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Dec 31, 2024
Bread Financial Q4 2024 Earnings Report
Bread Financial's Q4 2024 earnings were impacted by lower net interest income and higher non-interest expenses, but credit quality showed signs of stabilization.
Key Takeaways
Bread Financial reported a decrease in net income for Q4 2024, driven by lower revenue and increased expenses, although credit metrics showed signs of stabilization. The company highlighted its focus on disciplined expense management and capital allocation, while also navigating macroeconomic and regulatory challenges.
Credit sales increased by 1% year-over-year, reflecting new partner growth and stronger holiday sales.
The delinquency rate decreased to 5.9% from 6.5% in Q4 2023.
Revenue decreased by 9% year-over-year, primarily due to lower finance charges and late fees.
CET1 ratio increased to 12.4% from 12.2% in Q4 2023.
Bread Financial
Bread Financial
Forward Guidance
Bread Financial anticipates relatively flat average loan growth for 2025, with total revenue growth up low single digits. The company expects a net loss rate in the 8.0% to 8.2% range and a full-year normalized effective tax rate between 25% and 26%. This outlook assumes economic stability and no late fee reduction related to the CFPB late fee rule.
Positive Outlook
- Total revenue growth, excluding gains on portfolio sales, is anticipated to be up low single digits.
- Full year net interest margin is expected to be modestly higher than the full year 2024 rate due to mitigation actions taken in response to the CFPB late fee rule.
- Efficiencies gained from ongoing operational excellence initiatives, along with disciplined investment and expense management, are expected to generate full year positive operating leverage in 2025.
- Year-end 2025 loans are expected to be higher than year-end 2024 as a result of new business growth and higher credit sales in the year.
- The company expects to generate full year positive operating leverage in 2025, excluding gains on sales and the $107 million pre-tax impact from repurchased convertible notes in 2024.
Challenges Ahead
- The 2025 outlook assumes no late fee reduction related to the CFPB late fee rule, given uncertainty surrounding the timing and outcome of ongoing litigation.
- The 2025 outlook assumes economic stability, yet is subject to changing conditions as the impacts from key legislative and monetary policies are still unknown.
- Anticipated elevated gross credit losses may impact average loan growth.
- Interest rate decreases by the Federal Reserve are expected to pressure total net interest income.
- A continued shift in risk and product mix may impact total revenue.