SpecialtyFinance1Q19EarningsPreviewApril2019RESEARCHANALYSTSMosheOrenbuch+1212-538-6795moshe.orenbuch@credit-suisse.comJamesUlan+1212-538-8235james.ulan@credit-suisse.comHoangNguyen+1212-325-3357hoang.nguyen@credit-suisse.comDISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.CreditCards3AmericanExpress(AXP,Underperform,$105PT)Source:Companydata,CreditSuisseresearch,FactSetSpendgrowthstrategy:Weforecast$305Bnworldwidebilledbusinessinthequarter:$199BnUSbilledbusiness(+9%y/y)and$106Bninternationalbilledbusiness(+5%y/y),asthegrowthmomentumhasslowedduetothelappingofone-timesurgeingrowthlastyearandFXheadwind.Discountrevenue:Weforecast$6.3Bnindiscountrevenue,andacalculateddiscountrateof2.07%,asweexpectdiscountratetocontinuetoshiftdowny/y,thoughthepressureseemstobeabatingduetothelappingofmultipleheadwinds.Balancegrowthandlendingstrategy:Weforecast$80Bnincardmemberloans(+10%y/y)and$57Bnchargecardreceivables(+5%y/y).Welookforwardtomgmt’scommentsonthecompany’sabilitytomaintainloanandreceivablegrowthmomentuminfaceofmodestlyslowingmomentuminbilledbusiness.Expenses:Weforecast$7.4Bnintotalexpenses,whichinclude$1.7Bninmarketingandbusinessdevelopmentexpense.Forecastedcardrewardsandservicesare$2.5Bnand$488milrespectively;webelieveourrewardsestimatehasgenerallybeenaboveconsensus.Companycontinuestobelieverewardsandservicesexpenseswillgrowfasterthanrevenuegoingforward,thusputtingpressureonmargin.Thismakessensegivencontinuedintenserewardscompetition,particularlyinlightoftherecentrenewalwithDelta.Wenotethatin2Q19,AXPcouldseeaone-timerewardscostduetorevaluationofDeltamileswithinMR.Welookforwardtomgmt’scommentonhowthi...
