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Dec 31, 2022
Bread Financial Q4 2022 Earnings Report
Bread Financial reported a net loss due to a reserve build of $380 million, which was primarily driven by strong loan growth and the acquisition of the AAA credit card portfolio, while revenue increased by 21% compared to the previous year.
Key Takeaways
Bread Financial reported a net loss of $(134) million, or $(2.68) per diluted share, for the fourth quarter of 2022. Revenue increased by 21% to $1,033 million. The company experienced strong loan growth and continued normalization of credit metrics.
Announced new multi-year agreement with the New York Yankees.
Announced new relationship with Hard Rock International.
Delivered quality average loan growth of 13% year-over-year.
Observed a shift toward non-discretionary spending with payment rates approaching pre-pandemic levels.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial anticipates a challenging macroeconomic landscape in 2023 with continued inflationary pressures and an unemployment rate gradually moving to the mid-to-upper 4% range by year-end 2023.
Positive Outlook
- Additional interest rate increases by the Federal Reserve will result in a nominal benefit to total net interest income.
- Total revenue growth for 2023, excluding the anticipated portfolio gain on sale, is anticipated to align with average loan growth, with full year net interest margin similar to 2022.
- The pace of total full year expenses growth is projected to decelerate versus the 2022 rate.
- The company remains focused on delivering positive operating leverage for the full year as they manage the pace and timing of their investments to align with their full year revenue and growth outlook.
- The company remains confident in their long-term guidance of a through-the-cycle average net loss rate below their historical average of 6%.
Challenges Ahead
- The outlook assumes a more challenging macroeconomic landscape with continued inflationary pressures and an unemployment rate gradually moving to the mid-to-upper 4% range by year-end 2023.
- They expect full year 2023 average credit card and other loans to grow in the mid-single digit range relative to 2022 due to the anticipated sale of the BJ’s Wholesale Club portfolio and the current economic outlook.
- They anticipate an increase in total full year expenses versus 2022 as a result of ongoing investments in technology modernization, digital advancement, marketing, and product innovation, along with continued portfolio growth.
- They expect a net loss rate of approximately 7% for 2023, inclusive of impacts from the 2022 transition of their credit card processing services as well as continued pressure on consumers’ ability to pay due to persistent inflation.
- Quarter-over-quarter variability in their full year normalized effective tax rate is expected due to the timing of certain discrete items.