Ron Stovall - IR Dan Henry - Acting CFO

Bob Napoli - Piper Jaffray Craig Maurer - Calyon Securities Chris Brendler - Stifel Nicolaus David Hochstim - Bear Stearns Meredith Whitney - CIBC World Markets Bruce Harting - Lehman Brothers Sanjay Sakhrani - KBW Eric Wasserstrom - UBS James Fotheringham - Goldman Sachs Brad Ball - Citigroup Ken Bruce - Merrill Lynch Scott Valentin - FBR Capital Markets

At this time I would like to welcome everyone to the American Express second quarter 2007 earnings release conference call. (Operator Instructions) Mr. Stovall, you may begin your conference.

Thank you, Joanne. Welcome, we appreciate all of you joining us for today's discussion. As usual, it's my job to remind everyone that the discussion today contains certain forward-looking statements about the company's future financial performance and business prospects, which are subject to risks and uncertainties and speak only as of today. The words believe, expect, anticipate, optimistic, intend, planning, will, should, could, likely and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements included in the company's financial and other goals are set forth within today's earnings press release which was filed in an 8-K report, and in the company's 2006 10-K report, already on file with the Securities and Exchange Commission. In the second quarter 2007 earnings release and supplement, which are now posted on our web site at ir.AmericanExpress.com and on file with the SEC in an 8-K report, we have provided information that compares and reconciles the company's managed base financial measures with the GAAP financial information, and we explain why these presentations are useful to management and to investors. We urge you to review that information in conjunction with today's discussion. Dan Henry, Executive Vice President and Acting Chief Financial Officer of American Express will provide some introductory remarks highlighting the key points related to today's announcement. Once he completes his remarks, we will turn to the moderator who will announce your opportunity to get into the queue for the Q&A period. Up until then, no one is actually registered to ask questions. While we will attempt to respond to as many of your questions as possible before we end the call, we do have a limited amount of time. Based on this, we ask that you limit yourself to one question at a time during the Q&A. With that, let me turn the discussion over to Dan.

Thanks, Ron and thanks, everyone for joining the call today. I'm very pleased to address the results for this quarter. As Ron mentioned, and consistent with our usual process, I will make introductory remarks, and then we will open the lines and take your questions. As you've seen in the earnings document, our second quarter continued the strong business momentum we recorded throughout 2006 and the first quarter of 2007. It reflects the benefits of our multi-year investments in a broad range of business-building initiatives. When you compare our results from continuing operations to the second quarter of last year, net revenues grew 9%, income also increased 9%, and diluted EPS of $0.88 rose 13%. In addition, ROE for the prior 12 months rose 38%. Significant items this quarter include a $65 million tax benefit from the IRS related to the treatment of prior years' card fee income. In light of this benefit, we increased marketing and promotion spending by $68 million, or $42 million after tax, above the level planned for the quarter. Last year's second quarter included a $144 million, or $131 million after-tax gain related to the sale of our card and merchant-related operations in Brazil, and a $62 million, or $40 million after-tax charge, associated with Membership Rewards reserve model outside the U.S. In addition, both quarters include re-engineering costs, which totaled $8 million or $5 million after tax this year; versus $53 million, or $43 million after tax last year. During the quarter and year-to-date, we returned 81% and 85%, respectively of total capital generated to our shareholders through share repurchases and dividends. Since 1994, we have returned 90% of capital generated to our shareholders, which is above our 65% long-term target. The 9% revenue growth in the quarter reflects strong increases in discount revenue and card member lending finance revenue. However, overall revenue growth was suppressed by the negative impact within securitization income of higher credit losses following last year's unusually low level, and substantially higher interest expense, as we discussed with you last quarter. One other point of clarification related to revenues. It generally appears that analyst models detailing our revenues have been adjusted to reflect our revised income statement presentation. However, within the various services that report the analyst estimates, there seems to be inconsistencies in the revenues reflected for various analysts. In some cases, revenues reflected are net of interest expense as we report them, while in others, revenues before interest expense are included. Therefore, the consensus revenue figure reported by these services does not appear to be comparable to our reported revenues net of interest expense. As far as our results go, they were driven by excellent growth in cardmember spending, loans and cards-in-force. Billed business growth remained strong. Each of our customer segments and every geographic region contributed to the 15% growth worldwide, or 13% growth on an FX adjusted basis. So, let me give you some more detail. In our U.S. proprietary business, consumer spending grew 12%, small business spending rose 15%, and corporate services volumes improved by 10%. In total, U.S. volumes for retail and everyday spending grew 15%. This category represents about 68% of U.S. billings. Travel and entertainment-related spending, which accounts for the remainder, rose 9%. Outside the U.S., proprietary billed business grew 5% on an FX adjusted basis. This was driven by 3% growth within our consumer and small-business activity, and 10% growth within corporate services. As you know, these proprietary card comparisons outside the U.S. are negatively affected by last year's sale and transfer to three bank partners of our Brazilian operations as of June 30th, and our Malaysian and Indonesian activities during the third quarter of '06. Excluding the impact of these sales, the spending on proprietary cards rose 10% outside the U.S. on an FX-adjusted basis. Within Global Network Services, billed business rose 62%, driven by continued triple-digit growth within the U.S., as well as robust growth outside the U.S. Excluding the impact of the businesses transferred I just mentioned, GNS billed business growth was 41%. For those interested in learning more about our GNS business, I want to remind you that at our financial community meeting on August 1st we will feature a presentation by Peter Godfrey, the President of GNS. Worldwide cards-in-force rose 10%. We added 2.3 million net new cards during the quarter and 7.8 net new cards since last year. This reflects 5% growth versus last year in proprietary cards, and 34% growth in network partner cards. Spending per proprietary basic card grew 8% worldwide, even with the suppressing effect of the substantial card additions over the past few years. Despite strong growth in cards and higher average fee per card of $36 this year versus $34 last year, our net card fee revenue decreased 6% this quarter. Consistent with the last three quarters, this reflects the reclassification of certain card acquisition-related costs, which are now reported as contra-revenue within this line. Prior to the third quarter of last year, these costs have been included in operating expense. This reclassification suppressed the consolidated revenue growth rate by approximately 1%, but had no effect on net income and is not included in the average fee per card calculation. Our average discount rate was flat versus last year at 2.57% and consistent with seasonal mix of spend trends, declined 1 basis point versus last quarter. Travel commissions and fees increased 2%, reflecting a 9% increase in travel sales. Worldwide lending balances on a owned basis rose 33%. On a managed basis, balances grew 21% on 32% growth in the U.S. and 15% increase in our non-U.S. portfolios. This strong growth continues to reflect the attractive spending levels within our co-brand and other lending portfolios, and also reflects our successful acquisition efforts around these products. Securitization income declined 11%, primarily due to the increase in write-offs versus last year's unusually low levels. Cardmember lending finance revenue rose 38% on growth in our own portfolio and a higher gross portfolio yield. Other interest income increased 41%, primarily due to the recognition of interest associated with the company's loan to Delta Air Lines. Interest cost increased 44%. This was due to a 56% increase in funding costs within the lending business, a 35% increase within the charge and other line, and 45% higher international banking expense. Much of this reflects volume increases in the business and higher market rates. However, as we discussed with you last quarter, interest expense was also driven by the expiration of some fixed-rate debt and hedges at year end. Specifically, fixed-rate debt and hedges within the U.S. card operation declined by $11 billion. The effective funding rate on that amount was 3.2%. It was replaced with funding based on short-term rates of approximately 5.3%. Consistent with the first quarter, this resulted in about $60 million of incremental expense versus last year in the quarter that was solely related to the debt and hedges that expired. The marketing promotions, rewards and cardmember services line increased 9%, including last year's $62 million charge related to higher redemption rate estimates within our Membership Rewards reserve model outside the U.S. Excluding this, marketing and rewards costs increased approximately 14%. Increases in rewards costs continued to reflect our strong spending growth, higher redemption rates, and increasing cardmember participation. Within marketing and promotion, we continued to be selective and generally maintained the reduced spending we talked about last quarter within various product-specific advertising, creative development and market research initiatives. However, we did increase expenditures related to various acquisition, brand and loyalty-oriented programs in light of the tax benefit realized in this quarter. Here we were able to exercise our flexibility to invest an additional $68 million in marketing programs, although it is worth noting that even without the additional investments, our marketing expense would still have been significantly higher versus the first quarter, based on the strength of our business. Human resource expense increased 4% as merit increases and greater benefit and incentive costs and a higher number of employees was partially offset by lower severance costs this year. Growth in the remaining operating costs reflects the impact of increased volumes within our technology and cardmember services activity. However, excluding the impact of last year's Brazilian gain and the re-class of card acquisition-related costs effective July 1, 2006, these costs only rose 3%. The total provision for loss and benefits increased 36% versus last year. As the lending provision increased by 57%, the charge provision rose 21% and the international banking and other provision declined by 8%. The increase in lending provision was driven by higher loan volumes and increased past-due and write-off rates relative to the lower year-ago levels that benefited from the impact of the 4Q05 U.S. bankruptcy legislation. The charge card provision rose 21%, reflecting growth in volume and somewhat higher loss rates. The decline in international banking and other provision was primarily due to lower certificate provisions and a reduction in the merchant-related reserves this year. The consolidated tax rate of 26% for the quarter declined versus the 33% rate last year, primarily due to the cards fee related benefit mentioned earlier. With that, let me conclude with a few final comments. We again delivered strong revenue and earnings growth during the quarter, while continuing to invest in key business initiatives and maintaining substantial balance sheet strength. Business metric performance, like growth in billed business and loan balances, continued to be in the top tier of the industry. The gap between our growth rate and that of most major competitors demonstrates the effectiveness and ongoing benefits of our marketing and rewards investments over the past several years. Additionally, credit quality continued to be very strong. As expected, losses have trended upward post the U.S. bankruptcy reform benefit last year. However, credit quality remained well-controlled during the quarter as we continued to see the positive impact of our historic focus on the premium sector and our rewards capabilities through top tier write-offs and past due levels. While the bottom line results were strong during the quarter, as expected, we continued to be negatively impacted by the near-term interest expense and provision grow over challenges we discussed last quarter. Within interest expense, we saw the effect of the items I mentioned earlier: the $11 billion reduction in our fixed rate debt and hedge position, higher volumes, and the generally higher market rates. Our interest rate expense level for the remainder of the year is obviously dependent on any further market fluctuations. However, assuming rates remain at current levels, the incremental interest expense over the next two quarters related to the funding that replaced the $11 billion of fixed-rate debt and hedges will be approximately $130 million. Within the unhedged portion of our portfolio, assuming rates remain constant, we do not expect to have as unfavorable an impact during the remainder of 2007, since short-term market rates today are generally in line with where they were in the second half of last year. In addition, the beneficial provision impacts from the U.S. bankruptcy law change that we enjoyed last year, and the resulting grow over challenge this year, will be lower in the second half of 2007. As you know from prior discussions, we made considerable efforts over recent years to implement flexibility of business plans. These plans position us to pull back on spending when required by external economic factors for business performance. They also allow us to increase spending if the environment permits. This quarter you again have seen the impact of our flexibility plans, which focus on more discretionary items, with operating expense first and secondarily within our marketing expense base. Overall expenses in the quarter were very well controlled. In the first quarter, we discussed the fact that we would have invested more in marketing and promotion activity if we had had perfect foresight into the strength of our results during the latter part of that quarter. This quarter we became confident in our ability to realize the IRS benefit early enough to take advantage of some additional investment opportunities, although we were not able to spend the full $65 million after-tax benefit. While we continue to hold back spending within some of the less growth-oriented investment areas we identified in the first quarter, we approved additional investments for various card acquisition, brand and loyalty-related initiatives. For the remainder of 2007 we plan to continue to work to maximize our marketing-related investments to further build upon our competitive strengths at a point where some of our competitors may be experiencing comparatively weaker business results. In addition to our flexibility measures, we also remain focused on re-engineering to maximize our ability to invest in key growth opportunities. While re-engineering will likely generate some costs from period to period, it positions us to continue to effectively control underlying operating expense growth. We also look to continue to leverage our investment optimization and re-engineering disciplines to allocate our resources to initiatives that will provide the greatest returns on our investments. This tactic, combined with the benefits of prior-year investments and strong top-line growth, we believe, will help to continue to support our business momentum while controlling expenses thoughtfully. Despite some near-term interest and provision pressures we see, we continue to have confidence in the outlook of our business for several reasons: our position within the affluent and high-spending cardmember sector remains excellent. It is supported by our ability to leverage our direct merchant relationships, the unique information benefit of our closed-loop network, and our attractive rewards programs. All of these enable us to deliver premium differentiated offerings to our customers, while driving incremental spending to our merchants. We believe these advantages and our position within the marketplace are not easily replicated by our competitors. We are also very optimistic about the broad growth opportunities within the payments industry. We have spoken to you in the past about plastic penetration upside that we see, given the relatively low level of spending currently on plastic throughout the geographies and customer segments in which we operate. In particular, we have highlighted opportunities within our consumer, small business, middle market and GNS businesses. Given our recent business success and our strong track record of innovation, product development and customer-focused marketing, we believe that we are well-positioned to execute against these growth opportunities in a manner that appropriately balances our short, medium and long-term business and financial goals. Thanks for listening. We are now ready to take your questions.

Your first question comes from Bob Napoli - Piper Jaffray. Bob Napoli - Piper Jaffray: Thank you, good afternoon. I thought overall it was a pretty solid quarter. The one thing, though, that does continue to raise my eyebrows, if you will, is the growth in the lending balances. My concerns with that, with regards to potential credit risk are frequently, when you've seen somebody grow way above the industry, and you guys are taking, I think, the lion's share of the growth in the industry right now, you sometimes see credit blip up. But if you look at credit on a lagged basis, it's moving up there; it's still not at alarming levels, but it has moved up a little bit more on a lagged basis than we would like to see. So I'd just like a little bit more explanation maybe on your part for why you think you're able to grow so much above? Because American Express historically has taken some market share, but not at this pace. So what's different? Secondarily, why are you so comfortable with credit, with that growth? Thank you.

Thanks, Bob. You're right; we are growing our lending balances significantly faster than our major competitors. But we are also far outpacing our major competitors in terms of billed business. As you know, our focus is really on spend and not on growing balances. So, as we've discussed on a number of occasions, our spending is growing at a very robust rate of 15%, but our lending products within that number is actually growing at a faster rate. So the growth in our loans is commensurate with the growth in our spending on lending products. It also is a fact, as we've indicated, that we've been focused on acquiring cards-in-force that are lending products. We're very comfortable doing that because we're focusing on acquiring customers on lending products that will have higher spend and that's our main focus. In terms of credit, you can see from our credit statistics that while they have moved up from last year because of very low levels last year, we're still very comfortable where our credit metrics are showing. We have not in any way changed the criteria that we set in terms of bringing customers onto our books, and so we're not seeing any change in terms of the quality of customers that are in our franchise. So overall, we're very pleased with both the growth in spending, the growth in the AR balances, and the quality of the customers that we have.

Your next question comes from Craig Maurer - Calyon Securities. Craig Maurer - Calyon Securities: My question is around the additional marketing spend in the quarter. You said that you used the opportunity provided by the IRS gain to increase marketing. I was wondering if you can talk about where you targeted some of that spending, what parts of the market you're seeing opportunity in? For instance, in Capital One's call, they talked about basically a lack of opportunity in the upper end of the market and we're focusing again more down market. So I was wondering if you can clarify that a little bit. Thank you.

We tried to continue the same focus we had in the first quarter in terms of pulling back on marketing that was more product, brand focused, or was research in nature. We wanted to concentrate the dollars that we had on acquisition, brand and loyalty, because those are the ones that have a more direct impact on near-term metrics. We did that in the first quarter, we continued that in the second quarter. We don't see any shortage of opportunity to invest in the business. As we've talked about, we have an investment optimization process where we rank all of our investments. So if at any point we had to pull back on investments, we know which ones we'd pull back on. If we have the opportunity to spend more money, we know exactly what the next ones will be that we will invest. There's actually a long list of investment opportunities we have that are not funded that have very attractive returns. So we see great opportunity, both in the consumer, small business, middle market and GNS. So, when we have the opportunity to spend, we know where we want to spend and we think that they will give us returns that are very favorable from a shareholder perspective.

Your next question comes from Chris Brendler - Stifel Nicolaus. Chris Brendler - Stifel Nicolaus: I just wondered if you could give us a little more color around rewards. Specifically, I think, the last several quarters in a row you have highlighted higher redemption rates. At the February investor day you highlighted some new programs you had around increasing redemption, making it easier for Cardmembers to redeem their points. Can you talk at all about how you feel about your current models and where you're seeing redemption rates? Is this going to continue to be an increasing line, and is it within your expectations as it's gone so far this past year?

Our rewards programs, particularly Membership Rewards, we think is really an excellent program. It's superior to many of the programs that are in the marketplace. We continue to enhance the program by adding new redemption options. Recently we created tiers within the Membership Rewards program so that each tier is specifically targeted to the Cardmembers who can participate in that tier. Part of it, as you said, is either making it easier for people to redeem, or bringing value propositions to the programs that they value. We actually view it very positively when people redeem, because it means that they're engaged, and engagement is a very good thing as you look out in terms of what our performance will be over time. So we continue to enhance the program. We look to continue to innovate and to increase the value proposition. If redemption rates increase as a result of that, we view that as a positive thing. Because overall, we think, the economics are very positive in terms of the spend as well as the credit behavior that we see in customers who are very active. The increases that we're seeing within the redemption rate are very much within our expectations in terms of what we've been planning for.

Your next question comes from David Hochstim - Bear Stearns. David Hochstim - Bear Stearns: I wonder if you maybe could speak a little bit more about that in terms of the average cost per dollar of rewards. Has that moved up? As you create or increase engagement, as you put it, does that mean that we're headed for some other reevaluation of the liability on the balance sheet in the U.S. or outside the U.S.?

I don't think that we have disclosed historically the average cost. I would say that we're very pleased with where average cost is today compared to where it's been historically. Some of the offerings that we add to the program may be at the higher end of the cost, and others balance that out by being at the lower end of the cost. The important part is to have options that our customers want. So overall, we're very pleased with where average cost is and how it's been trending. The fact that it increases engagement is very positive. There's no indication, based on the comments I've made, that we're going to see an adjustment to the redemption rate, although as activity is processed, that's what drives where the redemption rate estimates are. We are constantly looking at our redemption rate methodology and seeing if new information provides us better insights, then we'll integrate that into the model as is appropriate. That's generally driven by the behavior of the customers and how the program has evolved over time.

Your next question comes from Meredith Whitney - CIBC World Markets. Meredith Whitney - CIBC World Markets: I need some extra help here, please. On page 7 of the earnings supplement, when you talk about the securitization income, if you could dumb that down for me, I would appreciate it. Because I appreciate the year-on-year decline in securitization income because of relative write-offs, but there was a pretty dramatic sequential decline. What does that mean in terms of how we look forward? In terms of the credit quality looks stellar, but then the securitization line has me a bit confused. So could you help me with that, please?

If we look at the owned assets and you look at provision expense, you see a notable increase in provision, as we expected, because last year's levels were very low. When you look at securitization income, within there you have both the revenue that is being earned on those receivables as well as the cost of carry. But also, the credit losses related to those receivables are netted within securitization income. So just as on the owned portfolio credit losses increased notably, that's reflected in the expense section. But for securitized receivables, those higher credit losses are reflected in securitization income, and therefore, that had the impact of reducing the excess spread.

Your next question comes from Bruce Harting - Lehman Brothers. Bruce Harting - Lehman Brothers: Can you talk about the pricing you're seeing on this very strong loan growth that you're doing? That is question number one. Bring that to the degree you can talk a little bit about adding to your discussion of liability hedging, but any kind of a forecast for net interest margin going forward, if you could. With regard to credit normalization and bankruptcy, if you could just comment on where you see that going from here, and maybe topping out, if you could.

I think our pricing is staying pretty much in line with where we've been historically. As we've seen over the last several quarters, our net yield has held very well. This quarter we saw a drop in net yield. If you compare that to last year, the reason for the drop is the higher interest cost that we have this year compared to last year. That was partially offset by the fact that we have fewer receivables on introductory rates. So that actually helped to hold the yield up. If you look at it compared to last quarter, the primary change had to do with revolve rates. That's a relatively common seasonal change that we see. Our pricing hasn't changed, and our yield is holding up as expected. In terms of whether credit is returning to normal levels, I think it's certainly moving up more towards normal levels. As we see both at American Express and throughout the industry, early write-offs continue to be well below where they have been historically. Over time, how there's a balance between early write-offs and just contractual write-offs, people who don't pay us but don't go bankrupt, that may change over time. So we'll have to actually see how that plays out into the future. So overall, we're very pleased with the yield within the receivable base.

Your next question comes from Sanjay Sakhrani - KBW. Sanjay Sakhrani – KBW: I know you guys are going to spend some time at your conference on this, but I just wanted to drill down a little bit on the GNMS segment. Not sure if you guys look at it this way, but the pre-tax margin on that segment, somewhere in the range of 43%, kind of year-to-date, versus 35%, roughly, last year. Could you just provide some color on how we should think about it on a go-forward basis?

So as you know, we don't provide forecasts in terms of anything including margins. I think what you're seeing there is very strong billed business, and the revenues related to that are being reflected in part within the GNMS segment. The tight control over marketing and operating costs that we discussed does not only relate to segments one and two, it also relates to GNMS. So I think what you're seeing there is strong billed business growth, as well as very good cost control on operating expenses, and a clear focus in terms of the marketing expenditures as well. That's what I think is having the most notable impact in terms of the improvement on margins. Let me just make one comment before we take the next question, as it relates to the question that Meredith asked. Let me just also note that if you were looking at excess spread on a sequential basis, in the first quarter of this year we also had the $80 million impact of the accounting change as it relates to the I/O strip that was on that line. So if you're looking at that information, that's something to keep in mind as well. With that I'll take the next question.

Your next question comes from Eric Wasserstrom - UBS. Eric Wasserstrom – UBS: I just want to return to this topic of the efficacy of the rewards spend. It would seem that the rewards spend, as strong as billed business growth has been, seems to be far outpacing it. I'm wondering how we should continue to think about that?

I'm not sure where, Eric, we would see that it is far outpacing that. If you look at this quarter, if you adjust for the adjustment to the redemption rate last year, we had growth of about 14%, which is a combination of both rewards cost as well as marketing. The increase on the marketing side in this quarter, absent the $68 million of additional spending we were able to do because of the income tax benefit, even absent that, was up very strongly and significantly. That was based on the strength of our overall business. So, I'm not sure exactly what statistics you're looking at that would indicate that rewards are growing much faster than billed business. Eric Wasserstrom – UBS: So I guess your position would be that the efficacy of each dollar invested remains undiminished. Is that true?

Yes. I think we're getting very, very good returns for both the marketing spending that we're doing; we think we're getting a very good payback for the rewards that we're offering to our customers, and the combination of our overall strategy and our focus on spend and acquiring affluent customers. The overall economics is playing out very well, as you can see in both this quarter's results, as well as the results over the past several quarters.

Your next question comes from James Fotheringham - Goldman Sachs. James Fotheringham - Goldman Sachs: In the release you say that given your momentum, you'll be looking to capitalize on opportunities to further strengthen your lead in the payments industry. I was just wondering, can you elaborate on that comment? Specifically, what's the nature of these initiatives? Are you considering both organic and strategic options? I don't know what you can share here, but any additional color on this relatively cryptic comment would be most appreciated. Thanks.

I think what we're saying is that we are in a very good position compared to the major competitors. We are performing very well from a spend perspective, very well from a loan perspective; we're acquiring new cards-in-force; and at the same time, having good growth in both revenues as well as net income. So what we're saying is we think we're really performing very well, which is really the result of business-building initiatives that we've had over many years, when it appears that some of our competition isn't enjoying the same level of success in terms of their business results. What we're saying is we're going to continue to spend on business-building initiatives to further capitalize on the momentum we have and continue to perform at very strong levels. So we're simply indicating that we're committed to growing the business over the medium to long term. We're very committed to investing in both rewards and marketing expenditures to continue the strong growth that we've had.

Your next question comes from Brad Ball - Citigroup. Brad Ball – Citigroup: A follow-up question on GNS. I think you said that adjusted for the sales and transfers, that you saw billed business growth in GNS of about 41%. How much of that was international versus domestic? Could you just remind us, have you in the last 12 months signed any new U.S. partners that would have been significantly buoying that, or was that driven largely by the partners that you had in place? Just one quick follow-up. Could you comment on the profitability on the earnings numbers and results overall in the international bank for the quarter? Thanks.

You're right, the GNS billed business growth adjusting for the three markets that were transferred in was 41%. In the U.S. we continue to see growth in excess of 100%. Internationally the growth continues to be robust as well so, our growth in GNS is strong. We did not sign any new U.S. partners in the quarter, although the business within the U.S., obviously, based on the numbers I cited, are continuing to grow in a very strong manner. As it relates to the international bank, we do not disclose that separately, although I guess I would describe the amount of their income as it relates to the total American Express income as modest.

Your next question comes from Bob Napoli - Piper Jaffray. Bob Napoli - Piper Jaffray: Thank you. I was hoping you could clarify the incremental change in interest expense that you expect in the last half of the year, if you could maybe go back over that? As the additional hedges run off, how much of a ramp-up are you looking for in interest expense?

As it relates to the hedges that expired at the end of 2006, a combination of fixed-rate debt and hedges, there was about $11 billion worth, we will incur about $130 million of higher interest expense in the second half of '07 compared to last year related to that $11 billion. As it relates to the unhedged portion, today, interest rates stand at about the same level that they did in the second half of last year. So, if short-term interest rates do not change, then we would not have a grow-over related to the unhedged portion. Obviously, if short-term rates change, then there will be an impact. Bob Napoli - Piper Jaffray: Then on a trend basis, the interest expense as a percentage of debt outstanding from here, assuming from the second quarter level, should be relatively steady. Is that from the second quarter? You still have the grow-over of $130 million additional from the hedged.

As it relates to the piece that was hedged, in the first quarter we said the impact was $60 million or a little north of that. In the second quarter it again was $60 million, and we'll dimensionally see a similar impact in the third and fourth quarter. So, that impact isn't going to change as we go into the second part of the year. It will be higher than what we had last year. As it relates to the unhedged piece, if you're thinking about it from a grow-over position, in the first and second quarter of '06, short-term rates were lower than they are or they were, in the first and second quarter this year. Therefore, we had a grow-over on that piece. If short-term interest rates remain unchanged, then related to the unhedged piece, the interest cost would be about the same, on the same level of debt. Obviously, because our business is very strong, the level of debt will be higher in the second half of '07 but the rate would be similar on the unhedged piece.

Your next question comes from David Hochstim - Bear Stearns. David Hochstim - Bear Stearns: I wanted to try again about the average cost of redeemed rewards and whether that's increased from a year ago. I understand you're not going to disclose what it is, but has it increased on average from a year ago? If you can clarify, when you reclassify the financials after this quarter, will you be providing the corporate segment as well, so that we can true up the entire income statement this time?

Our average costs of redemptions this year are flat with what we had last year. So we've been very focused on both adding value to our customers as well as controlling costs. The average cost year-over-year is basically flat from period to period. On the point about corporate, we endeavor to provide information that we think will be useful, although I understand that we don't provide a separate income statement by line for that segment. As we've discussed before, we think we're providing relevant information that, hopefully, will be helpful to you in terms of doing your analysis. But currently, we're not planning to provide a separate income statement for the corporate segment at this time, David.

Your next question comes from Ken Bruce - Merrill Lynch. Ken Bruce - Merrill Lynch: I'm hoping you might be willing to elaborate a little on your comments about the marketing or rewards investments. This quarter appears that maybe it normalized, certainly relative to the first quarter. So, when we think through in terms of how much flexibility you have going forward, is it fair to benchmark Q2 as maybe something in the trend line for acquisitions and loyalty, and if you really need to cut back on your investment spending in marketing, that we'd see something more closely related to Q1? This is net the $68 million that you've already identified, so if you just kind of look at the marketing spend in Q2 versus Q1, if Q2 would be normal and Q1 would be your bare-bones investments, please.

Certainly Ken, as we think about the first quarter, that certainly would be something that I would categorize as bare bones. Marketing spend has increased significantly in the second quarter compared to the first quarter, up to a level that I would consider to be a healthy level. As you know, in prior quarters at some points we've actually invested more than that, and in others, slightly less than that. But I think we're back to healthy levels in the second quarter. Really, when you think about it, our main focus is on the medium to long term. We will invest in marketing to ensure that we continue to have the type of business momentum that we currently have. It may fluctuate a little bit from quarter to quarter, but the main focus is to continue to bring on cards to stimulate customers to drive the type of spending that we like. So I think we'll continue to see some fluctuations but you're right; we have had a significant increase in the second quarter to levels that enable us to do much of the marketing that we'd like to do although certainly there are still some areas where we've held back, and at some point we'd like to start to invest in some of those areas as we move through the year. Now, as you think about the balance of the year, as we said, our greatest challenge is in the earlier part of the year. As we move into the latter part of the year, some of those challenges are not as steep.

Your next question comes from Scott Valentin - FBR Capital Markets. Scott Valentin - FBR Capital Markets: I view the domestic card business in two parts, the balance billed, as well as the charged. I guess the charge card generates a much higher ROE than the balance billed. I was curious if internally if management looks at this and says we have to balance or control growth in the balance side to allow for the ROE to remain high? Is there any process internally that does that, or is it just grow balance prudently and grow charge prudently?

Our focus is really spend-centric. What we are trying to do is acquire customers who will spend at a higher level than what you see on the other networks. We allow the customer to decide whether they want to do that on a co-brand product, a lending product, or a charge product. So it's really the customer who is making the decision. What we try to do is make sure that we have very good value propositions in each of those categories, so the customer will be attracted to the American Express Company. All of the investments that we make, whether it be on the charge side or the lending side, we ensure that we have the type of returns that are attractive to our shareholders. We also get a boost in ROE from our GNS business, where we're earning fee revenue but are not carrying balances. So when you look at the aggregate of the performance of charge, lending, GNS, we're winding up with a composite that's very good from a growth in spend as well as a return on equity.

Your final question comes from Bob Napoli - Piper Jaffray. Bob Napoli - Piper Jaffray: Just broadly wondering what you're seeing out of the health of the consumer in the U.S. particularly. I don't know if you can expand on that globally at all. I would be interested in your viewpoint.

I think what we saw in the first quarter for American Express, on a billed business basis, consumer growth this quarter was the same as last quarter. That was true for small business as well. I think corporate services was down just a tick, but very comparable to last quarter. So we continue to see within American Express very strong spending from both the consumer, small business and corporate sectors. Internationally, if you adjust for FX and adjust for the transfer of the three businesses, it was a healthy 10% growth on an FX-adjusted basis. So we're continuing to see very strong spending on the part of our customers.

There are no further questions at this time. Gentlemen, do you have any closing comments?

No, we don't have any closing comments. Thank you, everyone for participating in the call. Thank you very much, and have a good evening.