BFH
Bread Financial Holdings, INC
NYSE
8-K: Bread Financial Reports Q1 2024 Results, Declares Quarterly Dividend
Sentiment:
Quarterly Report
25 April 2024 6:54 AM
Bread Financial announced its first quarter 2024 financial results, reporting a net income of $134 million and declaring a $0.21 per share quarterly dividend.
Worse than expected
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.
Summary
- Bread Financial reported a net income of $134 million for the first quarter of 2024, with earnings per diluted share at $2.70.
- The company's tangible book value per share increased by 20% year-over-year to $45.96.
- The common equity tier 1 capital ratio rose to 12.6%, an increase of 80 basis points year-over-year.
- Average credit card and other loans decreased by 4% compared to the first quarter of 2023, primarily due to the sale of the BJ's Wholesale Club portfolio and strategic credit tightening.
- Revenue decreased by 23% to $991 million, while net income decreased by 71% due to the prior year's gain on the sale of the BJ's portfolio.
- Excluding the gain on sale, pre-tax pre-provision earnings (PPNR) was nearly flat, down $6 million.
- The company completed $11 million in share repurchases, buying back 293,000 shares at an average price of $37.54.
- Direct-to-consumer deposits grew to $7 billion, a 24% increase year-over-year, representing 36% of total funding.
- Parent-level debt was reduced by $100 million.
- The first quarter delinquency rate was 6.2%, and the net loss rate was 8.5%.
Sentiment
Score: 5
Explanation: The sentiment is neutral to slightly negative. While the company shows some positive metrics like increased tangible book value and direct-to-consumer deposits, the significant declines in revenue and net income, along with increased credit losses and the challenges posed by the CFPB rule, temper the overall outlook.
Positives
- The company demonstrated financial resilience with a net income of $134 million.
- Tangible book value per share saw a significant increase of 20% year-over-year.
- The company's capital position improved with an increase in the common equity tier 1 capital ratio.
- Direct-to-consumer deposits grew substantially, indicating strong customer confidence.
- Parent-level debt was reduced, improving the company's financial stability.
- The company is actively implementing mitigation plans for the CFPB late fee rule, with improved confidence in their effectiveness.
- The company is focused on responsible risk management and maintaining financial flexibility.
- The company has a strong leadership team focused on generating returns through prudent capital and risk management.
Negatives
- Revenue decreased by 23% compared to the first quarter of 2023.
- Net income decreased by 71% compared to the first quarter of 2023.
- Average credit card and other loans decreased by 4% year-over-year.
- The delinquency rate increased to 6.2% from 5.7% in the first quarter of 2023.
- The net loss rate increased to 8.5% from 7.0% in the first quarter of 2023.
- The company expects a net loss rate in the low 8% range for 2024.
- The company expects average credit card and other loans to be down low-single digits relative to 2023.
- Total revenue for 2024 is anticipated to be down in the midto high-teen range, excluding gains on portfolio sales.
Risks
- The company faces macroeconomic headwinds, including persistent inflation and higher interest rates, which are moderating consumer spending.
- The CFPB's final rule on credit card late fees poses a significant challenge, although mitigation plans are underway.
- There is uncertainty surrounding the timing and outcome of ongoing litigation related to the CFPB late fee rule.
- The company anticipates slower sales growth due to strategic credit tightening and moderating consumer spending.
- Multiple interest rate decreases by the Federal Reserve are expected to pressure total net interest income.
- Higher gross credit losses are expected to impact revenue and net interest margin.
- The company's business is concentrated in U.S. consumer credit, which exposes it to specific market risks.
- There are risks associated with the transition of credit card processing services to third-party providers.
- The company is exposed to potential failures or breaches in operational or security systems, including cyberattacks.
Future Outlook
The company expects average loan growth to be down low-single digits, revenue to be down midto high-teens, expenses to be down lowto mid-single digits, and the net loss rate to be in the low 8% range for 2024. These projections include the impact of the CFPB late fee rule, assuming a May 14th effective date.
Management Comments
- Ralph Andretta, president and chief executive officer, stated that the company's financial resilience was evident in the first quarter of 2024, driven by a strong risk-adjusted loan yield.
- Ralph Andretta also mentioned that the company continued to strengthen its balance sheet and is focused on responsibly managing capital.
- Perry Beberman, executive vice president and chief financial officer, noted that the first quarter financial results reflect the company's focus on responsible risk management and strong, durable profit margins.
- Perry Beberman also stated that the company is pleased with its ability to drive consistently strong financial results despite the challenging macroeconomic environment.
Industry Context
The results reflect a challenging environment for consumer finance companies, with moderating consumer spending, higher credit losses, and regulatory changes impacting revenue. The company's focus on risk management and capital allocation is consistent with industry trends in response to these challenges. The CFPB late fee rule is a significant industry-wide issue that all credit card issuers are grappling with.
Comparison to Industry Standards
- Bread Financial's net loss rate of 8.5% is higher than some of its peers, such as Capital One and Discover, which have recently reported net charge-off rates in the 4-6% range, indicating a higher level of credit risk in Bread Financial's portfolio.
- The company's tangible book value per share growth of 20% year-over-year is a positive sign, but it is important to compare this to other financial institutions with similar business models to assess its relative performance.
- The company's CET1 ratio of 12.6% is within the range of other financial institutions, but it is important to monitor this metric closely as it is a key indicator of financial health.
- The company's direct-to-consumer deposit growth of 24% is a positive sign, but it is important to compare this to other financial institutions to assess its relative performance.
- The company's revenue decline of 23% is significant and needs to be compared to other financial institutions to assess its relative performance.
Stakeholder Impact
- Shareholders will receive a quarterly dividend of $0.21 per share.
- Shareholders may be concerned about the decrease in revenue and net income.
- Employees may be impacted by the company's cost-cutting measures.
- Customers may be affected by changes in pricing and credit terms.
- Brand partners are being engaged regarding mitigation plans for the CFPB late fee rule.
Next Steps
- The company will continue to implement mitigation strategies for the CFPB late fee rule.
- The company will monitor the ongoing litigation related to the CFPB late fee rule.
- The company will focus on managing credit risk and maintaining financial flexibility.
- The company will continue to drive digital and technology capabilities.
- The company will continue to scale and diversify product offerings.
Legal Proceedings
- The company is monitoring ongoing litigation related to the CFPB's final rule on credit card late fees.
Key Dates
- April 25, 2024: Date of the earnings release and dividend declaration.
- May 10, 2024: Record date for the quarterly dividend.
- May 14, 2024: Assumed effective date of the CFPB late fee rule.
- June 14, 2024: Payment date for the quarterly dividend.
Keywords
financial results, credit cards, consumer lending, dividends, CFPB, late fees, net income, revenue, loan growth, delinquency rate, net loss rate, capital ratio, deposits, debt reduction, share repurchase
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.
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.
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.
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.