BFH - Earnings call transcript Q3 2024 | Bread Financial Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and, welcome to Bread Financial's Third Quarter 2024 Earnings Conference Call. My name is Michelle and I will be coordinating your call today. [Operator Instructions] It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial. The floor is yours.

Brian Vereb

you. Thank slides found reviewing section in website breadfinancial.com. the release the of will at be can the we of and be earnings our Copies Investor Relations

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

based that with These GAAP, questions call and posted management's we on of non-GAAP and to would on Before the you investors. our the information I filings will statements may for like materials comments today's which assumptions are the speakers responses subject quarterly and the of turn like to earnings would provide of our begin, reference your financial Ralph other contain measures those uncertainties that, company's included useful SEC. Also some Reconciliation certain website. With I statements. forward-looking made to are remind in to and are expectations Andretta. over to to some the on in current we on release described our today's call, earnings and measures, risks believe Relations Investor call will the

Ralph Andretta

everyone Thank call. morning you, to joining Brian, good and the

by by underscore and begin, the effort. Red to I wanted year's support those hurricanes. this serve, relief financial we our we Cross emergency our to communities American recent start I to thoughts impacted commitment Before to customers for the To sending the are increasing

support payment during customers efforts. our affected to the in safety providing and We are continued customers accommodations we affected Additionally, wish impacted regions. everyone the recovery

quarter key the on X. presentation, our with starting third to from Now Slide highlights

responsibly sheet. to risk our demonstrated and quarter improve business third results to capital balance commitment reduce growing our allocating Our and our

non-GAAP on for of our convertible by notes. impacted adjusted repurchase to materials results, strategic will help including balance million our company. per hand the net stakeholders results we expenses, which in on The the evaluate strengthening continue our sheet We our the more income provided believe share. Accordingly, our to repurchase to quarter, of $XXX reconciliations on clearly or our execute earnings and cash earnings operations GAAP using objectives we ongoing

funding continued deposit wholesale direct-to-consumer strong reduced deposit Additionally, to improve mix funding. growth our overall with and

of to we per Tier diluted year-over-year, basis adjusted generated share book adjusted points adjusted repurchased of both the XX.X%. and X post-tax the on our net share the to increased $XX income convertible capital XX% quarter, premium Tangible $XX XX our $X.XX, million $XX.XX of common For notes. earnings impact from year-over-year increased equity value per paid million while ratio exclude

and Hard the completed quarter, Saks credit portfolio October, we we in Avenue the card. Rock launched acquisition During Fifth the program. launch credit card of the Also

partners, We customers. to these are share to to us our with enabling cross-channel propositions our value strong excited deliver expertise

consistent products, back-to-school consumers have Spending nondiscretionary be continues discount consumer. towards and stores. items Spending co-brand by Turning second more proprietary expanded which lower are and shopping trips with quarter made remained to purchases, apparel patterns enabled more weighted our as along to the frequent the with at transaction with sizes. heavily

partners. late the fees, credit close final impact on the offset coordination mitigation prices starting gas expect execute wages stable we and rule potential signs and market, labor in on recovery. To to of declining, normalize, with continuing While still a are in strategy growth economic stabilization to gradual inflation and sales continue CFPB's card of our real we credit brand to see a our

market, statement increased in We have and various fees. pricing changes including the APRs

litigation objectives related rule, of in litigation uncertainty regardless the outcome of and our surrounding the the confident generate strong the remain targets and to our While achieve we to and strategic remains ability ongoing returns timing outcome. financial long-term

long-term improving and uncertainty, are strategy, our Investor Day, growth, reducing allocation responsible, and well-equipped capital which value X on flexibility parent profitable metrics, of focuses to for market results shareholders. Slide and funding sustainable capital us strength value. long-term position a the our with shareholder disciplined depicts As our increased debt, of enabling financial our and capital driving volatility generate resilience we discussed at in to are address

XXXX ratio common our capital approximately equity progress increased of Our XXX XX%. X basis Tier showing points XX.X%, to since target medium-term meaningful towards

optimize debt Our our efforts to stacks capital are ongoing. and

Over reduced parent X the XX%. last years, by we debt have

of well below this our ratio going leverage remain double below will we Our XXX%. than is anticipate forward. less now our that target target And

our has to expect more flow at third cash than we the grow. compounded of XX% book generation, our rate of our tangible Finally, $XX to quarter XXXX. value share continue since strong annual grown book tangible by value per Supported

Turning the to reflects product Slide our of X. The left diversification chart suite. on the

and fully credit risk profile. of installment proprietary Bread consists our and later Pay, buy platform. now, these private improved portfolio products products lending Our integrated which our have our is suite and Together, co-brand, loan label, pay of

continue changes. Shifting consumers and on light we right, pressures. suite are the macroeconomic in given the more product And the their expanded and current well-diversified across to several spend, recent proprietary partner entertainment. total to have Our sales. as additions of in wallet electronics patterns brand and outlook has in with share approximately chart shift ongoing this partners our gains economic Co-brand of nondiscretionary the travel spending potential led particularly XXX consumers' regulatory and expect than we represent XX% shifted more card our to credit and

entertainment at is result, perspective and of now sales. credit a XX% our As largest vertical from sales total travel a

product long-term and our our that will diversification us delivering vertical shareholder help industry confident strong, provides reach and targets stability while sustainable returns. financial are We

the capabilities growing technology driving Turning macroeconomic Throughout and operational X. excellence. and to and environment, Slide regulatory have on the managing we year, focused digital accelerating responsibly,

capital payment with monitor diversification, can our a closely credit risk-adjusted and and allocation are while growing plans our to to adjust along spending meet customers' responsibly. We Our portfolio needs partners' key management in then product strong sentiment behavior. and proactive we consumer turn, and trends In disciplined returns. marketing and credit delivering and

to will experience, strong capital customer efficiency, we returns through our summary, enhance remains team invest value. In me deliver capabilities to risk in continue improve our operational the technology heard enterprise-wide and and have create prudent reduce focused say, generating management. you leadership on digital As excellence and experienced risk and

an unwavering sustainable, an value have commitment economic regulatory throughout ever-changing growth, We drive and profitable for building shareholders our environment. long-term to

I'll Now discuss quarter's financials over and the to review to outlook. turn to Perry our it

Perry Beberman

Thanks, Ralph. X Slide provides our financial quarter third highlights.

will Before large quarter. on the convertible I financials, notes of review of the in impacts provide a I our the details from the repurchases portion

favorable our our see, $XX resulted amount $XX the a strategic to in Boards million equity were partly the financial reduction $XXX can of million in impacted company. pretax dividend million to and million our expense, The you facilitate As tax additional $X quarter. To offset XX% by to decision in parent transactions by or our million bank quarter of $XXX repurchase convertible notes. third results repurchase, impact a principal the a approved

a convertible As our notes result value our of outstanding. of actions, million in remain $XX principal

the to leave common we notes in strategically require dilution impacts in to of point the nearly notes. XXX% share certain quarter also of we quarter, remaining on entered notes was available amount remain convertible share of therefore, principal protection at that wanted have potential and/or stock offset up when capped cash our XXXX, Additionally, convertible dilution of to issued also reduce the payments to call remaining we to our are convertible of $XXX capped potential second maturity. I the the notes. We excess make to Effectively, price to diluted the into we potentially of be chose out the they, dilution And outstanding. certain convertible offset this of calls our which impact of dilution designed a transactions, EPS the may negligible.

EPS, diluted the reflecting of not cap So the adjusted we offsetting this did quarter. costs provide value

as mentioned, I offset However, in remains this place.

to highlights. financial Now, shifting the

the new year-over-year, decreased reflecting by consumer from a our quarter, partner new down third ongoing product X% billion late increased strategic fees and tightening, gradual the partially private $X.X our the loans $XX.X was leading spend During partner accounts. benefiting proportion growth. Revenue of mix, shift billion label in X% to lower to sales credit lower in due resulting primarily $X.X quarter credit from year-over-year, quarter, of X% offset Average growth. in moderating of year-over-year, billion

decreased Additionally, net have continuing operations lower income adjusted EPS be found by $XX million sales can along convertible total big to diluted discount pulled a million primarily large The back X%, credit excluding convertible of lower on by lower card All decline our fees reduction the we income, adjusted $XX primarily merchant was from our as are which pretax and consumers discretionary diluted and which operations from slide expenses notes, $X.XX. a and bottom noninterest figures premium impact from fraud processing reconciliation expenses, as noninterest represented in expenses, had repurchased was EPS continuing driven the driven was due losses. ticket Adjusted the a the as the financial for well adjusted paid. non-GAAP repurchased appendix, with notes. table impact been was and measures. Adjusted at income from our non-GAAP all financial measures in purchases. Total

the after-tax impact by Excluding for convertible both notes, higher losses in repurchased the our quarter. from credit a million impacted provision $XX

primarily of X. reduction net notes is $XX lower $X interest the Looking impact noninterest year-over-year, discount detail a repurchased income $XX by increased partly in of on XX% the year-over-year, on decreased income Total while fees. noninterest million, quarter convertible fees, premium pretax the at financials the expenses late more down the Total $XX million. in and Slide for by paid from merchant processing lower by card million or result X% XX% expenses million driven our offset driven

our the expenses impact repurchased X%. from total Excluding decreased convertible notes,

expense the can Pretax million $XXX the details primarily driven or earnings website. in posted our Additional from million deck of drivers impact notes. appendix $XX our the by on be XX%, or on convertible repurchased pretax PPNR found pre-provision slide decreased

our sales repurchased and the year-to-date impact notes, and on a increased decreased the gains for X% Excluding quarter on X% from basis. PPNR portfolio convertible

fees to sequentially and addition X. typical yield net lower points Both XX.X% to and mix the in following trends. Slide shift our credit yield to quarter. in leading basis XXX higher were of interest primarily reversal billed fees interest gross continued due loan of losses XX.X% of late due Turning Loan to in year-over-year, higher seasonal margin product to decreased higher

Fed side, U.S. are we term the seeing treasury savings rate rates. lower the On accounts and recent funding and begun new as our cut rate cost moderate have decline to with funding CDs

growth from $X.X in accounted improve, funding increased reduce wholesale to XX% year by deposits, funding, see as up Additionally, chart, wholesale at XX% our direct-to-consumer to decreased which continues you we for ago. XX%. while to average continue on the deposits to quarter a deposits. Direct-to-consumer billion from bottom can of XX% end, our fueled right deposits mix Concurrently,

While that we to grow steadily. anticipate continue deposits direct-to-consumer will

to million funding long-term growth our fund manage balance note have senior flexibility actions updated October to additional These we and unsecured funding disciplined covenants terms. that wholesale the by in and flexibility, maintain will efficiently facility capital including $XXX extended include credit objectives. I'll that terms sources, improved further provide of sheet secured taken October, future diversified revolving We the management. strengthen recognition we the our evidence our maturity also XXXX our and improved positive provided with our capital to and commitment to action that of

Moving on to X. Slide

of compared gradual XXXX. rate X.X% future improvements historical third second net quarters to up basis delinquency third tightening. The From for the of to the in was second quarter quarter the the quarter forward, subject was quarter. X.X%, largely seasonally and XX follow trends strategic Our and X.X% benefits credit expect this in to X.X% the loss from macroeconomic point seasonal our quarter continued points broad from for rate we XXXX

as The although These actions third by the a for fully actions effective of inflation benefit to outlook result reflecting the time expected customers point fourth will quarter baseline in elevated and timing a improvement in gradual prolonged losses take assumes in to XXXX of some the impacted rate reduction effects an our we customers. Overall, the support the be for by will quarter to timing macroeconomic absorbed have will low slow consumers. Ralph year, be our from environment customer-friendly second increase losses, for see the quarter XXXX quarter a we it period as taken as our simply hurricanes, net the loss fourth mentioned. recent the is of

reserve expect environment As expected, reserve reserve provides scenario company demonstrating and credit XX.X% margin XXXX protection remained of X reserve of to rate And economic year-end seen lower, the of ended we plus delinquencies total the total points appropriate total to flat reserve slightly we loss tangible XXX conservative conditions be portfolio. in loan within a adverse stability capacity comprised quarters. from reflecting our believe margin to past the Further, a at rate our the challenging outlook, strong remained basis macroeconomic in loss and range uncertain year protection. Compared XX% unchanged absorption arise. quality ago, year-end equity an economic rate our overall an the common credit should more of In modeling. weightings our have credit in increase over the loans, of quarter of we XXXX, this the

at and of our a XXX-plus Looking continued pressures. percentage This above the cardholders our our despite quarters risk with of result credit over inflationary remained product is mix relatively mix. well credit prudent tightening credit distribution, score X the as levels primarily past flat pre-pandemic ongoing as diversified actions more a

We compensated risk are for take. risk balance the sheet credit to and our continue we appropriately proactively to our manage protect we ensure

from the impact convertible from quarter Moving our our repurchased financial XXXX. unchanged outlook XXXX of to for Slide the remains second notes, XX. Adjusting expense

loans net percentage of spending, low excluding the to year and XXXX impact CFPB to impacts on to are is to reversal higher actions tightening interest to portfolio mid-single-digits credit products. This guidance in higher year with gains proactive be and down a than continued early declining guidance. XXXX relative on credit gross interest based mitigation XXXX, We full XXXX, losses. Total rates gross the shift pricing includes to revenue losses, be full reflecting due on mix continue which average proprietary to credit XXXX changes, lower margin product a and down to not material co-brand basis of interest fees digits expect sales, and higher low consumer a for single economic to expected

fees we the prime spend. Note our However, gross for credit as reversals higher loan our cash asset we pressure and typical pressures benefit increase offsetting than and expect remain and fourth actions proactive margin interest quarter, net from liabilities. margin more assets interest CFPB well losses position, Fed seasonal as from expect to that a from transactional rates fourth as specifically sensitive, net quarter lower our normal of higher from balance we faster variable holiday rate lower slightly reprice as from interest

gained our fraud, along expect operational expenses. be expenses, of adjusted and fourth the to impact repurchased from excellence, focus and relative figure notes convertible down excluding higher mid-single-digits on sales a in result efficiencies with investments the advancement, modernization to volumes expenses further would than increased to higher reduced quarter third ongoing on adjusted quarter be we marketing As based technology XXXX. We from expect digital including seasonally

to net As rate XXXX I loss around rate loss low net quarter a mentioned earlier, the be full year. expected low the the is X.X%. in for to third for X% point expect And we the range year continue or

of recent fourth modest $XX lower net aligned consensus. of relief This shift a and the communities in net solutions to quarter have rate conditions of second proactively quarter designed some in to in These the to That the assume gradual term FEMA XXXX. our will quarter modest the will continues economic the million of the rate longer aside, we payment approximately cardholders caused to to in second in near-term a in actions in XXXX fourth engage opportunity improvement the provide have accommodation hurricanes slightly have losses as devastation buckets a modest quarter from economist with outlook number of impact XXXX. loss loss identified delinquency live, the our result increase until the for needed. which we them Given zones frozen the

the repurchased year to of Finally, is excluding rate XX%, to effective convertible XX% notes. our be the our normalized impacts full from expected tax in range

repurchased tax was the the paid expected, deduction allowed premium As on limited.

the picture, provided financial Day progress bigger continue at we targets meaningful June. Investor toward Looking to in the our at we make

risk to made below additional achieving our way proactive of leverage progress XXX% our at CETX a on on quarter, a with strategies CFPB XX.X%. strong well near-term well implementing targets our and stable mitigation are actions given target, double our this We ratio XXX%, mix credit ratio a

targets to our book and achieve build will to We continue capital capital our tangible to grow look value.

highlighted, increased returns questions. shareholder we to positioned the to deliver already well up are for responsible open are Ralph growth, now As strong and lines we ready value. Operator,

Operator

Bhatia first question our And from comes Bank Instructions] America. of [Operator Mihir with

Mihir Bhatia

you I from Maybe to here. expect start, actions your just losses and big Look, that get comments some think you But picture. made seasonality wanted you get to also credit to on better. I mentioned expecting

is So is, I answer guess right the are losses than big question stable? to if you trying XXXX everyone losses stays losses to the close peak macro be And will better now? XXXX

Perry Beberman

question. the for you thank Mihir,

It's we're I to stability macro in Right now, we'll think the down environment. give it's obviously, delinquency. really guidance, come is what going in to January seeing our our -- call.

historical future our I'll some seasonality little So a from customers the did with we what inflation will through follow expecting of say, pass of XQ. -- and into customer-friendly to quarters hurricanes through the to things is that bit I'm some support

got rates will little -- going in really stable I are there. to the improving. you So expect noise bit come a it's encouraging of But in macroeconomic to spend general again, down to prolonged of over But going that, improvements to landscape. be be behavior number gradual consumer help our with in And slow loans. beyond the that would, expecting that a quarters. to consumer But I'm

unwind. from persistent trying just these dig still going X home autos years that's Given take and of high to that interest inflation, rates loans. And consumers then out are cards, on to high time nearly to

there's for, household. fast the no So say, fix typical I'd American

gradual come sentiment. what but So baseline on of really it to, more really be is it's going the give but I easing down next on is views through more economy, our I'd is could I mean macro hypothesis, think, economic is And I year. it going a to say dependent. that the to

Mihir Bhatia

talk And some should in gets I benefit higher particularly, next of a from market? guess, guess, understand to How is now? headwinds fee like as can situation. what at What to year, late a follow-up, yours are much delay of getting standpoint are in mitigants the about I it you are right -- point the just just, the going because you trying already, the of the rates? the less them from market if is already then Okay. help some And the I'm interest implemented mitigants I of were be maybe

Perry Beberman

mean excellent been our have -- No, with right? I question, we an partners. working brand it's so diligently

to intend want we've have put actions What We the You've market over-earn already. to I prior sure seen is an, date. do effective make some clear. in not to the

to Our and commitment economics partner our providing a needs customers in then their fair and investments to meet valuable borrowing remains our programs. product

had brand our back discussions have been took We changes to already partial then, have actions an some the rule. say, where put and very we've over including we And with in increase are meaningful burn APRs I'll of into we point, paper contractual statement XXXX, fees. market we're to and have required to early of I'd then probably take with took understanding that of in strategies partners effect. that a your executed. And implemented of anticipation in XX% be some a say actions to when. to, steps time Since of number increases lot APR APR increases build market, in the just end

build. year. color of as happening more the seasonal to you go that's on that, to offset in of comment give see next that And into then some Mihir, start benefit. And fourth it But things my as into that will we so quarter. And the get some we'll will year, next where start in we'll quarter other

back is that partners. of with shared some And

late So it's, flawed is is CFPB deem this. of as a here consequence goal an the not This We to unintended rule. fee again, over-earn.

Operator

with from KBW. comes question next Sakhrani Sanjay Our

Sanjay Sakhrani

metrics does improve. do based there to move the stats. were the of think delinquency of of on that sort your the changed like as I trying metrics. way? guys necessarily Perry, continue into steadily I comments any when you Shouldn't look to and credit tightening we on look credit late-stage improvement. a that we forward? to that guess guess would I'm year-over-year positively in change at delinquencies that that about to I derivative back credit not stabilize we how you just in lot that that comments, help seeing impacted expect have done as year? any just just your the next some second Has go on know

Perry Beberman

our certainly I'm on that fair very The credit sorry, actions. line actions Sanjay, -- Yes, taken here the benefiting is we've have some feedback point.

over still As you the the in think we're about this couple seen we've delinquency. at. is past of the that our stability Despite years, where actions credit

co-brand the to continued improvement or just other proprietary bit combination the -- is we've a all Now, actions you've our the going many to of we've products, to I are road probably I a through-the-cycle of more think that that mean seen macro and back our stabilized in seen credit again, has the think than still delinquency shifting degree peers is economy very the get fully that taken. result a expecting and from the our improvements of that private target. aided again with But combination the stabilizing be believe products risk with consumers away But we a I from it's I of It's year. an of towards improving next label challenging products outlook and or credit to serve. mix also is effects improvement. But be economic for and actions. will in going continued mitigations credit throughout dependent effect do we combination long the really

Sanjay Sakhrani

then just then that Okay. just maybe curious late I'm metrics one question delinquency did the in help And on September? just on hurricane more fees. actions the and the

Sorry, the same I'm asking asked. question questioner previous the one as

should far as impacts think you expect just we of late year to trying about sequencing all assuming to like would this as the kicked when of in whatever? stuff, like the have those offset I'm fee the mitigation, or it impacts. Just from

Perry Beberman

Yes.

in an having the effect October. So will first, all the from impacts start hurricane

those are of going come because October. in impacts to of what delinquency some that on So see reporting quality And credit we'll really our to provide in report. we'll that of see through monthly you're our clarity some impacts start the and

then losses will then then an detrimental will quarter. October-November year. And to go will think will be -- and that when be the quarter impact also next more it that's impact like I second So the it

just but -- So that's timing. pure

That's upon up and far long-term leading and of to into As degree XX-month to is a product go along, as going into said it effect the to effect. number guidance. it rule like relates continued as be benefit If the ramping upon goes ever when we will something in how the that late not negotiations mitigation, into, a years. of goes rule I'll happening the into there and of in time. effect, final our a that when our are does for number guidance we'll get take cared effect happens then we've we some strong a had actions late an The it of of depends with that That's that has takes into implementation when that's have partners fee the time back say, will builds the the well. But rule. And and over returns period that fee window. all that in a -- basically we've APR to

Operator

BTIG. with Caintic Vincent from comes question next Our

Vincent Caintic

season. your you're your on holiday the First sales talk in of one, on, about perspective and the having the is of first, fourth quarter, consumer promotions wanted fourth the additionally, you're terms discussions will quarter feeling doing be other terms on then in to sales? the I And perspective particularly What's holiday or how perhaps in terms merchant of merchant sales? experiencing engagement

Ralph Andretta

really expect don't consumer we've in in it, change the about quarter in think a fourth I And If Ralph. I quarter. to is consumer from second seen a behavior the change third the This not behavior quarter. Yes.

more will visits. There'll And out but there. you'll they probably be I be frequent self-regulating. consumers smaller they see think baskets,

doing to I partners they think fair terms attract prices. what think our they need consumers of do to are sales in and

appropriate. think I that's

will season. be moderate sales I it think a

But bit a little will fourth second line I'm that we've macroeconomics, the quarter the given think be fourth that just very and third robust out with spend quarter anticipating quarter, probably I seen. there. of not a uncertainty the in

Perry Beberman

I'll Yes. that. And to add

X the have range, the years. year. is Retail recent was And Christmas, things it in frame than than holiday to of the that due between may to retail read X.X% sales which for think nominal the X.X% be days, lower in will only that days part National Thanksgiving that time last I which shorter is One you Federation that anticipates shorter XX growth same is the and

going that's would we're getting some ads that normally a are pressure holiday season. possibly And flood the put campaign in this on out to retailers other amount the happened here squeezed on election sales of TV lot in of because So that the thing ads. the of that put that of cycle

So again, everything that health stable. sales. remains around think industry-wide Ralph the other said I consumer affect But some the will are of that these things retail is

Vincent Caintic

And day that about that count yes, well. I was Okay. thinking as

detail. appreciate can one point the impact I I guidance and losses just on if So that wondering hurricanes. all was the you second And then for Perry. put appreciate a the the all from that. I finer on

quarter charge-off the X.X%. I So think about rates in the past, thinking fourth of were we

points then has talking charge-off rate. basis million typically first second quarter about be $XX And then But benefit quarter XX a lower. So you're well. would higher as

the quarter the terms first would how to then into about rolling helpful. maybe know finer and then guidance think prior don't numbers quarter fourth your of you about the super that second to could with and if I how help So the in us versus quarter be think

Perry Beberman

Yes.

full benefit just you enough range. our took the characterized sizable zones. fourth it that is the guidance. X% I a XQ impact net seasonal way expecting customers the from right. $XX support the to million see that not FEMA increase think hurricane-impacted quarter to that's actions And will mean I But the to year in that we're in low we

to typically in down thought was important that going the in seasonal I fourth a number actually from seasonal didn't reason want We there models quantified you've expected. trends. the is, we've had it to increases of past it And and sure saw first would first when people does to reminded what surprised range we when people that of in some losses quarter think quarter did have be that. the actually of I first the comment then quarter, quarter. we that make go follow And you going why to

actions an there is best but the out there. as improve January, things can some quarter. But some that that credit been, We're hitting rise how in well to a seasonality going credit And guidance maybe point, of Now point for as as you point. there's, that hopefully then aside. to things follow at the -- That's give action historical we dependent be of I take increase. million closer -- that from into has what give then We'll will mute obviously upon beyond should second there much lots you and macro then get finer it's doing the $XX taking put on then can beyond that January. we the this it it. adjusted expected And

Operator

Our comes Stanley. Jeff from Adelson next Morgan with question

Jeffrey Adelson

impact now is for you roll impacting update Perry, elevated. real in dynamic should similar we quick the to that prices us talked on of you as that cadence might XXXX, a any the late-stage a dynamic think be seasonality? how if be roll of you about give your rest evolving. And the that wage sort rates growth I seasonality the was there late-stage has about why delinquencies? rates highlighted wondering charge-offs reason persistent guess part I here. the Or have been dynamic as of of more you've just could maybe and But have higher been

Perry Beberman

a so Yes, great question.

on think me this you thought little is I a point. give Let the an important on because bit economy, the

to is would of and some should and some improvements rates things we're inflation. so now start and expect with roll the in seen seeing have But then improvement, that signs delinquency. If economy stable in -- play improve. out better, of that stable to economy right too assist delinquency, like the to declare early some early-stage you it victory As we signs

acknowledged themselves. Fed the something that's think I

we target. And above Inflation So shelter, medical the concern areas X% remains all stickier still see insurance, especially the regarding still and for the economy still consumer of Fed overall. categories there's X%. true and above like

problem. this And concerns general been us so still consumer. a say, with that the it -- I'll has And

monthly If their it to employment done what And about about affect you loans, and power credit the the levels. means brings business you to invest auto future, they're increasing eroded still higher very which down hire and debt small card, road. Household mortgages, can spending think loans, have pessimistic that their that's ability well personal and high, above all to is question sentiment, the cost. think that's rates about grow, pre-COVID

done an has what this affordability So created gap. is

Americans. If served you it's we lower think and about who middle-income

materialize, did outpace this okay, signs Americans, quarter, say Sure tell of some X/X XX% stress. top, to it have inflation, the growth Americans up environment inflation. issuers, start showing when still other the that look wage I'll issue at ladder most been, driving a for their balance that of are could that's of our this but who But budget. you trends that not while we're doesn't that That are XX% customers But lot about X/X to all economy the broader these struggling with those the more So say, positive seeing said nuisance. the of this right? And signs prime to encouraging and encouraged struggling who they're of should say, is, were But higher I'll people the of delinquencies where are creeping the we concerns. those still we this the help the a this. piece talk

cuts into And again, so, are and is labor, year. should inflation towards well. moving more basis for unemployment expecting obviously next X% some target be XX that Fed's of employment, this end a year point as cut. People the good throughout in the That employment, resulted

economy what proven yet the well. has trending the of the higher not its say, of bit is past definitely signs. fully, everything adjust to showing But to over is inflation. the sufficient customers it's happened our line I'll So for has this in X cumulative impact many bottom And of years

depends administration create amount elected any inflation re-tick-up could happens the some some strain. what with tick-ups in on a reason, unemployment So and for of

encouraged So back-end landing. And to XXXX to cautiously say, It's or recession that be debate a with really And economists end and if optimistic we're, or the The roll our what have really see to others I'll for landing. it we're going rates. sentiment some that's no soft that's gone really is soft with from, we to those landing shifted consumers and that front and case, the a It's good. into. and the well should looks back want bode end looking relief for. for help start

Jeffrey Adelson

card when asset guide? XXXX? gross of How think And the follow-up, should be as here also start yields as we into your And curve we to those what about to impact good forward your could do Okay. quantify sensitivity. you higher reversals the charge-offs a level my think a from could be

Perry Beberman

a a -- guy precipitate good also net interest again, of guide should giving rate loss comes not the into that. if Well, margin for But XXXX. result if next as that down a year,

meaning lower benefit slightly mute cuts. down, that sensitive interest the continue the Fed we to will come And losses. gross are Now asset rates from if

Operator

Carcache Research comes next Our question Wolfe Securities. with from Bill

Bill Carcache

off of credit, exposure start many But lenders extending described. to to the When question. that look customers? lower you you universe population be broader a high-level the the scores with we customers you are relatively don't you've why same essentially across seem guys wanted higher of credit discuss sharing is, since credit have same than you to I with companies all headwinds. experiencing Could think as particularly consumer

Perry Beberman

Yes.

One, you K strain When about that's I the past, think think it's a combination saw one about economy, of the we've the we reason. in things. early. talked

the have from buy to So a from what our when time time, same at used faster. risk say continued mean through a They to little early. And -- going But to And other going and of risk, of we've couple through we take their we at level expand you years a a was know to reasons, universe yes, pandemic didn't issuers. We savings the actions customers. earlier. credit the other I'll felt same period customers was narrative elevated our we tilt box. X actions actions the understood of up our sensed credit that is big ago. took happened shared higher inflation customers. We we this, time, those And

us heard than You should that. talk larger they from been. have or not the about pain vintage vintages now And have feeling we're seasoning. the vintage. It's XXXX XXXX They're

look of credit the end our on some to we the year-over-year, low changes So ours you place. team is a of risk And that's other loss peers. go I rate at management the reasons when that's have disciplined think that that and in compared credit many to

Bill Carcache

up could That's helpful, And credit. follow on if Perry. I

rates longer loss sort towards targets expect the plays bit in clear sort it out from your to move should some parse to start you of sort think a some think under soft delinquency we made into being I an scenario, drift being us soft that ultimately supportive think term and to in the in if You of frequency The rate XXXX lower of you we lead and through-the-cycle loss later-stage cure severity rates of that here. But at gradually discussed all here? see landing, you very ultimately 'XX? drift able But how from earlier sort back reserve out that of I as the to landing to dynamics about could lower improvements point your little to for and macro response. end. these dynamics rates

Perry Beberman

from little be or I a think now, But mix what the all really it building from you be the just based that's march Are be of that there. It's to that up. either they right on drive are improvement some outpacing I better might of have, going with based ton key. said credit the what consumer. is fair. back-end is policies will mean, say, might getting to a going risk credit growth we're what things from it actions much that a to all we of to macro of relief are heard back inflation? So And party wage health to confidence And dependent. happen in I'll don't I taking I've going granted, be down there on inflation? book

I expect modestly your So see the fair a And year. It's a again, throughout -- improving. is optimistic said don't where earlier, something cliff with just I'm happen. going things thesis keep I event is and stable to I back-end then with But to fix. improve I think cautious. I'll would And if definitely little might -- cautiously things to that to look to to is I fast pairs stay But roll as rates reserve rate into the be you to me happen to about the dovetail what that. specific loss what isolate with like. And that you're want bit. trying if point, a then speak reserve were rate. because your on trying you can rates

until outlook, little I XX.X% time the today rate see bit. current evidence economic an which decline quality both where rate think reserve we've of the be past you've range near back-end the continued been the stress both the the quarters. expect at in over to That remain and the reserve of improved they credit scenario. baseline I in means we seen over X a the rates and improved roll rate

fourth we'll on landing go. down So less to as a change we the drift have CECL SX-SX down. would expect to of be, we for reserve in that flat those posture in going that rate a see scenario run. But now confident more that guide the is become our we going and I'd that that to will slightly outside possibly can we we But to any allow be that this I've possibly in about say given is quarters, really to the think and quarter flat. I'll right dependent I feel shift there's where slowly adverse softer reserve that that be, this if scenarios is rate in I'd confident the And say, we the weightings models coming then baseline

something of I'll much I that's now, So really we'll we to change think -- what running. to continue right as were those scenarios June this to year of watch. But didn't say, just from,

down quarter what of quarter versus it will now. down. right then I want to quarter XX, last I outlooks the said those So this very that to that's it back be quarter in year seasonally. and And seasonally, fourth first obviously, up fourth year, the was will it's watch days sure goes come from the XX fourth And make important going in to be what that do

Operator

question comes with Rochester & from next Our Trading. David Research Compass Point

David Rochester

all look be that's I pretty you're you in to guess up higher when Is those step that to volume And the marketing end would fourth And coming pickup. imply quarter? sizable I a just in expense mentioned to favorable guide, the seems that expenses, and down possibly from that XQ. at range quarter-over-quarter of more just guidance higher range. get Can the an of it expecting right? you On sales narrow increase

Perry Beberman

years correct. the in you'll third quarter. that's guide at your quarter quarter and the look you and of step-up expect see year. fourth is best past to of of probably go couple fourth that what terms Yes, I back in mean from the to And this

David Rochester

net still Okay. rolling a the maybe fourth all in mitigants in the some there some the of and the you net negative? the And there made Or even the the I pressure? pressures. are upside forces comments you in all work that Is fourth quarter? And to margin, or the still on be the enough drive on margin that quarter, stability appreciate expecting all supports could

Perry Beberman

in Yes. quarter. fourth I wouldn't say upside the

I think there's moving a lot of parts.

be And yet some of seen. to is, I'll say, it

the it loan that look through. is what behavior transactors. We've the say, growth I'll of in got Fed come does, cuts like going Some possibly consumer quarter, are with to still

that decrease why see just wanted interest we to there's, of of, a But typically, substantial seasonal commentary in a is variables. say, reason So net share the a amount. you I'll the lot margin

the put is Here, CFPB place late mute that. that offset mitigation actions we going in to to rule fee that some saying of our of some we're

David Rochester

Okay.

definitely expansion, not compression? the way but no in of much potentially So

Perry Beberman

as correct. Not much,

Operator

question Our from next John with Pancari Evercore comes ISI.

John Pancari

more expect seasonality? of Perry, And increase quarter I been first normal it have at looking define XX historical How had believe at we 'XX, you around here. normal would basis specifically, loss indicated your begin reflect to may you that when the your that to look you you're seasonality points. maybe trajectory seasonal

your 'XX loss quarter rate So that could above put first X%?

Perry Beberman

I guys analysts this. had had on suggested guidance earlier, just specific seasonal was that, I look giving what reflected you mentioned a I'm that decrease. their was it movement. not as at But So

of movement opposite what do. naturally seasonal exact the So would

normal I is just great wanted than dependent taking job collection will say, dependent to I'd and to effectiveness a terrific movement, we're there again, whether that credit the like. that we're doing actions. just movement. be do team collections. It's sure better seasonal The is macro seasonal recognition So it be there's and with And hoping

John Pancari

expected separately, then on call, times storms. impact And the you a the know this few flagged I of

much cardholder how Bread's curiosity, out of impacted base the storm Just areas? and of is Florida in

Perry Beberman

impacted right? to again, And than say areas. I population into it's It in was are want more Florida, of X% it's up Carolinas. the the about our

FEMA impacted. Atlanta. maybe we were I follow zones the that in counties Again, just some think had FEMA

X% was it to Carolina, in between of Florida, customers. that X% probably So range North

John Pancari

And on if an mitigation one. could around quick I ask last impact. question, was I think earlier It one question the just Mihir's

confirm, impact material we did benefits? to to assume was it in therefore, the a you your that not material Just should guide? indicate mitigation terms not impact quarter 'XX a And year to or full of this next

Perry Beberman

to it in and was Correct it material quarter. starts XXXX, in and out. material mitigation, to build not not say ramp that third But I'll wedge with

what seasonal for positive XXXX. is the ordinarily some did there. say, would have of be compression further that slightly I as quarter of the so will will fourth And CFPB of pronounced into will build And NIM It you will subsequently then seen. that it each to be some normal mitigation because into be positive quarter, going which helping that not offset

Operator

Our next with question Smith Regi from JPM. comes

Reginald Smith

buy which you a a us this. have debt thought how the when rate? It's low probably converts, could want a really easy about And stock? answer have And remind follow-ups. that down to did deciding calculus those you of redeem to back coupon or you I to internally guys fairly expensive you paying few more But then versus

Perry Beberman

hearing you. got if a of tell heard bit little But you I I right. and a correctly had I I if it think Regi, me hard time

for Did get on were right? that calculus to some versus actions. the other I the convertible debt repurchase of decision You asking the

Reginald Smith

Yes.

Perry Beberman

tremendous convertible months And And ago. not so quite progress to We our we've time. at plan capital to of debt pay year. we down a the we've did continue out debt our for the parent last had and XX necessity stack. took improve on almost when certainly So made us, since

additional sheet. rated been and senior million unsecured then million period. first in paid has million offering of parent that got last debt We just balance team 'XX, focused additional we got Our did in 'XX. of for during then January. And out $XXX got -- quarter. the first million right upsized time the $XXX issued We opportunistically November And a on $XXX of to in it, an really notes an went December we've down over $XXX the we strengthening

So again, improve company's we've of off focused then a it $XXX really been loan. our convertible, philosophy just to level our term this. bank situation. the And of debt the repurchasing million of trying parent on it's this continuation paid and And

XXX% was to is at we just XXX% our XXXX. double ratio As at down commented, year-end it leverage where

mean come. Day. we value to years out at opportunity, looked as numbers is I'll say, this Investor what you the And tangible I our thing we the put we accretion do. believe during a there over So to saw book for the good

future delever, dilution higher And so us these this further associated to expected is say, substantially is to consistent it share which priorities. our price with capital in convertibles our action, with And as move, the future. allowed it I'll derisked with

believe you've the to be a discount trading where we're So past when from -- we seen shares of we Day, went value year. we value. to said substantial just at in it close trading our should at book Investor a tangible multiple And pretty where tangible book

we navigate as so can environment the demonstrate, and time. a macro we challenging successfully improves And

a return we when convertible We do get time. expect responsible appreciation share with at along future could and And price commitments. the to it that, expensive continued our pretty achieving growth our repurchase

doing it call by were price take us, and to out a able early. we delever risk future I'll what So for

Reginald Smith

that the only And Is mechanically, but pays balances people when it benefit be. I off their when like the have X know the could about there's increases, apply first. new was bleed-in X I safe coming sure statement there, fees? assume Part curious. is those period pay I'm I understand. about from range mitigation is I APR balances, APR how to most impact, guys is, know those guess, thinking of part you stuff. I that APRs articulated quarter fourth what that then believe, a that to the fees the back of purchases. question. higher I -- It the if not was with it you're talking works? And the of

be great. could share you on would that anything So

Perry Beberman

bet. You

Act around to min highest pay And first, an it APRs rules the payment it against to which is effect. so why correct. is higher go anything allocation. has prevailing APR are has typically, takes the have for above long You balance CARD

are point that those in have Now you whatever throughout every at account XXX% rate. said, booked new the from rates or higher year the market

also fourth that new rates some accounts a come went that the that has helps with because benefit. Specific as quarter, quarter, So waves building will with in vintages be the of the build to building APR to of the balance higher some coming increases quarter. of continue been second of the each and the to on on some out new

see through come that be statement more net a in Specific not to bit would That benefit in noninterest interest affect really fourth start margin. fees, You the to that income. quarter. would

Operator

with from comes question Markets. next Our RBC Arfstrom Jon Capital

Jon Arfstrom

pipelines? quiet. potential pretty the activity, Can you're win your little in of the get to up. out company talked of Ralph, bit what Perry a talk the kind And been new been can for has visibility you've you guidance, I you a your want And maybe now? new business business what in then, P&L here. beat right seeing for and second talk about into pipelines. But seeing you're about you about

Ralph Andretta

beat you prefer up, I No, Perry. Yes.

Saks, and which we're and again, about. thrilled So Today, listen, program our it mean announced thrilled a we with a to about couple which of been talked novo always be pipeline starting what we're things. Rock, de I strong then about has continues we've Hard certainly, strong.

you of If through good programs, top good strong. top in the our of decade. to our our end XXXX, are you the look XX if general, XXXX The of are think 'XX. XX end good is end of the of at XX% -- to the programs portfolio about majority the the majority of our renewals overwhelming book The is XX%

have you like credit really certainly out is So which and out portfolios. really portfolios our out about Rock, reputation team. business I Saks respected. things then good verticals we be They're feel our are They for can good the de pipeline against I focusing compete well marketplace. to our And That the there, private or we is are starting which set continues co-brand we and love about novo development a could all that. What do really and you are. Hard label there. product do good in where like

goods. or longer As mall-based said, I on are one no dependent soft we vertical or

that success. portfolio diversified well a sets for diversified us product have set really We and up

Operator

to time. There I'll are now pass this it for further closing comments. no questions at back Ralph Andretta

Ralph Andretta

you speaking thank today look Well, in continued We Financial. with call Bread joining on the listen, next for all quarter. the to your and forward interest you

terrific day thanks a time. and have again for everybody, So your

Operator

This concludes the program.

day. Good You disconnect. may now

Bread Financial (BFH) 24 Oct 242024 Q3 Earnings call transcript