Bread Financial (BFH) Q4 2023 earnings summary

Executive summary

• FY23 continuing-operations revenue was $4.289B, up 12% YoY; income was $737M and diluted EPS was $14.74.

• Q4 continuing-operations revenue was $1.017B, down 2% YoY; income was $45M and diluted EPS was $0.90.

• PPNR rose YoY in each 2023 quarter; Q4 PPNR was $501M, up 3%, and FY PPNR was $2.197B, up 16%.

• Strategic credit tightening and the BJ’s portfolio sale reduced sales and loans; new partner growth partly offset declines.

Financial highlights

• FY credit sales were $28.9B, down 12% YoY; average loans were $18.2B, up 3%.

• Q4 credit sales were $7.8B, down 23% YoY; average loans were $18.3B, down 8%, and period-end loans were $19.3B, down 10%.

• FY revenue rose $463M, driven by higher finance charge yields and non-interest income, including a $230M portfolio-sale gain; PPNR excluding the gain was $1.967B, up 4%.

• Q4 provision for credit losses was $482M, down 30% YoY; reserve build fell to $115M from $380M, while net principal losses rose to $367M from $312M.

• Q4 non-interest expenses fell 6% to $516M; card and processing costs declined 20%, marketing 17%, and depreciation and amortization 30%, partly offset by employee costs up 6%.

Outlook and guidance

• FY24 average loans expected down low-single digits; excluding the sold BJ’s portfolio, average loans expected up low-single digits.

• FY24 revenue expected down low-to-mid-single digits, excluding portfolio-sale gains; net interest margin expected below FY23.

• FY24 net loss rate expected in the low-8% range, with Q1 and Q2 in the mid-to-high-8% range; Q1 reserve rate expected near Q3 2023’s 12.3%.

• Nominal positive operating leverage targeted for FY24; normalized effective tax rate guidance was 25%–26%.

• Guidance assumes multiple Fed rate cuts and excludes potential CFPB late-fee-rule effects; an Oct. 1, 2024 effective date could reduce Q4 revenue ~25% YoY after planned mitigation.