Bread Financial (BFH) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $133 million, up 180% year-over-year, with diluted EPS of $2.66 and adjusted EPS of $2.67, reflecting strong results amid a challenging environment.

• Tangible book value per share increased 25% year-over-year to $48.89, and CET1 capital ratio improved 170 bps to 13.8%.

• Direct-to-consumer deposits grew 20% year-over-year to $7.2 billion, now representing 40% of total funding.

• Credit sales declined 7% year-over-year to $6.6 billion, reflecting moderating consumer spending and credit tightening.

• Signed a long-term agreement with Saks Fifth Avenue, expanding the business development pipeline, with program launch expected in Q3 2024.

Financial highlights

• Revenue for Q2 2024 was $939 million, down 1% year-over-year, mainly from lower merchant discount fees.

• Average loans rose 1% year-over-year to $17.9 billion, driven by co-brand program growth.

• Non-interest expenses fell 12% year-over-year, driven by lower card processing, fraud, marketing, and compensation costs.

• Pre-tax pre-provision earnings (PPNR) increased 11% to $470 million.

• Efficiency ratio improved to 49.9% from 55.7% year-over-year.

Outlook and guidance

• 2024 outlook assumes no impact from the CFPB late fee rule due to ongoing litigation and expected delays.

• Average loans expected to decline low single digits versus 2023; revenue growth (excluding portfolio sales) anticipated to be down low- to mid-single digits.

• Full-year net interest margin projected lower than 2023, reflecting higher reversals of interest and fees and a shift in product mix.

• Net loss rate forecasted in the low 8% range for 2024, with improvement anticipated in the second half.

• Effective tax rate for 2024 projected at 25%-26%.