Dan Henry - CFO Ron Stovall - IR

Meredith Whitney - CIBC World Markets Chris Brendler - Stifel Nicholas Ken Posner - Morgan Stanley David Hochstim - Bear Stearns Sanjay Sakhrani - KBW Bob Napoli - Piper Jaffray Brad Ball - Citi Eric Wasserstrom - UBS Mark Sproule - Thomas Weisel Partners James Fotheringham - Goldman Sachs

Welcome to the American Express third quarter 2007 earningsconference call. (Operator Instructions) I would now like to turn theconference over to our host, Mr. Ron Stovall, Investor Relations. Please go ahead.

Thank you and welcome to everyone. We appreciate all of you joining us fortoday's discussion. As usual, it's my job to remind you that the discussiontoday contains certain forward-looking statements about the company's futurefinancial performance and business prospects, which are subject to risks anduncertainties, and speak only as of today. The words believe, expect,anticipate, optimistic, intend, plan, aim, will, should, could, likely andsimilar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materiallyfrom these forward-looking statements included in the company's financial andother goals are set forth within today's earnings press release, which wasfiled in an 8-K report; and in the company's 2006 10-K report, already on filewith the Securities and Exchange Commission. In the third quarter 2007 earnings release and supplement,which are now posted on our website at ir.americanexpress.com and on file withthe SEC in an 8-K report, we have provided information that compares andreconciles the company's managed financial measures with GAAP financialinformation, and we explain why these presentations are useful to managementand to investors. We urge you to reviewthat information in conjunction with today's discussion. Dan Henry, Executive Vice President and Chief FinancialOfficer of American Express, will provide some introductory remarkshighlighting the key points relating 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&Aperiod. Up until then, no one isactually registered to ask questions. While we will attempt to respond to asmany of your questions as possible before we end the call, we do have a limitedamount of time. Based on this, we askthat 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 calltoday. I'm very pleased to address theresults for this quarter. As Ron mentioned, I will make some introductoryremarks and then we will open up the line to take your questions. As you've seen in the earnings documents, our third quarterresults were a continuation of the strong business momentum we have reportedthroughout recent years. They reflectthe benefit of our multi-year investments in a broad range of business-buildinginitiatives. When we compare our results from continuing operations tothe third quarter of last year, net revenue grew 11%, income increased 15% anddiluted EPS of $0.90 rose 18%. Inaddition, ROE for the prior 12 months was 38%. Significant items this quarter included: A $41 million after-tax charge related to the AmericanExpress International Deposit Company's investment portfolio, resulting fromthe previously announced sale of American Express Bank; and, A $75 million tax benefit, primarily related to theresolution of prior years' tax items. Last year's third quarter included a $24million after-tax gain on the sale of our card-related operations in Malaysiaand Indonesia. In addition, both quarters included reengineering costswhich totaled approximately $7 million after-tax in each period. During the quarter and year-to-date we returned 84% and 85%respectively of total capital generated to our shareholders through sharerepurchases and dividends. Since 1994,we have returned 70% of capital generated to shareholders, which is above our65% long-term target. The 11% revenue growth in the quarter reflects strongdouble-digit increases in a number of revenue categories, including discountrevenue and card member lending finance revenue. As we discussed with you last quarter,overall revenue growth was suppressed somewhat by substantially higher interestexpense. There is one other point I want to clarify related torevenue estimates that I pointed out last quarter but continues to be anissue. It generally appears thatbrokerage analysts' models detailing our revenues haven't adjusted to reflectour revised income statement presentation. However, within the various services that report the analyst estimates,there seems to be inconsistencies in the revenues reflected from variousanalysts. In most cases, revenuesreflected are net of interest expense as we report them; while in others,revenues before interest expense seem to be included. Additionally, in some cases, revenue estimates are made on amanaged rather than a GAAP basis. Because of this, the consensus revenue figures reported by theseservices are not comparable to our reported GAAP revenues net of interestexpense. For those who want to comparethe company's revenues from a managed perspective, you need to add the U.S.Card Services GAAP-to-managed adjustment shown in our earnings tables andsupplements. Now as previously communicated, we revised our segmentreporting this quarter to reflect the impact of our recent realignment of thecompany into consumer and business-to-business organizations and the agreementto sell American Express Bank to Standard Chartered. As a result of these events, the previouslyreported International Card and Global Commercial Services segment is nowreported as two separate segments: International Card Services and GlobalCommercial Services. In addition, theresults of American Express Bank have been removed from the corporate and othersegment and are now reported within the discontinued operations line. So let me make a few observations related to the revisedreporting. As you have seen within ourprior disclosures, our overall international business growth has been strong,as the combination of our proprietary consumer, corporate services and globalnetwork services business have strengthened the company's position andpotential throughout the major regions around the globe. I would like to note that the relatively slower card andvolume growth within international card services during recent quartersreflects the constrained level of investments during the past few years, inaddition to the negative impact of business sales in Brazil,Malaysia and Indonesia. As you know from our prior disclosures, difficultindustry-wide credit conditions in certain markets and our own restructuringactivities reduced acquisition and loyalty-related investments outside the U.S. Recent quarters also reflect the more selective premiumcustomer strategy the international card services management team has beenfocused on. The benefits of thatstrategy shift are evident in the strong average card member spend growth andthe higher average fee per card reported in this quarter. These results, in addition to increasedinvestment levels, position us well for the future. You'll note a tax credit in most quarters withininternational card services. This willlikely continue, as our internal tax allocation process reports within thissegment the consolidated tax benefit arising from its ongoing non-U.S. fundingactivities. Lastly, you'll see that segment capital and return onsegment capital for international card services and global commercial servicesinclude the impact from the allocation of goodwill that previously residedwithin the old international card and global commercial services segment. Themajority of the goodwill was attributed to business travel acquisitions. Consistent with Generally Accepted AccountingPrinciples, that goodwill has been allocated to the two segments based on therelative fair value of these segments. Our segment capital allocation method includesa dollar-for-dollar allocation for our goodwill. I note this because it is important for you to understandthat the return on tangible equity within the international card services and globalcommercial services segments are substantially higher than the reportedreturns, which include the impact of this goodwill. Now as far as our consolidated results go, they were drivenby excellent growth in card member spend, loans and cards in-force. Billed business growth remains strong, andeach of our customer segments in every geographic region contributed to the 16%growth worldwide or 14% growth on an FX-adjusted basis. Let me give you some more detail. In our U.S.proprietary business, consumer spending grew 12%; small business spending rose15%; and corporate services volumes improved by 9%. In total, U.S.volumes for retail and everyday spend grew 15%. This category represents about 68% of U.S.billings. Travel and entertainment-related spending, which accounts for theremainder, rose 10%. Outsidethe U.S., proprietary billed businessgrew 10% on an FX-adjusted basis. Thiswas driven by 7% growth within our consumer and small business activity, and15% growth within corporate services. Within global network services, billed business rose 45%, driven bynearly 100% growth within the U.S.,as well as continued robust growth outside of the U.S. Worldwide cards in-force rose 11%. We added 2.5 million net new cards during thequarter and 8.2 million net new cards since last year. This reflects 6% growth versus last year inproprietary cards, and 32% growth in network partner cards. Spending per proprietary basic card grew 8%worldwide, even with the suppressing effect of substantial card additions overthe past few years. Our average discount rate of 2.57 was flat versus last yearand last quarter. With strong growth in cards and a higher average fee percard, net card fee revenue increased 13% this quarter. Travel commissions and fees increased 13%,reflecting a 16% increase in travel sales. Once again, we saw our strong growth in card member spendinggenerate a high level of loan growth. Worldwide lending balances on an owned basis rose 32%. On a managed basis, balances grew 23% on 24%growth in the U.S.and a 17% increase in our non-U.S. portfolios. This strong growth continues to reflect the flowthrough of particularlyattractive spending levels within our co-brands, lending on charge and othercredit card relationships. It alsoreflects our successful acquisition efforts surrounding these products. Securitization income increased 2%, as higher gains fromissuances and a greater average balance on securitized loans offset higherwrite-offs and interest expense. Cardmember lending finance revenue rose 30% on growth in the owned portfolio. Interest expense increased 39%. This was due to a 40% increase in fundingcosts within the lending business and a 38% increase in the charge card and otherinterest expense lines. Much of thisreflects volume increases within the business but also higher market rates,which, as you know, rose during the third quarter as LIBOR-based rates andmarket spreads increased in reaction to the credit concerns that were pervasivethroughout the markets. As we discussed with you last quarter, interest expense wasalso driven by the expiration of some fixed rate debt and hedges at the end oflast year. Specifically, fixed rateddebt and hedges within the UScard business declined by $11 billion. The effective funding rate on that amount was 3.2%. It was replaced by funding based on highermarket rates of approximately 5.4%. Thisresulted in about $59 million of incremental expense in the quarter versus lastyear, that was solely related to the debt and hedges that expired. Marketing and promotion rewards and card member servicesexpense increased 14%, reflecting higher volumes related to rewards costs andgreater marketing and promotion expense. Our marketing efforts this quarter were somewhat more focused onspending outside the U.S.versus the U.S.-oriented investment activity during the second quarter. Increases in rewards costs continue toreflect strong spending growth, higher redemption rights and increased cardmember participation. Human resource expense increased 11% due to merit increases,greater benefits costs and a higher number of employees, primarily resultingfrom customer service initiatives and acquisitions within corporate services.The growth in the remaining operating expenses reflect the impact of increasedvolumes within our technology and card member servicing activities. However, excluding the impact of last year'sgain on the sale of our Malaysian and Indonesian businesses, these expenseswere flat. The total provision for loss and benefits increased 25% versuslast year, as the lending provision increased 41%, the charge provision rose 9%,and the other provision was 5% higher. The increase in lending provision wasdriven by higher loan volumes and increased past due and writeoff rates in the USportfolio relative to the lower year-ago levels that benefited from the impactof the 4Q05 bankruptcy legislation. Thecharge card provision rose 9%, reflecting growth in volumes and relativelystable credit indicators. The consolidated tax rate of 24% for the quarter declinedversus the 29% rate last year, due to the $75 million of tax benefits Ireferenced earlier. With that, let me conclude with a few final comments. Weagain delivered strong revenue and earnings growth and excellent returns duringthe quarter, while continuing to invest in key business initiatives andmaintaining balance sheet strength. Business metric performance, like growth in billed businessand loan balances, continued to be in the top tier of the industry. The gapbetween our growth rate and that of most major competitors demonstrates theeffectiveness and ongoing benefits of our marketing and rewards investmentsover the past several years. Credit quality continues to compare favorably to theindustry. As expected, losses and past duelevels within the U.S.have trended higher, post the bankruptcy reform benefit of last year. However, credit quality indicators remain inline with historic ranges, as we continue to benefit from our focus on thepremium market sector and our rewards-oriented strategy. Needless to say, in light of some signs of stress withinaspects of the environment and our strong receivable growth, we continue to becarefully monitoring the trends as we go forward. While our bottom line results were strong during thequarter, as expected, we continued to be negatively impacted by near-terminterest rates and provision challenges discussed with you in priorquarters. Within interest expense, we saw the effect of the items Imentioned earlier: the $11 billion reduction in our fixed rate debt and hedgeposition, higher volumes and generally higher market rates. The interestexpense level in the fourth quarter is obviously dependent on the credit marketenvironment. Credit spreads remain widerfor debt issuers across all rating classes. Our spreads did not widen as muchas comparably rated financial institutions in the third quarter, and have sincenarrowed along with the rest of the market. For the remainder of 2007, if the more recent reductions inthe LIBOR benchmark rates persist but the wider credit spreads continue, webelieve our funding costs would not be materially different than what we sharedwith you last quarter. As you know from our prior discussions, we have madeconsiderable efforts over recent years to implement flexible businessplans. These plans position us to pullback on spending when required by external economic factors or businessperformance. They also allow us toincrease spending if the environment permits. As such, for the remainder of 2007 we continue to plan towork to target our marketing-related investments to further build upon ourcompetitive strengths at a point where some of our competitors may beexperiencing comparatively weaker business results. In addition to the flexibility measures, we remain focusedon reengineering to maximize our ability to invest in key growthopportunities. While reengineering willlikely generate some costs from period to period, it positions us to continueto effectively control underlying operating expense growth. Despite some of the near-term interest and provisionpressures we see, we continue to have confidence in the outlook of our businessfor several reasons: our position within the affluent and high-spending cardmember sectors remain excellent; it is supported by our ability to leverage ourdirect merchant relationships, the unique information benefit of our closed loopnetwork and our attractive rewards program. Given our business momentum and industry-leading results inrecent years, and our strong track record of innovation, product developmentand customer-focused marketing, we believe that we are well-positioned toexecute against growth opportunities in a manner that continues toappropriately balance our short, medium and long-term business and financialgoals. Thank you for listening. We are now ready to take yourquestions.

Your first question comes from Meredith Whitney - CIBC WorldMarkets. Meredith Whitney -CIBC World Markets: Dan, could I just get you to rephrase your finalcomments? Were you saying that you'regoing to use the excess earnings or any upside in earnings to plow that backinto marketing -- I know I'm extrapolating here -- as opposed to buying backshares, because you feel the opportunities are so rich this quarter?

I think our outlook now is the same as it has been for anumber of years. We look to continue toinvest in the business momentum that we've achieved. We certainly balanced theamount that we're spending on marketing, so that we can balance our earningstargets, as well as to continue to invest appropriately to achieve the kind ofgrowth that we have over recent periods. So we're very focused on our billed business growth, as well as loangrowth and cards in-force. So we willcontinue to invest to maintain that business momentum. Meredith Whitney -CIBC World Markets: So your summary is basically no new changes?

Correct. Meredith Whitney -CIBC World Markets: You guys again experienced receivable growth that none ofyour competitors experienced; not to mention the billed business growth. Isyour provisioning policy that you're just keeping up with the receivablesgrowth, which you're allowed to do? Canyou explain your provision policy, because obviously the market is freaked outsufficiently about some of the bank players who have increased their provisions,for different reasons?

So as we have discussed, we are focused on acquiringcustomers that have a high level of spend. We put products in the marketplace, both charge products and other lendingproducts, and we really allow the customer to choose which product they want touse, but focused on customers with high spend. As people spend on lendingproducts, there is a flowthrough effect of that high level of spending, whichis driving the increase in our loan balances. Now, as it relates to our provisioning, we have used thesame model for provisioning for the last several years. It's focused on the experience that we seeand we used those models the same way this quarter as we have in pastquarters. So we continue to use the samemethodology. We think it's a methodologythat appropriately matches credit expense with the revenues that are beinggenerated and provides us with reserves that are appropriate, given thebehavior that we're seeing within our customers. Meredith Whitney -CIBC World Markets: Finally, what are you seeing in terms of behavioral trendswith your high end consumer? Thanks so much.

I think you can look at both our average spend numbers,which despite the fact that we continue to bring in a substantial number of newcards, continue to be very strong, continue to be well above thecompetition. I think that's a reflectionof the quality of customers we're bringing in, as well as the loyalty of thosecustomers, based on the value proposition that we offer to them.

Your next question comes from Chris Brendler – StifelNicholas. Chris Brendler –Stifel Nicholas : Are you seeing any signs of a slowdown, particularlydomestically? Last time I discussed thiswith you, it seemed like the small business sector would be a place where youmight see early warning signs of a slowdown, but 15% this quarter looks prettygood. Anything beneath the surface thatsuggests that you're seeing any sort of slowdown in the U.S.?

As I mentioned, small business billed business grew by15%. That's the same level that we hadlast quarter. Quite frankly, theportfolio continues to perform very well and we are very pleased with it. So in the third quarter, as I said, 15%growth we view to be very positive. Chris Brendler –Stifel Nicholas : The discount rate continues to defy gravity a littlebit. You mentioned in the supplementthat you expect that to continue to trend down over time, but it's not trendingdown this year. Any color on the discount rate? Is that still a mix issue, or is it any sort of pricing initiatives thatyou have been able to put through?

Our discount rate is affected by the mix of spending. We have emphasized over the last few yearsspending in everyday spend categories. Some of those categories have lower discount rates than the average, soto the extent we continue to grow in that area, you'll see discount ratespotentially come down. Also, as certain merchants increase their billings, there issome impact on our rate related to that. Those two factors, in large measure in recent quarters havebeen offset by value recapture, where there are merchants where we can clearlydemonstrate the value that we are bringing to them and as a result, are able toactually increase the discount rate. This quarter's rate is the same as last year or last quarter,but what happens in the future will depend on the mix of those items and that'swhat will drive the discount rate. Itcould well be that in the future there is a drop in discount rate.

Your next question comes from Ken Posner - Morgan Stanley. Ken Posner - MorganStanley : Good afternoon. American Express is clearly generating veryimpressive revenue growth from its lending strategy. With the credit delinquencies starting tomarch up as has been long expected, and with economists in the U.S. calling fora little bit of a slowdown, are you guys taking steps now to tightenunderwriting standards and dial back on the growth? Or, are you planning to keep growing, so thatthe denominator keeps the credit loss ratio from getting too high?

I think it's important to view our results in the context ofthe industry, which everybody is aware of. We've been able to balance strong business growth, along with creditindicators which continue to be favorable to the industry. Certainly, if you look at some of our competitors, whiletheir growth in spending and their portfolios have been significantly slowerthan ours,, some have been able to control credit well and some have not. As we all know, credit risk is inherent inour business. Our main focus is to ensure that we are making good economicdecisions that really maximize the portfolio, as opposed to being focused onsimply keeping writeoff rates at a low level. That has always been our outlook and will continue to be our outlook. As we've discussed numerous times, we think we have builtvery strong credit capabilities, and those capabilities will monitor veryclosely what is taking place within the portfolio. We will react appropriately to any changes inthe credit environment. Ken Posner - MorganStanley : Could I take that to mean then that there are no plansunderway at this moment, or no steps being taking right now to tightenunderwriting or dial back on that growth rate?

I think we continue to want to focus on the premiumsector. As you've seen from the chartsthat we showed at the financial community meeting in August, the make-up of ourportfolio this year is exactly the same as it was last year, and the make-up ofthat portfolio is certainly focused on the prime and super-prime. We haven'tchanged that focus; we will continue to have that focus. Again, our immediate reaction to what is taking place in themarketplace isn't to constrain spending of our customers. We do that on a customer-by-customer basisand as long as customers continue to behave appropriately, we will continue tohave them spend, which is very much in line with our business model.

Your next question comes from David Hochstim - Bear Stearns. David Hochstim - BearStearns : Could you talk a little bit more about the growth in cardsin the quarter and the change in average spending per card member? Just lookingat the sequential changes there, is there an effect on the timing of theincrease in cards on average spending per card member? Could you give us a sense of what kind of shift there hasbeen in the last quarter or two on different relationships? Costco, forexample, or Delta? Are those stillcontributing meaningfully to growth in spending as well as cards, or not somuch?

Our cards in-force growth this quarter was strong. It actually is pretty consistent with what wehave seen over the last several quarters. David Hochstim - BearStearns : It was a little better, actually.

A little better, but consistent. That's a reflection of where we're puttingour investments. We are very focused oncontinuing to bring new card members into the franchise. Once we have them intothe franchise, to build their loyalty over time, to ensure that we offer themthe right product at entry but also, as they evolve as customers, to modifywhat product they may have so that we continue to meet their needs. I thinkthat is part of the average spend story as well, and we continue to be veryfocused on having the right loyalty programs in place to drive that higherlevel of spending. Quite frankly, I think we're also benefiting in terms ofaverage spend and overall spend, by the fact that the affluent sector isperforming very well, and that is really our sweet spot. So I think both how we're investing, what ourcustomer base is and our focus on loyalty programs are all contributing to thehigh level of spend and the improvement in average spend per card member. David Hochstim - BearStearns : Is there any change in the relative mix of things likeCostco and Delta, in terms of new cards and spending, or the other toprelationships?

I think our co-brand partners continue to be a veryimportant part of our franchise. We'reseeing an appropriate amount of growth in both cards and spend from thoseco-brand partners. I would say that wehave had a very good relationship with them which has been beneficial to bothour customers -- to them and to us -- and that is continuing. David Hochstim - BearStearns : Can you give us a sense of how different funding costs wereon secured and unsecured financings in the second half of the third quarterversus the second quarter? I was alittle unclear on what you were seeing.

As you think about it, we really broke this into two pieces. One, we were comparing the $11 billion offixed rate funding we had last year. When those hedges and fixed rate debt rolled off, they had a rate ofabout 3.2%. When we had to refund theaverage cost of that was about 5.4%. Wehave higher expense in the quarter this quarter compared to last quarter, justas a result of that, of $59 million. If you look at the rest of the portfolio, I think thefunding costs in the third quarter are slightly higher than in the secondquarter because there was a run-up in interest rates last year. I guess thegoal in the second quarter this year was higher for us, because interest rateswere lower in the second quarter of ‘06 than they were in the third quarter of‘06. I think funding costs for us fromthe second quarter to the third quarter are relatively comparable and we think,assuming the environment doesn't change, would be similar in the fourth quarterto the third quarter. David Hochstim - BearStearns : So saying basically that you weren't affected by the spreadwidening?

I think there are multiple things going on in themarketplace. We had LIBOR jump up. We had the spreads widen. On the other hand, Fed funds were moving down,even though that's what we collect from our customers. But when you put it in the mix of all theevents that happened in the marketplace, we would think we would wind up inabout the same place from a rate basis in the fourth quarter as compared towhat we were in the third quarter.

Your next question comes from Sanjay Sakhrani - KBW. Sanjay Sakhrani - KBW: Dan, you mentioned a lot of the marketing dollars were spentinternationally. What were the regionswhere most of those were spent?

I think we spent broadly across many regions, including Australiaand India. We mixed it up with both some of our larger,more mature markets as well as some of the markets that are smaller andemerging. We focused most of the dollars on acquisition, as we are looking tobring in more card members to the franchise. I would say it was prettybroad-based and heavily focused on the acquisition side. It also continues to support the strategy ininternational that I referred to, where there we are focusing on the premiumsector. Sanjay Sakhrani - KBW: If we were to think about the next couple of years and wherethe growth would come from, what regions would the growth in that segment comefrom?

So I don't think we do forecasting, although I think we willcontinue to focus on our major markets, which make a strong contribution. We would be looking to selectively decidewhich other markets are important that we invest in. Effectively, it will bedriven in large measure by both strategy as well as by using our investmentoptimization process, where we look at which investments will give us thegreatest long-term return. So acombination of those two things, I think, will dictate year by year and overthe longer term where our investments go.

Your next question comes from Bob Napoli - Piper Jaffray. Bob Napoli - PiperJaffray : Thank you. I was also focused on the internationalopportunity and any change in your viewpoint, given you've had a verysubstantial run-up or increase in marketing in the international segment. You're starting to see an acceleration ofcard growth. You had talked about under-investinginternationally. I would like a little more color. Your marketing is up 50% year over year; 43%internationally and up $60 million quarter over quarter.

As I said, because of just general industry issues, therewere credit issues internationally. The fact that we were doing somerestructuring, if you look back over the last couple of years, our investmentlevels were constrained. We think theinternational markets represent a significant opportunity to us and so wewanted to increase those investment levels. Now, when you saw us increase investment levels in marketingin the second quarter, it primarily came within the U.S.business because when we realized we had the opportunity, there was morereadiness in the U.S.to spend within the second quarter. Soas we moved to the third quarter, we wanted to balance that out so that we wereincreasing our investments in both the U.S.and the international markets, and therefore you saw that in the U.S.segment in the third quarter growth wasn't as robust, but we increasedmarketing in the third quarter. So if you look at the two quarters together, it really showsan increase in marketing dollars across all regions of the globe. Bob Napoli - PiperJaffray : You also talked about the tax credit that you had, youexpect to continue?

Yes. Bob Napoli - PiperJaffray : What kind of a tax rate are you looking at next quarter andthe next couple of quarters, so I can understand what that is?

In this quarter within the international card services,there was partial sharing of the $75 million; there was about $17 million inthere. But even excluding that, therewas a credit for that segment. I thinkthat will continue, and it's really based on the way we do our internal taxallocation within the group. We realizedsome benefits that are in high tax rate environments that we allocate to theinternational segment. But a large portion of their taxable income is actuallyin lower tax rate environments, and we permanently reinvest the dollarsthere. So on that, there's a very lowtax rate. We don't expect that tochange, so we would continue to see that tax benefit as we move forward. Bob Napoli - PiperJaffray : What is the global or the corporate tax rate, then?

This quarter, our global tax rate was 24% this quarter,compared to 29% in the quarter last year. Bob Napoli - PiperJaffray : What is it ongoing?

The 24% is largely driven by the $75 million tax benefitthat we received, related to prior periods. I think we've talked about this on other occasions. If you think about our tax rate, absent any itemsrelated to prior periods, we will probably be around that 30%, 31% range.That's on a consolidated basis, but the amount that we're allocating to theinternational card services group, for the reasons I just cited, it's likelythat they will continue to actually have a tax benefit, even when they have pre-taxincome. Bob Napoli - PiperJaffray : On the hedges, Dan, is that the last big significant amount,the $11 billion, to run off? The $11billion of funding where the hedges ran off this quarter that cost you $59million. You said that fourth quarter cost of funds should be similar to thethird quarter. So is that the lastsignificant amount?

The $11 billion ended last year. So every quarter this year will have animpact. So related to that, next quarter, the fourth quarter will be negativelyimpacted for a similar amount when you compare it to last year. Bob Napoli - PiperJaffray : But there are no additional hedges that are running off?

No significant hedges that are running off, no. Bob Napoli - PiperJaffray : Last question, one of your competitors had said that theyhad seen an uptick in delinquencies and credit issues in areas that haveexperienced high home price appreciation like Californiaand Florida, for example. Are you not seeing that same kind of a thing?

As you can see from our credit metrics, they have ticked upslightly, but very much in line with what we expected coming off very low rateslast year. At the current time, the creditquality of our portfolio continues to be the same. I think we benefit from thefact that we are focused on the prime and super-prime areas so we have notdirectly seen an impact from sub-prime activity at the current time.

Your next question comes from Brad Ball - Citi. Brad Ball - Citi : A question about the GNS business. You have been ramping the growth theresignificantly. Is there any particularrelationship or product that has really been behind that growth? Can you talk about any prospects foradditions on the GNS side?

Our GNS business continues to be very strong. We had growth in the U.S.of almost 100%. Growth outside the U.S.continues to be very robust. I think weare seeing positive results across a broad spectrum of products that we areissuing, as well as a broad section of our partners. We continue to be very pleased with the GNSgrowth and the way that it fits into our overall strategy, both in the U.S.and internationally. When you really put together internationally a combinationof our proprietary business and the GNS business, we are very pleased with theposition we are in. Brad Ball - Citi : You said in your prepared remarks that there was an impactin the year-ago quarter from lower bankruptcies. We are still seeing bankruptcy levels runninga bit below normal. Are you still seeing some benefit from that? How long do you expect that to play out?

I think if you look at industry statistics, they havegradually been rising over the past year or so. In recent time, probablyticking up a little bit faster. I think we'll keep our eye on that. But when you look at the bankruptcies inrelation to our other writeoffs, they are in line with what our expectationswere and reflect the fact that we're coming off very low levels in ‘06.

Your next question comes from Eric Wasserstrom - UBS. Eric Wasserstrom -UBS : I am just trying to reconcile two distinct trends. On the one hand, in terms of your payoutratios, you talk about how you continue to be far above the standard thatyou've set for yourself over time, which in some ways seems to question theappropriateness of that standard, given where your ROE is. I wonder why that target isn't discussed? The only reason I could think of would be if there was someconcern about credit trends. But on theother hand, of course, the message is that the credit trends, though risingmoderately, are very well contained. Can you help me understand that interplay between creditpressures and capital allocation?

I don't think what we are returning to shareholders in termsof dividends or share buybacks has anything to do with concerns about credit.We've been at levels above 55% for quite a while now. I think we like to keep the flexibility thatwe have in terms of returning capital to shareholders by having a lot of itcome through share repurchases. Itenables us, if sometime in the future we were going to do some supportingacquisitions, that we would have a way of funding that using the capital that isgenerated from our business quarter to quarter. That's really the driving force behind keeping the dividend level atwhere is today, or somewhere near that. As you know, we periodically have increased it over time,but having the flexibility to either absorb bumps in the road or to beavailable for acquisitions is the reason that we have our current policy. We'll largely continue that in the future.

Your next question comes from Mark Sproule - Thomas WeiselPartners. Mark Sproule - ThomasWeisel Partners: On managed receivable growth, can you talk a little bitabout the investment there and where you see opportunities distinctly, givensome of the pressures that your competitors have noted? How do you balance thedesire to build the portfolio with the market pressures of the currentenvironment?

As we say often, we have a spend-centric focus. It is not our objective to build the loanbalances. It is our objective to bringon card members who have higher than average spend. We allow those customers, really, to pick theproduct that best suits them; so that could be a charge card, it could be aco-branded card, it could be lending on charge, it could be a Blue card. As long as, on average, we're bringing incustomers that have higher average spend, that really meets our business modelof being focused on spend. Now what we're getting is really a flowthrough of thathigher spend on our lending products, which is what's growing our loan balances. So we don't have a loan balance growth target,it is really driven by our spend. We continue to be focused on the behavior ofour customers. We think we haveexcellent, best in class credit capabilities. They are at all times focused on the behaviors of our customers. Giventhe environment today, are even more so. I think loan growth is coming from really strong billedbusiness growth that we are seeing at the end of the day. I think we're comfortable with where we arebased on our focus on investing and allowing spending that will have an economicgain for us over time. Mark Sproule - ThomasWeisel Partners : I think you had mentioned earlier the bifurcation betweeninternational spending and domestic spending. As you look into Q4 and beyond, should we see some of that revert backto being maybe a little bit more evenly divided between the two, as you try toacquire more customers domestically?

Well, I think our spending growth, if you're going to splitit between U.S.and outside the U.S.,in part will be driven by our investment dollars. So if we are tending to invest a little bitmore on one section than the other, you would expect to see somewhat strongergrowth there. Now, it's not spending that comes five days or even a quarterafter we bring on customers; it builds over time. I think where we're doing our investing has an influence, aswell as the economy also has an influence. We have been pleased with theinvestments we have been making. I thinkwe've had very good returns. Going back a little bit to the question on how do we feelabout our AR growth, our AR growth is significantly higher than ourcompetitors', but our billed business growth is also significantly higher thanour competitors’. So you have to link those two together, and that strongerbilled business growth is what is driving the higher AR growth. We will continue to invest both in the U.S.and internationally. What the growthrates will be will be dependent on our investments and the economies within therespective regions. Mark Sproule - ThomasWeisel Partners : If I could sneak one last one in quickly. I understand thecredit markets, or your credit stability, has been much stronger than yourcompetition. When you look in yourportfolio and you're assessing issues that might be problematic, what are youdoing to proactively stay ahead of what might be consumer issues across thecountry, whether it's regionally or group specific?

On the charge card side, every charge is something that isapproved as the charge goes through. We are very focused on our lendingcustomers. If we see good behaviors, weincrease their lines. If theindividuals' behaviors are not, we actively manage those lines down. I think we also benefit from a wide amount of diversitywithin the portfolio, based on the products that we offer and the co-brandpartners that we have. So it is something that we are diligent about all thetime. We are constantly investing in improvingour capabilities and seeing what information we can use to help improve ourassessment of a customer's credit worthiness, and therefore what we allow themto spend. So it is an ongoing mission of ours to have capabilitiesthat will help to drive our business.

Your next question comes from Ken Posner - Morgan Stanley. Ken Posner - MorganStanley : I wanted to ask a question about the discount rate, which asan earlier questioner had pointed out, has remained stable year over year. Can you address the incentives and cashbacksthat are netted out in that calculation? Have those changed as a proportion of the total, or are those flat yearover year as well?

As it relates to cashbacks, which are reflected in thediscount revenue line, our cashback product continues to perform verywell. That is increasing within thatline. As we deal with commercial clients,that is also something that gets netted on that line, and we continue to havestrong growth in that business as well. Discount revenue is growing, and those are elements thatactually slow that growth down. When youare doing comparisons from billed business to discount revenue, those are someof the elements that come into play there. Ken Posner - MorganStanley : Forgive me, because I've misplaced which page has thefootnote that refers to the items that are netted out of that calculation. What is the effect of incentives and otherkinds of things that are netted out of the discount rate calculation? Are they increasing or decreasing?

I don't think they are having a material effect on thediscount rate. The thing that has amajor effect on the discount rate is really the mix of business that we'reseeing by type of merchant; that has an impact. The volumes at specific merchants have an impact. Those would have animpact in terms of driving the rate down. The major thing that's having an impact in improving therate is really value recapture where we are dealing with merchants where we canclearly demonstrate that we are bringing value to them and that it's warrantedthat we have a higher rate. Those arethe three key elements that are driving the discount rate.

Your final question comes from James Fotheringham - GoldmanSachs. James Fotheringham -Goldman Sachs : Thank you. Just with respect to growth opportunities, canyou talk about what you see as the greatest opportunities to grow the network?What is the best way to realize these opportunities with respect to organicversus strategic initiatives? Thanks.

I think our network is going to grow in two ways. The network is going to grow just based on thegrowth in our proprietary business. Aswe've said, we think we have great opportunities both in the consumer sector,in middle market, within small business. We think there is an abundant amount of growth as customers andbusinesses will continue to use credit cards more and more into thefuture. So I think as we grow theproprietary business, that will strengthen the network. GNS will also have a very positive effect on the network aswe bring more cards onto the network, more spending onto the network. How we utilize independent operators alsowill benefit the network in terms of allowing our customers to use their cardin more places. Really, all elements of our business will help to improvethe network, strengthen it and help us to continue to gain share as we haveover the last several years. James Fotheringham -Goldman Sachs : With respect to debit, do you see that as an opportunity forgrowth? Or is that not in theconsideration that you just outlined?

Debit is something that we've talked about many times. It's hard to have a large debit programwithout demand deposits. There arecertainly a number of things we can think about doing, but when we look atthose opportunities compared to the investment opportunities that we have inour core business, we have so many opportunities in our core business, that'swhere we will continue to invest. James Fotheringham -Goldman Sachs : Thank you very much.

Thanks, everybody for participating in the call today. Just before we get off, I wanted to mentionthat we will be filing an 8-K within the next couple of weeks, which willactually provide restatements back through 2005. You should be on the lookout for that. That willprovide you with some additional historical information on a restatedbasis. Thank you, everyone for joining the call. Have a goodevening.