Ladies and gentlemen, thank you for standing by and welcome to the American Express Third Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. (Operator Instructions) And also as a reminder, today's teleconference is being recorded. And at this time, I will turn the conference call over to your host, Mr. Rick Petrino. Please go ahead, sir.

Thank you and welcome. We appreciate all of you joining us for today’s call. The discussion 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 third quarter 2014 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 Web site 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 the discussion over to Jeff.

Thanks, Rick, and good afternoon everyone. I am pleased to be here today to report on another solid quarter of financial results by American Express. Our performance this quarter reflected higher spending by our card members, solid growth in loan balances, credit indicators at or near historical lows, disciplined control of operating expenses and a strong balance sheet that enabled us to return a substantial amount of capital to shareholders in the form of share repurchases over the past year. Our earnings per share growth of 12% outpaced revenue growth, once again reflecting the benefits of disciplined operating expense control and our share repurchase program. We also made progress on several newer fronts this quarter attracting additional partners to our OptBlue program, acquiring new card members on our EveryDay product and participating in the upcoming Apple Pay Global Wallet launch. Also during the quarter SAP announced its proposed acquisition of Concur Technologies, which as it closes will produce a significant gain for us given our long-standing ownership position in and operating partnership with Concur. I'll discuss each of these items in further detail later on the call. Stepping back a bit. On a year-to-date basis we have been able to drive strong EPS growth within our 12% to 15% long-term target range despite having adjusted revenue growth remain below our long-term targets at approximately 5%. As we have shown over the last two years, the different levers we have to drive earnings performance in a relatively slow growth environment have been a huge asset. We are beginning to see some modest acceleration in our volumes but revenue is not yet growing as fast as we and I suspect you, would like to see. Our challenge will be to continue to deliver in an environment that may be characterized by modest…

(Operator Instructions) Our first question comes from Betsy Graseck with Morgan Stanley. Please go ahead.

A couple of questions. One is on the discount rate and the different programs. You did a great job of outlining the puts and takes on what's driving the discount rate down broadly, and then talked through how those programs also drive down lower operating expenses. I'm wondering if you could give us a sense of, all in, where the pretax margin goes, including not only the discount rate side but the operating expense side as a total package.

So if you go back, Betsy, to when we first talked about the economics of OptBlue which I believe was at the financial community meeting in February. We pointed out that, you are correct, there is a partial offset to the decline in discount rate because certain other payments we have been making to the merchant acquirers which run through operating expenses we would no longer be making. Now that is not a complete offset, it's a partial offset. Our strong belief in the overall positive economics of the OptBlue program depend upon our belief that with expended merchant coverage, and over the course of the next several years we believe this program in the U.S. has the ability to make significant strides in the remaining merchant coverage gap we have. We believe that that will have very strong overall billings and revenue impacts that will more than offset the remaining negative impact on the margin when you just offset the discount rate decline on existing business versus the saving payments to the merchant acquirers. That will take time as merchant coverage grows and as our customers begin to learn and understand that it grows. But I would say we are really pleased with the progress we have made with the merchant acquiring community and are very bullish about the long-term prospects for the program.

Okay, thanks. And then separately follow-up question, separate topic on preferred. You indicated the 1.5 percentage point gap that you might be taking advantage of with preferred issuance, indicated over the next couple of quarters. But maybe you could give us a sense as to how much over the next couple of quarters. I'm wondering if you are intimating that you would fill that entire 150 basis point gap in that period or if that's over a longer period of time?

I think our view, and of course some of this will depend a little bit, Betsy, on market conditions. But sitting here today, our view is we will probably begin to fill the gap. And, of course, the way the CCAR process works as you know, we are committed to filling a portion of the gap that we put in our CCAR 2014 submission. But it would not take us all the way to filling the entire gap. We do believe in the long run, given the way the rules work, that the right, permanent long-term capital structure will eventually get us to that level. We probably won't get there with the first couple of issuances. I would also point out that, I don't want to drag everyone throughout the map, but it's a fairly complex calculation because what you really focus on is getting to that 150 basis points in a stress scenario through the CCAR process, because that's really where it would potentially become a binding constraint for us.

Right. So this should be over several, more than a handful of quarters, I would expect.

Yes. I don't want to speculate on just how many quarters because, again, it's tricky always to predict market dynamics and we will also be making some calls about how the market for these securities evolves and how the overall market evolves, particularly considering today's events. But it will certainly take more than the two quarters that we talked about in my prepared remarks.

Thank you. Our next question in queue will come from Sanjay Sakhrani with KBW. Please go ahead. Sanjay Sakhrani – KBW: I guess I wanted to go back to your opening comments on revenue growth not being in line with your long-term targets for a bit. And I was wondering what sort of initiatives or plans you have to get that going some. I guess one area that could I think of is some of these investments that you have made or reinvestments of the gains you have made, what is the payback time period? How do we assess whether or not the efficacy of those dollars are working? And I guess second question, just on the macro picture. Obviously it's a point of debate across the markets, and I was just wondering if you have seen any discernible trends this month specifically because just the magnitude of deterioration has been fairly significant. Also maybe tie in any travel related impacts that you might see because of the virus? Thank you.

Well, let me try to take those kind of one at a time, Sanjay, and I would start with your revenue growth questions. And I think I would preface my remarks by saying, we have a number of long-term targets. We have a EPS target in the 12% to 15% range, a return on equity 25% or better and revenue growth at 8% or above. Certainly our number one focus as we think about those targets is achieving the kind of very consistent EPS growth that you have seen us create quite a good track record of over the last few years. And when we think of the 8% revenue growth target, that is a facilitating lever to help us achieve those EPS targets. But one of the things that we began to talk about a few years ago and that I think we have really demonstrated over the last few years, is we have other levers to use in varied economic environments to get to our 12% to 15% EPS target even when we can't get to the revenue environment we would like. So when you say what would we do to continue to get revenue up, well, we think about investments across the short, medium and long-term horizon. And of course we could probably get the revenue growth up in the near-term higher than it is today if we abandon some of the things we're doing that we think are quite important for the longer-term. And two of the things you have heard us talk a lot about in the last couple of years are loyalty partner and loyalty coalition investments, along with the things we're doing in the reloadable prepaid markets. We continue to believe in those long-term investments but they are not in the near-term going…

Thank you. Our next question in queue will come from Mark DeVries with Barclays. Please go ahead. Mark DeVries – Barclays: The first question is on Apple Pay. Can you comment on whether you had to make any concessions around the discount rate to be included and also just contextualize how the role there fits in to your broader strategy to build your own proprietary mobile wallet?

Well, I don't think, Mark, that anyone is likely to comment on any of the contract terms here. I would point out, we don't really comment on contract terms with any of our partners. More broadly our philosophy is, we want to be everywhere that our card members want to be. And there is a real affinity between the Apple brand and what it means in our card member base. So we are very excited to be a part of this launch. We think it fits very well with our brand and card member value proposition and as we have said for a long time, form factor is not particularly important to us. We have tremendous share in online products, we have a tremendous partnership with someone like Uber where, of course, you don't see any physical card presence and it really takes advantage of some of our unique digital and customer capabilities. The closed loop gives us an ability to, in Apple Pay and in any other digital setting, do some things for both the card members and the merchants that are challenging for others to emulate. So we are very excited about being part of this launch and think over time it can really be helpful in the continuing trend towards less use of cash and more use of card payments. And that's a very good thing for us and, frankly, a very good thing for the industry. Mark DeVries – Barclays: Okay, great. Next question is just a follow-up on the timing of the preferred issuance. Was the Fed essentially forcing you to trap capital here, kind of leaving you at ratios well above the longer-term economic capital targets? Why issue now instead of later when you are closer to being able to get to levels that are consistent with your long-term targets?

Well, the short answer, of course, is we are issuing now because we committed to issuance in our CCAR submission. The longer answer for why we put it in the CCAR submission is that when you think about our capital constraints, you do have to consider them in the context of the stress scenarios that the Fed runs which can produce very very different results from what you may see when you look at our balance sheet. And the judgment we made is we submitted CCAR, our CCAR submission in 2014, was that the most prudent route to ensure that we continue to do the kinds of very aggressive returns of capital to our shareholders that we have been doing. And I would remind you that are -- we have been amongst the highest of any of the CCAR banks in terms of the amount of capital that we have been returning. The way to ensure we could continue to have a strong platform to do that given the evolution in the rules, given the way the process works, best way to do that was to put a portion of preferred into our capital structure. And that's what we committed to and therefore the will see us execute. As I said in answer to Betsy earlier, you won't see us get all the way up to the full level until some later point in time. But what our judgment was, it's prudent to begin that process now.

Thank you. Our next question in queue will come from Sameer Gokhale with Janney Capital Markets. Please go ahead.

The first thing I just wanted to go back to was the effect or the impact of OptBlue on your discount rate. And specifically, what I was curious about is, it was a meaningful enough impact for you to call it out and you have a 3 basis point decline year-over-year in your discount rate overall. So that seems to suggest that in a short period of time there has been a lot of uptake in terms of the amount of volume coming through your OptBlue partners. So am I thinking of that incorrectly because on a proportional basis, I need to work out the exact math, but it does seem like it probably had a significant impact in a relatively short period of time. So could you help us size that a little bit in terms of maybe volume coming through your OptBlue partners or merchants incrementally that have signed up, etcetera?

Well, I think it's a still very early days for the program. And I would remind you that there is really two aspects to this. One is, that we will get expanded merchant coverage over time as the acquirers go out and find merchants who do not take American Express today and are very attracted to a simple product offering that gives them the ability to expand the range of customers they can reach. Those acquirers will also take some of their existing customer base and put them on these simpler, and we think more attractive, OptBlue program. And so there is a mixture of both of those things going on right now. And the expansion in the spending at the new merchants will take some time because our card members will take some time to even realize when merchants get added and what the benefits are of that expanded coverage. So for all of those reasons we are quite comfortable, in fact quite pleased, with the early days of the program. And the fact that the acquirers have been signing on a little quicker than we expected, is why the modest impact has hit us a little bit more quickly than we had in our plan. We actually see that as a good thing, however.

Okay, thank you. And then just another question I had, and I am not sure if this is something you have tracked recently. But I know in the past, Ken has talked about the migration up-market in terms of more premium cards or the movement between card products as an indicator of what's going on with the underlying consumer that you are targeting. So I was curious if that's something you have looked at recently to look at migration upwards or downwards to give you a reading on what's going on with the health of consumers. Are we seeing a slowdown in the improvement or any sort of read throughs from that? I was just curious if you had any more recent data?

Well, I think the short answer is, of course we look very closely at all the trends across all of the many products. And one of the hallmarks I think of our business model is that we strongly believe that we have a broad range of products because we want to have the right product for the right card member and people have very very different needs. Well, I'll tell you, when we look across our portfolio now, we see some very strong performance in some of our premium products. We are very pleased, and in fact have exceeded our expectations on the take-up with our new EveryDay card which is clearly targeted at a very different demographic, customers who value the revolve feature. As you mentioned in my script, you see some of our cash back rewards for our products growing particularly strongly right now and that contributes a little bit to some of the difference between billed business growth and discount revenue growth. So when you look across our portfolio, there is no particular trends that we can point you to that show migration patterns that are different than what we have experienced historically.

Okay. Thank you. And I know I have exceeded my quota, but just a quick last one. The Concur gain this quarter, did you quantify how much that was that flowed through your income statement?

Well, so remember SAP hopes or expects that the transaction will close in the fourth quarter and we would expect that it will generate a gain for us of about $700 million.

Okay. Because I thought in one of the, in the supplement it talked about some small gain flowing through this quarter as well. So maybe [through it] (ph)?

Yes. So as you know we have for many years have been selling off at a modest pace very large gains we generated some years back from our investment in ICBC, the Chinese bank. The sale of those shares came to an end in the September quarter and we are now completely sold out on that position. We have been considering a range of alternatives as we reached an end of that ICBC investment sale, one of which was to begin to sell modest bits of Concur. That plan was beginning to be executed and thought about and SAP came along and changed our trajectory. So there is really nothing more than that going on with a very modest sales that you see referenced in the document.

Thank you. Our next question in queue will come from Bill Carcache with Nomura Securities. Please go ahead. Bill Carcache – Nomura Securities: I apologize for going back again to the capital question with the preferred, but I'm trying to make sure that I understand the reason for including the preferred issuance in your CCAR submission. So from an academic perspective, I get that it makes sense to fill that 150 basis point gap between total capital and common equity tier 1 minimums under Basel III. But in reality I thought of CCAR as the real binding constraint for most card issuers, given that losses tend to be quite high for unsecured credit card loans under a severely adverse scenario. And so if you have to run at, call it 12% common equity tier 1 levels for CCAR purposes, haven't you already filled the preferred bucket with common equity and so what's the benefit of the preferred? Maybe if you could just speak to that, it would be very helpful.

So that's exactly the right question, Bill. The thing you have to remember is, your binding constraint in CCAR is whatever your absolute low point is over and nine quarter period. So in CCAR 2014 you were running into 2015 when the new minimums come into effect. You are running a severe stress scenario where the Fed does the modeling and you are sustaining your capital payouts. So one of the realities for us as a bank which has made very aggressive requests for share repurchase along with dividends. That means when you sustain those right through a severe stress scenario, particularly when you have a company like American Express, which if you look at our payouts lately, we're paying out over 25% of our regulatory capital base each year. The math quickly takes you from what on the surface looks like a very highly capitalized company, and we of course believe we are very highly and well-capitalized, to one that actually begins to in that severely stress scenario where you, I might suggest, unrealistically sustain your capital payouts right through that severely stress scenario, you begin to approach those minimums. And as we thought about how do we make sure we don't trip those minimums, our choice was fill it with more common or fill it with some preferred. And we clearly chose to fill it for our shareholders with preferred because it's more economic buffer. Bill Carcache – Nomura Securities: I see. That's very helpful. Thank you. Separately, as you discussed earlier, you guys have been able to, despite a lackluster growth environment, deliver EPS growth at the low end of your on average and over time target range by pulling on all the levers that you have available to you. And I guess when we pull together all of the comments that you have made on that issue tonight, is it reasonable to take away from that, that you continue to have confidence in your ability to generate results that are in line with at least the low end of your on average and over time target? Even if it's just at the lower end of that range?

I think what you should take away from all of my comments is that our track record, we are using the range of levers we have to meet our EPS targets are pretty good. Our track record is very good and we have a lot of levers. And our job and our focus is on using all the levers we have to continue to achieve that kind of performance. It is more challenging in a modest economic growth environment where everything from the capital rules to the regulatory environment to the competitive environment just gets tougher every day, but that's our job. That's what you pay us to do. And we are committed to using every lever we have to stay focused on meeting those EPS targets. Bill Carcache – Nomura Securities: One of the important ingredients in being able to do that has been the positive operating leverage. And I think your commitment to keeping operating expense growth below 3% through the end of this year has given really the market a lot of confidence in your ability to generate that positive operating leverage. Is that something that would you be willing to consider extending that beyond this year? And that was my last question.

So we are not -- we are in the middle of our planning process right now for 2015, and so we are certainly not ready on this call to talk about what our targets are on operating expense going forward. But I would make a few obvious comments which is, we are in a business where we get some benefits from scale as our company continues to grow. And while I was calling our 5% revenue growth quite accurately less then we and probably you had hoped for, I would remind you that for a company of our size to have revenue growth in a 2% growth economy of 5% is actually, if you look at other industries, is not a bad number. That gives us the benefit of scale which is a helpful thing as we try to control operating expenses as we continue to grow. And we are also in businesses where technology helps us every year find new ways to be more efficient and where the behavior of our merchants and our card members every year is more and more about us finding ways to engage them digitally. Quite frankly, that's also a less expensive and more efficient way for us to engage with them. So we are not ready to give targets yet on expenses for next year but what we are ready to say, is we are very committed to using all the levers that are at disposal to meet our financial targets. And we have some natural advantages given our growth and our business model in finding ways to continually control operating expenses and get that very important operating leverage that you talked about.

Thank you. Our next question in queue will come from James Friedman with Susquehanna. Please go ahead.

I will just ask my two upfront, Jeff, to respect the constraints of the call. So first one is housekeeping. The salary and employee benefits, this is Slide 12, at $1.29 billion. Is that a good run rate moving forward for the rest of the year? Obviously, there's been a lot of movement in that. That's my first question. And my second question is, a couple of the networks, MasterCard and Visa, have introduced fees related to tokenization. You guys were there at the authoring of tokenization. My question about tokenization is, do you have a revenue model associated with that? So the first one is about salaries, the second is about tokens. Thank you.

Well, let me maybe work those in backward order here. We are constantly looking at ways to add value through innovation, technology, scale or closed loop. We are constantly looking to find ways using all of those tools, add value to our merchants. Frankly, we also expect when we find ways to add value that there will be reasonable compensation. Now that's a very general statement and we will have to see on any particular subject, I don't want to comment on tokenization in particular, where the market goes and what kind of value we can deliver to our partners. But certainly our general view is that we add value in a lot of ways and we should get compensated for it. On the salary and benefit point, there is always some quarter to quarter volatility so I'm going to be a little cautious on giving you a line item specific bit of guidance. I would make the point that salary and benefits are half or a little more of our overall operating expense. We are very committed to maintaining the trends you have seen thus far. And while you can't maintain the trends you have seen over the last few years without maintaining a very tight control around all of our employee related costs. I just want to point out that you do get a little bit of quarter to quarter volatility, sometimes particularly in the fourth quarter as you true up things at your end.

Thank you.

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

Thank you, sir. And that will come from David Hochstim with Buckingham Research. Please go ahead.

I wonder if you could talk for a minute about the potential impact on billed business and maybe revenues from the decline in gas prices we've seen and the further step-down in the value of a couple of currencies that you're exposed to late in the third quarter and as we've moved into the fourth quarter?

Well, let me maybe work those in reverse order. On the currency side, we actually, if you go back to Q1, we put a slide into our earnings call deck to help people understand a little bit which currencies we have significant exposure to. And I would also remind you even on that slide we have exposure at the revenue and billings line, there is some natural hedges to that because in many of the countries where we have the largest billings and revenue exposure, we also have just substantial operations. And so those provide some level of natural hedge. When you look at the range of currencies that matter for us, it's also a general truism that you seldom find all of those currencies moving in the same direction. Even if you look at our third quarter, the UK is a very significant country for us but it was actually fairly flat versus the U.S. dollar versus some of the other currencies. So this is a headwind for us. I would say it's generally a modest and manageable headwind unless we see an almost unprecedented across the board strengthening of the dollar. And given the events of the last few days I certainly wouldn't want to say that won't happen, but in general it's a manageable effect for us. In terms of gas, obviously our gas sales in terms of our overall business are not particularly material part of our billed business. I would just make the obvious point that for many other things in our economy that people to spend more money on, lower gas prices are generally a good thing. I guess I am an ex-airline CFO, so lower gas prices are generally really good thing to travel. But, boy, you certainly have some pretty tough to read challenging counter trends on travel right now when you look at all the news about turmoil in the world and Ebola. So it's hard to know how all that will play out. And so we will just remain committed to using all the levers we have to manage through whatever the economic environment brings for us. So I'd like to thank everybody for joining tonight's call and participating in the Q&A session. I'm going to wish you all a good evening but I'm going to turn it back over to Rick Petrino who will provide a brief overview of the investor conferences we plan to participate in during the fourth quarter. Rick?

Thanks, Jeff. So as part of our commitment to provide investors with exposure to company's management, our executives plan to speak at several events in the fourth quarter. Looking ahead through the balance of 2014, Jeff plans to speak at the Merrill Lynch Banking and Financial Services Conference in New York on November 13. In addition, Ken Chenault plans to participate in two upcoming conferences. The first will be in Las Vegas on November 4 as part of the Money 2020 Conference and the second will be also in New York on December 10 for the Goldman Sachs Financial Services Conference. Live audio webcast of each of these events will be made available to the public through the American Express IR Web site at ir.americanexpress.com. Thanks again for joining tonight's call and thank you for your continued interest in American Express.

Thank you. And ladies and gentlemen that does conclude your conference call for today. We do thank you for your participation and for using AT&T's executive teleconference. You may now disconnect.