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Mar 31, 2024
Bread Financial Q1 2024 Earnings Report
Bread Financial reported net income driven by strong risk-adjusted loan yield and balance sheet strength in Q1 2024.
Key Takeaways
Bread Financial reported a net income of $134 million for Q1 2024, driven by strong risk-adjusted loan yields and proactive credit tightening initiatives. The company focused on strengthening its balance sheet, managing capital, and implementing strategies to mitigate the impact of the CFPB's final rule on credit card late fees.
Net income was $134 million, influenced by a robust risk-adjusted loan yield.
Reduced parent-level debt by $100 million and increased tangible book value by 20% year-over-year to $45.96.
Common Equity Tier 1 capital ratio increased 80 basis points year-over-year to 12.6%.
Implemented mitigation strategies for the CFPB's final rule on credit card late fees, expecting the financial impact to lessen over time.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial anticipates slower sales growth due to strategic credit tightening and moderating consumer spending, which will pressure loan and revenue growth and the net loss rate. The company expects multiple interest rate decreases by the Federal Reserve, which will pressure total net interest income. Factoring in the potential impacts of the CFPB late fee rule based on a May 14 effective date.
Positive Outlook
- Efficiencies gained from ongoing investments in technology modernization and digital advancement.
- Disciplined expense management.
- Lower loss rate is projected in the second half of 2024 versus the first due to strategic credit actions.
- Assumed gradual modest improvement in economic conditions throughout the year.
- The rule (CFPB) is expected to reduce fourth quarter total revenue in the mid-teen range on an isolated basis relative to the fourth quarter of 2023, net of mitigation actions. This reflects an improvement from our previously disclosed estimated impact.
Challenges Ahead
- Slower sales growth due to ongoing strategic credit tightening.
- Continued moderation in consumer spending.
- Multiple interest rate decreases by the Federal Reserve will pressure total net interest income.
- Impact of the CFPB late fee rule.
- Higher reversals of interest and fees due to expected higher gross credit losses.