BFH
Bread Financial Holdings, INC
NYSE
8-K: Bread Financial Reports Mixed Credit Performance in March 2024 Update
Sentiment:
Performance Update
25 April 2024 6:57 AM
Bread Financial's March 2024 performance update reveals a rise in net loss and delinquency rates compared to the previous year, alongside a change in loan calculation methodology.
Worse than expected
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.
Summary
- Bread Financial released a performance update for March 2024, showing an end-of-period loan balance of $18,185 million.
- The average credit card and other loans for the three months ended March 31, 2024, were $18,546 million, a 4% decrease year-over-year.
- Net principal losses for the three months ended March 31, 2024, totaled $394 million, with a net loss rate of 8.5%.
- The 30+ day delinquency principal was $1,048 million as of March 31, 2024, compared to $963 million the previous year.
- The delinquency rate increased to 6.2% as of March 31, 2024, up from 5.7% the previous year.
- The company revised its calculation of average credit card and other loans to incorporate an average daily balance, aligning with industry practice.
Sentiment
Score: 4
Explanation: The document presents a mixed picture with some negative trends in credit performance, including increased delinquency and loss rates. The change in calculation methodology is a positive move, but the overall tone is cautious due to the increased risks.
Positives
- The company's end-of-period credit card and other loans remained stable at $18,185 million for both the month and three-month periods ending March 31, 2024.
Negatives
- The net loss rate increased to 8.8% for the month ended March 31, 2024.
- The delinquency rate rose to 6.2% as of March 31, 2024, indicating a higher proportion of loans past due.
- Average credit card and other loans decreased by 4% year-over-year for the three months ended March 31, 2024.
- Net principal losses for the three months ended March 31, 2024, were $394 million.
Risks
- The company faces risks from macroeconomic conditions, including inflation, rising interest rates, and potential recession.
- Global political and public health events could impact the company's performance.
- Future credit performance, including delinquency and write-off rates, poses a risk.
- The loss of or reduction in demand from significant brand partners or customers could negatively affect the company.
- Inaccuracies in models and estimates, including credit risk management models, could lead to adverse outcomes.
- The company is exposed to risks related to its level of indebtedness and ability to access financial markets.
- Pending and future legislation and regulatory actions, particularly regarding late fees, could impact the company.
- Failures or breaches in operational or security systems, including cyberattacks, are a risk.
- The company faces potential tax liabilities and other adverse impacts related to the spinoff of its former LoyaltyOne segment.
- The CFPB's final rule on credit card late fees could significantly impact the company's business and results of operations.
Future Outlook
The company's future performance is subject to various risks and uncertainties, including macroeconomic conditions, regulatory changes, and credit performance. The company does not provide specific guidance on future financial results.
Management Comments
- The company revised the calculation of average credit card and other loans to more closely align with industry practice by incorporating an average daily balance.
- The month ended March 31, 2023, 30 days + delinquencies principal and Delinquency rate were impacted by the transition of our credit card processing services in June 2022.
Industry Context
The update reflects the challenges faced by consumer lending companies in the current economic environment, with rising delinquency and loss rates. The change in loan calculation methodology is an attempt to align with industry standards.
Comparison to Industry Standards
- The change in the calculation of average credit card and other loans to incorporate an average daily balance is a move to align with industry practice, which is common among major credit card issuers such as Capital One and Discover.
- The reported delinquency rate of 6.2% is higher than the average for major credit card issuers, which typically range between 2% and 4% in a stable economic environment, suggesting Bread Financial is experiencing higher credit risk than some of its peers.
- The net loss rate of 8.5% is also higher than the industry average, which is typically between 3% and 5%, indicating a higher level of charge-offs compared to competitors like American Express and Synchrony Financial.
Stakeholder Impact
- Shareholders may be concerned about the increased delinquency and loss rates, which could negatively impact the company's profitability.
- Customers may face stricter lending criteria or higher interest rates due to the increased credit risk.
- Employees may be affected by potential cost-cutting measures if the company's financial performance deteriorates.
Key Dates
- April 25, 2024: Date of the press release providing a performance update for March 2024.
- March 31, 2024: End of the reporting period for the performance update.
- June 2022: Transition of credit card processing services which impacted the 2023 delinquency rate.
Keywords
credit cards, delinquency rate, net loss rate, consumer lending, financial services, Bread Financial, loan performance, credit risk, payment solutions
BFH
Bread Financial Holdings, INC
NYSE
Sector: Financial Services
Filings with Classifications
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.
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
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.
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.
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
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.
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
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.
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
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.