Yahoo Finance Bread Financial Holdings Inc (BFH) Q1 2024 Earnings Call Transcript Highlights: Navigating ...
Net Income: $134 million
Earnings Per Share (EPS): $2.70 per diluted share
Tangible Book Value: Increased by 20% year-over-year to nearly $46 per share
Direct-to-Consumer Deposits: Increased to $7 billion
Revenue: $1.0 billion, down 23% year-over-year
Net Interest Income: Decreased 6% year-over-year
Non-Interest Income: Pressured by lower merchant discount fees
Non-Interest Expense: Increased 12% year-over-year
Loan Yield: Increased 40 basis points year-over-year
Net Interest Margin: 18.7%
Delinquency Rate: 6.2%, showing improvement
Net Loss Rate: 8.5% for the quarter
Loan Loss Reserve Rate: Increased sequentially to 12.4%
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Could you discuss the mitigation actions taken in response to the CFPB's final rule regarding credit card late fees and the feedback from customers and retail partners? A: Ralph Andretta, President and CEO of Bread Financial, noted that the company has diversified its product and portfolio and implemented pricing actions including fee and policy changes. Feedback from customers has been as expected without any significant issues. Discussions with partners are ongoing, focusing on collaborative adjustments to comply with the new regulations.
Q: How are the credit tightening actions impacting the credit distribution, particularly the percentage of cardholders with a credit score above 660? A: Ralph Andretta explained that the company has proactively managed credit risk across the account lifecycle, resulting in lower approval rates and higher average credit scores for new accounts. Despite these measures, the distribution has not shown significant improvement due to downward migration of risk scores in the current economic environment.
Q: What further steps are planned to mitigate the impact of the CFPB late fee rule, and what is the potential for reducing its financial impact in the fourth quarter? A: Perry Beberman, CFO, mentioned ongoing work with brand partners to develop additional policy changes and other measures to close the financial gap caused by the rule. The company is cautious about predicting significant improvements beyond the current projections but remains focused on executing further mitigation strategies.
Q: Can you provide insights into the reserve rate increase and its implications for future credit loss expectations? A: Perry Beberman addressed the slight increase in the reserve rate, attributing it to model outputs that factor in economic outlooks and risk assessments. He anticipates an improvement in the reserve rate by the end of the year, assuming peak losses occur in the second quarter and delinquencies improve.
Q: What are the spending trends across different customer segments, particularly in relation to income levels and FICO scores? A: Ralph Andretta observed that higher-income and higher-credit-score customers continue to spend, albeit more on non-discretionary items. Customers with lower credit scores are being more cautious, focusing on essential spending and budget management.
Q: How does the potential implementation of the CFPB late fee rule on May 14 affect the company's dividend policy and overall profitability? A: Perry Beberman reassured that the company does not foresee any impact on its dividend policy due to the rule's implementation. He highlighted that improving credit losses and a potential reduction in reserve rates should support the company's financial stability and ability to maintain dividend payments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
