• Revenue: $3.8 billion for the full year 2024, a decrease of 11% year-over-year.
• Adjusted Income from Continuing Operations: $21 million for the fourth quarter.
• Adjusted Diluted EPS from Continuing Operations: $0.41 for the fourth quarter.
• Tangible Book Value per Share: $46.97, a 7% increase year-over-year.
• Common Equity Tier 1 Capital Ratio: 12.4%, increased by 20 basis points year-over-year.
• Credit Sales: $27 billion for the full year 2024, a decrease of 7% year-over-year.
• Average Loans: $18.1 billion for the full year 2024, a decrease of 1% year-over-year.
• Fourth Quarter Credit Sales: $7.9 billion, an increase of 1% year-over-year.
• Fourth Quarter Revenue: $0.9 billion, a decrease of 9% year-over-year.
• Net Loss Rate: 8.0% for the fourth quarter, flat year-over-year.
• Delinquency Rate: 5.9% for the fourth quarter, down 60 basis points year-over-year.
• Direct-to-Consumer Deposits: $7.7 billion at quarter end, accounting for 43% of average total funding.
• Loan Yield: 25.7% for the fourth quarter, decreased by 200 basis points year-over-year.
• Net Interest Margin: 17.8% for the fourth quarter.

• Warning! GuruFocus has detected 4 Warning Sign with BFH.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bread Financial Holdings Inc (NYSE:BFH) added iconic brand partners such as Hard Rock International, HP, and Saks Fifth Avenue, enhancing its portfolio and securing over 85% of its loans through 2026.
• The company successfully reduced its parent level debt by 50% since 2021, achieving a double leverage ratio target of below 115%.
• BFH's balance sheet improvements led to Moody's and Fitch upgrading their rating outlooks from stable to positive.
• The company achieved all its 2024 full-year targets despite a challenging macroeconomic environment, demonstrating operational resilience.
• BFH's direct-to-consumer deposits grew to $7.7 billion, improving its overall funding mix and providing a strong foundation for future growth.

Negative Points

• Credit sales decreased by 7% year-over-year, reflecting moderated consumer spending and proactive credit tightening actions.
• Revenue declined by 11% due to lower finance charges and late fees, as well as reduced merchant discount fees from lower big-ticket sales.
• The net loss rate remained elevated at 8.0%, with expectations of continued high loss rates in the first half of 2025.
• Loan yield decreased by 200 basis points year-over-year, impacted by lower finance charges and a shift in product and risk mix.
• The company faces ongoing economic and political uncertainties, including potential impacts from key legislative and monetary policies.

Q & A Highlights

Q: Can you discuss the path to achieving your medium-term targets, particularly in light of mitigation strategies and the absence of late fee regulation? A: Perry Beberman, CFO, explained that they are on track to achieve medium-term targets. The focus is on reducing gross losses from over 8% to around 6%, improving delinquency rates, and managing net interest margin (NIM) as liabilities catch up with asset repricing. The mitigation actions for the CFPB late fee rule are expected to gradually improve APRs, contributing to reaching these targets.

Q: How do you plan to accelerate loan growth, and are there any portfolio acquisition opportunities? A: Ralph Andretta, CEO, noted that the fourth quarter showed positive signs in specialty apparel and millennial spending. The maturation of portfolios executed in 2024 and a robust pipeline are expected to drive loan growth in 2025. They remain cautiously optimistic about sales and loan growth.

Q: Can you update us on the progress of NIM and mitigation rollout, especially with the new administration's impact on the CFPB? A: Perry Beberman stated that they are taking a phased approach with brand partners for APR increases. While there is optimism due to litigation outcomes, they continue to implement mitigation strategies. The industry feels optimistic with the change in administration, and they expect NIM to improve over time.

Q: What is your outlook on credit performance and the timeline for reaching long-term targets? A: Perry Beberman mentioned that recent vintages are performing well, and they expect gradual improvement in credit performance. The macroeconomic environment will influence the pace of improvement. They are not loosening credit standards and expect to reach long-term targets as the macro environment stabilizes.

Q: How are you managing capital returns and what are your thoughts on capital deployment in 2025? A: Perry Beberman emphasized their commitment to funding responsible growth and investing in technology. They aim to reach capital ratio targets and optimize the balance sheet. Capital returns to shareholders will be considered once these goals are met.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.