Bread Financial Reports Positive Trends in Credit Performance and Loan Growth
Bread Financial (NYSE: BFH) executives recently detailed encouraging early-year financial results and strategic advancements during a conference call hosted by Mihir Bhatia of Bank of America. The discussion centered on improvements in credit quality, stabilization in loan expansion, and ongoing investments in both technology and funding initiatives. Participants received updates regarding January trends and expectations for first-quarter expenses, signaling a period of measured progress for the Columbus, Ohio-based financial services company.
Perry Beberman, Chief Financial Officer, expressed satisfaction with January’s performance, noting favorable trends in both losses and delinquency rates. Loan growth remained stable, a development he characterized as “a nice little bit of inflection.” While acknowledging a typical seasonal increase in February, Beberman projected a rise to approximately 8% before a subsequent decline, factoring in standard day-weighting and seasonal patterns. The company anticipates first-quarter performance will align with previous guidance, projecting a slight decrease in expenses.
First Quarter Expense Outlook and Strategic Transformation
Beberman clarified that non-interest expenses totaled $500 million in the fourth quarter and are expected to decrease slightly in the first. He cautioned that year-over-year comparisons may differ due to one-time charges incurred in prior periods. These figures exclude debt repurchase costs, providing a clearer view of adjusted expenses. The CFO emphasized the company’s commitment to fiscal responsibility while continuing to invest in future growth.
Ralph Andretta, Chief Executive Officer, highlighted the significant transformation Bread Financial has undergone in the past five years, emphasizing the strengthening of the management team and a robust finish to both the fourth quarter and the full year. He noted substantial progress in fortifying the company’s balance sheet through debt reduction and increased tangible value, achievements recognized by positive ratings from various agencies. Andretta stated Bread Financial is now positioned to simultaneously invest in its business, improve its financial standing, and deliver value to shareholders.
Targeting “Middle America” and Consumer Resilience
Andretta described Bread Financial’s core customer base as residing in the “middle of the K” within the K-shaped economic recovery model. This signifies a deliberate focus on consumers who are neither at the highest nor lowest income levels. He emphasized the company doesn’t primarily serve superprime or subprime borrowers. Recent customer acquisitions demonstrate an average income of approximately $94,000, which Andretta characterized as “truly Middle America.”
Despite facing a challenging economic climate post-COVID, including compounded inflation of 30%–35%, this consumer segment has demonstrated adaptability in their spending and budgeting habits. Andretta described the consumer as “resilient,” adjusting purchasing behavior through trade-downs and quantity modifications. Bread Financial remains optimistic about the consumer outlook, citing strong “hard data” that contrasts with more pessimistic sentiment indicators.
Expanding Product Offerings and Vertical Markets
Bread Financial has broadened its offerings beyond traditional private label credit cards to include co-brand cards, direct-to-consumer products like deposits and credit cards, and buy now, pay later (BNPL) solutions, including installment loans that can evolve into personal loans. The company now boasts a portfolio of “seven or eight products” available to consumers. This diversified approach allows partners greater flexibility and expands the potential customer base.
The company operates across a diverse range of verticals, including soft retail, jewelry, beauty, travel and entertainment, home improvement, furniture (with partners like Raymour & Flanigan, Furniture First, and Bed Bath & Beyond), and electronics and technology (including Dell, HP, and B&H Photo). Offering multiple product options enables partners to cater to a wider range of consumers, such as providing a private label card as an alternative for those who don’t qualify for a co-brand product.
