BFH
Bread Financial Holdings, INC
NYSE
8-K: Bread Financial Reports Q4 and Full Year 2023 Results, Announces Dividend
Sentiment:
Quarterly Report
25 January 2024 6:52 AM
Bread Financial announced its fourth quarter and full year 2023 financial results, highlighting strategic initiatives and a declared quarterly dividend of $0.21 per share.
Worse than expected
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.
Summary
- Bread Financial reported a net income of $43 million for the fourth quarter of 2023 and $718 million for the full year.
- The company's earnings per diluted share were $0.87 for the quarter and $14.34 for the year.
- Average credit card and other loans decreased by 8% in Q4 2023 compared to Q4 2022, primarily due to the sale of the BJ's portfolio and strategic credit tightening.
- Revenue decreased by 2% in Q4 2023, while net income increased by $177 million.
- The common equity tier 1 capital ratio increased to 12.2%, a 350 basis point increase year-over-year.
- Tangible book value per share increased by 49% to $43.70.
- The company completed a $600 million senior notes offering in December 2023, which was upsized to $900 million in January 2024.
- The delinquency rate was 6.5% and the net loss rate was 8.0% for the fourth quarter of 2023.
- Bread Financial paid down approximately $500 million of parent unsecured debt in 2023 and an additional $100 million in the first quarter of 2024.
- The company expects the net loss rate to peak in the first half of 2024, with rates in the mid to high 8% range.
- For 2024, average loan growth is expected to be down low-single digits, excluding the sold BJ's portfolio, average loans are expected to be up low-single digits.
- Total revenue for 2024 is anticipated to be down low to mid-single digits, with a lower net interest margin.
- The company aims to deliver nominal positive operating leverage for 2024.
- The net loss rate for 2024 is expected to be in the low 8% range.
- A quarterly cash dividend of $0.21 per share was declared, payable on March 15, 2024.
Sentiment
Score: 5
Explanation: The document presents a mixed picture. While there are positives such as debt reduction and strong capital ratios, there are also negatives such as declining revenue, increasing loss rates, and a challenging economic outlook. The company is taking proactive steps to manage risks, but the overall sentiment is neutral to slightly negative.
Positives
- The company achieved significant progress in reducing parent debt, paying down approximately $500 million in unsecured borrowings during the year.
- Bread Financial successfully refinanced its term loan and revolving line of credit.
- The company obtained inaugural Holding Company issuer credit ratings.
- Bread Financial completed its first unsecured debt offering as a rated issuer in December.
- The company launched and renewed several key brand partner relationships, including Dell Technologies and The New York Yankees.
- The top five partner contracts are secured through 2028, and more than 85% of the current loan portfolio is secured through 2025.
- Direct-to-consumer deposit balances grew by 18% year-over-year.
- The company's common equity tier 1 capital ratio increased by 350 basis points year-over-year.
- The company has a strong focus on prudent capital and risk management.
- The company is proactively implementing plans to address the CFPB's final rule on credit card late fees.
Negatives
- Average credit card and other loans decreased by 8% in Q4 2023 compared to Q4 2022.
- Revenue decreased by 2% in Q4 2023 compared to Q4 2022.
- The company experienced a moderation in consumer spending.
- The delinquency rate increased to 6.5% in Q4 2023 from 5.5% in Q4 2022.
- The net loss rate increased to 8.0% in Q4 2023 from 6.3% in Q4 2022.
- The company expects the net loss rate to peak in the first half of 2024.
- The company anticipates a decrease in total revenue for 2024.
- The company expects a lower net interest margin in 2024.
- The company's 2024 outlook does not factor in the potential impacts of the proposed CFPB late fee rule.
Risks
- Uncertainty around future economic conditions, persistent inflation, and higher interest rates could weigh on consumers and impact the company's results.
- The CFPB's final rule on credit card late fees could have a significant impact on the company's business if not mitigated.
- The company faces risks related to macroeconomic conditions, including market conditions, inflation, rising interest rates, and unemployment levels.
- There are risks associated with future credit performance, including the level of future delinquency and write-off rates.
- The company faces risks related to the loss of, or reduction in demand from, significant brand partners or customers.
- There are risks related to inaccuracies in the models and estimates on which the company relies.
- The company faces risks related to its level of indebtedness and ability to access financial or capital markets.
- There are risks related to pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions.
- The company faces risks related to failures or breaches in its operational or security systems, including cyberattacks.
- There are risks related to any tax liability, disputes or other adverse impacts arising out of or relating to the spinoff of the former LoyaltyOne segment.
Future Outlook
The company anticipates slower sales growth in 2024 due to strategic credit tightening and moderating consumer spending, which will pressure loan growth and the net loss rate. Multiple interest rate decreases by the Federal Reserve are also expected to pressure total net interest income. The company's outlook does not factor in the potential impacts of the proposed CFPB late fee rule.
Management Comments
- Throughout 2023 we continued to execute on our strategic initiatives by strengthening our balance sheet and optimizing data and technology, while strategically investing to capture future growth opportunities.
- Our fourth quarter financial results highlight our focus on prudent growth and expense discipline.
- We are pleased with our significant financial progress in 2023 and remain focused on driving continued success.
- Our 2024 outlook reflects slower sales growth as a result of ongoing strategic credit tightening and continued moderation in consumer spending.
- We remain committed to driving sustainable, profitable growth and long-term value for our stakeholders.
Industry Context
The announcement reflects the broader trend of financial institutions navigating economic uncertainty, rising interest rates, and regulatory changes. The company's focus on credit tightening and expense discipline is consistent with industry-wide efforts to manage risk in the current environment. The potential impact of the CFPB's late fee rule is a significant concern for the credit card industry, and Bread Financial's proactive approach to mitigation is noteworthy.
Comparison to Industry Standards
- Bread Financial's CET1 ratio of 12.2% is above the regulatory minimums, indicating a strong capital position, similar to other large financial institutions such as Capital One (COF) and Discover Financial Services (DFS).
- The company's net loss rate of 8.0% in Q4 2023 is higher than some of its peers, reflecting the impact of credit tightening and consumer payment pressures. For example, American Express (AXP) typically reports lower net loss rates due to its focus on higher-credit-quality customers.
- The company's focus on direct-to-consumer deposits aligns with a broader trend in the financial industry to diversify funding sources and reduce reliance on wholesale funding, similar to strategies employed by online banks like Ally Financial (ALLY).
- The company's strategic credit tightening is a common response to economic uncertainty, similar to actions taken by other credit card issuers such as Synchrony Financial (SYF).
- The company's efforts to mitigate the impact of the CFPB's late fee rule are consistent with the actions of other credit card issuers, who are also exploring various pricing and product strategies to offset potential revenue losses.
Stakeholder Impact
- Shareholders will receive a quarterly dividend of $0.21 per share.
- Shareholders may be concerned about the decrease in revenue and the increase in net loss rates.
- Employees may be impacted by the company's efforts to manage expenses.
- Customers may be impacted by changes in credit terms and fees.
- Brand partners may be impacted by changes in program economics.
Next Steps
- The company will continue to implement plans to address the CFPB's final rule on credit card late fees.
- The company will continue to strategically invest in technology modernization, marketing, and product innovation.
- The company will continue to monitor the macroeconomic environment and adjust its strategies as needed.
Key Dates
- January 25, 2024: Date of the earnings release and investor presentation, and the declaration of the quarterly dividend.
- February 9, 2024: Record date for the declared quarterly cash dividend.
- March 15, 2024: Payment date for the declared quarterly cash dividend.
Keywords
financial results, credit cards, consumer lending, dividends, net income, revenue, debt reduction, capital ratios, CFPB, delinquency rate, net loss rate, interest rates, economic outlook, partner relationships
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.
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.
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