter revenues were 15.4 billion. We reached a record high for the sixth straight quarter, and we're up 13% year over year. This revenue momentum drove reported net income of 2.5 billion and earnings per share of $3.30, which grew 34% year over year. Let's now go to a more detailed look at the drivers of these results.

In our spend-centric business model, that begins with a look at billed business starting on Slide 3. Total billed business grew 27 billion this quarter versus last year, up 7% on an FX-adjusted basis, as we continue to see the more stable growth rates that we expected. This growth was driven by 6% growth in goods and services spending, consistent with last quarter's growth rate and sustained double-digit growth in travel and entertainment spending. This double-digit T&E growth has been driven by continued demand for travel and dining experiences with restaurant spending, our largest category, up 13% this quarter.

Total network volumes grew 6% year over year on an FX-adjusted basis. As you look at this results, I'd note that we exited a small product last quarter that was reported in our process volumes. This is reflected in the Q3 growth rate. I'd expect to see the impact of the year-over-year growth rate continue for the next few quarters until we lap this exit.

As a reminder, processed volume includes volumes from cards where we play more of a network role and from alternative payment solutions that we facilitate. The revenue associated with these volumes makes up a small portion of our total revenue, which you can see on Slide 11. As we then break down our spending trends across our businesses, there are a few other key points to take away. Starting with our largest segment on Slide 4, U.S.

consumer grew billings strongly at 9% this quarter. Our focus on attracting, engaging, and retaining our premium cardmembers is driving growth across all generations and age cohorts. Millennial and Gen Z customers continue to drive our highest billed business growth within this segment with their spending up 18% this quarter. Looking at commercial services on Slide 5, U.S.

SME growth came in at 2% this quarter, consistent with last quarter's growth rate. As Steve discussed on our Q2 call, organic growth in this segment has slowed, given unique dynamics seen by small businesses over the past few years. Importantly, we do continue to see strong high-quality demand for new accounts within this segment. Looking forward, we focus on continuing to help SME clients run their businesses.

Billings from our U.S. large and global corporate customers were flat year over year. As we have said for many years, these customers are not a major growth driver for our business, but they remain an important foundation for the company's business model. And lastly, on Slide 6, you see our highest growth again this quarter in international card services.

We saw strong growth across our geographies and customer types. Spending from international consumers and from international SMEs and large corporate customers each grew 15%. Overall, strength in spending growth from our U.S. consumers and cardmembers outside of the U.S.

continues to offset the softness with commercial services that we've been talking about for the past few quarters. Taking everything into account, our spending volumes are tracking to support our revenue guidance for the full year and our long-term aspirations for sustainable growth rates greater than what we were generating pre-pandemic. Now, moving on to loans and cardmember receivables on Slide 7. We saw year-over-year growth of 15%, as well as good continued sequential growth.

As our customers continue to rebuild balances, the interest-bearing portion of our loans and receivables balances continues to grow faster than the overall growth you see. Importantly, over 70% of our revolving loan growth in the U.S. continues to come from our tenured customers. As you then turn to credit and provision on Slide 8 through 10, the high credit quality of our customer base continues to show in our best-in-class credit performance.

As you can see on Slide 8, our cardmember loans and receivables write-offs and delinquency rates both remain fairly flat to last quarter and below pre-pandemic levels. Going forward, as we've talked about for many quarters now, we continue to expect this delinquency and write-off rates to increase over time, and they're likely to remain below pre-pandemic levels in the fourth quarter. Turning now to the accounting of this credit performance on Slide 9, the quarter-over-quarter growth in our loan balances, combined with a modest increase in our cardmember loans and receivables delinquency rate, resulted in a 321 million reserve build. This reserve build, combined with net write-offs, drove 1.2 billion of provision expense in the third quarter.

As you see on Slide 10, we ended the third quarter with 5 billion of reserves, representing 2.7% of our total loans and cardmember receivables. This reserve rate remained about 20 basis points below the level we had pre-pandemic, or Day 1 CECL. We continue to expect this reserve rate to increase a bit in the balance of year, similar to the modest increases we've seen over the past few quarters. Moving next to revenue on Slide 11, total revenues were up 1.8 billion or 13% year over year in the third quarter.

Our largest revenue line discount revenue grew 7% year over year in Q3 as you can see on Slide 12, driven by spending trends we discussed earlier. Net card fee revenues were up 19% year over year on an FX-adjusted basis as you can see on Slide 13. This growth remains very strong and is powered by the continued attractiveness to both new and existing customers of our fee-paying products due to the investment we've made in our premium value propositions. As we expected, growth moderated a bit this quarter from the high levels we saw earlier this year, reflecting our cycle of product refreshes.

This quarter, we acquired 2.9 million new cards. Importantly, the acquisition levels you see on Slide 13 remain consistent with our long-term growth aspirations. The spend, revenue, and credit profiles of our new cardmembers continue to look strong relative to what we saw pre-pandemic. Moving on to Slide 14, you can see that net interest income was up 33% year over year on an FX-adjusted basis, driven mostly by the growth in our revolving loan balances.

To sum up revenues on Slide 15, we're seeing broad-based revenue momentum across our diversified revenue lines. For 2023, we expect revenue growth to be within the range we communicated in January at around 15% growth for the full year. Moving to expenses on Slide 16, variable customer engagement expenses came in at 40% of total revenues in the third quarter. Therefore, I now expect these costs to run at around 42% of total revenues on the full year basis.

Looking forward, we view this cost as a key driver of our momentum as we continue to innovate our value propositions to deepen engagement with our premium members and to attract new ones, as Steve discussed earlier. On the marketing line, we invested 1.2 billion in the quarter. I still expect to have marketing spend of around 5.5 billion for the full year, fairly flat to our 2022 expense. We feel really good about the quality of our new card acquisitions, which I talked about earlier, and I continue to see great demand for our products across a wide range of attractive investment opportunities.

Given this strong set of opportunities, I would expect to increase our marketing spend in the balance of this year, and we're confident that our sophisticated acquisition engine will continue to do so in an efficient way. Moving to the bottom of Slide 16 brings us to operating expenses, which were 3.7 billion in the third quarter as we invest in critical areas, such as our talented colleague base and technology. Taking this into account, we now expect our full year operating expenses to be around 14.5 billion. Looking forward, we continue to view marketing and opex as a key source of leverage.

Turning next to capital on Slide 17, we return 1.7 billion of capital to our shareholders in the third quarter. This included common stock repurchase of 1.3 billion and 438 million in common stock dividends, all on the back of strong earnings generation. As you can see on Slide 17, we target a CET1 ratio between 10% to 11%. We ended the quarter with a CET1 ratio of 10.7%, which is well above our current regulatory minimum of 7%.

As we think about the Basel III proposal, the RWA increase could consume the buffer above regulatory capital requirements if the proposal is adopted as written. Notably, we believe there are clear opportunities for improvements between the proposal and the final rule. In fact, the regulators themselves have posed questions about potential issues in applying these rules broadly, and we are actively engaged in that dialogue. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth.

We do not expect any material near-term changes to our capital management approach. That brings me to our growth plan and 2023 guidance on Slide 18. As Steve and I discussed in our third quarter results, our third quarter results are -- reflect a continuation of the strong momentum we've built over the last few years, evidenced by our performance across diversified revenue streams. For the full year, we expect revenue growth of around 15%, consistent with the revenue guidance range we provided at the beginning of the year.

As I discussed before, we now expect variable cardmember engagement expenses to be around 42% of total revenues on a full year basis, modestly below our original expectation. On marketing, we still expect to spend around 5.5 billion for the full year. And lastly, we now expect our operating expenses to be around 14.5 billion this year, modestly above our original expectation, as we invest in areas critical to our success. Taking everything together, our earnings per share guidance remains between $11 and $11.40.

Looking forward, we remain committed to focusing on achieving our aspirations of sustainably delivering revenue growth in excess of 10% and mid-teen EPS growth in a steady-state macro environment. With that, we'll open up the call for your questions in a moment. A final point which relates to our investor relations team here in American Express. Steve and I have decided to move Kerri Bernstein to the critical role of corporate treasurer.

I'd like to thank Gary for leading the IR function during a period of strong performance for the company. I then like to welcome Kartik Ramachandran, our new head of investor relations. Kartik was most recently a key finance lead in our U.S. consumer business and has had a number of finance positions over his 11 years with the company.

Now, let me turn it back over to Kerri to open up the call for your questions.

Kerri Bernstein -- Head of Investor Relations

Thank you, Christophe. Before we open up the lines 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?

Questions & Answers:

Operator

[Operator instructions] Our first question is coming from Sanjay Sakhrani of KBW. Please go ahead.

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst

Thanks. Good morning, and congrats, Christophe, Kerri, Kartik. Steve, just a question, we hear a lot about the choppy macro backdrop and its impact on spending. I'm just curious if you've seen any changes, behavioral, over the past quarter that might make you more sanguine on the outlook? Or do you feel like your customers are unfazed? And just on a related point, you know, I know the Delta stuff, there's been a lot of headlines on the changes that Delta has made to the Medallion qualification process.

I'm just curious if you've seen any impact. Thanks.

Steve Squeri -- Chairman and Chief Executive Officer

Yeah. So, thanks, Sanjay. Let me start with Delta first. I think, you know, as Delta makes changes, we're in lockstep with them all the way.

And, you know, one of the great things about having Delta as a partner is they're a very customer-focused organization. And they made some changes. The team got some reaction, and I think they made some other changes which I think will be, you know, and have been received in very good fashion. But as far as spending or card acquisition, it has had zero impact.

So, we haven't seen anything from a card spending on Delta or from a card acquisition. In fact, you know, Delta card spending year over year was up almost 20%. So, we feel we feel pretty good about that. As far as the U.S.

consumer, and let's just talk about the U.S. consumer and international consumer, it's still strong. You know, we had 9% U.S. consumer spending, 6% growth in goods and services, you know, 13% growth on T&E.

And that continues to be very strong off a high base. And from an international perspective, we've seen 15%, you know, spending from an international card services perspective and strong both from a goods and services and a T&E perspective. And I think it's important that I'll remind everybody, you know, our card base is a really small piece of the overall U.S. economy.

And, you know, one of the reasons we have such such great credit metrics is we have a really high-quality cardmember. And so, at this point in time, they have not been impacted by anything. But the other thing that I would say is, you know, you probably had the same question at this time last year. And, you know, I probably gave you the same answer.

And right now, look, we can only manage the business for what we're seeing in our business, which is still strong growth. And, you know, we use the blue chip economic forecast, and that calls for pretty much more of the same. So, in a steady-state macro environment, I feel really good about, you know, delivering on our plan. As Christophe said, you know, we are well positioned.

And as I said in my remarks, we're well positioned, you know, to continue to deliver on our growth plan.

Operator

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

Ryan Nash -- Goldman Sachs -- Analyst

Hey, good morning, Steve. Good morning, Christophe.

Steve Squeri -- Chairman and Chief Executive Officer

Good morning

Christophe Le Caillec -- Chief Financial Officer

Good morning.

Ryan Nash -- Goldman Sachs -- Analyst

You know, look, you know, as a follow up to Sanjay's question, obviously, it was good to see, you know, the solid revenue growth, you know, given the challenging economic backdrop. And, you know, you're still talking about double-digit revenue growth next year. But could you maybe just talk about some of the pieces or the drivers you expect to see, you know, given what's going on in billings growth? And are you leaning more into lending in order to drive this growth? And then, just lastly, like do we need to see billings to improve in order to be able to drive double-digit revenue growth? Thank you.

Steve Squeri -- Chairman and Chief Executive Officer

Well, those are a lot of questions, Ryan.

Ryan Nash -- Goldman Sachs -- Analyst

I know. Trying to fit every one in there.

Steve Squeri -- Chairman and Chief Executive Officer

It's good. You actually only asked one, you just put it in multiple parts.

Ryan Nash -- Goldman Sachs -- Analyst

[Inaudible] 

Steve Squeri -- Chairman and Chief Executive Officer

Yeah, right, exactly. We'll leave that one alone. But when you look at our model, there are many ways for us to grow revenue. You know, we grow revenue from a billings perspective, we grow revenue from a card fee perspective, and we do grow revenue from a lending perspective.

The current revenue growth that we had, the current billings growth that we have is in line with what our long-term growth aspirations are. So, where we are from a billings growth perspective, we feel really good about that. From a fee perspective, and I'd like to point this out, is that the major driver of our fee revenue is actually new card acquisition. It's not raising fees, it's really new card acquisition.

And we -- look, we've invested approximately $5.5 billion this year. We'll probably step that up next year. So, we're very confident in our card acquisition. As Christophe said, there are a lot of great opportunities out there for us.

And from a lending perspective, and we've mentioned this multiple times, our book today we believe is better than our book was in 2019. And, you know, if our cardmembers will lend -- will continue to lend responsibly, and, you know, our cardmembers have various needs at various points in time. And I think it's that model, it's our three-legged stool of revenue which will continue to provide confidence that we're going to be able to deliver double-digit revenue growth next year.

Christophe Le Caillec -- Chief Financial Officer

And maybe, Ryan, can add one point on the lending side. As Steve said, we have, you know, a premium customer base. And we're growing lending of that premium customer base. Seventy percent of the balances are coming from established cardmembers that we know well.

So, you know, those cardmembers we know revolve with, you know, competitors' products. And historically, we under-index on that. We capture a big share of their spend, a smaller share of that lending. And what we're doing here is just deepening the relationship with them and capturing a bigger share of their revolving needs.

Operator

Thank you. The next question is coming from Bob Napoli of William Blair. Please go ahead.

Bob Napoli -- William Blair and Company -- Analyst

Thank you, and congratulations to everyone. Kerri, it's been great working with you and good luck. So, question, Steve, on the SMB business. That's a really important business for you.

It's only growing 2%. I think there are large opportunities there. But what is -- can you maybe give a little color on what's going on in SMB and your thoughts about SMB as we move into 2024?

Steve Squeri -- Chairman and Chief Executive Officer

Yeah, I think, you know, this is probably the second quarter in a row, you know, it's been low growth. I think a lot of it -- a lot of our high growth was really driven by organic growth, and we haven't seen as much organic growth from a small business perspective. I think from an acquisition perspective, we're still very happy about the opportunities that are out there. We're still happy about, you know, the lending opportunities that are out there.

And I think, you know, small businesses went through a very interesting cycle over the last few years in terms of not having a lot of inventory and then stocking up on inventory. And so, we're still very positive on small business, albeit the last two quarters were relatively slow. But we share your perspective that it's still a huge opportunity for us. And, you know, it's a big part of our business from a billings perspective.

And to remind people, our small business footprint is across a variety of small businesses, you know, whether it's restaurant and retail or professional services and construction and so forth. So, we still feel good about it. And I think that we'll see just, you know, when organic does come back, but we're still very positive on small business.

Operator

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

Rick Shane -- JPMorgan Chase and Company -- Analyst

Thanks everybody for taking my question, and congratulations, Kerri. We've really enjoyed working with you. And, Christophe, we are looking forward to more dialogue. I just have one question.

There was a comment about raising the reserve rate modestly as we move forward. Obviously, that's not a function of changing economic outlook because you don't know what that will be. I'm assuming it's a mix shift issue. Can you talk about that a little bit in terms of what components are shifting in the mix and the different reserve rates for those products?

Christophe Le Caillec -- Chief Financial Officer

Yeah, yeah, yeah. So, the trend -- you know, there is like still a bit of normalization going on. So, if you look at our delinquency rates, they're fairly flat. If you squint a little bit, you're going to see a couple of basis points increase.

And that's effectively what I meant when I said that you should expect that reserve rate to increase a little bit, where there's still a little bit of normalization happening here. But as you know well, those delinquency rates and write-off rates are very strong relative to our historical performance and, of course, relative to peers. So, there's nothing that gives me concern in that comment. It's just to pre-empt a little bit what we are seeing.

Operator

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

Don Fandetti -- Wells Fargo Securities -- Analyst

Hi. Good morning. Christophe, on the Basel III Endgame, has the message -- is the message still unchanged? It seems like that's a pretty big increase in RWAs and that maybe you might have to ultimately dial back the buybacks at some point. Just wanted to get your thoughts on that.

Christophe Le Caillec -- Chief Financial Officer

Yeah, so, this is, as you know, a complicated set of rules like over 1,000 pages. So, let me try to summarize it for you in the way we are thinking about Basel III. I think the right starting point is to remind ourselves that, first, we generate a lot of capital, or we -- in the 30% range. The second element of the starting point is that although our regulatory capital is at 7%, CET1 at 7%, we actually operate with a target of 10% to 11%.

So, that's 300 to 400 basis-point north of the regulatory level. And what I meant to say in my comment was to say that that buffer could be consumed by either the Basel III rules. They're adopted as currently drafted. Another way of saying the same thing is that our level of capital today is very healthy, you know, given those those rules.

I also need to highlight the fact that in the rules themselves, their regulators pose some questions about the applicability of these rules to businesses, such as ours, and their reference, the charge card, for instance, business. And as you know, over 75%, 78% of our revenue comes from fees. But those fees are stable, visible, such as card fees that we talked about a bit earlier. And we are actively engaged with the regulators to figure out, you know, what's the right thing to do here.

So, we'll see where we land. No one knows. But for now, I don't expect any change to our near-term capital management policies and practices.

Operator

Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.

Jeff Adelson -- Morgan Stanley -- Analyst

Yes. Hi. Thanks for taking my questions. Just wanted to focus a little bit on the spend versus account growth dynamics.

It looks like your average spending per card or account is flattening out and your account growth is finally slowing a little -- you know, more flat sequentially this quarter even as you continue to add 3 million new accounts or card in the quarter. And, you know, it came against the backdrop of your marketing a little bit lower this quarter, although it sounds like you're going to be leaning back in next quarter to hit that 5.5. So, I guess my question is, are you seeing something that's causing you to drive a little bit slower account growth here? Or is there anything going on with attrition, or anything with Delta?

Steve Squeri -- Chairman and Chief Executive Officer

No. I think, you know, it comes down to timing. And, you know, what happens is quarters happen to cut off on particular days, and that's just the way it is. But, no, we're committed to the 5.5 billion overall approximately of marketing.

You saw a slight sequential drop. I think we went under, you know, the 3 million for the first time in a while. And, you know, we look at account growth as -- or cards acquired from an overall revenue perspective. But we still see tremendous opportunities out there, which is why we sort of signaled here -- more than signaled.

We said we're going to raise our marketing expense for next year as well. So, no, we're not seeing anything at all that gives us pause, and we will continue to acquire those cards as long as those opportunities are out there. So, you will see a higher level of marketing spending in the next quarter.

Operator

Thank you. The next question is coming from Bill Carcache of Wolfe Research. Please go ahead.

Bill Carcache -- Wolfe Research -- Analyst

Thank you. Good morning, Steve. And, Christophe, welcome to the call.

Steve Squeri -- Chairman and Chief Executive Officer

Good morning.

Christophe Le Caillec -- Chief Financial Officer

Good morning.

Bill Carcache -- Wolfe Research -- Analyst

Can you share -- any initial thoughts on the open banking rule that the CFPB recently proposed? There's a view that the pen banking essentially forces banks to hand over the keys to their customer relationships. I was just hoping you could speak to any opportunities that may present for Amex. And following up on the capital commentary, Christophe, there's a view that you could reduce your at-risk if you treated your rewards expense as a contra revenue. Any thoughts on that would be great.

Thank you.

Steve Squeri -- Chairman and Chief Executive Officer

Yeah. Look, as far as FedNow, I think let's just go to the U.K., U.K.'s had open banking for 10 years or so, and it's really had no impact on our business either positively or negatively. So, I don't really see this as either a big threat or big opportunity. And I think wher I'd like to take you back, Bill, to is what product we're actually offering.

You know, we're offering a membership model product basically which has lots of different components other than just commodity paying. And, you know, our product has so many more benefits from a security perspective, a fraud perspective, a dispute perspective than an open banking product would have. And so, I really don't see this as either an opportunity or as a threat to our business either in the short term or in the long term. I will turn the other question over to Christophe.

Christophe Le Caillec -- Chief Financial Officer

So, on Basel, Bill, you know, there are various things that we're discussing with regulators. I don't think it would be useful to go through the list here this morning on the call. But you raise either an important element here, which is that nothing is really changing in our business, right? We're still doing the exact same thing. And so, we need to figure out with regulators what the right level of capital here and not be dependent upon accounting treatment or anything like that.

So, you know, too early to discuss this in detail. When we have more clarity, we'll provide you with a ton of Basel III details.

Operator

Thank you. The next question is coming from Dominick Gabriele of Oppenheimer. Please go ahead.

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Hi. Good morning. Pleasure to meet everybody. And, Kerri, thanks so much for all the help.

I was just curious on your cardmember rewards as a percentage of billed business, it's stepped down quite nicely quarter over quarter and year over year. I was just curious if you're seeing anything in particular on the utilization of rewards recently or any commentary around around that? Thank you so much.

Christophe Le Caillec -- Chief Financial Officer

Yeah. So, yes, and, you know, our VCE I called out was lower this quarter at 40%. So, as you know, variable cardmember engagement -- and rewards is the biggest number there. It's a very large expense base.

So, we're constantly looking at -- when we do product refreshes, when we launch products, we look at -- we're looking at ways to make sure that these value proposition works best, and we price for this. And there's always changes. There's always changes as well in terms of how the cardmembers choose to redeem their points from one quarter to another. As you know, we also adding constantly new redemption partners that changed the mix in terms of their weighted average cost per points.

So, there's, at any point in time, a lot of variables that will impact that ratio. We are very focused on making sure that we have the right ratio versus revenue, and we also have the right value proposition that would be compelling in the marketplace. So, it's a little bit lower this quarter. You know, I think we said 42% for the full year because we are seeing that it's a bit better as well from a full year standpoint.

It's still going to be an area of investments for us. It drives a lot of growth as well. That's one of the key reason why cardmembers sign up for for the cards and engage with it. And, you know, we're going to keep working on those on those value propositions and make sure that we have the right balance here.

Steve Squeri -- Chairman and Chief Executive Officer

The only other point I'll add is that within our value propositions, because of our really premium card base, lots and lots of partners want to work with us and include benefits within our value propositions to reach our cardmembers. And so, you know, when you look at the overall value proposition, it's just not rewards-based, it is partner-based. And there are different mechanisms from a funding perspective of how that all works out. So, that's part and parcel of our value proposition as well.

Operator

Thank you. The next question is coming from Arren Cyganovich of Citi. Please go ahead.

Arren Cyganovich -- Citi -- Analyst

Thanks. You continue to outperform on credit at least, you know, very much relative to your peers in below pre-pandemic levels. What are your thoughts on net charge-offs heading into 2024? And maybe you could touch a little bit on how the seasoning curves are happening for your recent vintages.

Christophe Le Caillec -- Chief Financial Officer

Yeah, yeah. So, you know, we're not going to give you a lot of details about 2024 on this call. We plan to do that in -- at the beginning of next year when we speak about 2024 guidance. But what I can tell you is that the starting point for us of our credit performance and all our credit decisions is the quality of the products and the fact that it attracts, you know, premium cardmembers.

That's the starting point, right? And we have a very talented risk organization. We have a very disciplined execution of our risk decision, but it starts with our -- with the quality of the product. And that's the key differentiator vis-a-vis our peers. And that's what we focused on.

And as you know, we've said this many times on this call, if anything, we are focused even more on the premiumness of their -- the portfolio. We are -- you know, the new cardmembers -- because you're talking about vintages, the new cardmembers we're bringing in, 70% of those consumer cardmembers are joining the franchise on a fee-paying product. That's a big statement to join the franchise. And so, you know, that's what we use to start projecting out.

You know, there's still -- as I've said before, there's still a little bit of, you know, COVID noise and normalization going on, but we're very pleased with the credit performance that we're saying. And as you pointed out, you know, the gap versus competitors, if anything, is increasing further.

Operator

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

Craig Maurer -- Financial Technology Partners -- Analyst

Yeah, good morning. Thanks for taking the questions. And congrats, Kerri and Kartik, on your new roles. The net interest yield on cardmember loans saw a nice improvement in the quarter, up 50 basis points quarter on quarter, and you're now above Q4 '19.

And while I understand what rates you're doing, the increase was pretty substantial this quarter. So, I was -- versus prior quarter. So, I was wondering how we should expect that to trend. And secondly, given your visibility due to the accounting treatment of card fees, how should we expect that to trend over the coming quarters considering it's decelerated for several quarters in a row? Thank you.

Christophe Le Caillec -- Chief Financial Officer

Yeah, yeah, so under yield, there -- the key thing here -- there are many moving parts, right? They are, you know, as you know, in terms of the funding, in terms of their pricing, in terms of their various vintages. But their key biggest element that is driving that small increase in the yield is the revolve rate. So, the share -- the revolving balances, the interest-bearing balances, and our total loan balances is increasing a little bit. And that's an outcome of our tenured cardmembers rebuilding their balances, which is something we've called out for several quarters now.

And I just want to point out again that either most of that growth is coming from -- most of that growth, i.e., 70% is coming from tenured cardmembers that we know well and we can underwrite well. So, that's the key driver behind the yield improvement. When it comes to card fees, you're right, we have good visibility because we amortize those fees over 12 months. So, we see that trend.

So, you should expect that trend to continue a little bit, i.e., the growth rate to moderate. As I said, a key driver to this is going to be the cycle of product refreshes. And it's also going to be a function of us investing more marketing dollars, bringing on more fee-paying cardmembers. And that dynamic is just going to play out.

So, you should expect, you know, in the next few quarters a bit of a moderation there, but I need to call out that it's a moderation from a very high level. And as we used to say on this call, even during the pandemic, that specific category was still growing. So, it's still going to grow strongly in double digits, right?

Steve Squeri -- Chairman and Chief Executive Officer

As we go back to the pandemic, we were growing at 10% to 11%. And so, when you look at the outsized, let's call it the outsized growth rates that we had in Q3 and Q4 of 2022, you did -- you had not acquired cards really in 2020. And so, when you got to the amortization in the third and fourth quarter of 2021, it was lower. So, the growth rate was a little bit higher as we got in there.

But, you know, look we're pretty happy with 19% growth rate over numbers that continue to get bigger.

Operator

Thank you. Our final question will come from Mihir Bhatia of Bank of America. Please go ahead.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Hi. Thanks for taking my question and squeezing me in here. And congratulations to Christophe, Kerri, and Kartik. I wanted to maybe switch from talking about the card products that, you know, the whole call has been talking about a little bit.

And maybe just talk a little bit about the noncard products. I think other loans and receivables is now up over 10 billion in total now. Obviously, being an area where you've spent a lot of time investing in, maybe just talk a little bit about that, both on the consumer and commercial side. Where are you seeing some of the strongest growth? How do you expect that to trend? How much is that contributing to interest yields, etc.? Thanks.

Steve Squeri -- Chairman and Chief Executive Officer

Yeah. So, let me sort of just hit from a strategic perspective of what we're trying to do. And, you know, even at 10 billion, it's still a relatively small piece. One of the things we try to do from a small business perspective is to make sure that we can provide a variety of working capital needs to our small business customers.

And in that case, it can be noncard loans for working capital, it can be shorter term loans for, you know, up to two years or so forth. And I think, you know, part of that was the overall Kabbage acquisition that we did to be able to do that. Because what we wanted to do, and it goes along with what we did with sort of our checking account as well, is we wanted to make sure that we could provide for small businesses a host of products and services from having a checking transaction account, having a lending product, having a charge product, and then having working capital loans. And so, I think that really that really fits in.

But, you know, that's not the driver of growth for us in that segment. From a consumer perspective, what we've continued to try to do is to really grow our organic footprint with our consumers. And, you know, you can go back in history. It started as a charge card, and then we put lending, and then we put pay over time, and, you know, plant it within the product and came up with a savings account and a debit product and also a small component of personal loans.

And so, you know, we've been judicious and careful about how we've gone about that. But I think it's an important add to make sure that our customers are not going to our competitors when they need products and services like that. So, that's the sort of strategic sort of backdrop on why we have that.

Kerri Bernstein -- Head of Investor Relations

OK. And with that, we will bring the call to an end. Thank you for joining today's call and 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 call at 877-660-6853 or 201-612-7415, access code 13740799, after 1 p.m. Eastern Time on October 20th through October 27th. That will conclude our conference call for today.

[Operator signoff]

Duration: 0 minutes

Call participants:

Kerri Bernstein -- Head of Investor Relations

Steve Squeri -- Chairman and Chief Executive Officer

Christophe Le Caillec -- Chief Financial Officer

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- Analyst

Ryan Nash -- Goldman Sachs -- Analyst

Bob Napoli -- William Blair and Company -- Analyst

Rick Shane -- JPMorgan Chase and Company -- Analyst

Don Fandetti -- Wells Fargo Securities -- Analyst

Jeff Adelson -- Morgan Stanley -- Analyst

Bill Carcache -- Wolfe Research -- Analyst

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Arren Cyganovich -- Citi -- Analyst

Craig Maurer -- Financial Technology Partners -- Analyst

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

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