Bread Financial Holdings, Inc. Q3 FY2025 earnings call

• Strong third quarter results with net income, adjusted net income, and earnings per diluted share reported. - Consumer financial health remained resilient with strong credit sales, higher payment rates, lower delinquencies, and losses. - Monitored monetary and fiscal policies and their potential impacts on consumer spending and employment. - Focused on expense discipline and operational excellence, with adjusted total noninterest expense down 1% year-over-year despite technology investments. - Expanded home vertical foothold by signing new brand partners like Bed Bath & Beyond, Furniture First, and Raymour & Flanigan. - Earned a credit ratings upgrade and positive outlook from Moody's recognizing financial resilience and enterprise risk management framework.

Bread Financial reported net income of $188 million for the third quarter of 2025. Adjusted net income and earnings per diluted share were $191 million and $4.02, excluding a $3 million post-tax impact from repurchase debt expenses. Tangible book value per common share grew 19% year-over-year to $56.36, and return on average tangible common equity was 28.6%. Credit sales increased 5% year-over-year to $6.8 billion. Revenue was $971 million, down 1% year-over-year. Total net interest income decreased 1% year-over-year, and noninterest income was $7 million lower year-over-year.

• Full year outlook unchanged with average loans flat to slightly down. - Total revenue, excluding gains on portfolio sales, anticipated to be roughly flat versus 2024. - Expected full year positive operating leverage excluding portfolio sale gains and repurchase debt impact. - Net loss rate expected in the range of 7.8% to 7.9%, with current trends suggesting it will be at the low end. - Adjusted full year effective tax rate guidance to 19% to 20%.

• Macro uncertainties including inflation, tariff and trade policies, and their potential impacts on consumer spending and employment. - Consumer sentiment and confidence issues with nervousness about the future. - Uncertainty around Federal Reserve policy and its impact on inflation and the labor market.

Q: It sounds like you're seeing constructive trends across the portfolio. Any signs of weakness?

A: Perry Beberman noted the macro environment is stable but consumers are nervous. Wages outpaced inflation, but future depends on Fed policy and tariffs. Within the portfolio, stable gradual improvement across all vantage bands with no cracks seen yet.

Q: How are you thinking about credit sales in 4Q and into 2026?

A: Perry Beberman said credit sales saw strong back-to-school, moderated in September but still positive in October. Retailers are aggressive with discounts, and consumers are looking for deals.

Q: Thoughts on the pipeline and signings in the home vertical?

A: Ralph Andretta said the home vertical is active, with a robust pipeline across verticals to insulate from one-off vertical issues.

Q: About capital return and CET1?

A: Perry Beberman said capital priorities are funding growth, maintaining strong ratios, and returning capital as appropriate. CET1 target 13%-14%, and longer-term target 12%-13% may involve preferreds.

Q: On AI and automation?

A: Perry Beberman said AI is used to accelerate operational excellence, with over 200 machine learning models and RPA, focusing on fast follower approach for impactful use cases.

Q: Underwriting and growth?

A: Perry Beberman said underwriting is prudent with focus on profitability, gradually unwinding macro tightening and moving towards Prime Plus, expecting growth as credit improves.