Chenault dealt with crises, competition as head of AmEx

NEW YORK (AP) — Kenneth Chenault, wearing no sport coat and no tie, with a large cup of tea in front of him, fits an image of a man ready for retirement.

Chenault is days away from stepping down as the chief executive officer and chairman of American Express, the credit card giant and one of the most iconic brands in the country. He will have run American Express for 17 years, guiding the company through the aftermath of the 9/11 attacks, the global financial crisis and numerous challenges to its position as the go-to payment option for the wealthy and well-traveled.

The son of a dentist from Long Island, New York, who grew up as a black man during the height of the Civil Rights Movement, Chenault never expected to be CEO of a major company, let alone work 37 years at the same one.

“I can honestly say I was approached by bigger companies, moments where people would say ‘wow, that’s a great opportunity.’ But this has been my dream job,” Chenault said. He sat down with The Associated Press for his last interview before leaving the company.

Who can blame Chenault, 66, for moving on? His successor as CEO and chairman, Steve Squeri, is well on his way to be trained for the job. Any problems that happened under Chenault’s watch, like the loss of a lucrative Costco partnership, have been neatly cleaned up. Since Chenault became CEO in 2001, American Express’ annual profits have risen from $1.31 billion to an adjusted $5.3 billion, excluding the impact of the new tax law. Sales rose from $17.71 billion to $35.58 billion and the stock has more than doubled and is trading at record highs. That said, AmEx shares did underperform the overall S&P 500 index, but outperformed other banks.

“I hate to see Ken leave. I mean, he’s done a terrific job. His record is really hard to match in corporate America,” said Warren Buffett, the billionaire investor, in an interview with the AP. Buffett’s Berkshire Hathaway is the largest shareholder of American Express, owning 17.5 percent of the company.

Under Chenault, American Express has expanded from its wellto-do and corporate expense account customers into more consumer products. AmEx now markets toward families buying groceries and gasoline an American Express Everyday Card, just as much it markets the Platinum Card toward the jet set who charge six figures a year.

But at the same time, AmEx has faced increased competition while Chenault has been CEO. The company once stood alone in the high-end credit card market. Now there’s the Sapphire Reserve Card by JPMorgan Chase, and Prestige by Citigroup, each with its own points program designed by former AmEx executives. That competition forced AmEx to respond with increased benefits on its premium cards to either keep up with or outsmart its rivals. Last year, AmEx raised the annual fee by $100 to $550, but added new benefits like a $200 a year credit on Uber. The company said it ended 2017 with the most Platinum Card users ever, despite the fee increase.

“Ken and his management team have built a terrific business even through a tough competitive environment,” said Gordon Smith, who runs the consumer banking division at JPMorgan Chase. He used to run the U.S. cards business at AmEx before going off to compete directly with Chenault.

The biggest threat to Chenault’s legacy came not from a competitor, but from a customer: Costco. The warehouse chain and American Express had a business partnership that stretched back to 1999, where Costco would only accept AmEx credit cards. There was also a co-brand credit card program between the two companies.

But that business relationship came to an abrupt halt in 2015, when Costco announced it was changing its credit card payment network to Visa Inc. and that Citigroup would take over the co-brand card. At the time of the announcement, the retailer represented 8 percent of all spending on the American Express payment network and 20 percent of all loans.

“If Chenault had left two years ago, we would be having a different conversation,” said Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, who covers American Express.