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Jun 30, 2022
Bread Financial Q2 2022 Earnings Report
Second quarter results demonstrated the benefits of strategic actions and business transformation efforts, leading to increased PPNR and loan growth.
Key Takeaways
Bread Financial reported a net income of $12 million, or $0.25 per diluted share, for the second quarter of 2022. Total revenue was $893 million, up 17% compared to the second quarter of 2021. The results reflect the spinoff of Loyalty Ventures Inc.
Net income was $12 million, or $0.25 per diluted share, including a reserve build of $166 million and a $21 million write-down in the carrying value of the Company’s investment in Loyalty Ventures Inc.
Total revenue was $893 million, up 17% versus the second quarter of 2021.
Credit sales increased 10% to $8.1 billion as consumer spending remained strong.
Average and end-of-period credit card and other loans increased 11% and 13% to $17.0 and $17.8 billion, respectively, driven by strong credit sales.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial is confident in its full year guidance and will continue to manage its business considering risk-reward tradeoffs to maintain sustainable, profitable growth in the periods ahead.
Positive Outlook
- The outlook continues to assume a moderation in the consumer payment rate throughout 2022.
- Payment rate variability is a key determinant for the high- and low-ends of our forecast.
- We expect ongoing interest rate increases by the Federal Reserve during the year to result in a nominal benefit to total net interest income, which is also included in our outlook.
- We continue to anticipate full year 2022 average credit card and other loans growth will be in the low-double-digit range relative to 2021.
- Total revenue growth for 2022 is anticipated to align with average loan growth, with potential upside from improved full year net interest margin.
Challenges Ahead
- We continue to be vigilant in monitoring macroeconomic conditions and the impact on consumers and our brand partners.
- We continue to expect increased expenses sequentially each quarter throughout 2022 as a result of ongoing investment in technology modernization, digital advancement, marketing, and product innovation, along with strong portfolio growth.
- We remain focused on delivering modest positive operating leverage for the full year as the pace and timing of our investments will be managed to align with our full year revenue and growth outlook.
- We continue to expect a net loss rate in the low-to-mid 5% range for 2022 as credit metrics normalize from historically low rates due to the expiration of federal stimulus and assistance programs.
- We also continue to expect our full year normalized effective tax rate to be in the range of 25% to 26%, with quarter-over-quarter volatility due to the timing of various discrete items.