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Jun 30, 2023
Bread Financial Q2 2023 Earnings Report
Bread Financial reported an increase in revenue and earnings per share, while also dealing with an elevated net loss rate due to a processing services transition.
Key Takeaways
Bread Financial reported a 7% increase in revenue and diluted EPS of $1.27 for the second quarter of 2023. The company also announced a partnership with Dell Technologies and managed to reduce parent unsecured debt by more than $500 million.
Revenue increased by 7% compared to the second quarter of 2022.
Average credit card and other loans increased by 4% versus the second quarter of 2022.
The delinquency rate was 5.5% and the net loss rate was 8.0%.
Tangible book value per share increased by 23% versus the second quarter of 2022.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial updated its full year 2023 outlook to reflect slower sales growth due to strategic credit tightening and moderating consumer spending, which is expected to pressure loan growth and the net loss rate.
Positive Outlook
- Nominal benefit to total net interest income is expected from interest rate increases by the Federal Reserve.
- Total revenue growth for 2023, excluding the gain on portfolio sale, is anticipated to be slightly above average loan growth.
- A full year net interest margin similar to that of 2022 is expected.
- Expenses in the second half of 2023 are expected to be lower than the first half driven by lower intangible amortization expense and improved operating efficiencies.
- Focus on disciplined expense management to align investments with the full year revenue and growth outlook.
Challenges Ahead
- Slower sales growth is expected as a result of strategic credit tightening and moderating consumer spending.
- Loan growth and the net loss rate are expected to be pressured.
- A more challenging macroeconomic landscape with continued inflationary pressures is assumed.
- An increase in full year total expenses versus 2022 is anticipated.
- A net loss rate in the low-to-mid 7% range for 2023 is expected, inclusive of impacts from the 2022 transition of credit card processing services, moderating consumer spending, credit management actions, and continued pressure on consumers’ ability to pay due to persistent inflation.