Bread Financial (BFH) Barclays 22nd Annual Global Financial Services Conference summary

Financial performance and macro trends

• Sales remain soft due to weaker big-ticket and discretionary spending, with expenses rising from new partnerships and increased marketing.

• Loss rates are expected around 8% in Q3, rising to 8.3% in Q4, with delinquencies stable due to credit actions.

• Reserve rates are stable but remain above pre-pandemic levels, with future reductions tied to macro improvement and unwinding risk overlays.

• Inflation is easing slower than expected, and wage growth lags, leading to a prolonged period of elevated charge-offs above 8% into 2024.

• Unemployment is still at healthy levels, and consumer credit behavior remains responsible, but macro uncertainty persists.

Strategic initiatives and partnerships

• Loan growth targets are low- to mid-single digits in the medium term, with product diversification into general purpose, co-brand, and technology verticals.

• Recent partnerships include Saks and HP (with BNPL), and the pipeline for new deals remains robust, though selectivity and discipline are emphasized.

• Preference is for general purpose spend for diversification and lower risk, with private label cards serving as down-sell products.

• Large partnerships (e.g., Walmart, Amazon) are approached cautiously due to thin returns and concentration risk.

• New entrants face high barriers, and established players with analytics and balance sheet strength are expected to persevere.

Regulatory and revenue impacts

• No late fee rule impact expected in 2023; potential mid-2025 implementation, with mitigation actions underway to offset revenue loss.

• Most partners are aligned on mitigation strategies, but rollout is ongoing and will take time to realize full revenue benefits.

• Higher APRs and new fees are being introduced, with customer response muted due to industry-wide changes; digital statement incentives reduce costs.

• Incremental revenue from mitigants will be clearer in 2025 guidance, with the overall impact expected to be net neutral over time.

• Strategic adjustments may include higher APRs, new fees, and tighter credit, especially if late fee revenue is structurally reduced.