BFH
Bread Financial Holdings, INC
NYSE
8-K: Bread Financial Reports Mixed Q4 Results, Announces Dividend
Sentiment:
Quarterly Report
30 January 2025 6:52 AM
Bread Financial announced its fourth quarter and full year 2024 results, showing a decrease in revenue but improvements in capital ratios and tangible book value, while also declaring a quarterly dividend.
Worse than expected
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.
Summary
- Bread Financial reported a net income of $7 million for the fourth quarter of 2024, and $277 million for the full year.
- Adjusted net income was $20 million for the quarter and $381 million for the year, excluding the impact of repurchased convertible notes.
- The company's average loans decreased by 1% year-over-year, while credit sales increased by 1% in the fourth quarter.
- The common equity tier 1 (CET1) capital ratio increased to 12.4%, a 20 basis point improvement year-over-year.
- Tangible book value per common share rose to $46.97, a 7% increase year-over-year.
- The fourth quarter delinquency rate was 5.9%, and the net loss rate was 8.0%.
- Direct-to-consumer deposits grew by 19% year-over-year, reaching $7.7 billion.
- Bread Financial repurchased $44 million in convertible notes and $44 million in shares during the quarter.
- The company expects 2025 average credit card and other loans to be relatively flat to 2024.
- Total revenue growth, excluding gains on portfolio sales, is anticipated to be up low single digits in 2025.
- The net loss rate is expected to be in the 8.0% to 8.2% range for 2025.
Sentiment
Score: 5
Explanation: The document presents a mixed picture with some positive developments like improved capital ratios and deposit growth, but also significant declines in revenue and earnings. The outlook is cautiously optimistic but faces considerable uncertainty, resulting in a neutral sentiment.
Positives
- The company achieved a double leverage ratio target of below 115%.
- Bread Financial received improved rating outlooks from Moody's and Fitch, moving from stable to positive.
- The company's funding mix improved with continued direct-to-consumer deposit growth.
- The company expects to generate full year positive operating leverage in 2025, excluding gains on sales and the impact from repurchased convertible notes.
- The delinquency rate decreased from 6.5% in the fourth quarter of 2023 to 5.9% in the fourth quarter of 2024.
Negatives
- Average loans decreased by 1% year-over-year due to lower full year credit sales.
- Revenue decreased by 9% in the fourth quarter, primarily due to lower finance charges and late fees.
- Income from continuing operations decreased by 83% in the fourth quarter, primarily due to lower net interest income and higher total non-interest expenses.
- The net loss rate for the full year 2024 was 8.2%, up from 7.5% in 2023.
- The company anticipates a net loss rate in the 8.0% to 8.2% range for 2025.
Risks
- The company faces macroeconomic uncertainty, including inflation and potential recessionary pressures.
- The ongoing litigation related to the CFPB late fee rule creates uncertainty about future revenue.
- The company's 2025 outlook assumes no late fee reduction related to the CFPB late fee rule, given the uncertainty surrounding the timing and outcome of the ongoing litigation.
- The company's outlook is subject to changing conditions as the impacts from key legislative and monetary policies are still unknown.
- Interest rate decreases by the Federal Reserve will pressure total net interest income.
Future Outlook
Bread Financial anticipates relatively flat average loan growth in 2025 compared to 2024, with year-end 2025 loans expected to be higher due to new business growth. Total revenue growth, excluding portfolio sales, is expected to be up low single digits. The company expects to achieve positive operating leverage in 2025, excluding gains on sales and the impact from repurchased convertible notes. The net loss rate is projected to be in the 8.0% to 8.2% range for 2025. The company's 2025 outlook assumes no impact from the CFPB late fee rule due to ongoing litigation.
Management Comments
- Our successes in 2024 place Bread Financial in a position of strength going into 2025 with increased capital flexibility and financial resilience.
- We made significant progress enhancing our balance sheet, executing on our long-term funding plan, and increasing shareholder value.
- We improved our capital ratios, while concurrently reducing parent-level debt and achieving a double leverage ratio target of below 115%.
- Our funding mix improved throughout the year with continued direct-to-consumer deposit growth momentum.
- We continue to add iconic brand partner relationships and further invest in our existing programs.
- We are pleased with our year-over-year positive fourth quarter credit sales growth as retail apparel sales and millennial and Gen Z sales showed signs of improvement.
- Looking ahead, we remain focused on growing responsibly, managing the macroeconomic and regulatory environments including ongoing implementation of CFPB late fee rule mitigation strategies, disciplined capital allocation, and continued execution on our operational excellence efforts.
- Our resilient business model allows us to generate capital, deliver strong returns, and create sustainable, long-term value for our shareholders.
- The fourth quarter showed signs of gradual economic improvement with credit sales growth of 1%, stable to improving credit performance, and a lower reserve rate of 11.9% compared to year-end 2023.
- We continued to strengthen our balance sheet by reducing debt and dilution risk while growing our CET1 to 12.4%, representing a 20 basis point year-over-year improvement.
- We repurchased $44 million in principal amount of our convertible notes in the fourth quarter and in January 2025 redeemed the remaining $100 million principal balance of our 2026 senior notes.
- Given the macroeconomic uncertainty that still exists for 2025, we remain vigilant around credit policy while cautiously optimistic for a gradual improvement in economic conditions.
- Looking ahead, we expect our resilient business model, prudent capital allocation, and operational excellence initiatives to deliver responsible growth and achieve solid financial results in 2025.
Industry Context
The results reflect a mixed environment for financial services companies, with some positive trends in consumer spending and credit quality, but also ongoing challenges from inflation, regulatory uncertainty, and interest rate pressures. The company's focus on diversifying its partner base and strengthening its balance sheet aligns with industry best practices for navigating these challenges.
Comparison to Industry Standards
- Bread Financial's CET1 ratio of 12.4% is within the range of other consumer finance companies, but specific comparisons would require a deeper analysis of peer group data.
- The company's net loss rate of 8.0% in Q4 2024 is higher than some industry benchmarks, indicating potential credit quality concerns, but is also impacted by the transition of credit card processing services in June 2022.
- The growth in direct-to-consumer deposits to $7.7 billion is a positive trend, as it provides a stable funding source, similar to other financial institutions focusing on retail deposits.
- The company's focus on operational excellence and technology advancement is consistent with industry trends towards digital transformation and efficiency improvements.
- The repurchase of convertible notes and shares is a common capital management strategy, but the impact on earnings needs to be evaluated in the context of the company's overall financial performance.
Stakeholder Impact
- Shareholders will receive a quarterly cash dividend of $0.21 per share.
- Customers may experience changes in pricing and fees due to the implementation of CFPB late fee rule mitigation strategies.
- Employees may be impacted by ongoing operational excellence initiatives and technology-related transformation costs.
- Brand partners will benefit from the company's continued investment in existing programs and the addition of new partners.
Next Steps
- The company will continue to implement mitigation plans for the CFPB late fee rule.
- Bread Financial will focus on growing responsibly, managing the macroeconomic and regulatory environments, and executing on operational excellence efforts.
- The company will continue to invest in technology modernization, marketing, and product innovation.
- The company will monitor the ongoing litigation related to the CFPB late fee rule.
Legal Proceedings
- Litigation associated with the CFPB late fee rule is ongoing, and the outcome and timing of the implementation of the rule is still unknown.
Key Dates
- January 30, 2025: Date of the earnings release and dividend announcement.
- February 14, 2025: Record date for the quarterly cash dividend.
- March 21, 2025: Payment date for the quarterly cash dividend.
Keywords
credit cards, financial services, consumer lending, dividends, capital ratios, net loss rate, revenue, earnings, CFPB, macroeconomic conditions
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.
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.
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.
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.
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