Bread Financial Provides Performance Update for January 2024
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Insights
The reported increase in the net loss rate from 6.7% to 8.0% suggests that Bread Financial Holdings is experiencing a higher proportion of loan defaults relative to the total loan amount. This uptick could be indicative of a riskier credit portfolio or perhaps external economic pressures leading to increased defaults. Investors should closely monitor this metric, as it directly affects the company's profitability. The year-over-year decline of 9% in average credit card and other loans also merits attention, as it could signal a shrinking loan portfolio or a strategic pivot in the company's lending practices.
Moreover, the rise in the delinquency rate from 5.8% to 6.8% is another critical indicator of potential future losses and financial health of the company. Delinquencies are often a precursor to defaults, which can result in write-offs and decreased earnings. The reported figures, if compared to industry benchmarks, could provide investors with insights into the company's credit risk management and underwriting standards.
An increase in the net loss and delinquency rates could reflect broader economic trends, such as a downturn or increased unemployment, leading to a higher incidence of loan defaults. This scenario may affect the entire financial sector, but companies with a higher risk tolerance in their lending practices could be more severely impacted. The market sentiment towards financial stocks may shift negatively as investors reassess the risk profiles of these companies.
It's important to analyze the competitive landscape and consumer behavior trends to understand the context of these financial metrics. For instance, if the market is moving towards more conservative lending due to economic uncertainty, Bread Financial's performance may align with or diverge from this trend, providing strategic insights into the company's positioning.
The financial update can be viewed as a microcosm of the broader economic environment. If the uptick in delinquencies and net loss rates is not isolated to Bread Financial Holdings, it may suggest macroeconomic headwinds such as inflationary pressures or a potential economic slowdown. This could lead to tighter monetary policy by central banks, affecting consumer borrowing and spending habits.
From an economic standpoint, the performance of a financial services company like Bread Financial Holdings can serve as an indicator of consumer credit health and economic activity. If their metrics are deteriorating, it might point to a need for economic intervention or a potential shift in fiscal policy to stimulate growth and manage credit risk.
COLUMBUS, Ohio, Feb. 15, 2024 (GLOBE NEWSWIRE) -- Bread Financial Holdings, Inc. (NYSE: BFH), a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions, provided a performance update. The following tables present the Company’s net loss rate and delinquency rate for the periods indicated.
| For the month ended January 31, 2024 | For the month ended January 31, 2023 | ||||||
| (dollars in millions) | |||||||
| End-of-period credit card and other loans | $ | 18,785 | $ | 20,837 | |||
| Average credit card and other loans (1) | $ | 18,915 | $ | 20,700 | |||
| Year-over-year change in average credit card and other loans | (9 | %) | 23 | % | |||
| Net principal losses (1)(2) | $ | 128 | $ | 115 | |||
| Net loss rate (1)(2) | 8.0 | % | 6.7 | % | |||
| As of January 31, 2024 | As of January 31, 2023 | ||||||
| (dollars in millions) | |||||||
| 30 days + delinquencies – principal (2) | $ | 1,170 | $ | 1,137 | |||
| Period ended credit card and other loans – principal | $ | 17,311 | $ | 19,529 | |||
| Delinquency rate (2) | 6.8 | % | 5.8 | % | |||
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| (1) | Beginning in January 2024 we revised the calculation of Average credit card and other loans to more closely align with industry practice by incorporating an average daily balance. Prior to 2024 Average credit card and other loans represents the average balance of the loans at the beginning and end of each month, averaged over the periods indicated. Consequentially, the calculations for Year-over-year change in average credit card and other loans and Net loss rate also differ for the periods presented. |
| (2) | As previously communicated, the month ended January 31, 2023 Net principal losses, Net loss rate, 30 days + delinquencies - principal and Delinquency rate were impacted by the transition of our credit card processing services in June 2022. |
About Bread Financial™
Bread FinancialTM (NYSE: BFH) is a tech-forward financial services company providing simple, personalized payment, lending and saving solutions. The company creates opportunities for its customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, Bread Financial delivers growth for its partners through a comprehensive suite of payment solutions that includes private label and co-brand credit cards and Bread Pay™ buy now, pay later products. Bread Financial also offers direct-to-consumer products that give customers more access, choice and freedom through its branded Bread CashbackTM American Express® Credit Card and Bread SavingsTM products.
Headquartered in Columbus, Ohio, Bread Financial is powered by its approximately 7,000 global associates and is committed to sustainable business practices. To learn more about Bread Financial, visit breadfinancial.com or follow us on Facebook, LinkedIn, Twitter/X and Instagram.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “plan,” “likely,” “may,” “should” or other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results, future financial performance and outlook, future dividend declarations, and future economic conditions.
We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that are difficult to predict and, in many cases, beyond our control. Accordingly, our actual results could differ materially from the projections, anticipated results or other expectations expressed in this release, and no assurances can be given that our expectations will prove to have been correct. Factors that could cause the outcomes to differ materially include, but are not limited to, the following: macroeconomic conditions, including market conditions, inflation, rising interest rates, unemployment levels and the increased probability of a recession, and the related impact on consumer payment rates, savings rates and other behavior; global political and public health events and conditions, including ongoing wars and military conflicts; future credit performance, including the level of future delinquency and write-off rates; the loss of, or reduction in demand from, significant brand partners or customers in the highly competitive markets in which we compete; the concentration of our business in U.S. consumer credit; inaccuracies in the models and estimates on which we rely, including the amount of our Allowance for credit losses and our credit risk management models; the inability to realize the intended benefits of acquisitions, dispositions and other strategic initiatives; our level of indebtedness and ability to access financial or capital markets; pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including, but not limited to, those related to financial regulatory reform and consumer financial services practices, as well as any such actions with respect to late fees, interchange fees or other charges; impacts arising from or relating to the transition of our credit card processing services to third party service providers that we completed in 2022; failures or breaches in our operational or security systems, including as a result of cyberattacks, unanticipated impacts from technology modernization projects or otherwise; and any tax liability, disputes or other adverse impacts arising out of or relating to the spinoff of our former LoyaltyOne segment or the bankruptcy filings of Loyalty Ventures Inc. and certain of its subsidiaries. In addition, a final CFPB rule is anticipated in the coming months that, if adopted as proposed and absent a successful legal challenge, will place significant limits on credit card late fees, which would have a significant impact on our business and results of operations for at least the short term and, depending on the effectiveness of the mitigating actions that we may take in response to the final rule, potentially over the long term; we cannot provide any assurance as to when any such rule will be issued, the provisions or effective date of any such rule, the result of any challenges or other litigation relating to such rule, or our ability to mitigate or offset the impact of any such rule on our business and results of operations. The foregoing factors, along with other risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements, are described in greater detail under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the most recently ended fiscal year, which may be updated in Item 1A of, or elsewhere in, our Quarterly Reports on Form 10-Q filed for periods subsequent to such Form 10-K. Our forward-looking statements speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.
Contacts
Brian Vereb — Investor Relations
Brian.Vereb@breadfinancial.com
Susan Haugen — Investor Relations
Susan.Haugen@breadfinancial.com
Rachel Stultz — Media
Rachel.Stultz@breadfinancial.com
FAQ
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