Bread Financial’s Earnings Call: Strong Performance Amid Challenges

Bread Financial Holdings Inc ((BFH)) has held its Q1 earnings call. Read on for the main highlights of the call.

Bread Financial Holdings Inc. recently held its earnings call, revealing a mixed sentiment. The company demonstrated strong financial performance and strategic initiatives, including successful capital structure optimization and growth in direct-to-consumer deposits. However, challenges such as revenue decline, decreased average loans, and macroeconomic uncertainty were also highlighted, posing potential concerns for the future.

Strong First Quarter Earnings

Bread Financial reported impressive first-quarter earnings with a net income of $138 million and earnings per diluted share of $2.78. This performance underscores the company’s resilient business model and strategic credit tightening actions, which have helped navigate the current economic landscape effectively.

Successful Capital Structure Optimization

The company executed a $400 million subordinated notes offering, significantly improving its total risk-based capital ratio by over 200 basis points. Additionally, Bread Financial completed a $150 million share repurchase program, reflecting its commitment to optimizing its capital structure and enhancing shareholder value.

Growth in Direct-to-Consumer Deposits

Direct-to-consumer deposits saw a substantial increase, reaching $7.9 billion at the end of the quarter, marking a 13% year-over-year growth. This growth highlights the company’s successful efforts in expanding its deposit base and strengthening its financial position.

New Partnerships and Program Renewals

Bread Financial signed new partnerships, including a notable collaboration with Crypto.com, and renewed programs with existing partners like Academy Sports. These developments showcase a robust pipeline and present significant growth opportunities for the company.

Revenue Decline

Despite the positive developments, Bread Financial experienced a revenue decline, reporting $970 million, down 2% year over year. This decrease was primarily attributed to lower net interest income, reflecting the challenges posed by the current economic environment.

Decreased Average Loans

The company reported a decrease in average loans to $18.2 billion, a 2% decline influenced by macroeconomic factors, reduced consumer spending, higher gross losses, and tighter underwriting standards. This trend indicates the challenges faced in maintaining loan growth amid economic uncertainties.

Macroeconomic Uncertainty

Bread Financial acknowledged the growing risk of economic weakness due to uncertainties in consumer and small business confidence, trade policy, and inflation concerns. These factors continue to pose challenges to the company’s operations and future performance.

Forward-Looking Guidance

Looking ahead, Bread Financial expects 2025 average loans to be flat to slightly down, with total revenue anticipated to be flat to slightly up. The company projects the net loss rate to remain in the 8.0% to 8.2% range for the year. Despite challenging macroeconomic conditions, Bread Financial remains committed to maintaining a robust credit risk management approach and improving credit performance trends.

In summary, Bread Financial’s earnings call reflected a company navigating a complex economic environment with strategic initiatives and strong financial performance. While challenges such as revenue decline and macroeconomic uncertainty persist, the company’s efforts in capital structure optimization and growth in direct-to-consumer deposits provide a solid foundation for future growth.