Bread Financial Holdings’ BFH operating income of $1.84 per share for the third quarter of 2024 missed the Zacks Consensus Estimate of $1.88. The bottom line plunged 88% year over year. Shares lost 1.9% in the last trading session to reflect the underperformance. 

The quarterly results reflected a drop in credit sales but average loans slightly improved on growth in co-brand programs. The company noted that consumer spending continues to moderate, given normalizing inflation. Loan growth was impacted by proactive credit tightening initiatives, given stricter credit risk management.

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Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise

Bread Financial Holdings, Inc. price-consensus-eps-surprise-chart | Bread Financial Holdings, Inc. Quote

Behind the Headlines

Revenues decreased 4.7% year over year to $983 million, attributable to lower late fees and reduced merchant discount fees. The top line, however, beat the consensus estimate by 0.8%.

Credit sales of $6.5 billion decreased 3%, reflecting moderated consumer spending and ongoing strategic credit tightening, partially offset by new partner growth.

Average loans of $17.8 billion increased 1%, benefiting from new partner growth and stabilizing consumer spending. Our estimate for the same was $17.9 billion.

Total interest income decreased 2% to $1.3 billion, in line with our estimate and the Zacks Consensus Estimate.

Net interest margin contracted 180 basis points to 18.8%. The Zacks Consensus Estimate for the metric was 18.9%.

Total non-interest expenses increased 14% to $574 million, primarily attributable to an increase in employee compensation and benefits, and other expenses. 

The delinquency rate of 6.4% deteriorated 10 basis points year over year. The net loss rate of 7.8% deteriorated 90 basis points.

Pre-tax pre-provision earnings decreased 22.7% year over year to $409 million.

Financial Update

As of Sept. 30, 2024, cash and cash equivalents were $3.5 billion, up 33.3% from the 2023 level.

At third-quarter 2024 end, long-term debt and other debt declined 25.3% from the 2023-end level to $1 billion.

Tangible book value was $47.48 per share, as of Sept. 30, 2024, up 12% year over year.

Return on average equity was 0.4%, which contracted 2440 basis points year over year. 

Cash from operations for the first nine months of 2024 increased 0.7% year over year to $1.4 billion.

Capital Deployment

The board also approved a quarterly dividend of 21 cents to be paid out on Dec. 13 to stockholders of record as of Nov. 8. The company bought back shares worth $11 million.