Bread Financial Q3 2024 Earnings Report

Bread Financial (NYSE: BFH), a prominent financial services provider, disclosed its third-quarter earnings on October 24, 2024. CEO Ralph Andretta and CFO Perry Beberman reviewed the company’s performance and outlook amidst economic challenges and recent hurricanes. The company reported an adjusted net income of $93 million and adjusted diluted EPS of $1.83, with a 12% year-over-year increase in tangible book value per share.

Key Takeaways

• Adjusted net income: $93 million, adjusted diluted EPS: $1.83.
• Strategic repurchase of convertible notes strengthened the balance sheet.
• Slight decline in total credit sales, modest increase in average loans.
• A 5% decrease in revenue driven mainly by reduced fees.
• Strong capital position with a CET1 ratio of 13.3%.
• Gradual economic recovery anticipated with monitoring of regulatory changes.
• Declining loan yield, but net interest margin showed sequential improvement.
• Slight rise in delinquency rates, with a projected full-year net loss rate of 8.3%.
• Expected decline in average loans and total revenue for 2024.
• Adjusted expenses anticipated to decrease in comparison to 2023.

Company Outlook

• Bread Financial envisions a gradual economic recovery and intends to mitigate regulatory impacts.
• Average loans to decline low single digits in 2024.
• Total revenue projected to decrease low to mid-single digits.
• Adjusted expenses to decrease mid-single digits, with an expected effective tax rate of 25%-26%.

Bearish Highlights

• 3% year-over-year decrease in total credit sales.
• 5% revenue drop, primarily from lower late fees.
• Pre-tax pre-provision earnings dropped 23%, a decline of $120 million.
• Loan yield decreased by 120 basis points.

Bullish Highlights

• Tangible book value per share rose 12% year-over-year.
• 41% increase in direct-to-consumer deposits, now representing a major funding source.
• Extended $700 million revolving credit facility with improved terms.
• Common equity Tier 1 capital ratio rose to 13.3%, up 40 basis points.
• Diverse product suite with over 100 brand partners.

Misses

• Non-interest expenses increased by $72 million due to repurchased convertible notes.
• Total expenses decreased 5% when excluding gains on portfolio sales.

Q&A Highlights

• Discussions about adapting to regulatory changes affecting late fees.
• Anticipated seasonal rise in charge-off rates during Q4, with mitigation measures supporting impacted customers from hurricanes.
• Ongoing inflation concerns affecting lower middle-income consumers, despite some economic indicators showing improvement.

Bread Financial’s earnings call showcased a company managing a complex environment with strategies and cautious optimism. Despite facing revenue and sales declines, they are focused on maintaining a robust balance sheet and promoting responsible growth. Their diversified product suite positions them well to tackle future challenges while supporting stakeholders.

InvestingPro Insights

• Market capitalization: $2.49 billion, P/E ratio: 5.14 (suggesting potential undervaluation).
• Revenue for last 12 months as of Q2 2024: $2.58 billion, with a 5.36% revenue growth in the last quarter.
• Maintained dividend payments for 9 consecutive years, current yield at 1.68%.
• 1-year price total return of 80.33% indicates significant market confidence.
• Fair value estimated at $60.19, suggesting possible upside.

Closing Remarks

Bread Financial’s strong earnings amid economic challenges reflect strategic initiatives and cautious optimism that could appeal to investors.