American Express Company (NYSE:AXP) Q2 2024 Earnings Conference Call July 19, 2024 8:30 AM ET
Company Participants
Kartik Ramachandran - Head of Investor Relations
Stephen Squeri - Chairman and Chief Executive Officer
Christophe Le Caillec - Chief Financial Officer
Conference Call Participants
Ryan Nash - Goldman Sachs
Donald Fandetti - Wells Fargo
Sanjay Sakhrani - KBW
Craig Maurer - FT Partners
Richard Shane - JPMorgan
Jeffrey Adelson - Morgan Stanley
Mark DeVries - Deutsche Bank
Cristopher Kennedy - William Blair
Terry Ma - Barclays
Saul Martinez - HSBC
Moshe Orenbuch - TD Cowen
Mihir Bhatia - Bank of America
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the American Express Q2 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded.
I would now like to turn the conference over to our host, Head of Investor Relations, Mr. Kartik Ramachandran. Thank you. Please go ahead.
Kartik Ramachandran
Thank you, Donna, and thank you all for joining today's call. As a reminder, before we begin, today's discussion contains forward-looking statements about the company's future business and financial performance.
These 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 statements are included in today's presentation slides and in our reports on file with the SEC.
The discussion today also contains non-GAAP financial measures. The comparable GAAP financial measures are included in this quarter's earnings materials as well as the earnings materials for the prior periods we discussed. All of these are posted on our website at ir.americanexpress.com.
We will begin today with Steve Squeri, Chairman and CEO, who will start with some remarks about the company's progress and results. And then Christophe Le Caillec, Chief Financial Officer, will provide a more detailed review of our financial performance. After that, we'll move to a Q&A session on the results with both Steve and Christophe.
With that, let me turn it over to Steve.
Stephen Squeri
Good morning, and thanks for joining us. As you saw in our earnings release issued a short time ago, we reported strong second quarter results and raised our EPS guidance for the full year, based on the continued momentum we're seeing in our core business.
Revenue in the quarter reached an all-time high and earnings grew 44% year-over-year or 21% after excluding the gain of $0.66 we realized from the sale of Accertify. The strong performance of our core business year-to-date and our expectations for the balance of the year will enable us to increase our investments in marketing and other strategic areas that drive our growth without using any of the proceeds from the Accertify sale, while still delivering exceptional earnings results.
In fact, we now expect to invest around $6 billion in marketing this year, up about $800 million versus last year, all of it funded from the results of our core business. As a result, we are raising our EPS guidance range for the full year to $13.30 to $13.80, up from $12.65 to $13.15 previously, and we continue to expect revenue growth in-line with our 9% to 11% range for the year.
As we've seen through the first half of the year, our core business continues to generate strong momentum, even against the backdrop of a slower growth environment. The continued momentum we're generating reflects the earnings power of our business model, which is driven by several interrelated factors, including.
First and foremost, the quality of our loyal premium customer-base, plus the increasing scale of our business, a well-controlled expense base, the success of the strategic investments we're making to enhance Amex membership and our talented colleagues around the world.
Our continued strong performance starts with our premium customers, who are high spending, long-tenured and have excellent credit profiles. And we continue to attract large numbers of high quality premium customers with our superior products as seen in the consistently strong new account acquisitions and 24 consecutive quarters of double-digit card -- double-digit growth in card fee revenue we've delivered.
Next is scale. Over the past few years, the scale of our business has grown significantly. Compared to year-end 2021, revenues have grown by nearly 50%, card member spending has increased by almost 40%, cards-in-force globally have risen by around 23 million, or about 20% and the number of merchant locations on our network has grown by over 30 million, or nearly 50%. This increased scale drives growth and gives us significant flexibility in running our business for the long-term.
At the same time, our operating expenses are growing well below revenues as we drive efficiencies across the business. The combination of our increasing scale in our well-controlled expense base produces significant operating leverage that generates more investment dollars we can inject into our business. Another key factor driving our momentum is the success of the strategic investments we've been making in critical areas like marketing, value propositions, technology, control management capabilities, and talent to sustain our growth.
And to keep the momentum going, we're continuing to invest in enhancing our unique membership model through ongoing product innovations and new capabilities and benefits. For example, as we execute our strategy of regularly refreshing our products, we focused on embedding additional value in our premium cards to make them highly attractive to customers across generations and geographies. This enables us to add large numbers of new premium card members to our customer base, drive greater engagement with existing customers and price for the value we add.
We are on track to refresh approximately 40 products globally by the end of the year. As part of that number, we look forward to announcing our refreshed US consumer gold card in the coming weeks, adding to the nearly two-dozen refreshed and updated products we've announced through the first half of the year. We also continue to add new capabilities and benefits through both internal innovation and bolt-on acquisitions.
For example, our Resy dining reservation platform has seen significant growth since its acquisition in 2019 and our planned acquisitions of Tock and Rooam will further expand our dining portfolio, giving our customers access to more great restaurants and increasing the digital offerings we provide to restaurants and merchants in the Food & Beverage industry.
Finally, our talented colleagues across the company are the engine that drives our growth. Their creativity, determination and deep commitment to providing the best customer experience every day is what has made American Express what it is today and will continue to make us successful in the future.
The combination of all these factors is what drives our premium business at a scale that can deliver superior earnings on a sustainable basis. The power of our unique business model and the ongoing momentum we're seeing in the business, driven by our loyal customers and dedicated colleagues, gives us confidence in our ability to achieve our expectations for the year and our long-term aspiration for the business.
With that, I'll now turn it over to Christophe.
Christophe Le Caillec
Thank you, Steve, and good morning, everyone. It's good to be here to talk about our second quarter results, which reflect another quarter of strong performance.
Starting with our summary financials on Slide 2. Second quarter revenues were $16.3 billion and grew 9% year-over-year on an FX adjusted basis. Net income was $3 billion in the quarter, generating earnings per share of $4.15.
Our second quarter results also reflect the sale of our Accertify business, which closed during the quarter. We recognized an after tax gain on the sale of $479 million, equating to $0.66 of EPS impact. Excluding this gain, EPS grew 21%, reflecting the power of the business to generate strong earnings growth even in a slower growth environment, as Steve noted.
On Slide 3, Billed Business grew 6% versus last year on an FX adjusted basis, reflecting stable growth and in-line with the softer spend environment we've seen in the past few quarters. The stability in spend growth was also visible by category where we saw 6% growth in goods and services, 7% growth in travel and entertainment spending.
We did see some slower growth in certain T&E categories versus the prior quarter, such as in airline and lodging. At the same time, growth in our largest T&E category, restaurants remained strong and goods and services strengthened a bit versus the prior quarter when excluding the impact of leap year.
Stepping back, while spend growth in certain categories was slightly higher or lower versus the prior quarter, overall spend growth was stable and we continue to see strong growth in the number of transactions from our card members, which grew 9% this quarter. There are a few other key points to take away as we then break down our spending trends across our businesses.
Starting with our largest segment on Slide 4. U.S. consumer grew billings at 6% this quarter with balanced growth across both goods and services and T&E. Our premium customer base continues to demonstrate steady growth. We also saw growth across all generations. Millennial and Gen-Z customers grew their spending 13% and continue to drive our highest billed business within this segment.
These younger card members continue to demonstrate strong engagement and we see that they transact over 25% more on average than our older customers. And in some categories like dining, they transact almost twice as much.
Turning to commercial services on Slide 5. Overall growth came in at 2% this quarter. Spending growth from our US small and medium enterprise customers increased a bit sequentially versus last quarter but remained modest.
Lastly on Slide 6, we see our highest growth again this quarter in international card services, up 13%. We continue to see double-digit growth in spending from international consumers and from international SME and large corporate customers and we are also seeing double-digit growth across all regions.
Stepping back, we continue to see stable spend growth across customer segments, spend categories and our US and international geographies. And while we are not in a high growth spend environment, particularly in the US, our spending volumes are tracking in-line with our expectations and support our revenue expectations for the year.
Moving on to loans and card member receivables, on Slide 7, we saw year-over-year growth of 11%, demonstrating strong growth, but continuing to moderate as expected. As we progress through 2024, we expect loan growth in particular to continue to moderate by a few percentage points, but it still grew in double-digits as we exit the year.
Turning next to credit and provision on Slide 8, through 10, our credit performance remains very strong and is a direct result of our disciplined growth strategy which has been focused on growing our high credit quality premium customer base, including through the younger customers we attract to the franchise.
This strategy, coupled with our robust risk management practices are an important aspect of our business models. Going forward, we expect our write-off rates to remain generally stable for the remainder of 2024.
Turning now to the accounting of this credit performance on Slide 9. The quarter-over-quarter reserve build of $101 million is mostly driven by growth in our loan balances, largely offset by lower delinquencies. This reserve build combined with net write-offs drove $1.3 billion of provision expense in the second quarter.
As you see on Slide 10, we ended the second quarter with $5.6 billion of reserves, representing 2.8% of our loans and card member receivables, a slight decrease compared to Q1. It's worth noting that there is a seasonality component to reserves, although we are also encouraged by the strength of the performance we see in the portfolio.
Moving next to revenue on Slide 11. Total revenues were up 9% year-over-year, benefiting from the diversification across revenue streams, customer segments and geographies. Looking at the components of our revenue, our largest revenue line, discount revenue grew 5% year-over-year on an FX adjusted basis, as you can see on Slide 12. This growth is mostly driven by the spending trends we discussed earlier.
Net card fee revenues were up 16% year-over-year on an FX adjusted basis. As you can see on Slide 13, we're now generating over $2 billion in quarterly card fee revenue as the differentiated value and experiences we offer on our products continues to resonate with our card members globally. This is an important metric for us because it also reflects the choice that our costs -- that our customers make each year to renew their membership. We're pleased with the growth and expect to exit the year with further momentum.
In the quarter, we acquired 3.3 million new cards, demonstrating the demand we're seeing for our products and the investment we've made. Acquisition of our premium fee based products continued to account for around 70% of new accounts. And importantly, as we have increased the total number of cards acquired, we have maintained disciplined underwriting standards.
Moving on to Slide 14, net interest income was up 20% year-over-year. This growth is driven by the increase in our revolving loan balances, which also contributes to the continued net yield expansion versus the prior year. As we've shared before, we continue to expect this growth to further moderate as we progress through the year.
To sum up, revenues on Slide 15, the power of our diversified model continues to drive strong revenue momentum even in a slower growth environment, as our results in this quarter were fueled by growth in all our major revenue lines across each of our different business segments and across geographies.
Moving to expenses on Slide 16, starting at the top of the page, variable customer engagement expenses came in at 42% of the total revenues for the second quarters. Looking forward, I expect variable customer engagement expenses as a ratio of revenues to be in-line with this level for the balance of the year.
On the marketing line, we continue to invest at an elevated level at $1.5 billion in the second quarter. Given the strong performance in the core business, we now anticipate our full year marketing spend to be around $6 billion or 15% higher versus last year as we plan to invest at high levels to sustain our growth momentum.
To put this in perspective, this is an incremental $800 million above what we spent in 2023. At the same time, we intend to deploy those investments in a disciplined way. As I discussed at Investor Day, our investment optimization engine is engineered to make profitability based decisions at the margin and there is a high bar for returns on these substantial incremental investments.
Moving to the bottom of Slide 16, brings us to operating expenses. Operating expenses were $3 billion in the second quarter, down 13% versus last year due to the $531 pre-tax gain we recognized from the sale of our Accertify business.
Excluding the gain, operating expenses were up 3% in the quarter, well below the pace of revenue growth even as we continue to invest in technology and our control management capabilities. Excluding the impact of the Accertify gain, we continue to expect operating expenses for the year to be fairly flat to 2023.
This quarter's results demonstrate how the scale of the business and strong expense discipline enable us to generate significant efficiencies and those efficiencies are enabling us to invest at elevated levels while still generating significant levers to drive strong earnings growth.
Turning next to capital on Slide 17. Our CET1 ratio was 10.8% at the end of the second quarter within our target range of 10% to 11%. We also returned $2.3 billion of capital to our shareholders, including $1.8 billion of share repurchase. This is the highest level in over two years. And the recent CCAR results further demonstrate the strength of our portfolio and the resilience of our business model.
The stress test results show that under a severely adverse scenario, our portfolio remains profitable. In fact, we are the most profitable financial institution as a percentage of asset growth across all the banks subject to CCAR and have the lowest credit card loss rate under stress as well.
These results in our stress capital buffer remaining at 2.5%, the lowest prescribed level. We plan to continue to return to shareholders the excess capital we generate while supporting our balance sheet growth. We do not expect any material near term changes to our capital management approach.
This brings me to our 2024 guidance on Slide 18. Let me step back and make a few observations about the growth in the business and the way we see the balance of the year unfolding. First, we have a core business that is comfortably generating mid-teens EPS growth, even in a slower growth environment and before the gain from the Accertify sale.
Second, the pace of earnings generation in the core business, combined with the strong demand we are seeing in the market for our products, is enabling us to invest around 15% more in marketing compared to last year. As a result, we are able to fund significantly more investments from our core business than our expectation at the start of the year without relying on the one-off gain from Accertify.
With that, as Steve mentioned, we are raising our guidance for EPS for the year to a range of $13.30 to $13.80, and within that range, we now expect to drop all $0.66 of the Accertify gain to the bottom line. This is a departure from our usual practice of reinvesting a significant portion of one-off gains in growth initiatives.
But we are confident in the ability of our business to support the year-over-year growth of around $800 million in marketing while delivering mid-teens EPS growth. Finally, we still expect to deliver revenue growth in the year in-line with our initial 9% to 11% range.
With that, I turn the call back over to Kartik to open up the call for your questions.
Kartik Ramachandran
Thank you, Christophe. Before we open up the lines for Q&A, I will ask those in the queue to please limit yourself to one question. Thank you for your cooperation. And with that, the operator will now open up the line for questions. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is coming from Ryan Nash of Goldman Sachs. Please go ahead.
Ryan Nash
Hey, good morning, Steve. Good morning, Christophe.
Stephen Squeri
Good morning.
Christophe Le Caillec
Good morning.
Ryan Nash
Steve, can you maybe expand on what you're seeing in the U.S. consumer and SMEs? In U.S. consumer, we saw a little bit of a slowdown from 8% to 6%. Are you seeing a broader slowdown in the consumer? Maybe just talk about what you're seeing on a same-store sales basis? And then on the SME side, you obviously saw a slight uptick. So maybe if you could just expand on those both. Thank you.
Stephen Squeri
Yeah. So I think look, in U.S. consumer, you saw a little bit of a sequential decline. But also remember, last quarter, we had the extra day. So it's not really apples-to-apples. But listen, the U.S. consumer was 6% up for the quarter. It continued to be strongly influenced by Millennial and Gen-Z growth. It's now up to 33% of our total billings and they're up 13%. And so we feel good where the U.S. consumer is. Obviously, organic spending, we'd like to see a little bit higher, but it is a slower growth economic environment.
But one thing I will point out before touching on SME. When our consumer, a lot of their spending is discretionary. And for our consumer, if they decide they're going to pull back, they'll pull back a little bit on a discretionary, but they'll continue to pay their bills, which is why our credit numbers continue to be so strong and we continue to widen the gap between us and our competitors.
So we feel that, look, the U.S. consumer has been pretty consistent and we think it's going to be pretty consistent throughout the year. From a small business perspective, while there still is an organic decline year-over-year, that organic decline is less than it was last quarter and the quarter before that.
So, we're seeing slight improvement. In both the U.S. consumer and in small business, retention is still strong and acquisition is still strong. And so, what I like about where we're sitting is, as the economy rebounds, whenever that may be, organic will pick-up driving future growth. And then just a last comment on international, you didn't ask about it, because probably it is so strong, it's up 13% in the quarter and even small business and commercial within international is up 14%. So we feel good about where we are right now.
Operator
Thank you. The next question is coming from Don Fandetti of Wells Fargo. Please go ahead.
Donald Fandetti
Yeah. Can you talk a little bit, I know you're reiterating your revenue guide for '24 of 9% to 11%, but just given results, do you think you're sort of more leaning towards the mid-to-lower end? And then can you talk about where you're investing in marketing in terms of U.S. consumer, commercial and international?
Stephen Squeri
Yeah. So I think, look, quarter-to-date, we're at about 10% both reported and FX. And for the quarter, we were at 8% and 9%. And so I think we're going to wind-up within that range. And I think depending upon how organic either rebounds or stays where it is, we'll determine where we wind-up within that range, but we're very comfortable with sort of the 9% to 11%.
As far as investment, what we do is, we will look at the myriad of opportunities that we have to acquire more card holders and depending upon at any given point in time because our acquisition engine is a very dynamic engine and things change all the time. We will allocate those investments either U.S. consumer small business or international. Traditionally, the U.S. consumer business would get more of that investment, followed either by international and small business.
But as I sit here today, it's hard to say exactly what percentages will be, but it will be focused on acquiring more cardholders. And the key about that is that when we acquire cardholders in the second half of the year, it's really not going to drive spending for us this year. It will -- what we're doing here is we're investing for the medium and the longer term and it will acquire cardholders that will spend for us, for us next year.
So I think the takeaway from the point that Christoph made and the point that I made is the business is so -- we feel the business is strong right now that we're able to invest more and we have line of sight into those opportunities without compromising on credit.
Christophe Le Caillec
The only thing I will add to that, Don, is that the revenue growth was exactly as we were expecting it to be. And as we talked about it under Q1 call, we talked about stable billings, which is exactly what we got. We talked about card fee remaining in terms of growth where it was in Q1 before picking up a bit of momentum in the balance of the year. We still think that is the right way to think about card fees. And we talked about NII growth rate moderating a little bit. So that revenue growth is where we thought it would be.
Operator
Thank you. The next question is coming from Sanjay Sakhrani of KBW. Please go ahead.
Sanjay Sakhrani
Thanks. Good morning. Steve, I think I heard you say a gold cart refresh will probably be announced shortly. I guess, just can we contextualize what that means? I assume it probably helps card fees next year. And then just the spend trends intra-quarter, were those pretty stable? It sounds like they were, but just clarifying.
Stephen Squeri
Yeah. So, not going to get into the details of the card. But what I would say is, one of the big advantages of the refreshes is it makes the marketing dollars work a lot harder, right? So what happens is, when you do a product refresh, whether it's Gold, whether it's Delta, whether it's Hilton or whether it's another Gold or Platinum card that we do internationally, what happens is you're able to provide more value to those cardholders that already have the product.
You may be able to upgrade a Green to a Gold. And obviously, you're able to acquire even new cardholders with that. And what happens is as you go out and acquire new cardholders, you'll have buzz around the fact that we have a new card and it has obviously a different value proposition and you'll have the marketing that goes with it. And so, when you do a refresh and you have your marketing spend, that your marketing dollars work a little bit. The overall value proposition is a lot stronger and it works a little bit harder for you.
Christophe Le Caillec
And when it comes to their intra-quarter billings, we typically don't talk about those and there's nothing much to say here. So there's nothing noticeable in terms of monthly billing growth.
Operator
Thank you. The next question is coming from Craig Maurer of FT Partners. Please go ahead.
Craig Maurer
Good morning. Thanks for taking the question. I wanted to ask about the marketing spend and it seems like you're putting the pedal down. So typically, when American Express does this, it's because -- or at least in the past, you've seen this happen because Amex is either anticipating or already seeing a slowdown from competitors in terms of their market activity and you see a significant opportunity to gain share. Is that -- is any of that thought process going into this year? And second, business development costs were lower than what was being forecast. So I'm curious if that's due to some slower partner growth that might have meant less incentives or what went into that? Thanks.
Stephen Squeri
Yeah. So a couple of points, I think $6 billion for the year in total marketing is not an area we've ever -- it's not an area we've ever been in before and an $800 million year-over-year increase is a pretty significant increase. I think that when we make a decision, Craig, to put more marketing dollars in, it's because we see the opportunity. And if you look at where we have been from a marketing spend for the first two quarters, that would show a trajectory of $6 billion. So we're really keeping all of our marketing spending consistent quarter-to-quarter because we do see the opportunity. And we see the opportunity within the credit box and within the dimensions of who we're looking for, for our cardholders. It's not due to a -- we're not making this investment because of a slowdown in billings. This was something that we had planned to do at the beginning of the year where billings were, where they weren't going to be. And as far as competitors pulling back, I don't see competitors pulling back at all. I think competitors right now -- the environment is just as competitive as it's ever been. Obviously, you make these investments because obviously you want to gain -- you want to gain more traction with your cardholders and you want to gain more share.
Christophe Le Caillec
Craig, let me add a few things and I will also answer your question about business development expenses. So the other element here to factor into the decision to invest more is the visibility we have in the balance of your performance. The business is generating a lot of earnings. We have more visibility in terms of the credit performance in the balance of the year in terms of the OpEx as well and that gives us confidence in our ability to actually deploy more marketing dollars. And to get to your question about business developments, it's expenses, there's nothing here significant. There was in the quarter some efficiencies, I will use that word in terms of the commercial spend and the incentives that we have with some card members and partners here and it gave us a bit of efficiency, but there was nothing related specifically to co-brand partners or anything of that nature.
Operator
Thank you. The next question is coming from Rick Shane of JPMorgan. Please go ahead.
Richard Shane
Thanks, everybody for taking my question. And I apologize, I can't see my computer this morning, so it's a little hard to get context on the marketing spend. But what I'm trying to understand is the following. What I've heard is that given the strength of the underlying business, the incremental marketing spend is going to be funded organically as opposed to from the Accertify gain. What I'm wondering is that $800 million year-over-year, has that changed materially from your prior guidance? Have you, in fact increased your expectations and funded it organically? Or is it roughly the same and it's just a matter of how you're going to pay for it?
Stephen Squeri
Yeah. Let me take that question and I hope you fix your computer problem soon. The way to think about this is, we always -- so we entered the year thinking we want to invest and we want to invest more because we see the opportunities and they are compelling investments with attractive returns. The fact of the matter is that the core business, which I would define as like the business, excluding the Accertify gain is generating more earnings than we had anticipated. So you're right, we can afford to spend more and to fund it through the core business. But on top of that, we also raised a little bit our marketing dollars. Now it's not a significant amount. As we've said in the past, in a given week, we spent $120 million on average of marketing dollars. So $100 million or $200 million a bit more or a bit less, it's actually not that material. But the key thing here is that in terms of the funding, it's going to be funded all from the core business and because it's generating more earnings than we had anticipated at the beginning of the year.
Operator
Thank you. The next question is coming from Jeff Adelson of Morgan Stanley. Please go ahead.
Jeffrey Adelson
Hey, good morning, Steve and Christophe.
Stephen Squeri
Good morning.
Christophe Le Caillec
Good morning.
Jeffrey Adelson
Just wanted to revisit the credit quality a little bit. I know last quarter, Christophe, you were talking about your expectation for write-offs to kind of continue ticking up from here. And it seems like your view has now shifted to a more stable outlook over the rest of the year. Can you just maybe talk about what you're seeing from your core customers' health and maybe what's driving some more confidence in the outlook there? And then should we also be thinking about a stable reserve rate from here versus, I think you were talking about more of an uptick over the rest of the year as well previously? Thank you.
Christophe Le Caillec
Yeah. Hey, good morning, Jeff. So you're right, we have changed a little bit the way we think about credit write-offs for the balance of the year. And we are at the beginning of Q3 now, we had good visibility in terms of what's going to write-off in Q3 and Q4. So we can be more confident in terms of providing a direction here. And to your point, the direction we're providing now is that it's going to be like stable at about the level you saw in Q2 at around 2.1%. Now, I need to say this specifically to address your question on the reserve and how to think about it for the balance of the year. A big driver of the reserve is going to be the delinquency levels, right. Those card members that are showing signs of -- signals of stress early on. The delinquency improvement in the quarter, there is seasonality in that improvement, right. And so we expect that delinquency rate is just going to probably tick-up a bit in the balance of the year and that will drive a bit of incremental reserve together with the volume growth that we expect to see. But from a reserve rate standpoint, we are 2.8%. It's a good reference point for what to expect for the balance of year. It might increase a little bit. We'll see. It's hard to predict where CECL is just going to land exactly at the end of Q4, but it's a good guide in terms of what to expect for the balance of the year. I would expect 2.8%, maybe 2.9%, but we're going to be in that range. And to your point, credit losses, we expect stability from where we are now for the balance of the year.
Operator
Thank you. The next question is coming from Mark DeVries of Deutsche Bank. Please go ahead.
Mark DeVries
Yeah, thanks. As I think you pointed out, it is pretty unusual for you to let a gain like the Accertify gain fall to the bottom line. And I realize you don't give 2025 guidance, but Steve, just kind of wondering if you still expect to target that mid-teens EPS growth off this higher 2024 EPS level?
Stephen Squeri
Well, I'm actually glad you asked that question because it is a one-time gain. And so as we do give guidance for next year, we certainly do expect to be in that mid-teens EPS range. However, we will be -- and we'd expect that people would adjust for that one time gain. I think by calling out that one time gain the way that we have and not using it within the business, I think it makes your job a little bit easier to just sort of remove that and then build from there. Because, when you look at it, it's a one-time gain. That's why they call it a one-time gain. But the thing that I would also point out is that, because we have elevated our marketing spending to where it is using the core business and not use the one-time gain and that gives us the opportunity to actually reset our marketing at a much higher level for next year, which will allow us to drive even more growth as we go forward. So, that's the big advantage that we look at this by not using a one-time gain and saying, hey, look, that's what we didn't have in our core. By adjusting up our marketing by using core earnings, our anticipation is we'll be able to keep that marketing there and grow from there going forward versus going back to the $5.2 billion.
Operator
Thank you. The next question is coming from Chris Kennedy of William Blair. Please go ahead.
Cristopher Kennedy
Good morning. Thanks for taking the question. At the Investor Day, digital banking was one of the key areas of investment over the next couple of years. Can you just talk about those investments and what the goal is there?
Stephen Squeri
Yeah. Look the overall goal is to be more engaged with both our small businesses and to be more engaged with our consumers. And I think, you know, digital banking is a bit of a journey for us. We now have multiple accounts and we're just going to continue to invest not only in capabilities, but continue to invest in making sure that our customers are using that. So there'll be more to come on that, but we're at the beginning of this journey and there's still a long way for us to go.
Operator
Thank you. The next question is coming from Terry Ma of Barclays. Please go ahead.
Terry Ma
Hey, thanks. Good morning. Just want to get some more color on how your announced product refreshes are going in terms of just acquisitions, retentions and just overall receptiveness and whether or not you still feel pretty good about having net card fees exit the year higher than last year?
Stephen Squeri
Yeah. In terms of acquisition or the product refreshes?
Terry Ma
In terms of just overall how product refreshers are going? And whether or not, you still feel pretty good about having net card fee growth exit the year?
Christophe Le Caillec
Yeah, net card fee. So we feel very good about either adding a bit more momentum as we said in terms of the card fee growth, we are at like 16% FX adjusted and we are definitely expecting this to tick up a bit in the balance of the year. It's on the back of the product refreshes, but not only on the back of product refreshes, I mean they're the single most important -- as I said in my prepared remark here, single most important element of that is the renewed commitment that card members, tenured card members in the portfolio make every year to actually renew their membership, right. That's a super important element of the mix here. But card refreshes, we are on track. We talked about 40 products and we are tracking well against that. And as Steve said, gold is next to come.
Stephen Squeri
Yeah. I mean we're about halfway through on those product refreshes. Gold is the next big one to come. And it's really a little bit too early to tell how each one individually has done. But what you look at is 3.4 million cards, 3.3 million cards acquired and retention rates are still strong. And those are the things that you look at, but we'll be able to have more color as the year goes on.
Operator
Thank you. The next question is coming from Saul Martinez of HSBC. Please go ahead.
Saul Martinez
Hey, good morning, guys. So a question on your EPS guide, the mid-point of your guidance range implies an EPS in the second half that at the mid-point of the range suggests around 2.6% growth. I think at the higher end, it's roughly, it's a little under 7%. Now, obviously, the higher marketing explains the bulk of it, if not all of it. But just wanted to ask, is there anything else there that is relevant that we should be thinking about driving that deceleration and maybe different than what you had anticipated? Because obviously, on a core basis, your numbers tripping out of Accertify have been better than expected in the first half, yet core basis kept EPS guide unchanged. And on that second half outlook, I think you have said in the past, correct me if I'm wrong, that card deceleration ends the year closer to 20%. I think you -- I don't think you've given a specific number on this call other than to say you see some acceleration, but it's 20% still the bogey there? Thanks.
Christophe Le Caillec
So we haven't given a number. So, and I'm going to stick to that. But your math is -- we've done the math as well and we're looking at those numbers and you need to factor as well into account the fact that last quarter, we had like about $200 million of one-off gain as well. You might remember linked to the URR model. But when -- as you think about the balance of the year, there are a couple of additional items to bake into your forecast. The first thing is that, as I said it was one of previous question, I think it was from Jeff, we expect to build some balances in the balance of the year for credit reserves, CECL balance -- CECL reserves, sorry. And so, that will put a bit of pressure on the EPS. The second thing is that OpEx, we're investing in technology. As I said in my remarks as well, we're investing in our control management capabilities. And typically as well, it's a seasonal factor at American Express, we've seen operating expenses pick-up a little bit towards the end of the year. So when you bake all of this into account, including a bit more marketing that we are projecting at this at this point in time, in the balance of year, you actually get back on your feet and you'll see that the EPS cadence or run rate is actually not moving that much and remains like very high.
Operator
Thank you. The next question is coming from Moshe Orenbuch of TD Cowen. Please go ahead.
Moshe Orenbuch
Great. Thanks. And is there, Kartik, as you look at the net interest income, that did decelerate about six points in the quarter from the first quarter level, but still the growth rate of NII is still well above the growth rate in loans. As you kind of approach the end of the year, do you think that those two kind of converge or will there be margin pressure? And could that net interest income growth be lower than the growth in balances by then?
Christophe Le Caillec
Yeah . Thank you for your question, Moshe. There are a couple of things to keep in mind here. The first one is that, as I've said, we should expect the volume, the balances, the loans to growth rate to moderate a bit further in the balance of the year, although it will remain in double-digit. From a yield standpoint, we have a slide that shows the yield. We had a bit of a yield improvement on the back of, I would say a few things, year-over-year yield improvement on the back of their revolve rates are a bit higher and they keep ticking up a little bit. And the second thing is and as we covered during the Investor Day on the funding side, we still have this dynamic around a bigger share of our funding mix going to high yield savings accounts, which for us is an effective funding channel. And so that dynamic is still going to play out in the balance of the year. And so you should expect to see the NII growth rate kind of like moderate a bit in the balance of the year.
Operator
Thank you. Our final question will be coming from Mihir Bhatia of Bank of America. Please go ahead.
Mihir Bhatia
Hi. Thank you for taking my questions. I wanted to go back just on -- just staying on spending and revenue. Is it fair to say that you're planning for this softer spending environment to continue for the next couple of quarters. So discount revenue growth will be at like current quarter levels is probably a fair way to think about it or are you thinking any change in that trajectory? And then just relatedly on spending, if I could just -- if you could just discuss what happened in large and global spend? It looked like it decelerated a fair amount. So is there anything to call-out there? I mean, I know it's a smaller business, but it's a fairly meaningful deceleration.
Christophe Le Caillec
So let me take the first one around how we're thinking about billing. So we are -- as I said, we see a lot of stability across the last two quarter, three quarters and even a bit further when you look at this in detail. So from a guidance standpoint, when we develop the guidance and the revenue guidance, that's what we bake in. If there is upside to that spend level, then all -- it's going to be a good thing for us. But from a guidance standpoint, that's what we are assuming on the revenue side. When it comes to global and large, last quarter, you remember, there was like a tick up, it was at 5%. This quarter there was a -- we're back to that 0%. There are few things here, like there's really nothing meaningful outside of like we noticed in like one specific client like a significant drop in terms of their card member usage, but there is nothing really material there, not big change, not an inflection point in terms of what we see in terms of corporate card spend. Donna, back to you.
Kartik Ramachandran
All right. Well, with that, we will bring the call to an end. Thank you again for joining today's call and for your continued interest in American Express. The IR team will be available for any follow-up questions. Thank you. Donna?
Operator
Ladies and gentlemen, the webcast replay will be available on our Investor Relations website at ir.americanexpress.com shortly after the call. You can also access a digital replay of the call at 877-660-6853 or 201-612-7415. Access code 13747456 after 1:00 PM, Eastern Time on July 19th through July 26th. That will conclude our conference call for today. Thank you for your participation. You may now disconnect.