Bread Financial Holdings Inc (BFH, Financial) released its 8-K filing on October 24, 2024, detailing its financial performance for the third quarter. The company, known for providing private label and co-branded credit cards, reported an adjusted earnings per share (EPS) of $1.83, slightly above the analyst estimate of $1.82. However, revenue exceeded expectations, coming in at $983 million compared to the estimated $981.28 million.
Company Overview
Formed by merging JCPenney's credit card processing unit and The Limited's credit card bank business, Bread Financial is a key player in the credit services industry. The company specializes in private label and co-branded credit cards, loyalty programs, and marketing services, with its credit card business being the most financially significant unit.
Performance Highlights and Challenges
Bread Financial's Q3 2024 results reflect a strategic focus on risk reduction and balance sheet improvement. The company repurchased $262 million in convertible notes, impacting pre-tax results by $96 million. This move aligns with their long-term funding plan, aiming to reduce risk and improve capital allocation. Despite these efforts, the company faced challenges with a 5% decline in revenue year-over-year, primarily due to lower late fees and reduced merchant discount fees.
Financial Achievements
The company's Common Equity Tier 1 (CET1) capital ratio increased by 40 basis points to 13.3%, showcasing disciplined capital management. Additionally, the tangible book value per common share rose by 12% to $47.48, indicating a stronger financial position.
Income Statement and Key Metrics
Adjusted net income for the quarter was $93 million, with an adjusted EPS of $1.83. The company's net interest margin increased sequentially to 18.8%, reflecting seasonal trends. However, the net loss rate rose to 7.8% from 6.9% in the previous year, and the delinquency rate slightly increased to 6.4%.
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Revenue | $983 million | $1,031 million | -5% |
| Adjusted EPS | $1.83 | $3.42 | -47% |
| Net Loss Rate | 7.8% | 6.9% | +0.9% |
| Delinquency Rate | 6.4% | 6.3% | +0.1% |
Analysis and Outlook
Bread Financial's strategic initiatives, including the acquisition and launch of the Saks Fifth Avenue Credit Card, highlight its focus on expanding partnerships and leveraging cross-channel expertise. Despite the revenue decline, the company's efforts to stabilize consumer spending and manage credit risk are evident. The ongoing litigation related to the CFPB's final rule on credit card late fees remains a concern, but the company is confident in its mitigation strategies.
Our third quarter results demonstrated our commitment to growing our business responsibly and opportunistically allocating capital to reduce risk and improve our balance sheet," said Ralph Andretta, president and chief executive officer.
Overall, Bread Financial's Q3 2024 performance underscores its resilience in navigating economic challenges while maintaining a focus on long-term strategic objectives. The company's ability to adapt to regulatory changes and economic conditions will be crucial in sustaining its financial health and delivering value to shareholders.
Explore the complete 8-K earnings release (here) from Bread Financial Holdings Inc for further details.
