BFH — Bread Financial Holdings, Inc.

Summary of Bread Financial Holdings, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $53 million (excluding $42 million post-tax impact from debt repurchase expenses).
• Adjusted Net Income: $95 million; Earnings per Share: $2.07.
• Credit Sales: $8.1 billion for Q4, up 2% year-over-year; Full-Year Credit Sales: $27.8 billion, up 3%.
• Average Loans: $18 billion for Q4, down 1% year-over-year; End-of-Period Loans: $18.8 billion, nearly flat.
• Net Loss Rate: 7.4% in Q4, down 60 basis points year-over-year.
• Tangible Book Value per Share: Increased 23% year-over-year to $57.57.
• Return on Average Tangible Common Equity: 8% for Q4, 20% for the full year.
• Direct-to-Consumer Deposits: Increased 11% year-over-year, now representing 48% of total funding.

2. Strategic Updates and Business Highlights

• New Partnerships: Signed seven major brands in 2025, including Bed Bath & Beyond and Raymour & Flanigan, enhancing product offerings.
• Renewals: Renewed partnerships with top brands, including a multiyear extension with Caesars Entertainment.
• Product Expansion: Launched new products like the enhanced fee-based Caesars Rewards credit card and expanded BreadPay relationships.
• Operational Excellence: Continued focus on technology transformation, including AI adoption, cloud migration, and improved customer capabilities.
• Capital Allocation: Returned $350 million to shareholders, including $310 million in share repurchases and a 10% increase in dividends.

3. Forward Guidance and Outlook

• 2026 Outlook: Expect low single-digit growth in average credit card and other loans, supported by stable partnerships and new business launches.
• Revenue Growth: Anticipated to be in line with average loan growth, with net interest margin expected to remain stable to slightly up compared to 2025.
• Credit Metrics: Projected net loss rate for 2026 in the range of 7.2% to 7.4%, with gradual improvements expected.
• Tax Rate: Expected normalized effective tax rate between 25% and 27%.

4. Bad News, Challenges, or Points of Concern

• Loan Growth Pressure: Average loans decreased slightly, and there is uncertainty regarding consumer behavior in response to macroeconomic conditions.
• Interest Rate Sensitivity: Anticipated lower prime rates could pressure net interest income, impacting profitability.
• Delinquency Rates: While improving, there are concerns about the stability of the labor market and potential economic pressures that could affect credit quality.
• Competitive Pressures: Increased competition for deposits and potential shifts in consumer sensitivity to deposit rates could impact funding costs.

5. Notable Q&A Insights

• Loan Growth Drivers: Management emphasized that loan growth is driven by resilient consumer behavior and stable partnerships, with no loosening of underwriting standards.
• Credit Quality: Improvement in credit metrics is noted, with management optimistic about maintaining a constructive outlook despite potential economic headwinds.
• AI Utilization: AI is being integrated across various operations to enhance efficiency and risk management, with over 200 machine learning models already in use.
• Tax Refund Impact: Management is cautiously optimistic about the upcoming tax refund season, which could positively influence consumer spending and credit sales.

Overall, Bread Financial Holdings reported strong financial results for Q4 2025, with strategic partnerships and operational improvements driving growth. However, challenges remain in terms of loan growth, interest rate pressures, and economic uncertainties. The outlook for 2026 is cautiously optimistic, with expectations for continued credit quality improvements and stable revenue growth.