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 the first quarter results, which reflect another quarter of strong results and are tracking in line with the guidance we gave for the full year.
Starting with our summary financials on Slide 2. First quarter revenues were $15.8 billion and grew 11% year over year. This revenue momentum drove reported net income of $2.4 billion and earnings per share of $3.33.
On Slide 3, billed business grew 7% versus last year in the first quarter on an FX-adjusted basis, in line with the overall spend environment we have seen in the past few quarters as we expected. Looking by category, we saw 6% growth in goods and services spending and 8% growth in travel and entertainment spending.
There are a 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 8% this quarter, with growth across all generations and age cohorts. Millennial and GenZ customers grew their spending 15% and continued to drive our highest billed business growth within this segment. In fact, we see that younger customers use their cards more overall, and this is even more pronounced in certain spend categories. For example, customers aged 35 and under use their cards at restaurants over 70% more on average than other customers in this segment.
Looking at Commercial Services on Slide 5, overall growth came in at 2% this quarter. Spending growth from our U.S. small- and medium-sized enterprise customers remain modest, given unique dynamics seen by small businesses.
Lastly, on Slide 6, you see our highest growth again this quarter in International Card Services, up 13%. We continue to see double-digit growth in spending from international consumers and from international SME and large corporate customers, as well as strong growth across our geographies. Overall, while we do continue to see a softer spend environment, our spending volumes are tracking in line with our expectations to support our revenue guidance for the full year and we are pleased with the continued strong engagement of our customers as the number of transactions from our card members continued to grow double digits this quarter.
Now moving on to loans and Card Member receivables on Slide 7, we saw year-over-year growth at 12%. As we progress through 2024, we continue to expect this growth to moderate, 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 expected, our write-off and delinquency rates ticked up a bit, increasing very modestly quarter over quarter. Going forward, we expect to see these delinquency and write-off rates remain strong with some continued modest increase in 2024.
Turning now to the accounting of this credit performance on Slide 9. The quarter-over-quarter growth in our loan balances combined with a modest increase in our Card Member loans and receivables delinquency rate resulted in a $148 million reserve build. This reserve build combined with net write-offs drove $1.3 billion of provision expense in the first quarter.
As you see on Slide 10, we ended the first quarter with $5.6 billion in reserves, representing 2.9% of our total loans and Card Member receivables. We continue to expect this 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 first quarter. Our largest revenue line, discount revenue, grew 6% year over year in Q1 on an FX-adjusted basis as you can see on Slide 12. This growth is mostly driven by the spending trends we discussed earlier. Net card fees revenues were up 16% year over year in the first quarter on an FX-adjusted basis as you can see on Slide 13.
We are pleased with this growth and continue to expect to exit the year with some further momentum reflecting our cycle of product refreshes. In the quarter, we acquired 3.4 million new cards, demonstrating the demand we are seeing for our products and the investments we've made. Importantly, acquisition of our premium fee-based products accounted for around 70% of new accounts and the spend revenue and credit profiles of our new card members continue to look strong.
Moving on to Slide 14. You can see that net interest income was up 26% year over year in Q1. This growth is driven by the increase in our revolving loan balances and also by continued net yield expansion versus last year. We do expect this growth to continue to moderate as we move through the year. 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 this year.
To sum up, revenues on Slide 15. The power of our diversified model continues to drive strong revenue growth momentum. I would note, as you think about the CFPB late fee rule, that late fees from our us consumer segment make up a small portion, less than 1% of our overall revenue. While we have no specific plans to mitigate as of now, we are always looking at our pricing and policies in the ordinary course of business.
Moving to expenses on Slide 16. Starting at the top of the page, variable customer engagement expenses came in at 40% of total revenues for the first quarter. As you look at these costs, I would note that Card Member rewards included a $196 million benefit as a result of enhancements to our remodels for estimating future membership rewards redemptions, some of which we reinvested for growth in our marketing line.
Looking forward, I still expect our variable customer engagement expenses to grow slightly higher than our revenue on a full-year basis as we continue to focus on our premium products and drive engagement from card members.
On the marketing line, we increased investments to $1.5 billion in the first quarter. We continue to be pleased with the strong, high-quality customer acquisition and engagement we see as a result of these actions, and we are on track to increase marketing spend in 2024 versus last year.
Moving to the bottom of Slide 16 brings us to operating expenses, which were $3.6 billion in the first quarter, flat to last year's expense and in line with our expectations for the year. When you look at the components of our operating expenses, salaries and benefit grew modestly versus last year compared to the growth we've seen in this line over the past years. This reflects the discipline with which we manage our expenses and is a great example of how we are able to drive efficiency while continuing to grow our business. We continue to see opex as a key source of leverage and are focused on delivering low levels of growth as we have historically done.
Turning next to capital on Slide 17. We returned $1.6 billion of capital to our shareholders in the first quarter on the back of strong earnings generation. Our CET1 ratio was 10.6% at the end of the first quarter, within our target range of 10% to 11%. 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 2024 guidance on Slide 18. We feel really good about our first quarter results, which are tracking in line with our expectations for the year. These results continue to reinforce that our strategy is working and we plan to continue to invest to support our momentum. As Steve discussed, for the full year 2024, we are reaffirming our guidance of having revenue growth of 9% to 11% and earnings per share between $12.65 and $13.15, and we remain committed to running the business for the long term.
As a reminder, this guidance and the items related to the full year 2024 that I just walked through do not include the potential impact from the sale of our certified business that we previously announced. We 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 will -- we still 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 up the call for your questions.
