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Operator
Automated System
Ladies and gentlemen, thank you for standing by. Welcome to the America Express Q1 2023 earnings call. At this time, all participants are on a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, please press star, then one on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from the queue at any time by pressing star, then two. If you are using a speakerphone, please pick up the handset before pressing the numbers. Should you require assistance during the call, please press star, then zero. 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. Carrie Bernstein. Please go ahead.
Carrie 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 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 gap 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'll begin today with Steve Squary, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Jeff Campbell, 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 Jeff. With that, let me turn it over to Steve.
Steve Squary
Chairman and CEO
Thanks, Carrie. Good morning, everyone, and thanks for joining us today on our first quarter earnings call. Back in January, we laid out our guidance for 2023 of 15% to 17% revenue growth and double-digit earnings per share growth. Our first quarter results are tracking to this full year guidance. Revenues were a record $14.3 billion per quarter, up 22%, which is well above our full year expectations. Stronger spending growth outside the US and in T&E offset some softness in US small business spending. EPS came in a bit higher than our original plan expectation. Our plan calls for quarterly EPS to grow sequentially through the year as our revenue growth continues. Build business was up 16% globally year over year on an FX adjusted basis. T&E spending was up 39% year over year on an FX adjusted basis due to the grow over effect through the grow over benefit from the impact of the Omicron variant in last year's results. We saw strong demand across all T&E categories and customer types. Spending at restaurants continues to be a bright spot with growth accelerating to 28% on an FX adjusted basis year over year. In fact, March was a record month for reservations booked through our Resi platform. The platform now has more than 40 million users globally, an increase of 5 million in the last six months. Consumer travel demand also remains high, with Q1 bookings through our consumer travel business reaching their highest levels since pre-pandemic. As you'll recall, we reorganized our international business last year, bringing together our consumer, small business, and large corporate management teams outside the U.S. to increase agility, scale and efficiency, and accelerate our growth. Our international issuing businesses were the fastest growing before the pandemic, and we're seeing a return to those trends. International card services billings continued to accelerate in the quarter, up 29% on an FX-adjusted basis. Results were driven by robust growth in T&E spending, which increased 58% year-over-year on an FX-adjusted basis. We also saw continued momentum in card acquisitions, with 3.4 million new cards acquired in the quarter. U.S. consumer platinum and gold, business platinum and Delta co-brand account acquisitions all reached record levels. Notably, over 70% of the new accounts acquired globally in a quarter are on fee-based products. As we noted for some time, millennial and Gen Z consumers are driving our growth in billings and acquisitions of premium fee-based products. More than 60% of consumer new accounts acquired globally came from millennial and Gen Z. These customers also continue to contribute the highest growth in billed business among all age cohorts in the U.S., up 28% in a quarter. On credit, our metrics remain best in class, supported by the premium nature of our customer base, our strong risk management capabilities, and the thoughtful underwriting actions we've taken on an ongoing basis. Our customers have been resilient thus far in the face of slower growth and higher inflation economic environment. While the near-term economic outlook is mixed, our customer spending and credit performance to date, along with the continued strong demand for our products from high-quality new customers, reinforces our confidence in our ability to achieve our long-term aspirations. Our capital, funding, and liquidity positions are strong, and we continue to have significant flexibility to maintain a strong balance sheet in periods of uncertain stress. As you know, we run our company for the long term. We have a strategy in place to deal with swings in the economy, which has enabled us to be successful in navigating through the pandemic, the initial recovery period, and the current environment of elevated inflation and higher interest rates. Through it all, we've continued to attract and retain high-quality customers, and our strategic investments have resulted in the momentum we've seen throughout last year and into 2023. We feel good about the decisions we're making around growth, risk management, and the economic environment. Our key metrics are strong. The market opportunities we see in our core businesses are plentiful. And our strategy of investing in value proposition innovations, customer acquisitions, and global merchant coverage continues to drive our growth. Based on our performance to date, we are reaffirming our full-year guidance of delivering between 15% and 17% revenue growth and earnings per share of between 11% and 11.40%. We remain committed to focusing on achieving our aspiration of delivering sustainable revenue growth greater than 10% and 15% ZPS growth as we get to a more steady-state macro environment. Thank you, and now I'll turn it over to Jeff.
Jeff Campbell
Chief Financial Officer
Well, thanks, Steve, and good morning, everyone. It's good to be here to talk about our first quarter results, which are tracking in line with the guidance we gave for the full year and reflect steady progress against our long-term growth aspirations. Starting with our summary financials on slide two, our first quarter revenues were $14.3 billion, reaching a record high for the fourth straight quarter, up 23% on an FX-adjusted basis. This revenue momentum drove reported net income of $1.8 billion and earnings per share of $2.40. Given we had a sizable credit reserve release of pandemic-driven reserves in the first quarter of last year, we've also included pre-tax, pre-provision income as a supplemental disclosure again this quarter. On this basis, pre-tax, pre-provision income was $3.2 billion, up 20% versus the same time period last year, reflecting the growth momentum in our underlying earnings. So now let's get into a more detailed look at our results, which in our spend-centric business model always begins with a look at volumes, which you see on slides three through seven. Total network volumes and billed business were both up 16% year over year in the first quarter on an FX-adjusted basis. Given that most of our spending categories have fully recovered versus pre-pandemic levels, we saw the more stable growth rates we expected this quarter with first quarter bill business growth of 16%, just above last quarter's growth of 15%. As Steve noted earlier, we did see particularly strong growth in travel and entertainment spending in Q1 of 39%, driven by continued demand for travel and dining experiences. As expected, this growth rate was elevated early in the quarter as we lapped the impact of Omicron in January of the prior year, So I would expect to see growth moderate moving forward, but to remain high given the strong demand we are seeing across geographies, customer types, and T&E categories. We also saw solid growth in goods and services spending for the quarter, up 9% year over year. I would note that we did see this growth rate slow sequentially in the U.S. for both SME and consumer as we went through the quarter. So we are continuing to monitor these spending trends. That said, overall billed business reached a record level in the month of March, and our largest segment, U.S. consumer, grew billing 16% in the first quarter, accelerating a bit above last quarter's growth. Millennial and Gen Z customers again drove our highest billed business growth within this segment, with their spending growing 28% year-over-year this quarter. Turning to commercial services, we saw year-over-year growth of 10% overall. U.S. SME growth came in at just 6% this quarter, but was somewhat offset by really good growth in U.S. large and global corporates, up 34% year-over-year. And lastly, you see our highest growth in international card services. We are seeing the early benefits of the organizational changes we announced last year start to play out demonstrated by strong growth across geographies and customer types. Spending from international consumer and international SME and large corporate customers, who were among our fastest growing pre-pandemic, grew 27% and 34% year-over-year, respectively. International card services travel and entertainment growth was especially robust at 58% for the quarter. This segment is still in a recovery mode, given it started its pandemic recovery later than other segments. Overall, our spending volumes are currently tracking to support our revenue guidance for the year and our long-term aspirations for sustainable growth rates greater than what we were seeing pre-pandemic. Now moving on to loans and card member receivables on slide eight, we saw year over year growth of 25% in our loan balances, as well as continued sequential growth. This growth continues to come mostly from our existing customers who are rebuilding balances. And as a result, the interest bearing portion of our loan balances is growing faster than the 25% growth we see in total loans. Specifically, over 70% of this growth in the U.S. is coming from our existing customers. We are pleased with this growth and with the overall lending economics we are generating. That said, looking forward, you may see the growth rate of our loan balances moderate a bit as we progress through 2023, but we would expect it to remain elevated versus pre-pandemic levels. As you then turn to credit and provision on slides 9 through 11, the high credit quality of our customer base continues to show through in our best-in-class credit performance. Our card member loans and receivables write-off and delinquency rates remain below pre-pandemic levels, though they did continue to move up this quarter as we expected, which you can see on slide 9. We view these consolidated write-off and delinquency rates as more comparable to pre-pandemic rates than the individual loans and receivable rates because, as we talked about last quarter, our charge products in many instances now have embedded lending functionality. Going forward, we continue to expect these delinquency and write-off rates to increase over time, but they are likely to remain below pre-pandemic levels in 2023. Turning now to the accounting for this credit performance on slide 10. The expected increases in delinquency rates, combined with the quarter-over-quarter growth in our loan balances, resulted in a $320 million reserve bill. This reserve bill, combined with net write-offs, drove $1.1 billion of provision expense in the first quarter. As we move past much of the volatility in this line item that CISO reserve bills releases caused during the pandemic. As you see on slide 11, we ended the first quarter with $4.4 billion of reserves representing 2.5% of our total loans and card member receivables. This reserve rate remains about 40 basis points below the levels we had pre-pandemic or day one CECL. We expect this reserve rate to continue to increase as we move through 2023 but to remain below pre-pandemic levels. Moving next to revenue, on slide 12, total revenues were up 22% year-over-year in the first quarter or 23% on an FX-adjusted basis. Before I get into more details about our largest revenue drivers in the next few slides, I would note that service fees and other revenue was up 34% in the quarter. driven largely by the year-over-year increases in travel-related revenues that accompanied the tremendous demand we've seen for travel. As you can see on slide 13, our largest frontline discount revenue grew 17% year-over-year in Q1 on an FX-adjusted basis, which, similar to spending volumes growth, is just above last quarter's growth rate. Net card fee revenues are up 23% year-over-year in the first quarter on an FX-adjusted basis, as you can see on slide 14. Growth, which did moderate slightly this quarter as expected from the extremely high level we saw last quarter, remains quite strong. This growth continues to be driven largely by bringing new accounts onto our fee-paying products as a result of the investments we've made in our premium value propositions. This quarter we acquired 3.4 million new cards, demonstrating the demand we're seeing, especially for our premium fee-based products. Moving on to slide 15, you can see that net interest income was up 36% year-over-year on an FX-adjusted basis, accelerating versus last quarter, primarily due to the growth in our revolving loan balances. I'd also note that net yield on our card member loans increased 50 basis points sequentially, reaching pre-pandemic levels this quarter. as our customers increase their revolving balances. We have been able to increase our net yield while maintaining net write-off rates below pre-pandemic levels, expanding our net credit margin. To sum up on revenues on slide 16, we're tracking well against our expectations and looking forward, we still expect to see revenue growth to 15 to 17% for the full year of 2023. The revenue momentum we just discussed has been driven by the investments we've made. Those investments show up across the expense lines you see on slide 17. Starting with variable customer engagement expenses, these costs came in at 43% of total revenues in the first quarter, tracking right with our expectation for them to run around 43% of total revenues on a four-year basis. On the marketing line, we invested $1.3 billion in the quarter on track with our expectation of marketing spend that is fairly flat to our full year 2022 expense, $5.5 billion. We remain focused on driving efficiencies so that our marketing dollars grow far slower than revenues, as we did for many years prior to the pandemic. Moving to the bottom of slide 17 brings us to operating expenses, which were $3.6 billion in the first quarter. There's usually some quarterly volatility in this number, and this quarter, for example, we saw a $95 million impact from net mark-to-market losses on our Amex Ventures investment portfolio. But you can see, based off our first quarter results, that similar to marketing, we are tracking with our expectation for operating expenses to be around $14 billion for the full year. We continue to see operating expenses as a key source of leverage, and moving forward, expect to have far less growth in OPEX relative to our high level of revenue growth. Turning next to capital on slide 18, we ended the first quarter with our CET1 ratio at 10.6% with our target range of 10 to 11%. I would note that AOCI already flows through our regulatory capital today. So any unrealized gains or losses on our investment portfolio are fully reflected and the 10.6% that I just quoted. I'd also point out that we hold only $4 billion of investment securities, most of which are short-dated U.S. treasuries. In the first quarter, we returned $600 million of capital to our shareholders. With our strong capital position, we have both the capacity and the intent to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. I'd also note that our liquidity position remains extremely strong as we ended the quarter with $41 billion of cash, our highest ever balance, excluding the pandemic period. We also saw a 10% increase in our deposits this quarter, including the inflows in the weeks following recent volatility in the banking sector. On slide 25 of the appendix, we have provided a bit more detail on deposits than we typically do. if you'd like to look at some of the numbers. That brings me then to our growth plan and 2023 guidance on slide 19. For the full year 2023, we are reaffirming our guidance of having revenue growth of 15% to 17% in earnings per share between $11 and $11.40. At this level, year-over-year revenue growth, we expect to see a significant sequential increase in the amount of revenues as we go through the year. In contrast, our marketing and operating expenses were already more in line with the run rate for the year in the first quarter. So there's always some quarter-to-quarter volatility. So the simple math then gets you to the sequential growth in our underlying earnings consistent with our full-year EPS. There is clearly uncertainty as it relates to the macroeconomic environment, but as Steve discussed, our customers have remained resilient thus far in the face of the slower growth, higher inflation economic environment. Our outlook is based on the blue chip macroeconomic consensus, which continues to expect slowing growth, though not a significant recession. In any environment, though, we are focused on running the company for the long term, looking forward to we remain committed to focusing on achieving our aspiration of sustainably delivering revenue growth in excess of 10% and mid-teens EPS growth as we get to a more steady state environment. With that, I'll turn the call back over to Carrie to open up the call for your questions.
Carrie Bernstein
Head of Investor Relations
Thank you, Jeff. And before we open up the line for Q&A, I will ask those in the queue to please limit yourself to just one question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Operator?
Operator
Automated System
Ladies and gentlemen, if you wish to ask a question, please press star, then 1 on your touchtone phone. You'll hear a tone indicating that you've been placed in queue. You may remove yourself from the queue at any time by pressing star, then 2. If you're using a speakerphone, please pick up the handset before pressing the numbers. One moment, please, for the first question. Our first question is coming from Sanjay Sakrani of KPW. Please go ahead.
Sanjay Sakrani
KPW
Thanks. Good morning. Steve, I think the number that's pretty striking is the strong growth among millennials and Gen Z, which seem like a third of the US spending volumes. I've heard some worry about like this cohort because they're relatively new to credit, but obviously it seems like the spending remains quite strong. So I'm just curious sort of how you're seeing things trend for them. you know, whether or not you feel like there's more risk or less risk. And then, you know, maybe Jeff, you can elaborate a little bit more on the weaker spending trends that you saw in March. Thanks.
Steve Squary
Chairman and CEO
Yeah, I think that, well, Jeff can elaborate a little bit more, but March was a record spending month for us overall. It was the highest month we ever had in history at a company. So feel free to elaborate on that, Jeff. But, you know, millennials have been Millennials have been a big part of our growth story. And if you go back pre-pandemic, they represented about 20% of our billings. Now they represent 30% of our billings. And they're growing at, I mean, you know, last quarter they grew at 30%. This quarter they grew at 28%. And, you know, we're acquiring 60% of our new cards acquired. I think from risk perspective, they play out much like low tenure plays out. And so we really have not seen anything different with millennials than we have seen with any of our other card acquisitions. And so, you know, like anything, you need to watch that. But right now, we don't have any concerns with that. And the other thing that I will point out is that This whole concept of getting more millennials really started with our focus on generational relevance and making sure that our products and services were attractive across an entire cohort. And so that is really working for us as you've seen the composition of our base change. And so that gives me a lot of confidence as we move forward that we're making the right moves from a value proposition perspective and continuing to invest in the right benefits and we are acquiring the right customers. And as I've said on these calls before, we continue to raise the bar. In the face of an uncertain economic environment, we continue to raise the bar on who were acquiring the last point that i'll make because i think it's really relevant and stay with me on this for a second if you go back to 2018 and look at all the cards that we acquired in 2018 and looked at what the first quarter spending was in 2019 and you did the same thing in 2022 and looked at what the first quarter spending was in 2023 we are 50 higher meaning we're requiring higher spending card members. And so I think the teams have done a phenomenal job of really sort of getting through the clutter and getting not only more card members, but getting card members that spend, getting card members that are paying fees, and getting card members that will be with us for a long time. So it's a long sort of answer, but I think it's It really is relevant to what you were talking about in terms of millennials, because I think that gives you a pretty good picture of just how we are looking at that segment and just how that segment is performing and how we believe it will continue to perform. So you want to talk about March, Jeff?
Jeff Campbell
Chief Financial Officer
Well, the only thing I would add is, you know, we're just trying to be transparent, Sanjay. I think a lot of people describe the current economic environment as mixed. And so March was our strongest month ever. across the globe in terms of volumes as a company. In the U.S., spending by all customer types on travel and entertainment is really strong. But you did see in goods and services as you went from January to February to March, spending slow a little bit, the growth rate sequentially. On the other hand, you've also got to sort through how does Omicron last January, February fit into that So we're just trying to be transparent about sorting through all the mixed signals, but I think we come back to our customers overall have shown great resilience in the face of all the mixed signals in the economy, and that's what we're running the company on.
Operator
Automated System
Thank you. The next question is coming from Mihir Bhatia, Bank of America. Please go ahead.
Mihir Bhatia
Bank of America
Hi, thank you for taking my question. I was curious if you could elaborate a little bit more on the slowdown that you're seeing, I think you mentioned, in the U.S. a little bit. Are there particular types of spending you're seeing? Is it broad-based across customers? And I think you mentioned both on the consumer and small business side, so if you could just elaborate on that. And if you have any data on April, you can share.
Steve Squary
Chairman and CEO
Well, on the consumer side, you know, just look at sequentially, consumer in the fourth quarter grew 15%, we're growing 16%. So there was really no slowdown there. You know, when you look at US SME, we grew 8%, we're growing 6% now. So I think it was a little bit of a slowdown in US SME. And remember, you know, when you look at our consumer business, our consumer business, I don't believe is really representative of the entire economy. our consumer business is representative of a really high-end premium consumer base. Our small business, because of the volumes that we have, are probably a little bit more representative. And where you do see a slowdown in small business is goods and services. What I remind people is small businesses are small businesses because they're small. And what happens is, to a level of spending, and then, you know, unless that business is really going to grow, you can only spend for what you're taking in. But I think what we've seen, and this is a continuing trend, is you've seen a slowdown in a lot of the advertising spending. But I will point out that that's not any different than what you've seen from a lot of corporations, I mean, and ours ourselves. I mean, if you look at it, our plan has been to spend the same amount of marketing that we spent last year this year. And that number is $5.5 billion. And when you look at that number, we try and get more and more efficient with that. And we push our partners to become more and more efficient as well. And so you get to a point of scale where you just don't spend anymore. And I think we're seeing a little of that in small business as well. But look, 6% growth in the U.S. small business for the amount of volume that we have You know, right now we're okay with that, and it's in line with us making our overall plan. What I would point out from a small business perspective is international is not like that. International is growing much, much faster than that, and international is back to, you know, our fastest growing segment. So, you know, we'll keep watching it, but, you know, really happy with the consumer experience. And right now, I think small business is kind of in line with where we have it going for the rest of our plan for the rest of the year.
Operator
Automated System
Thank you. The next question is coming from Mark DeVries of Barclays. Please go ahead.
Mark DeVries
Barclays
Yeah, thanks. I just wanted to get into what drove the acceleration of growth in international card services. Jeff, I heard you allude to the fact of seeing results from the reorg, but could you talk a little bit more specifically about kind of what you did in that business segment to really drive the improvement?
Steve Squary
Chairman and CEO
Well, I think there's a couple things, right? Number one, there was no place in the world that was more impacted by the pandemic than international. And when you look at our card base internationally, it is a – a really high T&E orientated, you know, card base. And correct me if I'm wrong, I think this is a 59% T&E increase in our international card. So that's number one. I mean, I think you just have, you have just some built up demand that had been pushed down, number one. We continue to improve our merchant coverage tremendously in international. So there are more and more places to use the card. And I think coverage cannot be understated or overlooked in how it drives growth, especially in international. And I think that's really important. I think we continue to acquire new card members in international as well. And as far as the reorganization, What the reorganization does for us is makes us a lot more efficient. And so let me give you an example. You know, sometimes it's really hard to determine whether a potential customer is a small business or whether a potential customer is a consumer. And what you do is you put resources in, you go against, you attack them both ways. Well, now what we're doing is we're looking at that in a more holistic way. And so instead of having what I like to refer to as the Noah's Ark syndrome of two of everything, We now have someone in a market focused on card acquisition, both small business, consumer, and international, and large market and corporate as well. And so I think what we've done is we've been able to become more efficient with our marketing. We've been able to share intellectual property across business lines. And we've been able to, in a given market, make better trade-off decisions from an investment perspective because we're running it much more as a market as opposed to running it as global segments. And I think that's really given the team a lot more flexibility and given them a lot more ability to achieve their goals. And look, the reality is international was the fastest growing part of our business pre-pandemic. And these moves were made to become more efficient, to get it back to where it was and go beyond that. And so we feel good about, you know, the start that international is on at the moment.
Jeff Campbell
Chief Financial Officer
You know, the only comment I'd add, Mark, is it is remarkable the breadth of the strength right now when you look across geographies. It's Europe, it's the UK, it's where we are in Latin America, it's Asia. It's really broad based. So we feel really good about the progress.
Operator
Automated System
Thank you. The next question is coming from Betsy Grothick of Bork and Stanley. Please go ahead. Hi, good morning.
Betsy Grothick
Bork and Stanley
I did want to just ask an overarching question on top line growth drivers from here. And I know we have already spoken about a couple of different line items. I think U.S. and large corporate is still something we could unpack a little bit. But I would also like if you could just, from your vantage point, give us where you think the growth drivers are from here, which one cue, extremely strong. Thanks.
Jeff Campbell
Chief Financial Officer
Well, you know, in many senses, Betsy, I would almost just point you to the first quarter results, because I think one of the drivers of our confidence is the breadth of strength we see across all the lines of the P&L. So discount revenues, when you look forward and look at growth, are going to look about like they did this quarter. I think you'll see a tail down slightly because you have a little bit of an Omicron tailwind maybe in January and February. But volumes look good, and that's going to continue to be a nice double-digit driver of growth. We have grown net card fees. in double digits consistently for years right through every single quarter of the pandemic, and they've been above 20% for the last couple of quarters. That's going to continue because what we constantly have to remind people of is it's not particularly increases in fees for any given card that drive that, although it helps, it's mostly the steady acquisition that Steve talked about of more people on our higher fee paying cards. You know, net interest income, as I said, I think our overall loan balance growth will probably continue to be higher than it was pre-pandemic, but moderate a bit as our customers kind of get through the process of rebuilding balances. I think I don't want to pretend to suggest I can predict exactly what interest rates do the rest of the year. That'll have some impact on the growth rate, although I'd remind you, unlike most banks, the impact of rates moving one way or another on us is very, very modest. We're reasonably hedged. There's a 10K disclosure about that for anyone who's interested, but we're not that heavily impacted. And then you have the service fee and other revenue line, which is benefiting from travel-related strength, and I think that will continue. So, you know, I think as you think about the drivers of revenue growth across the rest of the year, it doesn't look that different than what you saw in the first quarter. It's very broad-based, and that's what gives us confidence.
Steve Squary
Chairman and CEO
Yeah, so I could just say what he said, but, you know, let me just take it up a level, and I think that You know, one of the things that we do in looking for opportunities is we try and make sure we're investing in those opportunities which have the greatest return. And Jeff said this many, many times on these calls. We have more good opportunities to invest in than we have dollars to invest. And I think nothing is a better example of how good our opportunities are how much better our opportunities have become than what I, and how I answered the first question for Sanjay in talking about how the cards that we're acquiring now are 50%, you know, in this first quarter, anyway, 50% better than they were back in 2018. And the other thing that I would say, which I think is really important is when we look at acquiring a customer and we report cards, but we look at acquiring revenue. And when we look at a customer, Revenue for us is a three-legged stool. We acquire card members and a majority, 70% of the cards we're acquiring right now are paying fees. That's a huge differentiator for us. Then what we do, you pay that fee, you use the product, and then as Jeff said, that discount revenue. And that discount revenue, you know, is going to grow pretty much in line with where it was now. And then the third-legged stool is interest income. And, you know, we've we've modified our products so that we have planted on it, we have pay over time. And so we're giving our customers lots and lots of choices in how they want to manage their financial lives with us and in how they want to manage their credit card payments. And so, you know, we really focus a lot on revenue for our customers. And that's what gives us a lot of That's what gives us a lot of confidence because when we acquire a customer, it's not, okay, we're going to acquire this customer and they're going to drive lending revenue. We're going to acquire this customer and it's going to be fee. We literally look at that entire basket. And as we look at the ROIs, all of that is taken into account.
Operator
Automated System
Thank you. The next question is coming from Rick Shane of JP Morgan. Please go ahead.
Rick Shane
JP Morgan
Thanks, guys, for taking my question this morning. I'd like to discuss the accounting and strategy on fee waivers. When fees are waived, I'm assuming that the fees are recognized and there's an offsetting expense in terms of marketing. Are both the fees and expenses accreted and amortized quarterly? Is that the way we should think about it?
Jeff Campbell
Chief Financial Officer
Well, I think, can I maybe step back, Rick? So when you, because in many ways I think sometimes there's a misnomer about when we have a line called marketing, what's actually in the marketing line. So there are a variety of incentives that we offer to customers and sometimes to partners to acquire customers that are involved in bringing new card members into the franchise. And when you look at the $5.5 billion that we spend in marketing, there's a very small portion of that that is ads that probably people talk about more. But the overwhelming majority of what's in that $5.5 million is are the costs of the many kinds of incentives that we offer to customers. And so fee waivers can be incentive or interest rates on balances that are at promotional levels. But in general, the cost of those welcome incentives are going to be amortized over varying periods. We offer lots of different kinds of marketing incentives, so I can't generalize to the exact period, but generally they're going to be advertised over a period. So one of the things we always wrestle with is when you look at it in total, as you're bringing more customers into the franchise, you generally are recognizing the cost of bringing them in more quickly than their spending and their revenues ramp up. And so, you know, like many companies, you sometimes have the good problem that the more you bring new customers in, which is a good thing for the long term, in the short run, that can create a little bit of an economic headwind. So that's the way I would think about this.
Operator
Automated System
Thank you. The next question is coming from Craig Moore of FT Partners. Please go ahead.
Craig Moore
FT Partners
Hey, good morning. Thanks for taking the question. Hey, welcome back. Thanks. It's been fun getting the business up and running for FT Partners. And again, I appreciate you taking the question. So with thinking about credit, if we look at what drove the provisioning expense in the quarter. It looks like the allowance bill was actually materially less than it was in fourth quarter, despite the relatively similar provision amount. So it seems like you were soaking up the losses that were driven by the rise in delinquencies in the back half of last year. but you only saw a very small increase in delinquencies in the quarter. So I guess the question is, are you comfortable with where allowance levels are now, especially considering they're materially higher than where they were going into the pandemic?
Jeff Campbell
Chief Financial Officer
Well, can I work backwards? I think the simple way, because this is such a complex subject, as you know, Craig, that I always encourage people to think about this is take the reserves on the balance sheet divided by the total loans and receivables. That ratio is 2.5% at the end of this quarter. Compare that number to what was day one CECL. It was 2.9%. You can compare that same number to every other financial institution that reports. And I think that's a simple way to both track us versus history and us versus other companies. And as you know, our 2.5% is by a long shot, best in class relative to what others have. When you think about sequential CECL accounting, what I would say is the fourth quarter of last year was probably one of the last quarters that's still what I will refer to as pandemic CECL noise. In other words, all of the financial institutions built all these big reserves, released them at different times. For us, and I think this is different from any other institutions, we're kind of past that. And so, you know, what you see starting in the first quarter, not in the fourth quarter of last year, is really not influenced by all the noise that the pandemic drove as we all built and then released reserves. It's why, in some ways, I think going forward from here, you're back to, I don't know if there's such a thing as a BAU view of CECL accounting because none of us have done CECL accounting in a, normal world. But for us, we're sort of back at a fairly steady state run rate. So, if you think about it, we expect loan balances to continue to build. We expect credit metrics to continue to moderate up a little bit, and that will cause us to continue to build a little bit of reserve each quarter, and all of that is built into the guidance that we're offering today.
Operator
Automated System
Thank you. The next question is coming from Dominic Gabriel of Oppenheimer. Please go ahead.
Dominic Gabriel
Oppenheimer
Hey, guys, good morning. Thank you so much for taking my questions. So I know a lot of the business obviously depends on the consumer, but you do have a very large, unique commercial business. And so, you know, if you think about the bank tightening, some believe will occur. How do you think this plays out through your large and SMB businesses that credit access to credit changes? And how do you think those dominoes kind of fall in affecting their spending levels or whatever you think, you know, are the key elements there. That'd be great to hear your perspective. Thanks so much.
Steve Squary
Chairman and CEO
Well, I think, you know, let's look at how much it represents, right? Large and global accounts represent about 6% of our overall spending. And I'm not so sure when you look at that segment that sort of credit tightening is really going to drive drive their spending. That is predominantly a T&E game. And most companies are trying to get their people out and trying to get them to go out and travel. And that spending has been up 34%. We're still not back to where we were. What normally affects that for us is more layoffs and things like that. But even in the face of layoffs, especially in the tech segment or late starts that are going to occur in consulting and things like that, I think we're in a unique situation right now where I just don't think credit tightening in that segment is really going to be an issue. I think there it's going to be more of an earning story and do they do layoffs. But again, we're in such a crazy spot where most people aren't traveling anyway and people are encouraging to travel. I don't see that. I think when you look at small businesses, you know, small businesses go in and out, um, quite a bit. And, you know, you could see, uh, with some credit tightening, some small businesses having, you know, uh, harder access to some, to some working capital. What I would say is one of the things that we do have from a small business perspective is we are really, um, you know, with our launch of blueprint and cabbage and so forth, um, We have working capital loans, we have short term loans and so forth. And, you know, we're not in the same position as a lot of these other smaller banks are. And for those credit worthy small businesses, we will continue to extend, extend credit. And, you know, it could be an opportunity for us actually. you know, provided the credit is good. So I think in general, it can affect the small business economy and their ability maybe to grow, to get working capital. But I think it also provides us with an opportunity because we may not be the lender of first resort to these small businesses right now. And I think it could be an opportunity for us, again, judiciously, but an opportunity.
Operator
Automated System
Thank you. The next question is coming from Moshe Orenbeck of Credit Suisse. Please go ahead.
Moshe Orenbeck
Credit Suisse
Great, thanks. Jeff, you had talked a little bit about the OPEX being kind of flattish over the course of the year. I think, I mean, historically that had kind of been seasonally low in the beginning of the year and seasonally high at the end. Is there something that's changed with respect to that?
Jeff Campbell
Chief Financial Officer
Yeah, I think... Look, every year is a little different, and you have a higher growth rate year over year, most this quarter, because if you think about 2022, we really were in a ramp up, as were many companies, as we came out of the pandemic, as we all dealt with what was some pretty high attrition in late 2021 and 2022, and we were sort of fully ramped. to where we needed to be. I mean, the way we think about OpEx, and this is actually the way we talk about it internally as well, is we have a lot of confidence in the very high revenue growth rates that we have set out in our guide, 15 to 17% this year. We built the infrastructure of this company through the end of last year to manage that level of volume and revenue. So we are where we need to be to manage that, which is why we'd expect sequentially this year to find that OpEx pretty flat. So we provided guidance for OpEx of about $14 billion. You know, if you take out the $95 million mark-to-market loss we had on our ventures portfolio, which was mainly driven by one company, we're pretty much tracking right to that. And I think our record, I would suggest, over more than a decade is when we tell you we're going to hit a certain OPEX number or control OPEX. I think we have a pretty good track record of doing that. So that's how I would think about it.
Operator
Automated System
Thank you. The next question is coming from Bob Napoli of William Blair. Please go ahead.
Bob Napoli
William Blair
Thank you, and good morning. Question just on big picture, if you will, from uh if you look at the big tech companies like amazon and apple and their involvement in financial services getting a little bit more and i know that in some ways they're partners but what are your thoughts around the uh the competitive risk uh from the uh the large tech companies they seem to be getting more and more involved in credit cards and uh you know other financial service types that might be competitive well i i you know look they've been involved for
Steve Squary
Chairman and CEO
for a decade. And, you know, we obviously, we partner with Amazon. We work very, very closely with Apple on Apple Pay. And obviously, they're a large merchant and a large partner. And, you know, it's not just Apple and Amazon we look at. We look at all the fintechs and the startups and what have you. And I think, you know, that's why we always say when, you know, you look at competition, it's just not the traditional banks. It's the fintech, it's the big tech players and so forth. And the reality is the way that you have to compete not only against them, but compete against everybody else is you have to give your customers what they want and you have to continually to develop better value propositions. And so, yeah, these are great companies. There are great banks out there. There are great, you know, the Amazon and Apple are phenomenal companies that, you know, know the consumer. We believe we know the consumer as well. And, you know, they help us raise our game overall. But, you know, we're not naive enough to think that we can just go on. you know, sort of strolling down the street here thinking who's ever going to compete and no one's going to come after us the way we're paranoid. We think everybody's coming after us. And it's one of the reasons that we constantly focus on upgrading our products and services. And It's one of the things that we talk about. We're constantly adding value to our products. Yeah, it would be probably easier to not do that, but we challenge the team constantly to develop better value propositions. And so we worry about everybody, and the only thing that we can do about it is continue to do what we've done for years, offer the best service, offer the best products, and make sure that our customers are happy.
Operator
Automated System
Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.
Don Fandetti
Wells Fargo
Good morning, Jeff. If you can talk about the banking crisis. Do you expect that to
Jeff Campbell
Chief Financial Officer
impact your ability to buy back stock and also was there any impact from the delta sharing adjustment um and will there be any this year uh so two very different questions so capital and liquidity don i mean we are in a very strong position our capital target of 10 to 11 on a ct1 basis is actually well above the regulatory requirement. Our target is really driven by the rating agency view. So we don't know exactly what's going to happen from the regulatory perspective, but even some change in the regulatory environment that significantly increased the capital we need to hold is unlikely to have any impact on what we actually hold today. And so Look, our company has a ROE of 30% or better. We generate a tremendous amount of capital. We don't need that much capital to support our organic growth. So you'll see us continue to aggressively buy back shares, which is why I think our board, in fact, approved a huge new multi-year target for share repurchase earlier in the quarter. Our liquidity position is also very strong, as I talked about in our remarks. When you think about headwinds in 2023, I'd remind you on the January call, I pointed out that a 500 basis point increase in interest rates in a year is a headwind for us year over year in 2023, which won't really exist in 2024. They're unlikely to do another 500 basis points. For that matter, I just talked in response to Craig's question about the fact that our provision this year is kind of back to a steady state level whereas last year you had it still greatly impacted by ceaser reserve releases so those are two headwinds in 2023 we will not have in 2024 you have put your finger on the third headwind which is we have a fabulous partnership with delta works great for them works great for us we work together all the time I seem to see Steven together like every week practically. But it is true that when we renewed early the Partnership Act in 2019 and extended it through 2030, we agreed to a change in the rates of how some of the economic sharing work effective the year the original contract was going to expire, which was 2023. So there is a step up this year. That flows through various lines in the P&L, but generally falls into the variable customer engagement line. So that's part of what drove us up a little bit on the 42% to 43% target that we have this year. I would point out that's another sort of headwind to our earnings growth this year that we will not face in 2024. So thank you for the question.
Operator
Automated System
Thank you. Our final question will come from Lisa Ellis of Moffitt Nathanson. Please go ahead.
Lisa Ellis
Moffitt Nathanson
Terrific. Thanks for taking my question. I had a question on T&E renormalization. You know, with T&E up 39% again year on year, it's still clearly renormalizing a bit post-pandemic, as you highlighted, particularly outside the U.S. Do you have a sense, like looking under the covers at the spending dynamics, how much further that has to go and when we might see that piece that's been driving your disproportionate growth moderate a little bit? I think some folks might have been expecting that to start happening already at the beginning of this year, but clearly it's not happening. So I'm wondering how many. how much more we've got to go on that. Thank you.
Steve Squary
Chairman and CEO
Well, I think you still have quite a bit to go on T&E, and especially as corporations start to bring back their T&E spending as well. And T&E spending is up in every single segment that we have. I mean, we talked about total T&E up 39%, the consumers up 30%, you know, commercials up 41%. it just keeps growing. And, you know, we talked about international up 50, 59%. So we still think we have more room to grow. And I talked about bookings with airlines. And airlines will also expand their capacity. And as they expand their capacity, will continue to grow with them. So I think there's still more upside in airlines. And when there's more upside in airlines, it becomes more upside in lodging. And people have gotten used to eating out. And, you know, the restaurant spending is, you know, if you ask me about anything that surprises me, it would be restaurant spending continuing to be as strong as it is. But I think for us, a lot of that has to do with resi. And the fact that we are able to probably even get a larger share of our card members' restaurant spending as they book their reservations through Rezzy. And the other thing I'd point about Rezzy, Rezzy's been a really nice addition to our acquisition of new cardholders. who have a propensity to want to eat at restaurants and T&E. So I think you're still going to see very strong T&E throughout this year. It'll certainly outpace our goods and services. And we're getting back. We're continuing to climb back. If you remember, pre-pandemic, we were around 70-30 in terms of our spending, 70% goods and services and 30% T&E. And there really is no reason that should not go back to the way it was. So we think we should have upside in T&A. Great.
Carrie Bernstein
Head of Investor Relations
And with that, the operator will close the call. Thank you again 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
Automated System
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 1373-6900. after 1 p.m. Eastern Time on April 20 through April 27. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.
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