American Express (AXP) Q4 2023 Earnings Call Transcript

American Express (AXP -0.62%)
Q4 2023 Earnings Call
Jan 26, 2024, 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 Q4 2023 earnings call. At this time, all participants are on 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 will now turn the conference over to our host, head of investor relations, Mr. Kartik Ramachandran. Thank you.

Please go ahead.

Kartik Ramachandran -- 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 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. We will 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

Good morning, and thanks for joining us. 2023 was another strong year for American Express. We delivered record revenues of 61 billion for the year of 15% on an FX-adjusted basis, and we had record net income of over 8 billion with earnings per share of $11.21. In the fourth quarter, we continue to drive strong customer engagement and demand for our premium products.

We had solid growth in billings, strong new account acquisitions, and continued strength in credit quality, which remains the best in the industry. As a result, we achieved fourth quarter revenues of nearly $16 billion, which was another quarterly record. And EPS was $2.62. Christophe will provide detail on our quarterly results, but I would like to take a step back to talk about what we've accomplished over the last two years until you why I'm feeling good about where we are today and why I'm confident in our future.

Coming out of the COVID pandemic in January of 2022, we saw an opportunity to accelerate our growth. And we set an aspiration to sustain growth over the longer term at levels that were higher than what we were achieving prior to the pandemic. At that time, we laid out a growth plan with the objective of positioning the company to be able to deliver on our aspiration of driving annual revenue growth of 10%-plus and mid-teens EPS growth over the long term. In executing the plan, we focused on listening to our customers and understanding their needs.

And we invested in innovating our value propositions, as well as uplifting our marketing and technology capabilities and backing our colleagues to meet those needs. Looking back over the two years since we announced the growth plan, I'm pleased to say that we achieved what we set out to do. And in fact, we're ahead of where we thought we'd be on our journey. Thanks to the millions of premium customers we have around the world and the American Express colleagues who support them.

Today, we are a larger and stronger company. Since 2021, we've delivered record annual revenues, increasing the scale of our business by over 40% in just two years, from 42 billion to 61 billion in annual revenues -- in revenues. Annual card spending over this period has increased 37% on an FX-adjusted basis to a record 1.5 trillion. We've added about 25 million new proprietary card accounts over the last two years.

And over 70% of these new accounts are coming into the franchise on fee-based products. With the growth in new accounts we've seen over the past few years, we now have a total of over 140 million cards running on our global network. Our focus on continuously innovating our value propositions to meet the needs of our customers is driving increased brand relevance across generations, including millennial and Gen Z consumers. These customers represent over 60% of the new consumer accounts we acquired globally in 2023, and 75% of new consumer platinum and gold accounts acquired in the U.S.

came from this cohort. At the same time, retention continues to be very high, and our credit metrics remain strong and best in class. These strong results reflect the success of our strategic investments we've made in our business along with the tremendous earnings power of our business model. Looking ahead, let me tell you why I feel really good about our future prospects.

We have a business model that is delivering premium performance, and we have strong momentum, which is driven by four key features of our model that differentiate us from the competition and are difficult to replicate. First, our economic construct has a set of diversified revenue sources that include card fees, spending, and best-in-class lending, with our subscription like card fees being a core and fast-growing component of our revenue mix. We have a singular focus on premium customers and superior innovative value propositions. Our premium customers are high-spending, loyal, and drive our strong credit performance.

We have a large and growing partnership ecosystem that expands our brand value to cardmembers and merchant partners around the world. And we have a global brand and a servicing ethos that truly sets us apart. Our business model provides us with strong competitive advantages. And the way we've been able to leverage the model's unique elements and execute our strategy has strengthened those advantages, giving us the runway for continuing our momentum across generations, geographies, and both our consumer and small business customers.

The power of our business model, combined with the global scale of our premium customer base, the dedication and focus of our talented colleagues, and the attractiveness of the many growth opportunities we see ahead are the key reasons why I'm confident in our ability to continue on our growth plan. And it's why, going forward, we'll remain focused on our long-term aspiration of delivering annual revenue growth of 10%-plus and mid-teens EPS growth. We believe this aspiration is the right one, and we aim to achieve it every year. However, we manage the company for the long term, and we anticipate there will be a range of potential outcomes in any given year due to a variety of factors, such as external environment and actions we might take that we decide are best for the business.

Looking at this year, the continued momentum we've seen in the business as we've executed our strategy gives us confidence in our guidance for 2024, which is in line with our long-term aspiration. For the year, we expect to deliver annual revenue growth between 9% and 11% and full year EPS of $12.65 to $13.15. In addition, we plan to increase our quarterly on common shares outstanding to $0.70 a share, up from $0.60 beginning with the first quarter 2024 dividend declaration. This represents more than a 60% increase in the dividend from when we introduced our growth plan in January of 2022.

As always, we will continue to run our business for the long term, and we'll do that by listening to our customers and meeting their needs through innovative unique value propositions and exceptional service that reflects our brand built on trust and security, delivered and supported by a world-class colleague base. In keeping our focus on backing our customers and our colleagues, we are confident that we will continue to deliver strong growth on a sustainable basis over the long term. Thank you, and let me now turn it over to Christophe.

Christophe Le Caillec -- Chief Financial Officer

Thank you, Steve, and good morning, everyone. It's good to be here to talk about our 2023 results, which reflect another strong year of performance, and to lay out our expectations for 2024. I will discuss both our quarterly and full year results this morning since its year in and since looking at our business on an annual basis is more in sync with how we run the company. Starting with our summary financials on Slide 2.

Full year revenues reached an all-time high of 60.5 billion, up 15% on an FX-adjusted basis. Our fourth quarter revenues were 15.8 billion and grew 11% year over year. This revenue momentum drove reported full year net income of 8.4 billion and earnings per share of $11.21. For the quarter, we reported net income of 1.9 billion and earnings per share of $2.62.

Let's now go to a more detailed look at the drivers of these results beginning with billed business on Slide 3. We reached record levels of spending for both the full year and the fourth quarter in 2023. Total billed business grew 9% versus last year on an FX-adjusted basis. In the fourth quarter, billed business grew 6% as we continue to see more stable growth rates after lapping the prior-year impact of omicron back in the first quarter.

This 6% growth rate does reflect a bit of softening versus last quarter, but I would point out that the number of transactions from our cardmembers continues to grow double digits year over year, a good indicator of the engagement of our customer base. Our growth was driven by 5% growth in goods and services spending and, although slower than last quarter, continued strong growth in travel and entertainment spending up 9% for the quarter. Restaurant spending remains our largest T&E category and reached 100 billion for the full year for the first time, while airline spending growth slowed in the quarter. There are few other key points to take away as we then break down our spending trends across our businesses.

Starting with our largest segment on Slide 4. U.S. consumer grew billings at 7% this quarter. We continue to see growth across all generations in age cohorts with millennials and Gen Z customers again driving our highest billed business growth within this segment.

Their spending was up 15% this quarter. Looking at commercial services on Slide 5, overall growth came in at 1% this quarter. Consistent with last quarter's growth rate, spending growth from our U.S. small and medium-sized enterprise customers remain modest, given unique dynamics seen by small businesses over the past few years.

Specifically in 2022, we saw a large increase in organic spending as businesses restock their inventories following supply chain issues during the pandemic. This caused a significant grow-over challenge for spending from this segment in the industry in 2023. Importantly, we continue to see strong levels of demand for new accounts, high levels of retention, and strong credit performance on our small business products. Looking ahead, this positions us well for the future as spending growth rebounds.

And lastly, on Slide 6, you see our highest growth again this quarter in international card services. We continue to see double-digit growth across all regions and customer types. Spending from international consumers and from international SME and large corporate customers each grew 13% in the fourth quarter. Overall, while we're seeing a softer spend environment, we are pleased with the continued strong engagement and loyalty of our cardmembers across the globe.

As we think about 2024, we are assuming a spend environment similar to what we've seen in the past few quarters. Now, moving on to loans and cardmember receivables on Slide 7. We saw year over year growth of 13%. We expect this growth, which has been elevated versus pre-pandemic levels, to continue to moderate as we progress through the 2024, but to still grow modestly faster than billings.

Turning next to credit and provision on Slide 8 through 10. First and most importantly, we continue to see strong and best-in-class credit metrics. We attribute this performance to the high credit quality of our customer base, our robust risk management practices, and our disciplined growth strategy. As we had expected, our write-off and delinquency rates did continue to tick up this quarter as you see on Slide 8.

Going forward, we expect to see this delinquency and write-off rates remain strong with modest increases in 2024. Turning now to the accounting of this credit performance on Slide 9, the modest increase in our cardmember loans and receivables delinquency rate, combined with a quarter-over-quarter growth in our loan balances, resulted in a 400 million reserve build. This reserve build, combined with net write-offs drove, 1.4 billion of provision expense in the fourth quarter. As you see on Slide 10, we ended the fourth quarter with 5.4 billion of reserves, representing 2.8% of our total loans and cardmember receivables and continuing to reflect the premium nature of our cardmember base.

This reserve rate remains about 10 basis points, below the level we had pre-pandemic or Day 1 CECL. We continue to expect the reserve rate to increase a bit as we move through 2024, similar to the modest increases we've seen over the past few quarters. Moving next to revenue on Slide 11, total revenues were up 11% year over year in the fourth quarter and up 15% for the full year on an FX-adjusted basis. Our largest revenue line discount revenue grew 5% year over year in Q4 and 9% for the full year as you can see on Slide 12.

This growth is mostly driven by the spending trends we discussed earlier. Net card fee revenues were up 17% year over year in the fourth quarter and 20% for the full year as you can see on Slide 13. As we expected, growth continued to moderate a bit this quarter from the high levels we saw earlier this year, reflecting our cycle of product refreshes. In 2024, we expect to exit the year with some further momentum compared to the current growth, supported by continued product innovation and our focus on premium value propositions.

We currently have plans to refresh around 40 products globally next year. In the quarter, we acquired 2.9 million new cards, and the spend revenue and credit profiles of our new cardmembers continue to look strong. Moving on to Slide 14, You can see that net interest income was up 30% year over year on an FX-adjusted basis in Q4 and 33% for the full year. This growth is driven by the increase in our revolving loan balances and also by continued net yield expansion versus last year.

When you think about 2024, you should expect to see net interest income growth moderate as balanced growth moderates with some continued tailwind from our tenured customers continuing to rebuild balances. And I would remind you that for our business model, we would not expect to see a meaningful impact from a lower interest rate environment next year. To sum up revenues on Slide 15, the power of our diversified model continues to drive strong revenue momentum. Looking forward into 2024, we expect to see revenue growth between 9% and 11%.

Moving to expenses on Slide 16. Overall total expenses were up 5% in the fourth quarter and 10% on a full year basis, both growing significantly lower than revenue. This expense growth reflects the strong growth we are seeing in our business, the investments we've made, as well as our continued focus on expense discipline. Starting at the top of the page with variable customer engagement expenses.

These costs came in at 40% of total revenues for the fourth quarter and 41% for the full year. I would note that this cost came in a bit lower than our expectations, reflecting some of the natural hedges in our model. As T&E spend growth slowed a bit in the quarter, we saw lower rewards costs than we had expected, for example, a lower mix of redemptions for airline tickets and fewer points earned on airline spend. In 2024, I would expect our variable customer engagement expenses to grow slightly higher than our revenue as we continue to focus on our premium products and drive engagement from our cardmembers.

On the marketing line, we invested around 1.2 billion in the fourth quarter and 5.2 billion for the full year. This is a bit below last year and our expectations to have marketing spend at around 5.5 billion. Marketing expense came in lower than we expected for the quarter, reflecting lower demand, given the softer T&E environment. However, we saw demand increase as we move through the quarter, and we continue to plan for increased marketing spend in 2024.

We're confident that with our sophisticated acquisition engine, we'll do so in an efficient way. Moving to the bottom of Slide 16 brings us to operating expenses, which were 4.2 billion in the fourth quarter and 14.9 billion for the full year 2023. This was above our original expectations, driven by a few notable items in the quarter. First, as part of the normal course of business, we set up a reserve to cover expenses as we continuously look to enhance the organization's effectiveness.

We also set up a reserve for exposure to a specific merchant. And like many others, we were impacted by the devaluation of the Argentine peso, which increased our opex in Q4 by $115 million. Looking forward, we continue to see opex as a key source of leverage and our focus on delivering low levels of growth as we have historically done. In 2024, we expect operating expenses to be fairly flat to this year's expense.

We will, of course, continue to assess opportunities as we move through the year, and our flexible model will allow us to dial up or down investments as needed. Taking everything into account in 2024, we expect total expense to grow mid- to high-level digits for the full year as we expect to drive continued leverage through our operating expenses. Turning next to capital on Slide 17. We returned 5.3 billion of capital to our shareholders in 2023, including 1.4 billion in the fourth quarter.

On the back of strong earnings generation, we ended the year with our CET1 ratio at 10.5%, within our target range of 10% to 11%. In Q1 2024, as Steve discussed, we expect to increase our dividend by over 15% to $0.70 per quarter, consistent with our approach of growing our dividend in line with earnings and our 2025 target payout ratio. 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 long-term aspiration and 2024 guidance on Slide 18. We continue to run our business with a focus on our aspiration of revenue growth in excess of 10% and mid-teens EPS growth, and we believe that is the right aspiration. As Steve discussed, for the full year 2024 specifically, we are introducing our guidance of having revenue growth of 9% to 11% and earnings per share between $12.65 and $13.15. This guidance remains in line with our aspiration and also factors in a range of scenarios based on what we're seeing in our business today.

We also recently announced an agreement to sell our Accertify business. Our guidance and the items related to 2024 that I just walked through do not include the potential impact from this sale. We do expect to realize a sizable gain on the sale and to reinvest a substantial portion of the gain back into our business as we've done with similar transactions in the past. We expect the deal to close in the second quarter and plan to provide more detail then.

With that, I'll turn the call back over to Kartik to open the call for your questions.

Kartik Ramachandran -- 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 comes from Don Fandetti of Wells Fargo. Please go ahead.

Don Fandetti -- Wells Fargo Securities -- Analyst

Hi, Good morning. Good to see the 24 'EPS guidance and rev guidance. I guess on January spend, some of your peers have noted a slowdown on weather. Can you comment on that? And then, just maybe talk a little bit about billed business in '24 in terms of SME?

Christophe Le Caillec -- Chief Financial Officer

Yeah, so we don't talk about monthly numbers, so let alone about you know a few weeks into the month of January. So, I think the best is to wait until the end of the quarter and we'll provide a lot more color and detail on the billing in January so far. As far as how we think about billed business in 2024, our planning assumption is that we should expect -- or we're expecting billings to be consistent with what we've seen in the prior few quarters. You know, and we're ready to see an upside if there is some.

But for now, that's the assumption we baked in our plans and how we constructed this guidance. On the SME side, it's the same assumption, if you want. We are assuming, you know, something similar to what we're seeing in Q3, Q4. And, you know, we are very focused on winning the recoveries with SMEs.

As I said in my remarks, these cardmembers have been through a lot over the last two, three years. And we are focusing on providing the best experience, the best products. We are focusing on acquiring as many customers as we can and helping them grow their business. And we'll be ready when they're ready.

Historically, this has been a volatile segment for us. You know how dynamic these customer segments are. And we play a critical role in that industry, and we'll be ready when they're ready.

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, guys. Good morning. Maybe to build on Don's question, can you maybe just dig a little bit deeper on some of the drivers of revenue growth, so discount revenues, card fees. And, Christophe, I know you said that NII should decelerate.

And, you know, are we assuming any sort of reacceleration as we move through the year, particularly in areas like U.S. consumer or SME. Thank you.

Christophe Le Caillec -- Chief Financial Officer

Yeah. Hey, good morning, Ryan. Thank you for your question. So, the building blocks of the revenue growth remain the same.

At a very high level, we expect billing and, therefore, discount revenue to grow at a pace similar to what we've seen in the recent quarters. We expect card fees -- so Q4 is at 17%, full year at 20%. We expect card fees to be a key contributor to growth going forward -- to remain a key contributor to growth going forward and actually to exit Q4 at a higher level than where we are right now. And I gave you the context in my remarks, very much supported by the constant strength in premium acquisition through product refresh and renewals that we are committed to execute on and very strong retention rates, which we have experienced for many years now.

And when it comes to the last, you know, component of our revenue pool, net interest income, you should expect that growth rate to moderate, very much driven by the fact that -- and you've seen the trend, I'm sure, Ryan, their, you know, asset growth and their lending growth rate have been moderating over the past quarters. And we expect that moderation to continue. The very strong growth was a function of tenured cardmembers rebuilding balances post-COVID. And, you know, at some stage, we're going to reach their -- a more normal rate there, and that will naturally drive NII, you know, to a more moderate level of growth.

You know, I'm going to also mention that we believe that the interest rate dynamic and what the Fed will decide doesn't play a big role here in terms of what's going to happen to NII. And when you put all of this together and you can -- you know, we run multiple scenarios, what if billing is a bit stronger, what if, you know, NII is a bit weaker, and we land in the same range of 9% to 11%. So, that's very much how we think about the revenue guidance.

Operator

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

Mark DeVries -- Deutsche Bank -- Analyst

Yeah, thanks. I was hoping you could dig a little further into kind of where the loan growth is coming from, how much of it is from new customers or relatively recently added customers versus older and gaining share there, and, also, whether you're seeing any kind of difference in credit performance on kind of balances from -- from newer customers versus older.

Christophe Le Caillec -- Chief Financial Officer

OK, on -- so let me take loan growth. First. The -- the dynamic on loan growth has now changed. And for several quarters now, it's also our philosophy and how we run the company.

About 70% of their loan growth comes from tenured members and what we call tenured cardmembers. It's cardmembers who've been with us more than 12 months. And that's very much how we think about acquisition. We acquire cardmembers, we develop relationships with them, then we offer them -- you know, we cross-sell products, we increase the lines, we nurture those relationships.

And we do that because we understand them better, we understand their spend patterns, and they understand our products better as well. And that's the driver. They're -- you know, we don't do much balance transfers, if any at all. And we don't have promotional offers much promotional offers also.

So, it's very much growing with our tenured cardmembers. And it's part of our strategy to contain, if you want, the credit risk and to control it. And when it comes to the credit profile of the new cardmembers, we haven't changed our credit underwriting models, right? We still -- and we haven't changed as well our marketing channels and products well. We still skew toward positive selection in terms of credit profile.

That has not changed. And, you know, I need to say that the prospects that we bring in and become recent cardmembers have very good credit profile.

Operator

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

Bill Carcache -- Wolfe Research -- Analyst

Thank you for taking my question. Good morning. I wanted to follow up on your comments about customer engagement spending outpacing revenue growth. Can you speak broadly to your ability to continue to drive customer engagement with elevated investment spending while, at the same time, offsetting that margin pressure with operating expense leverage and other parts of the business? And I guess, you know, do you anticipate positive operating leverage on an aggregate basis, you know, with revenue growth outpacing the some of that customer engagement and operating expense combined?

Christophe Le Caillec -- Chief Financial Officer

OK. There's a lot here. So, let me first take you through customer engagement through the key thing for us, and you heard us say this for years, right? We built premium products and we priced for that value. You heard say as well that over the last years, we -- the mix of the portfolio shifted more toward premium products.

That premiumization of the portfolio is the key driver behind that ratio of variable customer engagement expenses to revenue. The more platinum cardmembers we bring, the more variable customer engagement expenses you should expect to see. But at the same time, we have a lot of initiatives to actually optimize this. We have a lot of innovation in that space.

I'm going to share with you one that is driving a lot of efficiencies for us. We recently introduced their pay-with-point option where you can actually go in the app or the website select one specific transaction, and pay with points. So, we have that either constant innovation to try to delight the customers, make their life easier and, at the same time, create efficiencies in terms of the weighted average cost per point. Specifically in Q4, one of the driver of that efficiency or that variable cardmember engagement expense was the fact that we saw less point redemption with airline tickets, which is one of the most expensive cost-per-point that we have.

That drove some efficiencies in that metric. We also saw, as there was some softness in -- in some T&E categories, less point accelerators earned. And that created as well some efficiencies there. The reason why I'm pointing that out is just to give you some example of some of their natural hedges that exist in our business model, where when you see a little bit of softness in the top line, that creates some some savings as well in some expense lines.

So you know, we guided there, you know, toward a little bit of an increase in terms of the variable cardmember engagement expenses. And we're going to keep monitoring that, but I feel good about that trend. And I think that that margin is still very strong and able to generate very strong earnings. We've committed to containing opex.

And as I said, we expect 2024 operating expenses to be, you know, about flat to where we are ending 2023. And marketing expenses will dial up or down based on opportunities that we see based on the efficiencies that we create as well. The model works really well as you can see, and I'm comfortable that the model is strong. And we are stress testing that model running multiple scenarios, and it works well in terms of its ability to generate earnings over time.

And I would say risk-adjusted earnings because that powerful model, what we pay on variable cardmember engagement expenses comes back with a multiple on the credit line. We attract positive select, we generate positive select, we attract premium cardmembers who have a very strong credit profile. And I like paying for that as opposed to trying to control the credit risk down the road.

Operator

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

Jeff Adelson -- Morgan Stanley -- Analyst

Hi. Good morning. Thank you for taking my questions. Chris and Steve, just wanted to dig into the softer T&E trend a little bit.

You know, it looks like you're seeing some softness, particularly in airline spend. You're seeing some slower point redemptions for tickets there. Just maybe give us some insight into what you're hearing and seeing from your cardmembers on that front And then, just maybe in the forward look, can you help us understand what you're kind of embedding in your expectations for T&E from here? I think in the past, you've talked about how the booking trends have been a pretty good indicator of what's to come. Maybe any comment on what you're seeing there?

Christophe Le Caillec -- Chief Financial Officer

Yeah. So T&E, sequentially, the growth rate came down. I need to point out, though, that it's still up 9% year over year um. So, it's a pretty strong growth rate.

In terms of airline spend, and if you heard, I'm sure, the various airlines, they all made comments about a bit of a softer demand. And since many of those customers are using an American Express card to pay for the airline ticket, we -- we saw a similar trend. This being said, booking remains very strong on our, you know, TLS, segment. I don't have the numbers in front of me, but I know they were strong.

So, I don't -- you know, we'll see whether it's the beginning of a trend or whether it's a data point. But we keep seeing, you know, a lot of strength and, you know, the partnership we have with Delta is working very, very well. Originations, you know, of new cards are very strong. And, you know, cardmembers decided to redeem a bit less in Q4 with airline tickets than they did in the past.

And, you know, we've seen in, you know, that choppiness as well in the past, I don't worry, it's one data point. And for 2024, we haven't, you know, communicated on exactly what assumptions we're making by category, but, you know, I'm not too worried. We have a cardmember base that loves traveling, and I'm sure they're going to keep traveling.

Operator

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

Rick Shane -- JPMorgan Chase and Company -- Analyst

Thanks for taking my questions this morning. Look, you guys had alluded to the fact that the reserve rate is going to go up or drift up in 2024. I'm curious if what's driving that. Presumably, it's a mix shift between loans and cardmember receivables.

But I'm wondering if at any level you're also suggesting that the reserve rate on the loan portfolio is going to go up as a reflection of either of some sort of shift there. Or is it just pure mix shift as the loan portfolio grows faster than the cardmember receivables?

Christophe Le Caillec -- Chief Financial Officer

Yes. So, thank you, Rick, for your question. So, this is an important point. So, I'm glad you're asking the question.

The first thing I want to say is that the absolute levels when you look at the delinquency rates or the write-off rates are very low in terms of our historical performance. And on the slide, I put as well the pre-pandemic levels. The write-off rate is 2% in Q4. It was 2.2% pre-pandemic, right? So, we're still below where we were pre-pandemic.

So, in absolute, they're very low relative to our peers, which I know you know well. They're also very good, and I'm sure you noted that every competitor or peer reported their numbers and experienced the same tick but at a higher magnitude. Our tick up of 20 -- or, you know, 0.2 -- or 20 basis point is one of the lowest in the industry. So, I feel good about where we are, and I feel good about the trend.

When it comes to the dynamic in the portfolio, the key driver behind this is that there's still some normalization going on here. We are moving from sub 1% write-off rate during the pandemic. As you all know on this call, this was not a sustainable level, and these rates are normalizing. And they are normalizing at a slow pace, and I like that.

And the 2% is, again, a place where I feel comfortable from a credit standpoint there. The other thing to expand a little bit and take a step back in terms of, you know, what kind of loan growth we are seeing, the biggest contributors in terms of loan balances are the pay over time facility that we offer with our charged products and their co-brands cards. And so, both those portfolio have very strong credit profile and better credit profile than what we call internally proprietary lending, which includes Blue Cash Everyday, for instance. So, if anything, the profile of the portfolio and the mix of the portfolio is shifting and evolving more toward products that have a strong credit profile and, you know, high velocity.

This being said, that normalization is happening and that's what's creating that that little tick up. And as I said in my comments, we're not quite done with that normalization. There are still a bit more to come in our mind, but not a lot.

Operator

Thank you. The next question is coming from Saul Martinez of HSBC. Please go ahead.

Saul Martinez -- HSBC -- Analyst

Hey, good morning. Thanks for taking my question. May I just ask on capital. Is there any updated thoughts on how you're thinking about Basel endgame? Obviously, you know, your preliminary expectations of the proposal at least are that it would, you know, take you down to, you know, closer to 7%.

But you know, there is a lot of talk about, you know, that being soft. And just how are you thinking about, you know, capital management? You obviously increased your dividend. But how are you thinking about buybacks going forward in light of the uncertainty?

Christophe Le Caillec -- Chief Financial Officer

Yeah, so thank you for your question. So, not a lot has changed on that front outside of the fact that we've been meeting with regulators. Steve met with regulators, I met with regulators as well. And what I can tell you is that they are listening, they're engaged, and I think they understand our comments.

The ball is back in their camp now, and they're incorporating all the comments they're received from the industry. And I'm sure you've seen a lot of those comments as well. So, they have a lot of work to do. Right now, we are in waiting mode.

And I think we're expecting the current estimate is we expecting there or at least their next version of the rules by the end of 2024. We'll see. It took 10 years to get to their first draft. So, you know we'll see when we get the next version.

There -- I'm not too concerned. I feel good about our starting point and our capital position. As you know, we generate about 30% return on equity, which means that we generate a ton of capital. And, you know, for now, we're not going to change our capital policy.

The first thing we do is of course fund the balance sheet then we distribute dividends. We feel very confident about the increase that we are planning to do this year. And the rest are going to go in share buyback so that we keep capital between 10% and 11% of our risk-weighted asset. And that's what we've done for years, that's what we're going to keep doing.

And we're going to adapt to the Basel rule. You know, we're running the company conservatively as well with a big buffer over there, 7% rate that we have. And so, nothing has changed much on that front, so more to come when we get the final rules.

Operator

Thank you. The next question is coming from Moshe Orenbuch of TD Cowen. Please go ahead.

Moshe Orenbuch -- TD Cowen -- Analyst

Great, thanks. And many of my questions have been asked and answered. But I'm hoping to follow up on a comment that you had just made about the pay over time business. Could you talk a little bit more about the characteristics of that? You mentioned that.

Obviously, that's going to, you know, tenured charge card customers, so the quality is very strong. Can you talk a little bit about the yield and how much you've seen in kind of growth from that product?

Christophe Le Caillec -- Chief Financial Officer

Yeah. So, your description is, correct, Moshe, there is a facility that we attach to our charge card products where they can decide if they want to revolve proportion of their bill. This is the fastest growing category for us in terms of loan growth. It was very well received.

It was very well received by the cardmembers. And I don't know what else I can tell you. Remember that the charge card has a no-preset limit, which is an important feature here. So, it's a way for us to give them as well -- and it's a pay-in-full product.

So, it's a way for us to give them a facility where they can, you know, revolve over a period of time. And as I said, previously, their credit profile is very strong on this product, very much because it is attached to a very premium base, right, either premium gold cardmembers are using this facility and revolving from time to time.

Operator

Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.

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

Thank you. Maybe I could ask the questions regarding what's embedded in the revenue growth expectations for 2024 differently. If we look at the fourth quarter exit run rate, would that sort of target us to the low end of the guidance range? And then, Christophe, you mentioned that lower rates shouldn't tell, but aren't you guys liability-sensitive on the charge card portfolio? Thanks.

Christophe Le Caillec -- Chief Financial Officer

So, let me take there the second question first. We are slightly liability-sensitive, and the key assumption for us -- but the comment remains that, you know, in its totality, our total balance sheet and total funding stack level, the impact of rate costs is going to be very small to our NII. There -- the big unknown here is what's going to happen to the beta. We've been, as an industry trending, around 0.7 on the way up.

We're probably going to trend to 0.7 on the way down, but not immediately. And it's hard to say exactly at this point in time where are we going to be when the Fed starts cutting rates. We are making assumptions that, we think, are conservative, but we don't know for sure and we'll see where we are. So, there is a bit of uncertainty here.

But what is -- what you know for sure is that you should not expect a big impact to our NII depending on the rate curve. Going back to your first question around revenue, you know, I just -- I don't have a lot to say on top of what I said earlier and what I said in my prepared remarks. I'm happy to be surprised on the upside if billed business is stronger. Card fees, we have good visibility.

NII, I think the trend is very established. And on billing, as I said, we are assuming at this point in time, something consistent with what we've seen in the previous quarters, and we'll see where we are at the end of the year. But if the economy rebounds, if the growth is a bit stronger than what is expected by economists and our cardmembers, you know, are optimistic and keep spending. And, you know, I'd be delighted to have a higher billed business to report.

Operator

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

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Hey, good morning, Steve and Christophe. Thanks so much for taking my question. I was just curious about the total card growth. I mean, we all know that you've seen some really excellent account acquisitions over the last number of years.

But I was just curious about total card growth versus proprietary cards-in-force growth, in particular this quarter? If there's any color you can provide on why that may diverge or what the strategy is between maybe having more proprietary cards as a percentage of total cards. Anything on that would be excellent. Thanks so much.

Christophe Le Caillec -- Chief Financial Officer

Yeah. So, we have about 140 million cards that got transact on our network. Out of the 140 million cards, about 80 are issued by American Express. That's what we call the proprietary cards.

they represent the bulk of the spend, and they drive the very vast majority of our economics. From a growth rate standpoint, if you look at cards-in-force, and it's -- you know, you'll see that in the details of of our disclosures, their proprietary cards in force of 5% year over year and the total cards-in-force. So, including their cards issued by network partners is up 6%. Does that answer your question?

Dominick Gabriele -- Oppenheimer and Company -- Analyst

Very much. I really appreciate that. Have a good day.

Christophe Le Caillec -- Chief Financial Officer

Thank you.

Operator

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

Arren Cyganovich -- Citi -- Analyst

Thanks. Maybe you could -- I was wondering if you could talk about the plans for the next platinum refresh in the U.S., I think the last one was done in 2021, and whether or not you have any plans to do that this year and if that's in your guidance for the year as well.

Steve Squeri -- Chairman and Chief Executive Officer

Yeah, so as you know, we have committed to refreshing 40 products this year, as Christophe had said, and strategically, we look at refreshing all of our products on a sort of three- to four-year basis. And it's important because it's really important to make sure that we keep our products fresh. We're listening to our customers and putting in those enhancements and the extra value that they want. And it enables us to make sure, from a generational perspective, we are modifying those products as trends change and as our customer needs change.

As far as, specifically, for the platinum card, we don't really pre-announce that, and so I think you just have to wait and see.

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, two quick questions. You know, you've -- considering the strength of Delta Airlines over the last number of years, you know, as consistently the top airline, you know, you've clearly benefited a lot from that in terms of new card issuance and likely and spend as they've been able to hold fares better? You know, as we see airlines spend slow, does that benefit diminish? And is it something you have to think about? And second, you know, in terms of small business, you know, we've been pretty flat now for a couple quarters. Curious what you're seeing under the covers there.

Is this -- you know, are you still able to issue new cards? Or -- and, you know, are you seeing any reluctance, you know, from small business to take, you know, additional products that might increase their costs beyond the baseline? I'm just trying to understand the mood better of small business owners. Thanks.

Steve Squeri -- Chairman and Chief Executive Officer

Yeah. So, from a small business perspective, the drive is really organic spend. We're not seeing existing small businesses spend more than they spent the year before. And that's not an American Express phenomenon, that is an industry phenomenon.

As far as card acquisition within small businesses, that still remains strong. As far as small businesses, looking at our platform, and looking at our loans, and so forth, that remains strong. And the credit quality remains strong. I think as Christophe said in his remarks, there is this phenomenon of inventory buildup.

There's some interest rate shock and so forth. And so, small businesses tend to be very, very secular. I would be much more concerned if we weren't acquiring cards, if we weren't engaging in new small businesses, or if write-offs and delinquencies were higher. So, at the moment, as we look at this, we truly believe this is an organic spending issue.

And it's not American Express-specific. I'll let Christophe talk a little bit about Delta.

Christophe Le Caillec -- Chief Financial Officer

Yeah. So, the Delta product is still going very, very strong. The total billing growth on the Delta product for the full year was up 15%, and we originating a lot of new cards as well. My comment about their, you know, softness in terms of Q4, hard to say whether it's the beginning of a trend or whether it's just a blip.

Time will tell. But it's still going very, very strong. And the engagement with the partner -- you know, with the partner is very strong. The partnership is going strong.

So, I don't see any softness there at all. And, you know, I will say as well that their credit quality of those new cardmembers remain very strong. I made comments about it's one of the fastest-growing segment on the loan side. and it comes with very strong performance.

People who travel a lot and who fly a lot tend to have strong credit quality, and we see that on the loan side, on the spend side, on the origination side. So, you know, I'm not worried about that at this stage.

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. Thank you for squeezing me in here. I just wanted to go back a little bit and maybe just unpack the billings growth a little bit. Maybe can you just talk about how much of that is being driven by adding new cardmembers versus winning wallet share? And then, just related to that same topic is just how are you thinking about the environment for new card acquisitions? Is this 3 million level that you have been at for the last couple of quarters the right level to think about for the next year? I understand that it's dynamic and you'll change, but what have you assumed in your planning?

Steve Squeri -- Chairman and Chief Executive Officer

Let me talk about sort of card acquisition numbers. You know, when we go out and we look at acquiring cardmembers, we really focus on acquiring build business, and we acquire we acquire revenue. And, you know, consistently now, if you take the first quarter out of last year, where it was a little bit more of an anomaly of 3.4 million cards, we've been around that 3 to 2.9. And we will -- as long as we have a line of sight into high credit quality premium cardmembers, we will continue to be out there aggressively acquiring cardmembers.

And, you know, that range will be where we see that range today, between 2.9, 3.1. We don't really provide any guidance on that, but with the amount of money we're planning on spending, I think that's a -- it's a pretty fair assumption. And we report that. But what we really focus on is making sure that we're getting, you know, build business acquired.

when you look at the composition, obviously, in a stronger and stronger environment, you really looking for more organic growth from your existing cardholders. And I just made the comment before, we're small businesses, that's not what we're seeing. And so, when you look at any growth that you're seeing from a small business perspective, that is truly from new cardholders acquired. And a lot of the growth from a consumer perspective right now is new cardholders acquired, which actually, as we think about engaging with our cardholders, gives me a lot of confidence going forward because as we continue to engage and not only get more wallet share, but as our cardmembers get back to where they were probably before the third and fourth quarter, we believe there is upside there from a billings perspective.

And, you know, we've talked a lot about millennials over time. And you know, we get on this growth trend, we get on this trajectory with these millennials and Gen Zers, where we start with a higher share of wallet and we start with that higher share of wallet because they're used to using their American Express card everywhere. And as they move through their life cycles, their wallets increase. And so, we have a lot of confidence in the long term lifetime value of the millennial base and of Gen Z base that we're now acquiring.

And you see, even in this fourth quarter that is 32% now of our total spending. So, you know, a way to think about this right now is a lot of the growth is coming that you're seeing is coming from new card acquisition, but there will be an organic step-up as the economy gets better. So -- and that that gives us a lot of confidence of how we're positioned for future growth over the long term, which gives us confidence to say, aspirationally, we should be a 10%-plus revenue company. And that's why you see the guidance that we've given this year and both from a revenue perspective and EPS perspective.

Kartik Ramachandran -- Head of Investor Relations

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 13743240 after 1 p.m. Eastern Time on January 26th through February 2nd. That will conclude our conference call for today.

Thank you for your participation. [Operator signoff]

Duration: 0 minutes

Call participants:

Kartik Ramachandran -- Head of Investor Relations

Steve Squeri -- Chairman and Chief Executive Officer

Christophe Le Caillec -- Chief Financial Officer

Don Fandetti -- Wells Fargo Securities -- Analyst

Ryan Nash -- Goldman Sachs -- Analyst

Mark DeVries -- Deutsche Bank -- Analyst

Bill Carcache -- Wolfe Research -- Analyst

Jeff Adelson -- Morgan Stanley -- Analyst

Rick Shane -- JPMorgan Chase and Company -- Analyst

Saul Martinez -- HSBC -- Analyst

Moshe Orenbuch -- TD Cowen -- Analyst

Sanjay Sakhrani -- Keefe, Bruyette and Woods -- 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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