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Mar 31, 2022
Bread Financial Q1 2022 Earnings Report
Bread Financial reported first quarter 2022 results, demonstrating strategic transformation and focus on profitable growth.
Key Takeaways
Bread Financial's first quarter results showed a 15% increase in revenue compared to Q1 2021, driven by balance sheet growth and improved net interest margin. The company launched new co-brand credit card with Victoria's Secret and a pilot program with Harley-Davidson. The company is closely monitoring macroeconomic conditions and the long term effects of persistent inflation on the economy and consumers.
Bread Financial successfully launched the Bread Cashback™ American Express® Card.
The company launched a new co-brand credit card with Victoria’s Secret and renewed their long-term relationship.
A pilot for a new Harley-Davidson private label credit card was launched.
New online brand partners continue to be added to the Bread Pay™ platform, including Wayfair.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial anticipates full year 2022 average credit card and other loan growth in the low-double-digit range relative to 2021. Total revenue growth for 2022 is anticipated to be aligned with average loan growth, with potential upside from improved net interest margin. The company continues to expect a net loss rate in the low-to-mid 5% range for 2022.
Positive Outlook
- Nominal benefit to total net interest income is expected from rate increases by the Federal Reserve during the year.
- Full year 2022 average credit card and other loan growth in the low-double-digit range relative to 2021.
- Total revenue growth for 2022 is anticipated to be aligned with average loan growth, with potential upside from improved net interest margin.
- The pace and timing of investments will be calibrated to align with revenue growth outlook.
- The company remains confident in its long-term guidance of a through-the-cycle average net loss rate below the historical average of 6%.
Challenges Ahead
- The outlook assumes a moderation in the consumer payment rate throughout 2022.
- Total expenses will increase in 2022.
- The company plans incremental investment of more than $125 million in digital and product innovation, marketing, and technology enhancements during the year.
- Net loss rate is expected in the low-to-mid 5% range for 2022 as credit metrics begin to normalize from historically low rates due to the expiration of federal stimulus and assistance programs.
- Effective tax rate is expected to be in the range of 25% to 26% with quarter-over-quarter volatility due to the timing of various discrete items.