Christophe Le Caillec
Chief Financial Officer at American Express
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 it's year-end, and since Looking at our business on an annual basis, it's 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 continued 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 card members 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 continued to see growth across all generations and each 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 remained modest, given the 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 continued 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 continued 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've seen a softer spend environment, we are pleased with the continued strong engagement and loyalty of our card members 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 Card Member receivables on Slide 7. We saw a 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 Slides 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 these delinquency and write-off rates remained strong with modest increases in 2024.
Turning now to the accounting of this credit performance on Slide 9. The modest increase in our Card Member loans and receivables delinquency rates, combined with the 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 Card Member receivables and continuing to reflect the premium nature of our Card Member base. This reserve rate remains at about 10 basis points below the level we had pre-pandemic or day one 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 card members continue to look strong.
Moving onto 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 balance 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 the 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 the full-year basis, both growing significantly lower than revenue. This expense growth reflects the strong growth we're 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 these costs 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 cost than we had expected. For example, a lower mix of redemptions for airlines 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 card members.
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 of 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 are confident that with our sophisticated acquisition engine, we will 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 at -- 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 20% to 25% 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 certified 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.
