Ladies and gentlemen, thank you for standing by and welcome to the American Express First Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I’d now like to turn the conference over to our host, Mr. Rick Petrino. Please go ahead, sir.

Thank you and welcome. We appreciate everybody joining us for today’s call. The discussion today contains certain forward-looking statements about the Company’s future financial performance and business prospects, which 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 forward-looking statements are set forth within today’s earnings press release and earnings supplement which were filed in an 8-K report and in the Company’s other reports already on file with the SEC. The discussion today also contains certain non-GAAP financial measures. Information relating to comparable GAAP financial measures may be found in the first quarter 2015 earnings release, earnings supplement and presentation slides, as well as the earnings materials for prior periods that may be discussed all of which are posted on our website at ir.americanexpress.com. We encourage you to review that information in conjunction with today’s discussion. Today’s discussion will begin with Jeff Campbell, Executive Vice President and CFO, who will review some key points related to the quarter’s earnings through the series of slides included with the earnings documents distributed. Once Jeff completes his remarks, we will move to a Q&A session. With that, let me turn it over to Jeff.

Well, thanks Rick and good afternoon everyone. Overall, Q1 was a solid quarter for the Company consistent with the framework and financial outlook we presented at Investor Day last month. The quarter reflected solid core underlying performance as well as several discrete impacts including the strengthening of the U.S. dollar and various changes to our cobrand relationships. As you recall, we discussed at Investor Day our expectations for the first quarter and in fact EPS growth of 11% did come in better than our full-year outlook and even a little better than we thought a few weeks ago, in part due to the timing of our incremental spending on growth initiatives which will ramp up over the course of the year along with some other timing benefits that we don’t expect to repeat as we go through the year. I’ll discuss these items in more detail later in my remarks. Importantly for these reasons, our full-year 2015 EPS outlook remains unchanged as we continue to expect EPS growth to be flat to modestly down. Looking back to the financial outlook framework from Investor Day, our core underlying performance remains consistent and continued to be driven by solid revenue growth of 5% after adjusting for FX and business travel revenues in the prior year, disciplined cost controls and a strong balance sheet that enabled us to return a substantial amount of capital to shareholders in the form of repurchases over the past year. Our results also reflect some of the discrete impacts that we discussed a few weeks ago. In the cobrand space, we are seeing the impact from the termination of our relationship with Costco in Canada as well as the reset impact from the early renewals we have done with several other cobrand partners including Delta, Starwood and Cathay…

Thanks Jeff. As a reminder, in order to provide a greater opportunity for more analysts to ask a question during the call, I will ask that those in the queue please limit yourself to just one question. Thanks for your cooperation in this process. And with that operator, let’s open up the lines for questions.

Thank you. And we’ll go to the line of Sanjay Sakhrani with KBW.

Thank you. I guess my question will be on Costco Canada. I know you guys have addressed it throughout the last couple of times you’ve spoken. But now that you have a full quarter’s worth of experience at Costco Canada, could you maybe just talk about you know your ability to retain spending on those customers’ cards and how you think it reflects, relative to your strategy in the U.S.? Thanks.

Thanks Sanjay for the question. Maybe let me start by providing just a little bit of context for Canada because we’ve given a fairly unusual amount of color around the U.S. where we pointed out that that relationship consists of about 70% of the cobrand spend being out of store, also talked about the cobrand in the U.S, accounting for about 8%of global billings. To draw a contrast to Canada, in Canada, the Costco cobrand and Costco as a merchant represented a more significant portion of our country total billings in Canada. The other probably two very important differences to point out to you are that the portion of spend on the Costco Canada cobrand that was in store was much higher, it was about 60% in store and of course in Canada there was no sale of the portfolio. So with all that as context, you are correct that this is the first full quarter since the termination of acceptance of Amex products in Canada on January 1st. As you would expect that means all of the in store spend goes away. But we, while it’s still early, I would say continue to be pleased as you now heard us say in a couple forums, by our efforts to capture the spend and lend of the Canadian Costco card members. And of course in Canada, we did issue a new cash back card. As you would expect we are very focused on those customers who clearly have an affinity with the American Express brand. And I’d say there have been significant learnings and we are encouraged by them and we are being very thoughtful about how we will apply them in the U.S. As you would expect Sanjay, I probably don’t want to provide a lot of color and detail beyond that general statement, but we are encouraged on quarter end.

[Operator Instructions]. The next question will come from Don Vendetti with Citigroup.

Yes Jeff, I was wondering if you could talk a little bit about how we should think about a potential gain from the Costco sale. I mean sometimes these portfolios can trade for 15% plus premiums. And can you talk about some of the offsets and how that may also impact your capital return, given that you’re able to return more than 100% in the CCAR?

Couple of comments, I really, in terms of the progress potential outcome, Don, on any portfolio sale, I can’t really comment beyond what we’ve already said, which is we’ll just have to see -- there’s a process and we’ll see how it plays out. In terms of the financial outlook, we have provided, I would remind everyone that we did not include any assumption about a gain on the sale of the portfolio. So any gain would be incremental to the outlook we laid out. When you think about capital implications, obviously if there is a portfolio sale, there’s a significant reduction in risk weighted assets, that’s the Costco U.S. loan portfolio as we previously talked about constituted about 20% of our global loan portfolio. That in and of itself depending upon how quickly we ramp our efforts elsewhere to replace that spend, that of course frees up some capital. And to the extent there is a sale and there is a gain, I think it’s fair to say that we’d have to look at the timing and amount of any gain and think about what portion of it we might want to use to make sure we’re fully funding our efforts to capture the future spend and lend from our relationships with the Costco card members and what portion should drop to the bottom line. Clearly, we have a very strong balance sheet already. And I think we’ve demonstrated a very strong and steady commitment to using that balance sheet to return capital to shareholders. It’s also fair to say though that the nature and timing of the CCAR process means there is often a lag between big developments that impact capital and our ability to run them through the CCAR process. So, we’ll kind have to see how this plays out. But hopefully that gives you a sense Don of how we’re thinking about the various components.

And our next question will come from David Ho with Deutsche Bank. Please go ahead.

Good afternoon. Can we talk about the expense ramp in specifically what areas you’re investing, particularly as we saw in the second quarter and maybe this quarter as well? And how are they different than some of the areas that you have invested in previous years and in particular coalition partners and do you expect the Costco USA build to accelerate towards the end of the year versus the middle part of the year.

Good question, David. Let me make a few comments. One of the reasons why we have continued to talk a little bit about an expectation that you will see more quarterly unevenness in our earnings is we think the prudent thing here is to be a little flexible around the timing at amounts that we choose to spend around one of the things that we will be ramping our growth spending initiative, our growth initiative spending on and that’s focusing on the capturing a future spend and lend from our relationship with Costco card members. It’s very complex process between now and 2016 that will play out in that relationship. And we need a little bit of flexibility that will determine when we choose to ramp up some of our marketing efforts and when we do. Certainly that is one of the elements though when you think about what is different this year, potentially next year about the range of things that we do growth spending on. We have a very rich pool of very dedicated American Express card members and we will do our best to capture their future spend and lend. The second thing I might point out for 2015 is we are very excited about the launch of Plenti, since you brought coalition. As you would imagine or as you recall, we have a pretty well drawn track with the loyalty coalition business as we’ve launched that in other countries for understanding the flows from the first year of launch which is more of an investment year and has as the program that matures in the coming years. So, it’s fair to say that we want to make sure this is a really strong launch and we’re putting a lot of resource towards that in 2015. And that’s probably a little different in terms of the profile that you would have seen last year and a little different than what you will see next year as the progress moves beyond the launch phase. Beyond those two things, I would say, really that we will be investing in the range of growth opportunities we have across the Company; we tried to do a pretty thorough overview of those at Investor Day and really expand the Company. So, you’ll see us continue to invest in some of the international markets where we’ve seen particularly high rates of growth. Basically you’ll see us continue to invest around our small business and middle market efforts. You will see us continue to invest in some of the areas where we believe expanding the breadth of the demographic that our brand reaches out to is producing new opportunities and you will see us continue to do some things that we think will drive the steady growth in lending that you’re seeing above industry averages. So that’s probably how we think about the spending overall.

And our next question will come from Bill Carcache with Nomura Securities. Please go ahead.

Thank you. Good evening, Jeff. Could you clarify for us what cost of equity or hurdle rate you use when evaluating new investment opportunities? And can you also discuss how your hurdle rates might differ across your different businesses including for example cobrand, particularly since it seems like your GNS and charge card businesses generate structurally higher returns and are big driver of that 25% plus return target that you have? I don’t think you guys have discussed that in the past but I do think it could be helpful to the extent you can give some kind of indication would be helpful for investors to assess the risk that people have been worried about that you could lose, continue to lose future partnerships to competitors who are willing to accept lower returns?

Bill, that’s a good and actually very important question. So, we have a range of businesses across American Express and of course we have a fairly unique business model in our core business. That range of businesses and that business model produce a tremendous return on equity relative to most of our peers in financial services. And so, we are thrilled that we have an ROE which this quarter was 29% and we have really strong track record in meeting our more than 25% target. And I think it’s a real commentary on the strength of more business model. But we shouldn’t confuse that with hurdle rates for incremental investments or for how we think about bidding for business. Because of course if we really look at our cost of capital, you will of course get to numbers far, far below 25%. And I can spend the rest of the call getting philosophical, but exactly how you might calculate our cost of capital when we look at it, as you would expect in many ways, but suffices to say it is much below 25% and it is somewhere around the 10% range depending on which measure you want to look at. And when we are thinking about incremental opportunities in a bidding situation, I don’t really believe that we would take a different economic choice based strictly on a hurdle rate. Now, we do make choices based on the next part of your question though which is we do have a range of opportunities in our business. And we generate a range of returns on equity and a range of returns on an incremental dollar of expense spending as well. And so, when we think about opportunities, we’re always making sure that anything we do is going to generate incremental…

And the next question will come from Sameer Gokhale with Janney Montgomery.

Hi, thank you. My question was about your loss provisions and the reserve release. Jeff, you provided a bit of an explanation. I think you talked about the provisioning, the reserve release being more related to charge cards, I think this quarter, if I heard you correctly. But it just seems like between last quarter and this quarter there seem to be a lot more volatility than we’ve seen I think at least in recent quarters; recent years between Q4 and Q1. So, were there any changes made to any underlying assumptions that would drive this kind of volatility? So, if you could just parse that out a little bit that would be helpful.

It’s a very accurate description, Sameer I think of where we are in the last couple of quarters. I would have to call this quarter’s provision one that is certainly off the normal trend. I talked in my remarks about the fact that of course, you have a normal Q4 to Q1 decline in your loan and receivable balances and that does generally drive a seasonal therefore decline in your reserves and that happened this year, as it did last year. However, you have a combination of the fact that last year’s first quarter had a few various more specific items that happen to drive that number up; a little bit this quarter, we had some of the kind of specific adjustments for items that you have every quarter in the provision that happen to drive it down a little bit. You put those two together and you suddenly get a really big year-over-year difference. I think the more which is why I also in my remarks tried to point people to I think the more important thing to think about here is, as we look at the rest of 2015, in the current economic environment, we expect layoff trends to stay pretty strong. However, we’ve been steadily growing our loan balances and you would expect reserves to build along with those loan balances. And some of these specific items that drove the Q1 results, we wouldn’t necessarily expect to repeat. So you put all that together and I would expect to see provision going up year-over-year in 2015. And I would also just remind you that in terms of what assumptions, we made in the financial outlook we’ve given for 2016 and 2017, we did assume in 2016 and 2017 that you do see some modest uptick in write-off rates and hence provision and reserves.

The next question will come from Eric Wasserstrom with Guggenheim Securities. Please go ahead.

Jeff, can you just clarify in terms of the ‘16 broad guidance that you gave back in February and related at the recent Investor Day, does it contemplate the foregone net interest income from a sale of Costco portfolio, that’s really I suppose?

That’s a good question, Eric. And what I would say is that because we can’t be completely sure of the timing and outcome of any potential portfolio sale, we built an outlook for 2016 which we think we can achieve under a range of potential outcomes for the portfolio. And we’ve built an outlook that to be exclusive does not include any potential gain on a sale. So, we think as a matter what assumption you might want to make about the resolution around the portfolio, we think we have enough levers in our business to hit the outlook we’ve given for 2016. Now certainly there are some things that could drive you above that. If there is a gain on a sale for example that is clearly not in our outlook and would be incremental, but we just don’t know enough about the final outcome and the timing of the final outcome to be specific beyond the comments I just made.

And the next question will come from Cheryl Pate with Morgan Stanley.

Just wanted to touch on billed business a little bit and if we can split it up into international and U.S. On the international side, I was just wondering if you could maybe spend a minute on how you think about potential hedging strategies to help offset some of the headwinds. And then on the U.S. side, if you could provide a bit of color for how you’re thinking about trends as we look at the rest of 2015 and on top of that potential to maybe take some share with OptBlue similarly tracking a bit ahead of expectations? Thank you.

Let me take those one at a time, Cheryl. On hedging, so we do some foreign exchange hedging but it’s really about frankly helping us have a clear view from a planning perspective within a quarter. It helps us know what the FX impact is going to be. In essence at the beginning of a quarter we do a bunch of hedging that unwind as you get to the end of the quarter. So, you’re not further impacted by anything that happens in the quarter. That obviously has zero impact on our longer trend or on the year-over-year declines. And as we think about doing any other kind of strategy longer term to hedge, our conclusion at the end of the day is that, we think there is value in the diverse set of global businesses we have we think in the long run; the currencies go up and down and tend to equilibrate over time and that the frictional costs and frankly the volatility that the accounting drives for any longer term hedging strategy has caused us to shy away from it. So that’s how we think about hedging. On the U.S., obviously we’ll have to see where the economy goes as we get into the rest of the year. I think it’s fair to say from our experience in the first quarter, we haven’t started to see estimates of GDP growth in the U.S. or elsewhere, but I think when we look at our own experience and some of the external data around retail sales and we look at what’s happening to gas prices, when we look at some of the immediately somewhat anecdotal stories we hear in our corporate card business, it suggests to us that it was certainly not the most robust of quarters for economic…

And our next question will come from Craig Maurer with Autonomous.

Good evening. Just a fast question, the sharp decline, or not the sharp decline but slowing in commercial card spend; if you could first tell us where or in what parts of the economy you’re seeing that weakness most clearly? And secondly, historically in talking to Amex, we’ve discussed corporate spend trends, leading consumer spend trends by about six months. Do you still think of that as a good relationship that the slowdown in commercial could be forecasting a slowdown in consumer toward the back half of the year? Thanks.

Well, it’s a good question Craig. Let me just remind everyone of the facts. So, what it does to us as well, strike us is that in the corporate card segment you saw a sequential slowing from 8% in Q4 to 4% in Q1 and that’s clearly a much sharper sequential slowing that you’ve seen elsewhere. As we have dug into that a little bit, it is primarily driven by the U.S. and seems to be a little bit more striking in our larger accounts in the U.S. In terms of what this means for the broader economy six months from now, I guess I’d be cautious. One, if you look at corporate spending, it tends to be a little more volatile than some of our other segments because companies who’ve gotten pretty good over the years are turning on and off their travel spends and other T&E spend in response to their own business challenges in all sense of the economic environment. I think in any part of our business we are always cautious about saying just one quarter makes a trend. So, we’ll have to see. I guess I’d say it’s a note of caution for us but I wouldn’t want to read too much into it at this point in time.

And our next question will come from Rick Shane with JP Morgan.

Craig, actually just asked my question but I’d love to get a little bit more of a specific answer. You defined where the slowdown was in terms of size of the customer but I think what I’m interested in and I suspect Craig was as well, is there any industry that we can specifically look to; I think everybody’s sort of wondering about oil and gas and also any category of spend where you saw it particularly?

Those are good questions, Rick and ones believe me we’ve been asking ourselves. So, maybe I’ll even take this opportunity to step back a little bit. Certainly, we are watching very closely across our global portfolio for any impact to both billings and credit arising from the rather dramatic drop in oil prices. And what I would tell you for now is certainly we see the billings impact to the drop in oil prices; remember it’s 2% to 3% of our billings, so 30% drop costs about 1 point of billings growth. We do see some drop in spend from some of the oil services companies in the grand scheme of our overall billings. However that did not total up to anything that is significant for us. We have not seen any significant deterioration in credit yet either by industry or parts of the U.S. or parts of the globe that are particularly driven by an oil economy but believe me we’re watching all of that like a hawk. It’s also difficult for us to say whether people taking their monies, their savings from slightly lower oil prices and using it to spur more spending elsewhere, that’s tough for us to see. I’m not saying it’s not happening but not sure we can really see any of it. So to come all the way back to the origin of your question which is what’s driving the sharper sequential decline in corporate card, I think we’ve done enough work to say it doesn’t appear to be isolated to oil service, doesn’t appear to be isolated to any particular industry or geography with any fire point than it is primarily U.S. not in other parts of the world.

And our next question comes from Ryan Nash with Goldman Sachs.

Good afternoon, Jeff.

Hi Ryan.

So, I just wanted to ask you one quick question regarding loan growth. You made the comment that you could have some slower growth related to Costco; your growth has been running into the 4%-5% range. Just want to get a sense given the efforts that you’re putting into this from a growth perspective, we’ve seen some across the industry have accelerating growth rates. And I was just wondering, given the focus here, should we expect that we could actually start to see growth rates across the lending area accelerating or do you think the offsets from run-off in Costco are going to overtake the incremental growth that you’re seeing in the rest of portfolio?

Well I think, I might break the answer, Ryan, into three components, so we think about this. Talk a little bit about U.S.; talk a little bit about international; and then separately talk about Costco. Because in the U.S. in fact our loan growth is close to 7% and has been running up at the 6% to 7% rate for the last couple of quarters. And I would say that if you look at the kinds of things that Ed in particular talked about at Investor Day, this is an area where we think we could run that number also little higher than that in the current industry environment without any material change in our risk profile by continuing to build from a marketing perspective, new customers as well as within existing customers, both bringing or borrowing focus customers as well capture more of our preferred share of the borrowing behavior of our existing customers. We are pretty upbeat about that and think it’s a real opportunity for the Company. Internationally, we have a much, much smaller loan portfolio. We do think we can achieve steady growth that’s masked right now by the very significant foreign exchange impacts you see and the fact that and this comes in our third point, there was a loan portfolio associated with Costco Canada. While we didn’t sell the portfolio as you would expect because as I said earlier in response to question because 60% of the spend on it Canadian Costco cobrand using store as that spend run away January 1, you see a more rapid decline in some of the loan balances as well and so that will drag on the international piece a little bit. The third component to think about is Costco in the U.S. So, we can’t be sure of the outcome of any potential sale of the portfolio but that portfolio, if were to be sold, represents 20% of our loan. So, you could accelerate your growth excluding that by significant amount from 7%; it’s still going to take you a long time frankly to get back to even where we are today in terms of the overall loan portfolio and what that means for the spend centricity if you will of our overall income statement. So, long winded answer to your question, but I think you do have to think about loan growth in the context of those three categories. So, I think we have time for one last question, operator.

Thank you. And that will come from line of Bob Napoli with William Blair. Please go ahead.

Thank you. I just want to focus little more on small business and maybe how the lending growth in small business and OptBlue, how that’s tying together. I mean every merchant acquirer talks positively but OptBlue and one of them talk about moving it into Canada. You said Jeff earlier that you’re moving in something similar in related markets. The investor meeting you had you showed the merchant loan portfolio growing from almost nothing to 500 million over the last couple of years. So, how was that tying together? Do you expect to grow the loan portfolio along with OptBlue; is that part of the strategy? And will that be not only in the U.S. but in another markets? And is there any way to quantify in some way the incremental effect that you think that will have on spend growth or loan growth?

Bob, that’s a good question, that’s a series of questions, Bob. And in some way that is the way I would tie together my answer, is to say remember, one of the aspects of our unique close look model is we work extremely hard every day, not just to generate value for our card memories but we work extremely hard every day to see how we generate more value for our merchants. We are very excited about the OptBlue program and we think it is making it easier for smaller merchants to work with us. We think it’s going to expand their business opportunities. And we’re very excited about what it will do for merchant coverage over the next few years. We do lots of things to try to help small businesses operate better. When you look at our open business which on the issuing side, target small businesses, it’s really all about helping drive the success of those businesses and giving them access to spend capacity that our business model and our charge card model really is able to fairly uniquely provide them. And we really try to use that and have used it over the years to drive to a very significant position with small businesses. And we do like small business pattern, another example of what we do to help try value and support for our merchants. Merchant financing in that context is just another extension of the same driver. We have to constantly work at how do we find new ways to add value to merchants, very excited about merchant financing and we think, it is not only a good opportunity for us to in a very thoughtful, measured risk profile centered way grow our financing portfolio , we think it’s a real value add for our partners, particularly some of our smaller business partners. So, hopefully that strategy all fits together; it’s really part of what we have to do every day. So with that I would like to thank you all for joining tonight’s call and participating in the Q&A session. I would summarize by coming back to the fact that we think our results in the first quarter reflect solid core underlying performance. When you think about our Q1 performance and what I said today about Q2 and when you think about it in the context of the multiyear financial outlook that we reviewed at Investor Day, we think we’re on track and we’re continuing to do the right things to position the Company for the long term. So, with that I wish all of you a good evening. And I’m going to turn it back over to Rick, who is going to provide a brief overview of the investor conferences we plan to participate in during the second quarter. Rick?

Thanks Jeff. So, yes, before we close, I just want to mention that we are speaking at a number of conferences this quarter. First, our CEO, Ken Chenault will be participating in the Bernstein Strategic Decision’s Conference in New York on May 28; then the President of our Global Network and International Card Services Business, Doug Buckminster will be at the William Blair Growth Conference in Chicago on June 9th; and then on June 10th, American Express President, Ed Gilligan will be at the Morgan Stanley Financial Conference here in New York. Live audio webcast of each of these events will be made available to the general public through the American Express Investor Relations website at ir.amerianexpress.com. Thanks again for joining tonight’s call and thank you for your continued interest in American Express.

That does conclude the conference for today. Thanks for participation and for using AT&T Executive Teleconference service. You may now disconnect.