Ladies and gentlemen, thank you for standing by and welcome to the American Express Third Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode and later, we will conduct a question-and-answer session with instructions being given at that time. (Operator Instructions) As a reminder, today’s conference is being recorded. I would now like to turn the conference over to your host Mr. Rick Petrino. Please go ahead sir.

Thank you. Welcome. We appreciate all of you 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 2012 10-K 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 third quarter 2013 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 and provide some brief summary comments. 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. I am excited to be here on my first quarterly earnings call with American Express since joining the company on July 15 and listening as Dan Henry managed the Q2 earnings call later that week. I am also excited to have my first earnings call be one where we have such solid results to discuss. Our performance during the quarter produced strong EPS growth built upon improved billed business and revenue growth trends, a continuation of excellent credit performance and disciplined control over operating expenses. During the quarter we also made a number of strategic announcements which I’ll discuss later on the call. To begin with the summary you can see on slide 2, FX adjusted growth in billed business of 9% is the primary driver of our FX adjusted revenue growth rate of 7%. This FX adjusted revenue growth rate is the highest we have seen this year and helped us grow net income by 9%. Our strong capital position allowed us to continue our share repurchase efforts which cumulatively resulted in our average shares outstanding declining by 5% versus the prior year. The combination of our solid operating performance and strong capital position drove our earnings per share to a $1.25 which was up 15% versus the prior year. These results helped to bring our ROE for the period ending September 30 to 24%. As a reminder ROE is calculated on a rolling full year basis. So this quarter will be the last one to include the impact of the three previously announced items we experienced in Q4, 2012. Excluding these items the adjusted ROE for Q3, ’13 is 27%. We feel good about this improved performance especially considering the continued moderate pace of the economic recovery. Now focusing first on…

(Operator Instructions) We’ll go to the line of Sanjay Sakhrani from KBW. Please go ahead.

Thank you. Good evening. I had a quick question on billed business volumes. When we look at the acceleration even on FX adjusted basis it’s fairly modest year-over-year. Could you just talk about how you guys feel about that and what might be some of the constraining factors that are leading to some temporary growth year-over-year? And then secondly just on prepaid, I know you guys talked a lot about it this quarter, I was just wondering if you could just discuss its contribution to profitability and how you guys think about its contribution maybe over time? Thank you.

Great. Well, I would say given the continued moderate pace of economic recovery both in the U.S. and the other – most of the other significant economies we serve around the globe, we actually feel pretty good about the sequential acceleration we saw from 8% to 9% in FX adjusted billing growth. And I think we would really not necessarily expect to see dramatic uptick until we saw something different happening in the economy that also brings it back I think to the importance of nothing happening in DC tonight or tomorrow that further disrupts the pace of economic recovery in the U.S. and elsewhere. On the prepaid point we did spend quite a bit of time at the August financial community meeting having Dan talk about our enterprise growth efforts and in particular about our efforts in the reloadable prepaid market. You also heard me in my comments talk a little bit about how we tried to as we think about where we are investing we like to create a mix of investments some of which are targeted at producing short-term results to help us achieve our financial targets next year and some of which have much longer term time horizons, and certainly we would put what we’re trying to achieve in the reloadable prepaid market in the latter category. We’re very excited about that market and we see a very significant market potential in the longer term as I think Dan did a very nice job of taking people through in August and also Jim has showed you a number of metrics at that meeting that we think are very early, very positive indicators about the potential that we see in the market longer-term but it is a longer-term prospect and certainly in the near term the revenue and earnings contributions from the prepaid market will be fairly modest but we think it's really important part of the broader investment portfolio and we think it's really important part of what a company of our size and scale that manages itself for the long term needs to do and that is having a mixture of both initiatives targeted at short-term growth as well as those targeted at the long-term.

Thank you, and next we will go to the line of Don Fandetti of Citigroup. Please go ahead.

Jeff I was wondering if you could talk a little bit about historically I think one of the concerns that AMEX has been when the top line starts to accelerate that there is a propensity to boost expenses and I was just curious you know you think there is a strong commitment still to keeping expenses under control as we look like we’re turning the corner on top line growth?

Well I think that's a very good question Don and as I said in my comments one of the things I have been most impressed by in my first three months here is the commitment of the company and the extent of the reengineering efforts going on across this entire company, all aimed at hitting the expense targets that we set for this year and for next and in fact we have done much better than we set out to do in 2013, we’re flat year-to-date and we’re certainly very confident that we will come in for the full year below our target of 3% operating expense growth. When we launched those initiatives we did talk about 2014 as well and it's certainly too early to give you a forecast for 2014 but what I would tell you is that many of the initiatives, many of the things that we’re doing in the reengineering area are only in midflight and there are many aspects of the program that we’ll still continue to play out next year. And so I certainly feel very comfortable saying it's an appropriate target for us in 2014 to continue to see the kind of great control on operating expenses that you see in 2013. Now I would say as you go beyond 2014 we’re very committed to our financial targets and we've have had the same long-term financial targets since 1993 but we're also very committed to managing the company for the long term and to using our financial strength to continually invest in growth opportunities both in our traditional businesses and some of the things that we think are a little longer-term as Sanjay just asked about in the prior question. So some of those investments at times are going to drive operating expense in the longer-term, so as the near-term benefits of the reengineering start to become more distant as we move beyond 2014, I think we will be thoughtful about how we manage expenses across the company but our larger goal will be to continue to achieve the kind of growth we have over a much longer time period historically that is consistent with our long-term financial targets.

We will go next to the line of Craig Maurer with CLSA. Please go ahead.

Yes, hi. Thanks for taking my questions. Regarding marketing, 9% of total revenue, was that still – is that still an appropriate target for the year? And to follow up on other revenue excluding ICBC gains which I believe were in the numbers last year that line was up nearly 10%. Is the growth there being driven by loyalty partner above everything else? Thanks.

Well, let me take those one at a time. On the marketing, I think as I have on the history Craig, at one point we said if you take a historical average view, our marketing and promotional expenses have on average been about 9% of revenue through different parts of the cycle. Certainly if you just even look at the slide that’s in the deck today, you see that there is quite a bit of quarterly volatility to that number. And I think the more important way to think about the target is we are very committed to achieving the financial goals we have around earnings growth in particular. And we see the marketing and promotional line as one of the most important levers we have to help us achieve those targets while still funding a significant number of growth initiatives to allow us to continue to grow into the future. So at times, that’s going to drive us above 9%. If you look at this quarter, we actually are at about 10% of revenue this quarter in terms of marketing and promotion. So I guess that historical average is an okay, reasonable guideline, but our real goal is to continue to drive towards the long-term financial targets on the bottom line. In terms of other revenue, I would tell you the ICBC gains were fairly similar both last year and this year in the results. And I don’t know if there is any other particular drivers in that other revenue line as you would imagine, there is a number of things that make that lineup and that can produce a little bit of quarterly volatility, but there is nothing reflective of any longer term trend.

Thank you.

Thank you. We will go next to the line of Ryan Nash with Goldman Sachs.

Good evening. Just a follow-up on with your comments pertaining to the government shutdown, I guess first can you give us a sense of how spend volumes progressed during the quarter and while you haven’t seen a direct impact, did you see corporate spend slowing as the shutdown approached?

Well, couple of comments, Ryan. One thing even in three months here I have learned to be a little cautious about is attaching too much significance to daily or weekly trends, because they are volatile. With that caveat, what I would tell you is that we are certainly pleased with the modest sequential improvement in our billed business - it went from 8% to 9% on an FX adjusted basis, and really if I take the time period from the beginning of the quarter on July 1 really to the most recent days, there is no particular trends within that period between the beginning of the quarter and a couple of days ago that show any meaningful variance from that overall sequential trend. So there is just nothing in our data that would support any particular impact amongst our customer base in what they spend money on from the economic turmoil, but boy, I don’t want to in anyway draw a conclusion that the uncertainty being created in DC if it continues isn’t eventually going to cause a real challenge economically for us and for many people.

Got it. And then just on an unrelated note, on the NII growth, you noted that loan balances were up 2%, I think you said NII growth was up 9% and I know some of that’s coming from lower funding costs, but it seems like a lot of that is actually coming from the yield side, any – is there anything seasonal component to that or is there any changes in the underlying portfolio dynamics that drove such a large year-over-year increase?

Well, the short answer is no. So it’s really as simple as the loan balance being up a little bit and the funding costs are really the larger driver, not so much the yield we are getting on loans, but our funding costs are down nicely year-over-year and that’s what drove the 9%.

Thanks for taking my questions.

Thank you. We will go next to line of Betsy Graseck with Morgan Stanley.

Hi just a follow-up on the last question, so what is the opportunity for continuing to reduce funding, cost going forward deposit pricing or makeshift?

Well excellent question so you're correct in terms of the underlying premise of the question which is if you think about the past year you have both frankly a little bit rate environment based on the part of the interest rate curve that drives our funding along with the steady improvement in the mix in particular the larger mix that power the larger portion the deposits or the mix. I would say that we have multiple goals when we think about our overall funding and while minimizing the cost is one of those goals so is having a diverse group or diverse set of sources of funds so it's regularly accessing the various markets from which we get funds so that we maintain a good visibility in the marketplace and so is thinking about the structure of the company both at the parent level as well as the two U.S. banks that are part of American Express and so when you put all of those things together I would say that the steady growth in deposits that you've seen over the last couple of years is probably at least in the near term and a bit of a standstill and so where we’re today we're pretty comfortable and we probably won't be driving that much increase in deposits going forward. So that really leaves our funding costs a function of where interest rates goes if you think about the near-term.

Okay and then the flip side of them obviously is the yields, can you give us some color on how you’re thinking about positioning AMEX as a competitor in the marketplace, it feels like there's been at the margin more competitive actions taking place on yield trying to attract incremental balances how do you guys think about that?

Well of course there are many different answers to that which market but the U.S. market is certainly the most important market for us financially and to touch on that one a little bit I guess you know our goal is to continue to use a variety of products and initiatives all targeted at trying to grow the franchise with the demographics if you like which are the more affluent, spend centric consumers that value the brand and service and that really is our goal as we think about the design of products, as we think about competitive responses. And we use lots of different attributes of our products and lots of different marketing approaches to try to get at that demographic but trying to out compete people on just offering lower yields or rates does not really rate very highly on our list. And while the competitive environment is certainly a challenging one it's always challenging. You know we feel pretty good about our retention of customers one of the things we talked about if you go back to the August Financial Community Meeting was the fact that if you look at our attrition rates so these are customers or card members in the U.S. who leave us voluntarily. Those attrition rates have steadily declined over the last five years and continue to steadily decline and so when we look at that statistic it makes us feel pretty good about the fact that we remain very competitive in the marketplace and our card members are not being lured away by our competitors in various offers that they have in the marketplace.

Thank you will go next to the line of Moshe Orenbuch from Credit Suisse. Please go ahead.

Couple of questions about marketing, Jeff could you just talk about whether you think just near term are your marketing efforts kind of accelerating or decelerating going as we go into the fourth quarter into 2014?

Well I suppose it's a broad, it's hard to broadly generalize about our marketing efforts because of course we do lots of things and lots of different areas that said with the caveat if you just look at the marketing and promotion expense slide in our slides today, you will see that into third quarter we had the highest spend we have had in quite a number of quarters, but I would say there is really a couple of factors that drive that. One is what we are really focused on is trying to balance our near-term financial performance with the many strong investment and growth opportunities that we see across this company. I would tell you one of the things that perhaps has been one of the more positive surprises as I joined the company – as I joined the company because I saw lots of great growth opportunities in lots of ways for a company to create value for its shareholders in the coming years. I would say since I got here I have been even more surprised at the breadth and depth of the opportunities we have which are very financially sound, financially positive to grow our franchise. And in fact, our challenge in many ways, Moshe, is to think about how we balance all of those opportunities with the fact that we also need to continue to achieve the steady strong financial performance that we are known for. So in many ways, we never have a shortage of financially sound profitable marketing initiatives to pursue. We have to be thoughtful and prioritize which ones we can afford given our financial targets. What that means is when we are having a financially strong quarter when we did this quarter, it allow us to invest a little bit more in the future. And that’s really what you see I think as you look at that marketing and promotions line.

Got you. There is a follow-up. Can you talk about your approach towards the credit card enhancement products? I mean, have you started to remarket those and what’s best to take after what went on with the CFPB?

Well, obviously another thing I have come to appreciate since I joined the company is the full complexity of the regulatory environment. And we remain incredibly committed as a company to continuing to improve all of our control and compliance efforts and to ensure that our customers always know exactly what they are getting and we deliver exactly what we told them we were going to deliver. And we think we have made significant improvements and we think we still have further to go in many areas. That certainly has had some impact on the full range of products that we offer. And those impacts will probably lessen over time as we continue to strengthen our control and compliance efforts, but we want to be a little bit cautious to make sure that we pace all of our efforts in a way that allows us to be very consistent with what the regulators would like us to do and very consistent what is really in the best interest of our customers and that does mean going a little slower times. Over time, we are quite confident we will be back being as nimble as we have ever been.

Thanks so much.

Thank you. And next we will go to the line of David Hochstim with Buckingham Research.

Yes, thanks for taking my call. I am wondering if you could expand on what you said about the billed business trends over the course of the quarter, I think you said there was no meaningful variance, but I wonder how that relates to the change in loan growth from month-to-month, because it seems through the first two months of this quarter, your loans were growing faster than the industry and it’s kind of consistent with high rate of spending growth, but then in September there seemed to be a reversal of that trend? And I had follow-up.

Well, I will say David, well, when we look at that data we don’t see a lot other than what maybe noise and not necessarily yet indicative of any trends. And certainly we would believe that we are still outpacing the overall industry with our loan growth. There are also at times there are seasonal fluctuations I don’t know if there is fluctuations around when holidays occur around Labor Day and when schools start and back-to-school spending all those kinds of things can influence just a little bit. So as we stare at the data, we really have not drawn any conclusions from that month-to-month volatility.

So we could expect some increase as we head into the fourth quarter again do you think?

Well, that’s…

With that forecast.

I would see with what tonight brings in D.C. and what the fourth quarter overall brings.

Okay. And then I am sorry if I missed it, but did you say what the gain would be from Publishing from the sale and what the impact on income would be going forward?

So the financial results of the sale of publishing are actually in the third quarter results because while the transaction closed right at the beginning of October because most of the impacts of the sale broadly speaking were known and correct accounting was to go ahead and approve them in the results that we just published today. Now I would point out to you that this was a sale driven by the reality of banking regulations and in fact in the quarter the net of all the costs associated with the sale and the sale itself is very modest loss or very modest negative for the company.

I was wondering could you tell us how modest the losses in the negative?

No but it was more than modest I would have bothered to call it out I guess part of what you see when you look at some of that professional fee line in the slide and you have a big professional fees there is some cost associated with the sale as well as the business travel transaction and some other items but it was a loss.

Okay and then going forward should there be any noticeable impact on other income?

So there will be a modest impact on revenues and it was a profitable business for us and as we go forward into Q4 we will help make sure we call out to people what the impact year-over-year was so we don't distort any of the trends but it was a very important business to our card members and customers. It is a great management team and a great business and we’re sorry to see it go but it will not be a meaningful financial event.

Right -- I know I used up my call but if you just clarify what you said about professional services that's crept up a lot over the last year? How much of that is control and compliance spending and how much is kind of one-time items like the sales and the joint ventures and other investments do you think?

Well there is a couple of things, remember the way we run our technology today a tremendous amount percentage of our development efforts on technology are actually outsourced and run through that professional services lines and so as I mentioned earlier in my remarks it's also true that increasingly many of our growth initiatives are technology oriented which drives more technology application development expense. So that is certainly one and probably the largest significant contributor to the growth in that line. Now you’re correct though that as have all large financial institutions we have significantly increased our spending in the area of control and compliance and there is a significant portion of that spent that also runs through the professional fees line and in addition to rank through the salaries and benefits line. So that is a second component that is not one-time in nature and it will be ongoing and is a very important and will continue to do it. I would say when you look at this quarter's results which have that line of 15% that is not run rate we would expect to be a normal run rate and there were some one-time anomalies including the costs related to the business travel transaction and the publishing sale amongst few others that created a little bit of spike this quarter.

Thank you and we will go next to the line of Bill Carcache of Nomura Securities. Please go ahead.

You’re supplement says that the URR was unchanged this quarter versus last at 98%, can you give us a sense for how it's been trending over the last few quarters if you were to go out an extra decimal point?

Well you give me a heart attack there for a second Bill because if it was 98% we would-

Sorry, I meant 94%.

Hopefully it says the supplement says 94% which is a good number and that number varies a little bit by a basis point to each quarter because of course there is a very complex set of calculations based on the behavior patterns that we see across tens and millions of members but unbalanced since we last made a methodology update which would have been in Q4 of 2012 the number has been reasonably flat at 94%.

Okay. And switching gears as a follow-up on credit, we have seen peak losses evolve quite a bit post the crisis, do you think that there is still room for peak losses on the loans that you are originating today to continue to move lower based on the credit quality at which you are underwriting loans currently?

Boy, we are at such a historical low. And as I have learned in the history, I think we have had quite a number or strain of calls like this where you said we are at the historical low, it’s great, but eventually things have to go up and then we have another quarter as we do this time where they have gone down. I would be hesitant to speculate, but Rick, you may want to add some comments if you like a more history.

Yes, I think what you said is exactly what we said a couple of times, probably not just as for the number of players in the industry. We continue to see good trends in delinquency. So it’s hard to see any deterioration there, but we continue to enjoy where we are now and haven’t really put in place goals to change the risk profile of the company at this point.

Okay, thanks very much.

Thank you. We will go next to the line of Sameer Gokhale with Janney Capital. Please go ahead.

Great. Thank you for taking my questions. I just had a couple. Number one, just touching on the expenses again, we are hearing over the last couple of quarters that the American Express has been investing quite a bit on – in big data projects, large data analytics projects and the like and if that’s true then where are lot of those expenses, are those in part of marketing, because they are analytical in nature or in professional services? And should we expect the high level of expenses that continue or would the mix shift more to traditional what we think of is traditional marketing? And the other unrelated question was in terms of the expected or proposed sale of the Business Travel business and the cash of $700 million to $1 billion, it seems like that business was not generating a lot of bottom line profit. So it seems like the bottom line impact should be relatively modest and I say relative compared to the $700 million to $1 billion in cash that you expect to receive. So when you give the cash do you expect that to be additive to your current run rate for buybacks and dividends or how should we think about that? Thank you.

Well, let me take those one at a time. So as I said a few minutes ago, our strategy historically in our technology development area has been to outsource a lot of that work and therefore the costs run through the professional services line. And certainly you have heard us talk a lot about some of the really interesting things we are doing around big data and a portion of that involves some very complex IT work and that is some of what is driving up our technology costs in a very positive way right. I mean, these are – we would love these into the kinds of growth oriented initiatives than spending that we are really pleased. We have the financial strength to do and still hit our financial targets, but that does run through the professional fees line. It’s part of what’s driving it up. I do want to keep coming back to a 15% year-over-year increase is not what we would expect as an ongoing run rate, but that is part of what’s going on this quarter. To go to the Business Travel transaction, let me just step back for a second. So this is what we are creating here will be a 50:50 joint venture. And we are very excited about this transaction, because we think the influx of the capital from the other partners will really help the joint venture to do a better job. And frankly it’s been able to do for the last few years at growth and investing in technology, because to some of the points I made earlier, we have so many great investment alternatives here at American Express that it had at times been difficult for travel to compete for our investment dollars. So because if there is a joint…

Thank you. We will go next to the line of Bob Napoli with William Blair.

In the press release Ken just mentions that the strength and earnings that you have had this year is going to give you the flexibility to make substantial investments in the fourth quarter. I know there has been a lot of talk around expenses and many times you've reiterated the importance of the growth targets but I'm just wondering if you could with that kind of a call out in the press release what you were thinking I mean the earnings in 2012 were 440 if you look at your 12% to 15% are you looking at it that way in some regards and the minimum of 12% of earnings growth this year and maybe just quantify a little bit or give us a little more color on that call out in the press release.

Well I think Bob we’re always balancing, making sure we achieve the financial targets that we’re known for achieving on a consistent basis with investing to sustain the future and long-term growth of the company. And you saw this quarter our financial strength allowed us to get to a 15% EPS growth number year over year while spending more in the marketing and promotions areas than we spent in many quarters and while also doing some of the things like some of the technology spending we talked over the last couple of questioners which is also very growth oriented and so when you look at what Ken said in the press release today he talks about the flexibility that our financial strength gives us flexibility that gave us to make substantial investment this quarter in marketing and other initiatives. The fourth quarter is another quarter and if you’ve seen one quarter you’ve seen one quarter and we'll as we always do as we get into the fourth quarter make sure we balance what we need to do to achieve our financial targets with what we need to do in the short term with what we need to do to achieve our 2014 but I don't think we intended to make any particular call out on our actions that we would be taking in the fourth quarter in the press release. Okay follow up on the prepaid on the relaunch prepaid and trying to understand a little bit more time you’re expanding the distribution you call out certain retailers and American Express has had a prepaid card on the [indiscernible], several of those retailers is the difference that you're rolling out, you’re going to be getting more space in those new retailers and they will be offering a Bluebird like card but not under the Bluebird name?

Well I would say it's a good question and when you look at a new launch or the relaunch of serve [ph] it involves a range of new product features that makes it a much more comprehensive tool for managing all of your financial affairs. As part of those broader capabilities we’re including a number of new partners and retailers that will help people with a card do cash load and in particular we called out CVS and 7/11. So the combination of the broader, more complete array of features based on what we've learned from Bluebird and other efforts that customers really value and want in these products along with the broader distribution network, we think makes this a very attractive product and we are very excited about the re-launch.

Great, thank you.

So operator, I think we have time for one last question.

Great. That will come from the line of Mark DeVries of Barclays.

Thank you. First question is on GNS, how long can that segment continue to grow at the double-digit plus rate on billed businesses? And is any Wells Fargo business in that yet and how big can the Wells Fargo business get for you?

Well, a couple of questions. Our GNS business as you really pointed out is both active in the U.S. marketplace as well as internationally. And I might almost take your questions in turn certainly or split it into two parts. In the U.S., we are very excited about the Wells Fargo partnership. You wouldn’t have seen any results from the Wells Fargo partnership in the third quarter results. They are going to begin to do a few pilots in the fourth quarter and the larger rollouts will occur in 2014, but as you know, Wells is very focused on growing its credit card business. They have a tremendous customer base. They are very excited I think about what we are bringing to the partnership and we are very excited about their focus on trying to build broader royalty across their current customer base. We think that’s the model that can be replicated in many other places in the U.S. and we are hopeful that over time you will see more announcements in that arena. When you go outside the U.S. in the GNS business, I guess I would point out the obvious which is our – we are still a modestly sized player in many markets around the globe, particularly relative to the too dominant networks. We see tremendous opportunity to continue to grow at the kind of reach you have seen for a very long time, because if you just do the math, we could grow at these rates for very long time and still be the scrappy third competitor trying to bring innovation to the markets and focus on strong customer service and focus on delivering real value to the merchants we have to negotiate with every day. So this is a business that we launched in the late 90s, 1999 I believe. It’s interesting as a newcomer to look at the historical charts on this business, because it took a while to begin to get contraction perhaps like some of our early efforts today may take a while to get traction, but we believe it has tremendous momentum right now and we are very, very excited about the business. So on that note, I would like to thank everyone for your time and say I am very excited and pleased to be here at American Express. I think we had a tremendous quarter and I look forward to doing many other calls. With that, I am going to turn it back to the operator.