BFH
Bread Financial Holdings, INC
NYSE
10-K: Bread Financial Holdings Issues Non-Employee Director Stock Award and Files Annual Report
Sentiment:
Annual Results
20 February 2024 7:13 AM
Bread Financial Holdings grants restricted stock units to a non-employee director and files its annual report on Form 10-K, detailing financial performance and strategic initiatives.
Worse than expected
The company's Delinquency rate of 6.5% as of December 31, 2023 exceeded the peak rate during the Great Recession.
The company's Net loss rate of 7.5% for 2023 is high relative to historical experience.
The company's 2024 financial outlook anticipates lower revenue and a higher Net loss rate.
Delay expected
The document mentions that certain lenders of private placement commitments within the company's securitization trusts have sought and obtained amendments to their respective transaction documents permitting them to delay disbursement of funding increases by up to 35 days.
Capital raise
The company issued and sold $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028.
The company issued and sold $600 million aggregate principal amount of 9.750% Senior Notes due 2029.
The company issued and sold an additional $300 million aggregate principal amount of Senior Notes due 2029 in January 2024.
Summary
- Bread Financial Holdings has awarded restricted stock units to a non-employee director under its 2022 Omnibus Incentive Plan.
- The award vests on the first anniversary of the grant date, contingent upon continued service.
- The agreement includes dividend equivalent rights, which vest and are paid only when the corresponding stock units vest.
- The document outlines forfeiture conditions for early termination of service.
- The company filed its annual report on Form 10-K for the fiscal year ended December 31, 2023.
- The report highlights Bread Financial's focus on payment, lending, and saving solutions.
- The company's primary revenue source is interest and fees on loans.
- Strategic investments are being made in digital and technology.
- The company has reduced its parent company debt by approximately $1.7 billion since 2020.
- The report details the company's private label and co-brand credit card programs, direct-to-consumer credit cards, Bread Pay products, and Bread Savings products.
- The company's retail deposits grew 18% from $5.5 billion as of December 31, 2022 to $6.5 billion as of December 31, 2023.
- The company is proactively managing credit risk and monitoring projected returns.
- The company is subject to extensive government regulation and supervision, including by the FDIC and CFPB.
- The company is implementing plans to address potential changes in regulation, including the CFPB's proposed rulemaking with respect to late fees.
- The company is committed to sustainability and integrating ESG principles into its business strategy.
- The company employed approximately 7,000 associates worldwide as of December 31, 2023.
Sentiment
Score: 5
Explanation: The document presents a mixed picture. While the company has made progress in reducing debt and diversifying its funding mix, it also faces significant challenges, including high delinquency and net loss rates, regulatory risks, and intense competition. The company's 2024 outlook is also somewhat negative, indicating a potential slowdown in growth and profitability. Therefore, the sentiment is neutral.
Positives
- The company is making strategic investments in digital and technology.
- The company has diversified its funding mix, with retail deposits representing 34% of total funding sources.
- The company has a comprehensive suite of payment, lending, and saving solutions.
- The company has long-standing partner relationships.
- The company has a strong focus on risk management and is proactively managing credit risk.
- The company has a strong focus on associate health and well-being.
- The company has a commitment to diversity, equity, inclusion and belonging.
Negatives
- The company's Delinquency rate of 6.5% as of December 31, 2023 exceeded the peak rate during the Great Recession.
- The company's Net loss rate of 7.5% for 2023 is high relative to historical experience.
- The company is subject to extensive government regulation and supervision.
- The company faces potential adverse impacts from the CFPB's proposed rulemaking with respect to late fees.
- The company is reliant on a limited number of partners for a significant portion of its revenue.
- The company is heavily concentrated in U.S. consumer credit.
- The company experienced an uptick in both the volume and sophistication of fraud attacks in 2023.
Risks
- Macroeconomic conditions, including inflation and rising interest rates, could negatively impact consumer spending and the company's financial performance.
- The company is reliant on the future credit performance of its customers, and defaults could increase.
- The loss of significant brand partners could have an adverse effect on the company's business.
- The company's business is heavily concentrated in U.S. consumer credit, making it susceptible to fluctuations in that market.
- The amount of the company's Allowance for credit losses may be insufficient to cover actual losses.
- The company may be unable to successfully integrate business acquisitions or divestitures.
- The company faces intense competition in the financial services industry.
- The company's results depend on the active promotion of its products by its brand partners.
- The company's results are impacted by the financial performance of its partners.
- The company may be unable to effectively manage its funding and liquidity risk.
- The company's level of indebtedness may restrict its ability to compete and grow.
- The company is subject to extensive government regulation and supervision, including by the FDIC and CFPB.
- The company faces risks related to pending and future litigation.
- Regulations relating to privacy, information security, and data protection could increase costs and limit business opportunities.
- The company relies on third-party vendors, and their failure to fulfill obligations could adversely impact the company.
- Failures in data protection, cybersecurity, and information security could impair the company's ability to conduct business.
- The company may be unable to successfully develop and commercialize new or enhanced products and services.
- The company faces potential tax and other liabilities related to the spinoff of its former LoyaltyOne segment.
Future Outlook
The company expects slower credit sales growth in 2024, with average credit card and other loans growth down low-single digits. Total net interest and non-interest income, excluding gains on portfolio sales, is anticipated to be down low-to-mid single digits. The company expects its Net loss rate to be in the low 8% range for 2024, peaking in the first half of the year. The company's 2024 financial outlook does not factor in potential impacts of the proposed CFPB late fee rule changes.
Management Comments
- The company believes its comprehensive suite of payment, lending, and saving solutions offers a significant competitive advantage.
- The company is proactively managing credit risk to strengthen its balance sheet and ensure it is appropriately compensated for the risks it takes.
- The company is focused on creating an exceptional digital and mobile experience for its customers.
- The company is committed to sustainability and integrating ESG principles into its business strategy.
- The company is committed to providing its associates with competitive total compensation, benefits and wellness resources.
Industry Context
The announcement reflects the ongoing trends in the financial services industry, including the shift towards digital and mobile banking, the increasing importance of data analytics, and the growing regulatory scrutiny of consumer financial products. The company's focus on BNPL products and direct-to-consumer offerings aligns with the broader industry trend of offering more flexible and personalized payment options.
Comparison to Industry Standards
- The company's Net loss rate of 7.5% for 2023 is higher than the industry average, indicating a higher risk profile compared to some competitors.
- The company's reliance on a limited number of partners is a common practice in the private label credit card industry, but it also exposes the company to concentration risk.
- The company's focus on digital and technology investments is consistent with industry trends, as financial institutions increasingly rely on technology to improve customer experience and operational efficiency.
- The company's retail deposit growth of 18% is a positive sign, as it indicates the company's ability to attract and retain deposits in a competitive market.
- The company's capital ratios are above the well-capitalized standards, which is a positive indicator of financial health and stability.
- The company's transition to Fiserv for credit card processing is a common practice in the industry, as it allows companies to focus on their core competencies while leveraging the expertise of specialized service providers.
- The company's focus on ESG principles is consistent with the growing trend of companies integrating sustainability into their business strategies.
Stakeholder Impact
- Shareholders may be concerned about the company's high delinquency and net loss rates, as well as the potential impact of the CFPB's proposed rulemaking on late fees.
- Employees may be affected by the company's ongoing business transformation and efforts to optimize teamwork and collaboration.
- Customers may be impacted by changes in the company's credit card programs and fees.
- Brand partners may be affected by changes in the company's business model and revenue-sharing arrangements.
- Creditors may be concerned about the company's level of indebtedness and its ability to access capital markets.
Next Steps
- The company will continue to implement plans to address potential changes in regulation, including the CFPB's proposed rulemaking with respect to late fees.
- The company will continue to strategically diversify its business to be less reliant on late fees.
- The company will continue to focus on growing its Bread Savings operations.
- The company will continue to make strategic investments in digital and technology.
- The company will continue to monitor economic conditions and indicators.
Legal Proceedings
- The company is subject to various lawsuits, claims, disputes, or potential claims or disputes, and other proceedings, arising in the ordinary course of business.
- LoyaltyOne, Co. filed suit against the company and Joseph Motes, the company's general counsel, in the Ontario Superior Court of Justice in Canada in October 2023.
- A putative federal securities class action complaint was filed in April 2023 against the company and current and former members of its management team concerning disclosures made about LVIs business.
Key Dates
- March 23, 2022: Bread Financial Holdings, Inc. changed its corporate name from Alliance Data Systems Corporation.
- April 4, 2022: Bread Financial Holdings, Inc. changed its ticker to BFH from ADS on the NYSE.
- June 2022: The company completed the transition of its credit card processing services to Fiserv.
- September 30, 2022: CCBs total assets exceeded $10 billion for four consecutive quarters.
- February 2023: The CFPB published a proposed rule with respect to late fees.
- February 2023: The company sold the BJs portfolio.
- June 2023: The company issued and sold $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028.
- June 2023: The company entered into a new credit agreement.
- October 2023: The company acquired a credit card portfolio.
- November 2023: The company obtained credit ratings for its Parent Company from the major credit rating agencies.
- November 2023: The FDIC issued a consent order to one of the company's subsidiaries.
- December 2023: The company issued and sold $600 million aggregate principal amount of 9.750% Senior Notes due 2029.
- January 2024: The company issued and sold an additional $300 million aggregate principal amount of Senior Notes due 2029.
- January 2024: The company redeemed $400 million in aggregate principal amount of its outstanding 7.000% Senior Notes due 2026.
Keywords
credit cards, financial services, consumer lending, fintech, payments, retail deposits, risk management, digital technology, BNPL, regulation
BFH
Bread Financial Holdings, INC
NYSE
Sector: Financial Services
Filings with Classifications
Delay expected
11 June 2025 7:01 AM
Performance Update
- The company froze delinquency progression for cardholders in Federal Emergency Management Agency (FEMA) identified impact zones for one billing cycle due to hurricanes Helene and Milton. This action delayed the recognition of certain losses, resulting in modestly lower Net principal losses and Net loss rate in the fourth quarter of 2024, and will consequently negatively impact these metrics in the second quarter of 2025.
Better than expected
11 June 2025 7:01 AM
Performance Update
- The net loss rate improved to 8.0% from 8.8% year-over-year.
- Net principal losses decreased to $120 million from $133 million year-over-year.
- The delinquency rate improved to 5.7% from 5.9% year-over-year.
- 30 days+ delinquencies decreased to $926 million from $976 million year-over-year.
- Despite the company's forward-looking statement that hurricane-related actions would negatively impact Q2 2025 metrics, the reported actuals for May 2025 show year-over-year improvement in key credit quality indicators.
Better than expected
5 June 2025 7:45 AM
Current Report Tender Offer Results
- The tender offer was significantly oversubscribed, with approximately $536.8 million in Notes tendered against a $150 million Tender Cap. This indicates strong participation and allows the company to achieve its debt reduction goals effectively.
- The successful execution of the early tender results means the company can proceed with purchasing the desired amount of Notes, thereby managing its debt obligations and potentially reducing future interest expenses.
Better than expected
13 May 2025 7:01 AM
Performance Update
- The net loss rate improved from 8.6% to 7.8% year-over-year.
- The delinquency rate decreased from 6.0% to 5.7% year-over-year.
- Net principal losses decreased from $127 million to $114 million year-over-year.
Worse than expected
28 April 2025 9:49 PM
Quarterly Report
- Average and end-of-period credit card and other loans decreased, indicating a contraction in lending activity.
- Total interest income decreased due to lower late fees and average loan balances, suggesting weaker revenue generation from core lending operations.
- The 2025 outlook has been adjusted to reflect slower credit sales growth and slightly higher inflation, signaling a less optimistic future performance.
Worse than expected
24 April 2025 6:56 AM
Performance Update
- The net loss rate increased to 8.1% for the month and 8.2% for the quarter, indicating worsening credit performance.
- Net principal losses were $123 million for the month and $365 million for the quarter, suggesting increased credit risk.
Better than expected
17 March 2025 7:31 AM
Performance Update
- The net loss rate improved from 8.9% to 8.6% year-over-year.
- The delinquency rate improved from 6.7% to 6.2% year-over-year.
Capital raise
6 March 2025 1:32 AM
Debt Offering Announcement
- Bread Financial is raising $400 million through a private offering of subordinated notes.
- The net proceeds are expected to be approximately $395 million after deducting the initial purchasers' discount.
- The company intends to lend at least $250 million of the proceeds to Comenity Capital Bank.
- The remaining proceeds may be used for general corporate purposes, including share repurchases.
Capital raise
5 March 2025 7:45 AM
8-K Filing
- Bread Financial intends to offer $400 million aggregate principal amount of fixed-rate reset subordinated notes in a private offering.
- The company intends to lend no less than $250 million of the net proceeds of the Notes offering as subordinated debt to one of its subsidiary banks, Comenity Capital Bank, with the remaining proceeds intended to be used for general corporate purposes, which may include share repurchases.
Worse than expected
30 January 2025 6:52 AM
Quarterly Report
- The company's net income and adjusted net income decreased significantly year-over-year, indicating worse than expected results.
- Revenue decreased by 9% in the fourth quarter, primarily due to lower finance charges and late fees, indicating worse than expected results.
- Income from continuing operations decreased by 83% in the fourth quarter, primarily due to lower net interest income and higher total non-interest expenses, indicating worse than expected results.
Worse than expected
30 October 2024 5:52 PM
Quarterly Report
- The company's net income decreased significantly due to increased provision for credit losses and expenses related to convertible note repurchases.
- The company's net interest margin decreased due to decreased late fees and higher funding costs.
- The company's credit sales decreased, reflecting a slowdown in consumer spending and strategic credit tightening.
Worse than expected
24 October 2024 6:57 AM
Performance Update
- The net loss rate increased to 7.4% for the month and 7.8% for the three-month period, indicating a deterioration in credit quality.
- The delinquency rate also increased slightly to 6.4%, suggesting a higher proportion of loans are becoming past due.
Worse than expected
24 October 2024 6:55 AM
Quarterly Report
- The company's net income and earnings per share were significantly lower than the previous year due to the impact of the convertible note repurchase and increased credit losses.
- Revenue decreased year-over-year, indicating a slowdown in business activity.
- The delinquency and net loss rates increased, suggesting a deterioration in credit quality.
Better than expected
21 October 2024 5:06 PM
Material Definitive Agreement
- The document indicates better results due to the extension of the maturity date, lower interest rates, and increased financial flexibility.
Worse than expected
16 September 2024 7:31 AM
Performance Update
- The net loss rate increased from 6.7% to 7.8% year-over-year.
- Net principal losses increased from $99 million to $118 million year-over-year.
- The delinquency rate increased from 5.9% to 6.2% year-over-year.
Worse than expected
15 August 2024 7:31 AM
Performance Update
- The net loss rate increased from 7.4% to 8.0%, indicating a deterioration in credit quality.
- The delinquency rate rose from 5.7% to 6.2%, suggesting more borrowers are falling behind on payments.
- Net principal losses increased from $108 million to $120 million, reflecting higher credit losses.
Delay expected
31 July 2024 5:51 PM
Quarterly Report
- The final rule on credit card late fees published by the CFPB had an original effective date of May 14, 2024, but was delayed by a court injunction.
Worse than expected
31 July 2024 5:51 PM
Quarterly Report
- The company's credit sales decreased by 7% year-over-year, indicating a slowdown in consumer spending.
- The net interest margin decreased to 18.0% from 18.7% in the same quarter last year, due to higher funding costs.
- The company expects 2024 average credit card and other loans to be down low-single digits.
Worse than expected
25 July 2024 6:56 AM
Performance Update
- The net loss rate and delinquency rate both increased compared to the previous year, indicating a worsening credit performance.
Worse than expected
25 July 2024 6:52 AM
Quarterly Report
- The company's revenue decreased by 1% year-over-year, indicating a worse performance than the previous year.
- The company's credit sales decreased by 7% year-over-year, indicating a worse performance than the previous year.
- The company's net loss rate increased to 8.6% from 8.0% in the second quarter of 2023, indicating a worse performance than the previous year.
Worse than expected
12 June 2024 7:31 AM
Performance Update
- The net loss rate increased from 8.4% to 8.8%, indicating a deterioration in credit quality.
- The delinquency rate increased from 5.5% to 5.9%, suggesting a higher risk of future losses.
Worse than expected
15 May 2024 7:31 AM
Performance Update
- The net loss rate increased from 7.8% to 8.6%, indicating a deterioration in credit quality.
- The delinquency rate increased from 5.5% to 6.0%, suggesting a higher risk of future losses.
- Net principal losses increased from $114 million to $127 million, reflecting higher credit losses.
Worse than expected
1 May 2024 5:50 PM
Quarterly Report
- The company's total net interest and non-interest income decreased by 23% year-over-year.
- Credit sales decreased by 18% year-over-year.
- The provision for credit losses increased due to a smaller reserve release and higher net principal losses.
Worse than expected
25 April 2024 6:57 AM
Performance Update
- The delinquency rate increased from 5.7% to 6.2%, indicating a worsening credit quality.
- The net loss rate increased to 8.5% for the three months ended March 31, 2024, compared to the previous year, indicating higher losses.
Worse than expected
25 April 2024 6:54 AM
Quarterly Report
- The company's revenue and net income decreased significantly compared to the same quarter last year, primarily due to the sale of the BJ's portfolio in the prior year and the impact of the CFPB late fee rule.
- The company's net loss rate increased to 8.5% from 7.0% in the first quarter of 2023, indicating a deterioration in credit quality.
- The company expects average credit card and other loans to be down low-single digits relative to 2023, indicating a slowdown in growth.
Worse than expected
13 March 2024 7:02 AM
Performance Update
- The net loss rate increased from 7.8% to 8.9% year-over-year.
- The delinquency rate increased from 6.0% to 6.7% year-over-year.
Delay expected
20 February 2024 7:13 AM
Annual Results
- The document mentions that certain lenders of private placement commitments within the company's securitization trusts have sought and obtained amendments to their respective transaction documents permitting them to delay disbursement of funding increases by up to 35 days.
Worse than expected
20 February 2024 7:13 AM
Annual Results
- The company's Delinquency rate of 6.5% as of December 31, 2023 exceeded the peak rate during the Great Recession.
- The company's Net loss rate of 7.5% for 2023 is high relative to historical experience.
- The company's 2024 financial outlook anticipates lower revenue and a higher Net loss rate.
Capital raise
20 February 2024 7:13 AM
Annual Results
- The company issued and sold $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028.
- The company issued and sold $600 million aggregate principal amount of 9.750% Senior Notes due 2029.
- The company issued and sold an additional $300 million aggregate principal amount of Senior Notes due 2029 in January 2024.
Worse than expected
15 February 2024 7:35 AM
Performance Update
- The net loss rate increased from 6.7% to 8.0%, indicating a deterioration in credit quality.
- The delinquency rate increased from 5.8% to 6.8%, suggesting more borrowers are falling behind on payments.
- Average credit card and other loans decreased by 9%, indicating a contraction in the loan portfolio.
Worse than expected
25 January 2024 6:56 AM
Performance Update
- The delinquency rate increased from 5.5% to 6.5% year-over-year, indicating a deterioration in credit quality.
- The average loan balances decreased year-over-year, suggesting a potential slowdown in business growth.
- The net loss rate of 8.2% for the month is higher than the 8.0% for the three months, indicating a worsening trend.
Worse than expected
25 January 2024 6:52 AM
Quarterly Report
- The company's revenue decreased by 2% in Q4 2023 compared to Q4 2022.
- The company's net loss rate increased to 8.0% in Q4 2023 from 6.3% in Q4 2022.
- The company expects average loan growth to be down low-single digits in 2024.
- The company anticipates a decrease in total revenue for 2024.
- The company expects a lower net interest margin in 2024.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.