Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to Bread Financials’ First Quarter Earnings Conference Call. My name is Daisy, and I'll be coordinating your call today. [Operator Instructions]

It's now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial to begin.

ahead. go please Brian So

Brian Vereb

Thank you. and the will reviewing slides Relations of earnings release the the website. on of we can section be our Copy be Investor found

Andretta, the President Bread On and Executive Officer Chief Beberman, President Perry we of today, have Bread Financial; and Executive Financial. Officer call Chief of and Financial Vice Ralph

to contain call you in and other the release comments of statements. we I filings and of are management's Before some some based begin, may uncertainties subject earnings would assumptions current that like the your the statements the These expectations described with responses on risks company's and forward-looking and to today's questions to remind on the made are and SEC.

speakers which at financial our materials quarterly information certain on posted to those useful provide our our today's we website will investors. are Investor will measures breadfinancial.com. Reconciliation for of earnings on GAAP measures call, non-GAAP reference in believe included Also Relations

like would call I over that, Andretta. to With Ralph to the turn

Ralph Andretta

you, to will in strong begin actions good the as standing transformation. volatility the given continue our sector, reviewing banking have to we joining morning company's to focus we key Then, everyone and call stability. by taken will execute today's recent I highlight business the call. the our the I Thank Brian, financial areas and improve

first the Finally, for review quarter. Perry financials the will

growth our three continue And team company in optimizing TCE initiatives focus strategically sheet, over Slide capital the key focal made point we'll in on data for centered responsibly, and including balance management TA investing We strengthening our the a our to progress growing now four great forward. profitable total above quarter areas, on have current business. level. the Sustainable, first been ratio technology our has moving X, Starting past years. X% our building and

Yankees and with standing active to of extension Cleveland with are we Michaels, world new world's York pleased pipeline first our the credit, largest the market. partner announce development relationship Cavaliers, long all the Signet, including Our retailer pet Also, New quarter jewelry. business the remains launches diamond of

extension With on now based five outstanding XXXX. secured largest loan are at through partners least the balances of brand

support will long growth new continue term partner value. organic deliver and we expect to that will We

to strengthen capital credit, We structure our We will continue risk position. our rate our and to funding sheet. our and enhance find balance manage interest liquidity proactively

our all Additionally, platform, the the near leverage we through platform tech to initiatives, end gain innovative the have speed as the converting from significant begun Fiserv of benefit scale and solution monetization new capabilities collection market. and Alberia to to we cloud to to optimization

Finally, will continue our XXXX. technology product innovation in and

our we Cashback card received credit recognition the and dedication highlights innovative, Card Breakthrough payment of for transparent being Awards. named team's FinTech This this industry Just ever acknowledgement solution payment creating changing launch to best to easy our serve use the that our by consumers. month Bread solutions needs

focus enhanced engagement We the digital with customers will with innovation customer our spirit mobile and a on to experiences. continue expanding of provide

growth. remain disciplined investing our As to term long always, we in drive

Through of X. business financial decisions enhance we to our transformation have our resiliency Slide to efforts, Moving company. made

credit past and the sheet risk enhanced and balance our our strengthened diversification, Over our and management have partner years, improved three funding product, underlying credit we distribution.

economic the balances. We with proactively We profile on and strongly more partner continuously credit that positioned us diverse through credit brand levels. historic outperform and an update managing our and risk emphasis entire man improved models with management base coupled to criteria a our cycle underwriting risk portfolio believe and lines

with growing Slide a funding, our financial diverse, management X additional discipline provides and have sheet stable on color and our base. Starting funding balance we oversight.

end, the first as notably, on well Bread consumer experienced from year our we balances savings many deposit weeks when the platform of net direct banks outflows. deposit to over of of net we experienced as last during two Notably, X% inflows March, positive quarter

XXX,XXX more of of base. to Our and and long confident term board accounts deposits going growth efficiently total with remain consumer With nearly our than fund program growth direct insurance within XX% our in objectives ability consists to deposits limits. our forward. further the We funding from FDIC

significantly to business financial since leverage risk, the Our We nearly at held over to our disciplined progress. balance nearly years over cash transformation. by and XXXX coming remain reducing approach And to to our our Federal sheet portfolio. remain liability quarter asset committed reflected securities. over our with management. of including the to It liquidity tripling been ratios at to with with nearly to prudent reduced further management rate in quarter is management of maturity no the held We our all XX% pleased interest We TCE are our regard debt rate Strengthening end. arrival has first three my fundamental our improved our consists interest since Reserve parent capital and committed ratio ago we level TA years. X%

financial we Finally, capacity, our the commitment loss a day to over past years are dedication three rate our increase in basis testament point from significant reserve credit that one in and with a accomplishments our CECL entire rate teams. and built absorption the XXX XXXX. Bread These

values underpin of it to Newsweek's qualities in long with XXXX. strong leading has financial America's list earn And companies, are essential with stakeholders. that and most enabled closing, spot trustworthy companies recently transparency and financial our Bread that trustworthiness that integrity we value for deliver confident as successful The will credibility, Bread team are organization. a our governance term is an And that consistent

it pass to the financials. review now Perry I'll to

Perry Beberman

sales provides up X $X.X first were highlights. year-over-year our to billion. credit quarter financial financials Bread's X% Slide Ralph. Thanks

consumer continued continue growth during quarter decline. sentiment slow to spend consumers the as While to

all to groups pull based We credit spend are inflation. result the a back seeing as of decisions across that many borrowers spectrum and on making are discretionary income broad

non-discretionary retain purpose shift strategic to over proprietary offerings our increase spend. allows this Our general to years three past us and co-brand the

normalization loans X% respectively spend and of further around proprietary well and year-over-year sales. into half period credit moderation by XX% launches in including and driven partner the NFL Averaging growth, payment brand consumer rates. as now Co-branded comprise sales increased and as credit AAA our

BJs portfolio sale year figures. billion impacted these this $X.X in of February The

loan net As first portfolio in we income. of loan which seasonal release non-interest in be sale loss credit to million up XX% The normal BJs the Total a the a portfolio higher also quarter second second result balances. the the first has related the resulting first and the increased resulted uplift expense XXXX to expect quarter $X.X sales lower despite average XX% $XXX reserve quarter from sale year-over-year. slightly quarter. billion gain portfolio of the on sale, BJs quarter benefitted was than Revenue quarter for our versus the of

first care expenses and inclusive technology increased The and interest of XX% was expected. accelerated the Total in X. first collection quarter first the Looking as at more and declined quarter in Noninterest $XXX from and monetization $XXX non-interest quarter financials customer year-over-year the digital on which resulting sale. from XXXX related balances. million hiring the and income on XX% driven result of was up of detail sequentially XXXX hiring, included by higher increase slightly gain benefits compensation million increased loan was the the income higher of Slide from staffing. net costs average Total employee

increased We also saw expenses. volume related transaction and systems

be the slide in of drivers the expense can Additional found details deck. on appendix

up the was quarter driven portfolio quarter the operations continuing from improved XXXX. XX% $XXX of first gain sale. million by PP&R income for on versus the year-over-year Overall,

producing focused $XX Excluding the on PP&R generated have PP&R the we marking remain quarter increased sale growth, X%. consecutive eighth earnings. million quality year-over-year or we that sustainable

yields Turning from increase X. was in by increase reversal higher, benefited yields Loan fees up an which prime to year-over-year. to loans rate interest moving to in in results of our Slide price in moving basis higher partially related losses. Loan elevated points variable credit This increase offset continued tandem. XXX

strong Funding interest costs expectations. XX% in loan XX% a be net the adjusted nearly to risk remain yield our with of at with Overall in quarter. line continue margins

maintaining can of you to our we and graph, flexibility deposits mix the right actions funding. unsecured on unsecured to borrowings while through funding our our the As our see reduced grow to secured, continue and direct parent consumer bottom wholesale improve

loan $X.X requirements BJs our sale in seasonal end. Typical the combined reduced the with over year have funding quarter pay from downs the bounce billion by first portfolio

result, deposits pay and down large our a reduced of line brokered we portion conduit secured wholesale balances. opportunistically our and a As

$X Importantly, These funding diversify quarter. term we of and recently expect maturing renewed approximately renew needs. two provide billion this to facility company's the valuable and facilities flexibility remaining upcoming of our further borrowing secured our million condo $XXX funding of long lines

to X. Slide Turning

to of proud achieved our with are and direct consumer deposits. we have the We diversification funding success

our versus quarter. Our direct for average These insured. XX% direct year to billion ago. XX% mix XX% consumer $X.X deposits our deposits year-over-year total are to Again, over deposits grew of the represented FDIC XX% a to of consumer funding

we're our even continue make stability competitive to overall We able time. repricing funding to offer deposits portfolio, balance admits market up consumer to recent the credit over maintain of that volatility. Given direct large the will a of characteristics growth our to very portion rates anticipate and card drive

Slide to XX. on Moving

X% Our up processing approximately related credit the net quarter rate the of delinquency quarter. in was We customer to quarter rate estimate XX behaviors. to for transition accommodations first for points the slightly from quarter, basis pressure as card The from elevated payment was by XXXX July the rate of from made our X.X%, services. continues persistent first the loss consumer was impact fourth inflation

of The our XX impact with points the increasing average potential in as maintain BJs its basis credit increased result than metrics. reserve higher intend We expected of the portfolio conservative to a performance model weighting rate reserve and in sale challenges, quality. predominantly XX.X% seasonality our to anticipation sequentially credit on macroeconomic a of and scenarios economic credit

to reserve continued the we macroeconomic in increase pressures. due rate to that approximately could previously estimate As up mentioned, XX.X% coming quarters our

of portfolio seasonality. adjusted risk fourth downward the or BJs credit a distribution Our the exit quarter the mix result from of as and

our of larger given strategic Our materially made a proprietary remains above diversify card our product with have mix decisions portfolio. plus cardholders percentage we of representing to pre-pandemic and portion levels the co-brand XXX

risk We monitor we took our challenging adjusted of properly in and economic to that cycle. our models to discipline, closely risk strong with margins manage business for our that drive management risk returns Ralph we economic credit element the the projected As proactive expectation we conditions. we the through the in take. actions full our management, credit sustainable sheet our ability ensuring protect compensated levels. to confident tolerance, of noted, fundamental generate We above growth are face A balance profitable our peer remain more risk

efforts Turning to shareholders the steps slide results positive and further near additional the The reflect These improving capital our debt XX. our continued term. create these We on remain evident growth our financial priorities the and metrics success. slide. responsible reducing graphs our for while value supporting focused to years levels actions actions on in commitment capital are position to company's the Bread stated our this over of in past our and three for

TA at a XXXX ratio of quarter the Our triple quarter TCE nearly X.X%, first the to level. ended

Our leverage with level continues to down same reduce over XX% period. the debt parent

continuing As Ralph said, remain we trends. to these committed improvement

that the provide greater our flexibility will many in currently you The debt know, mature process this plans. XXXX. term to of are reduce of our is to of overall support in As long restructuring set growth we restructure level and that completion parent leverage

XXXX. common Additionally, compound have quarter tangible our improvement XX% of first substantial annual since book of growth the share we rate with per value a seen

couple results value this our value book for Taken more inherent creation that has all the in tangible same than commitment over and Bread the our initiatives and the we successfully together at company show over if transform actions shareholders the potential and this and to you believe share timeframe taken the that Financial, doubled time. unlocking to per three past with value over underlying a look years back

outlook Finally, of for provides slide full XXXX. our XX financial the year

Our financial guidance unchanged remains we the January. outlook in provided from

in strategies loans digit consumer outlook. are grow the to mid given our single spend For the range economic and relative partner marketing patterns on year average pipeline, and our XXXX full to based current credit investment, new payment expected

net with sale growth the with consistent average rate to full excluding revenue year growth expect full interest of gain XXXX XXXX year on margin We loan to similar a portfolio be XX.X%. in

slightly outlook NIM new Our fed one holding remainder rate with increase for of steady the each the contemplates prime year. we are more accreative increase. than Recall

expect a XXXX. We in full to operating positive leverage deliver year

reported as on servicing the technology are half gain product transformation. brings of and to we leverage platforms possible. of modeling otherwise pricing well million been million expenses provide Now to advanced our accelerate and rate as forward essentially full after grow capabilities from XXXX full $XXX $XX our the efficiencies, and than operating innovative color with ability opportunistically adjusted from the year XXXX up sale, gain magnitude the gain to exclude on to incremental expenses investing both enhancements, total investment year we in and $XX $XXX to digital from investment capabilities sale first drive million for million full the we more the look revenue, the have future of our reported the as you revenues purposes year technology for and at This To new sooner would expect offerings same XXXX.

this time, At quarter. expenses total expect second to from flat first approximately quarter we be the

a expect the decline in efforts. quarter. $XX be to half efficiencies capitalized amortization we're than second of of to rate driven project With closer in lower We expense per XXXX reaching technology previously amortization first useful and the forecasting quarter to life second the improve by operating end depreciation quarter a to expense software lower run the half expenses to third million total our modernization related development the its year intangible

card There's services. rate outlook we from our no transition net XXXX rate approximately to our credit of processing the change as including anticipate full impacts loss X% to be the year

can imagine, based on broad range year outcomes of there potential As various economic you the for scenarios. a are

that Our gradual our in time, unemployment At persist XXXX. moderating contemplates assumes same outlook remains inflation in a and outlook elevated, but increase pressures XXXX. these will the rate throughout the

and the clarity curb inflation, will We continue as efforts Federal update expectations our we monitor to accordingly. Reserve's macroeconomic we closely gain to indicators, on

points. our above processing peaking May, approximately the services quarter net accommodations in customer XXXX are the we upward we in fourth quarter by second the that discussed transition in forecasting to X% will impacts expect loss of from to the basis around X% inflate credit loss with rate rate trend We connection previously made XXX net second card of the quarter

the net with be rate is to Given current the slightly anticipated is or delinquency services. the quarter X% to card trends, third loss credit representing reflect expected the that processing from then transition our of month July below last impact

to strong range items. full term first build expect with value forward upon financial shareholders. remain on rate in to our of our we due Finally, year of strategic priorities timing our the variability to tax the to quarter-over-quarter and results discrete quarter XX% execute for We long company's building effective normalize XX% look we'll to continue the to in

the are Operator, to lines now questions. ready we open for

Operator

from ahead. Instructions] Our [Operator you. Thank is from Sakhrani KBW. first go Sanjay question please today Sanjay

is open. line Your

Sanjay Sakhrani

what lot Thank on the perspectives sort in morning. you pullback mean, that discretionary year? part through back guess about know into you. in spend. Ralph, Good talked the of a we move maybe start I we'll some the I the as see with your on guys mentioned the economy. how of happening I following do call. Obviously, backdrop of you Perry a

Ralph Andretta

Yes. It's a great question, Sanjay.

to concerning is inflation a three is feeling discretionary with spend and non-discretionary members of that think a we've consumer program it's from but than our sticking and and others. there are years diversified products ago I with The still to current our still non-discretionary the us, persist, of obviously, greater would spend some impact products move to co-brand have portfolio of us product. been direct more some

continue seeing of So we and to we'll on move as not We loss end rates, about the guidance We the we're it. in the talked improvement I changing forward. back see our year, think loss that rates. we're monitor

Sanjay Sakhrani

then great. up maybe Okay, a for And follow Perry.

such, curious you forms was I'm that think about were I if little mean, guys assume like facilities I tapping But incorporated guide. just quarter. facilities? been was there the these into the positive plans just cost because what chatter and a ABS into was other into it bit of on think I I the are, sorry, that's was differential period, some we differential? cost renew maybe think unsecure, to a significant able it and conduit debt that just Thanks. those

Perry Beberman

Yes. Sanjay. Thanks,

eager or of funding we're say in a in a it that deposits, are debt the what that opportunistic, plan. we funding. have to all And So when we're think source the we'll look good got ABS us. is heard But month, banker to of the on right over interest up support And consumer we more all there's it's the whether continue to it's diversified going into again, will, to in update to say again, the I'd rates parent your right something a And there instruments, being get I group direct an time interest to as you market. we've position. There a, now, now, aspects. as share right well point market be coming We what really on. but the out the of with other lot is relates at the doing

So we're ahead. excited about what's

Sanjay Sakhrani

thank Okay, you..

Operator

you. Thank

question go is Robert Robert, Blair. from ahead. next William Our Napoli from please

Your line is open.

Unidentified Analyst

Hey, on morning, Napoli. good for Bob [indiscernible] a This guys. is

on to you're wanted of comments in the ask just Thank broader pipeline. of of Could you. give business what partner Just sales year you development the and remainder seeing momentum? some terms the in for terms

Ralph Andretta

Sure.

and in remains it's We our couple enjoy what pipeline. particular or Our the pipeline, pipeline strong do is really I partners. after as partners new go past things. a reality One, of about

partners, We be That's also me, the in. good have good to of good really it's position down very, and with the sense And is a our securing not it's a really a good securing, just for up pipeline economics. very a chance the and of larger spectrum.

all sized be would strong and with 'XX wins had medium new novo play and we'll as business of new de are to in and partners, allow. pipeline. us those announce I we expect XXXX, in And think So contractual another I were partners, as in partners small obligations I successful partners

Unidentified Analyst

of out the up. tightening incremental changes sort Thanks. follow plus quick three action to quarters? of underwriting two Is quarter there in a as to just or terms throughout And call you. standards just Thank anything

Ralph Andretta

levels. at underwriting pre-pandemic quite not We're

continue on monitor continue we'll We do and that. to And basis adjust a to accordingly. daily

continue. We are surgical that on not and short a focus is did bit We're standards very little our we term. that will focused maintaining higher and pre-pandemic, term, long

So we'll trends continue make as to adjustments move. the economy appropriately

Unidentified Analyst

Thanks very much.

Operator

you. Thank

from please question from Vincent ahead. Stephens. Caintic Next Vincent is go

Your open. line is

Vincent Caintic

my Thanks question. with taking update for situation Ralph, Good morning. provide you could loyalty ventures? an on the

Ralph Andretta

the sure. Sure, loyalty to continue for and ventures. the we're we question. clearly with monitor aware, It's thanks And situation

maintained As in as loyalty completed, standalone financial, spinoff a was soon the stake we've XX% Bread ventures business. the nearly

always ventures from thrive. and we loyalty been are has with expected we So largest interest would our the and had inception, grow business aligned shareholder its and hoped interest,

disclosures, its and ventures cited economics, filings, geopolitical the public foreseeable its affected and unfortunate. repeatedly royalty As were was factors quite by bankruptcy not and business macro that other

they We strongly regarding appropriate. we respect entirely believe against including filings some to of made are and transactions spinoff completely that respond decision defending the with And allegations meritless. And prepared and claims, are was loyalty should the our that ventures any arise. spin process transaction bankruptcy making any in aggressively the appropriately,

Vincent Caintic

dividend And parent recent Okay, the helpful. your you the any on excess bank great. has That's capital do? can and ratio. talk what you what but Thank restrictions to taking volatility, your a bank Can can bank any a very looking for thoughts you. on if flexibility high excess Thank very account about industry capital? And to commodity you. are from into Perry, the capital at with there do you

Perry Beberman

Yes.

source has had I of capital that ratios. of dividend And capital of able good our up to the the a level, think that a a that you will that's exceeded XX% too. be really we've being see slides And in can that portion observation. bank one

down element we the it portion. also restructure is big a paying as parent of mentioned, to I the debt, As look

were, and parent in sure with available shared are points that would big we think parent historically, we So slug the we the to further back low by debt to up of we banks And look to plans communication we up what hold the make And support. dividend excess to that's the to of able plans. constant that's dividend we at that in have are our to support that middle to trying then the regulators. a that be will our level, I ratios the can say have

Vincent Caintic

Great, great. much. very very helpful. That's Thanks

Operator

Thank you.

from Orenbuch Our Credit Moshe, Suisse. next question please go is ahead. from Moshe

is open. line Your

Moshe Orenbuch

thanks. Great,

looking mentioned the Can -- the losses in and kind outlook into of about bit in for second what would we're to the guys that of that a half to You kind the what carry and get quarter us have second the you year. delinquency you into things lower little of outlook to increased for XXXX? be just and performance in first what, likely see talk confidence have gave to confidence able be you

Perry Beberman

Thanks for the question.

still part there's challenge the impact And, in as with numbers, will related I XXX as of items. then noise first inherent transition the there's our quarter. from to that the points So just And impacting be know, mentioned it second be there in quarter. you basis of XX the basis about going points

as you the right delinquency can to so delinquency, So of in elevated the second little quarter see look and what affect a numbers stage for later July. you in at they're even losses as going now, our the a what's that's part

if you going to continue. I looks see think month just you're March's loss rate, to can largely you like. unimpacted So at Like, look what have

And transition confidence part stuff. gives when through of related this what that's of get so we the

look don't good, that's quarter, lot quarter have seeing. see opportunity the But obviously, for what buckets time early continue going we again, us have And and an have of the really stage every are the what gives losses rates see to can't the sight stage really sight, line Okay, continue which guide yet. a the because to the what Again, third along improved. we're role fourth entered looking line of into you have we really quarter. way, delinquency numbers. it's to of delinquency at We're great can good I fourth

Moshe Orenbuch

that going internally. offsetting movement some a impacts on things And kind maybe Bread's other that of issue. late been about hasn't any any any on I bit kind to things you doing could little been the public fee of whole of the are Got maybe ways that or talk about it. there Thanks. know But of

Ralph Andretta

address that. I'll

services some could proposal not assess its and we May are along the rulemaking rules continue they which are result comment financial currently that industry think where think X I potential the final And a period, impacts the in us industry those new are any strategies I be to at with, to yet. ends any the they with mitigate proposed It rest lengthy court. could in like revisions. rules But effective, looking become impact. a in process, be the before changes challenged may of but

they tightening APR to board, across pricing partner fees in a some tier restructuring credits are lastly for effective We don't contracts, higher So changes, standard. and the and different brand strategies, credit, expect that be any XXXX. of

And to are final, that to at and impacted become this by so to closer happy when we that time. rules our to gets the be When how our not financials intend the impact. it impact close share we'll approach

Moshe Orenbuch

Okay. Thanks Ralph.

Operator

you. Thank

Our next Bhatia of Mihir Bank is go please Mihir, question from ahead. from America.

is open. line Your

Mihir Bhatia

about buying, sizes, you customer what you changes seeing taking to question. an in I April any out? in to? frequently you did quarter. Thank Are trends for just tickets purchase paying update. behavior, the morning. ask buying, can you're anything they're Good how my volume want attention call And if they're give Anything

Perry Beberman

A Yes. of things couple there.

move bit excuse a We're about we talked discretionary to a seeing So me, it. slight little non-discretionary. from

that their people to with partners. And some retail a we couple this So bit see in we're were we traffic the seeing stores, said of were our in buy. a week there while and are that less come they little they move

that to think And habits. I kind the in as seeing buying browse. true their And not are people online well. change that's buy partner purposely holds to of and So the in going to we're retail for establishments

Mihir Bhatia

it. you're to roll just And back to early seeing trends stage delinquencies I week's the Got and wanted rates. discussion. go in some then understand last your favorable of

view sub macro the year, elevated get term, the midpoint, rate? the all that you'll here the given like in the at we you to X% what's six percents little rates XXXX? pressures it into normalized to and bit take back you your going to I Or that near closer exit or an as a of loss half. think still in be to giving that's back confidence Is that looking are

Ralph Andretta

that thinking be away, I little you look and macro long be break rate a year in What environment. down circumstances credit year, into actively the seven, think we're leads you unemployment the you said is own environment inflation does below managed to as and as it next set When will half Where of should how does things to strategies again, bit hopefully the persist? back to you the said, that is, its well. that go? well. get elevated of and XXXX

we'll give get the have as half the there of we're seeing this there. we for what And accommodations to be prepared of guidance But year for first that will the year. the the related related where do those customers in is what for end you expect we towards system or not that conversion

and length when the We're things cycle. based the will I committed of on into So to than stabilize. to cycle. expect get depth less matter of X% through the It's be a just

Mihir Bhatia

Thank you.

Operator

you. Thank

is go please Stanley. Adelson Morgan question next from Our Jeff Jeff, ahead. from

open. is line Your

Jeff Adelson

Perry. good Hey, morning.

like. go unimpacted wanted back or to March Just made luxury look what month being a to you month on the a largely unimpacted comment would

of this bip benefiting next the quarter fact thought there have Just you. the approaching in offs you're Was the trying to that know BJs BJs see exited other that is commentary want kept But do mean, for was more square to we out expecting year? to X% well. end the the as know But from confirm loss some are like the just at get year rate I the all favorable here. with I as I I would number that in going elevated. NCO I X%. still just rate now. trends anything month XXX that you're of impact with I know thinking we the there you because a still charge more seasonality And more that

Ralph Andretta

thinking I think way correct. the year about you're the sounds

the very or conversion, or do in some talked it in access quarter. saw friendly that as are largely July, it May, points. And what you up. it And XXX happened be less fourth and That last a us being And had from their to to so suppressed June that April, March And February, had able is being consumers basis is Then the further discrete the things we accounts actions. action. made there customer when by what's on to whatever saw impacted over being related about whether to do an then a communications spike July. of far I accommodations those accommodations were you impacted caused which July impacting year

months really that things and there four discrete of part are we impacted year, did, that anything and the So March. those impacted back wasn't last by to

said we've than I other why that's we've had this, January. So that less the impactful month the least

Jeff Adelson

April. Got super coming it. in BJs Is slowdown quarter. I FICA? with part we sure core effect And other that sales to a any income Omicron? are of you seeing that around helpful. shifts a just seeing guess the about learned else. noticing with Or back as lapping on the out laying are credit and talk some this make you I to you've And spend to That's March or think I by is by number and that you then issuers that want about more that and anything guess of stripping of cohorts of consumer? caution continued different just out. we're that's comment a Thanks you, some the out then slowdown sort And credit and for the going

Perry Beberman

earlier more on. what's question good broadly, we're lot around Yes, and economy partners. a brand seeing the good And economy. the question. ties And back you're I But going There's think Ralph kind right. it answer what the of from on gave on in a going

growth been slow going to we obviously with consumer strong, Inflation XXXX. into not inflation. is year GDP move as Again, is just the the So to to and it's Wage that elevated. throughout there's that's forecasted helped but hopes remaining which up the keeping is has moderate through down continue year.

population So and for that some stress, portion pressure, wages to of the the come again, back. creating that's why going companies start under pulling as are

putting auto they're the are that for for So on or more be their layoffs strong we're payments but all consumers even rates could loans though unemployment interest home now, pressure credit higher for driving also loans there and or loan remains card. reading headlines higher companies,

for savings that's fine. that Americans this by related while talked income you to doing to seem middle stimulus, even I've households before the about think lapping depleted excess you largely talked affluent and So, about about that been K-economy more lower be period,

that's So are a there little. to best with keep but the cohort doing growing a their population struggling is inflation, in up

shelter, think inflation. And still of those up the a from are basics about utilities, are lot costs those so and you

So I think that's what's putting pressure on.

look at consumers. we So

definitely quarter because are first you and little of foot decline We in there's seeing the a decline the see consumer that sentiment decline in traffic. the happened the bit

more exaggerated the across broader are lower trends risk consumer broad loan a are those the happening growth across group for little So the scores. but definitely consumer

our And they we think we've diversified I non-discretionary. manage But good back doing way can the more rotating, where So from discretionary you what's to They're consumers are best that's to mentioned happening. to portfolio. budget. that's about the a as feel

Jeff Adelson

taking Got my it. Thank you for questions.

Operator

Thank you.

Our next Bill, question from Bill is Wolfe Research. go from Carache please ahead.

Your line open. is

Bill Carache

thanks morning, and for taking Perry, my questions. Ralph Good

merchant getting partners? discussions your from that be up on CFPB from any sales with you feedback whether share merchants, expecting your you're impacted? you're early negatively Ralph, think Just pushback may their those curious any Following comments particularly late fee can

Ralph Andretta

Yes.

with our to that And parties appropriate. aligned we're changes know partners. will impacts really strong relationships I or We is any both mitigate help have potential

extending work talked good of any is about true that it's might partnership. pushback one things those that And the issues sign think there. we're going a be out we I through a Signet to of

and well. these I attitude mitigations vendor said of they're relationships, as not and the any we'll partnerships, been through So that's as all we have work are to, partners

Bill Carache

can if give one Perry, And which anticipating? to for to little helpful. math, XX%, in your this be That's betas. up you the deposits. relative of to Can sense for deposits maybe your a deposit you. outlook us betas one be paying a better bearing hike peers, to if thank is you're frame interest least from terminal high that beta more cycle Or finance consumer here, you bit rise our expect By your cost on more is at which correct? how Ralph, seem for squeeze you your Understood, I

Ralph Andretta

Yes.

think is, price. I will it to remain I'd the way we competitive continue categorize on

low a have to brick all accounts. us operating know, As avenue don't generate We you we cost these servicing have deposits. and for we of have don't mortar,

we to assets. fact goes price, like for And card it. again, credit are So us, the that variable we back it

along way. So we're to lot fine pass the increased a those continuing of along

Bill Carache

Very questions. Thanks my helpful. for taking

Operator

Thank you.

is go is question next open. Our from line from Regi Regi, your ahead, JPMorgan. please Smith

Regi Smith

there But guess, recognize for And share stock that well. me as your obviously on so there repurchases a Like share of it. the loyalty you there's Thanks Good lot price to question. I you through are you the temperature have do a mind in price that morning, and package. market guys. I is that guess give We buying becomes about taking where to, that kind take in you're today repurchases. to uncertainty the compelling thinking back of the price ventures working your is with how asks a refinancing economy,

Ralph Andretta

my Regi. taking you temperature appreciate I Yes.

think what profitable the to continue I continuing debt, now, that years. we've And, invest that pay I TA TCE the proud things, that. to of pretty three we of continue where more We're beginning. I of in we've taking in It's think out doing focus do a But minimum. we've ratio been do. partly think was like down in to debt to we three XX% hit couple to doing, there's growth, is it's tripled a given years, right are, our our that chunk

down So we'll our debt. And want continue build capital. to we pay to that

is our that capital, And I focus, we But of sheet now. to right want add And balance building our So our be is return our capital strengthening course, we think excess so and then growth. partners build we capital in can continue at business. investing time. our to focus, have in point profitable the the some to shareholders will

my to ask had me you priorities three If are.

Regi Smith

a put I one Bread quarter And that $XXX but for up, million. Bread credit math you out on Understood. maybe guys presentation it pay my is the below probably sales during follow suggested off, guess, were pay,

a my Now. figure I while kind ago billion it pulled are a back But know and from $XX sales right. math you is of guys that. given

are kind on that Why pay? of is kind what's Bread you this kind grown. you're has the happened? market of What's thinking what so And of not as materialized

Perry Beberman

I in the a that product us. option that a for our regulatory product is think installment but move, particularly if way is product. Most a people it importantly, product compliant we've loan. option mean, It only about us. for it's think we the partners. not That's in. portfolio, product, want for to the pay diversified we very Bread continue we a not markets our It's as It's to have. an is pay, important invest people the to We've diversified I

from how a feel about us of we borrow So and will and that. basket people buy of good it's part

Regi Smith

there? You follow of that. up performing kind on consider at is it there there's any a where just or Is to risk of there level internment still nothing

Perry Beberman

let Perry Well, of I'll back a is forming I'll then that risk a answer level there not There impairment. at up. me and is

Ralph Andretta

Correct.

Regi Smith

you. Thank Cool.

Operator

Thank you. Oppenheimer. [Operator Dominick Instructions] from go question Dominick, from is Our please ahead. Gabriele next

Your line is open.

Dominick Gabriele

so was guess lot Hey, for in roughly bit much taking NIM just questions. we're about particular. I year-over-year I flat A great, my down here. of it talking about know great I thanks but just was NIM. thinking little detail the a

the pressure was just benefit there's of here? follow of to flat little it Thanks. pay if bit How was huge Or pay is further some that deposit yield? expense a on to then roughly so we debt. it deposit rates And Because And more debt? Is from wondering number? down a that just get I up. do the down

Perry Beberman

Yes.

to going couple see of you're things, right. think a I

we gotten So rate and our NIM neutral. I steady, pretty think the largest manage remaining try impact, obviously that's because NIM to be to you've

of losses, seasonal So of is larger I'll But elevated and that's that's purification. losses, then NIM. of say, components, one in of movements dynamic shifting the got called portfolio higher the in levels the moving actually credit the the you've NIM the around

a losses that in have a impact much you from in when losses, they elevated from when have NIM higher basis, reversal during impact period, the percent So you have on point your low period reversal you [appeared] fees. go of you interest or and those interest fees, that was

more much year, So if longer are then the we've have the those year, in have of the of as you talked reversals. also where back you the you and as think improvement elevated into you'll NIM as about those about items, the the of being conversion losses, first no half related go from quarters of half because an impacted

Dominick Gabriele

share interchange because down of be Is Perfect. of that retail to revenue growth. the sales loss that perfect portfolio? sale say year-over-year If That And net or right of the year-over-year your the of retailer or makes revenue has interchange we the sense. share agreements? credit, it portfolio, should agreements that traditionally of linked the to about how that and sale think net

Perry Beberman

that you interchange will like mentioned unique say are net contracts because I the includes that, kind what there. and the share agreements, So retail brand our fees in of

think comes But way sales. to correlate with just constantly that will different best to the So is that every move meeting I it say on it's like I think a related new line And in our RSA overall, construct. would I it's partner just little sales.

Dominick Gabriele

Okay, perfect. so appreciate insight. Thanks for it. Really much the

Perry Beberman

Okay.

Operator

questions. have no you. Instructions] We further Thank [Operator

back to for Ralph Andretta So to remarks. I'd closing like hand

Ralph Andretta

and continued you want just interest I morning. a all day. call good joining all So your thank for and wish the interest appreciate I you in this to Bread I Financial,

Bread Financial (BFH) 27 Apr 232023 Q1 Earnings call transcript