Bread Financial (BFH) Q3 Earnings call transcript Oct 24, 2024
1min read In the third quarter of 2024, Bread Financial demonstrated its commitment to responsible growth and strategic moves, as outlined in its earnings call. The company reported a solid financial performance, with adjusted net income of $93 million and diluted earnings per share of $1.83, excluding the impact of the repurchased convertible notes. The tangible book value per share increased by 12% year-over-year, signaling a strong financial position.
Focus on Strategic Objectives and Balance Sheet Improvement
Bread Financial's strategic objectives include strengthening its balance sheet and improving its capital metrics. The company successfully repurchased $262 million of convertible notes, a move that positively impacted its GAAP results and improved its funding mix. The overall funding mix continued to improve, with strong direct-to-consumer deposit growth and reduced wholesale deposit funding. This strategic focus on balance sheet improvement and capital allocation is expected to support Bread Financial's long-term growth and shareholder value.
Consumer Spending Trends and Market Diversification
Consumer spending patterns remained consistent, with consumers making more frequent shopping trips and higher nondiscretionary spending. The company's diversified product suite, consisting of private label, co-brand, proprietary, and Bread Pay, has contributed to improved loan portfolio and credit risk profile. Travel and entertainment, the largest vertical from a sales perspective at 32% of total credit sales, underscores the company's market diversification.
Challenges and Mitigation Strategies
Bread Financial acknowledged the challenges posed by the CFPB's final rule on credit card late fees. The company is executing a mitigation strategy, including pricing changes and close coordination with brand partners. These efforts are expected to offset potential impacts and ensure strong returns and long-term strategic objectives.
Looking Ahead: Optimism and Caution
Despite the challenges, Bread Financial remains optimistic about its future prospects. The company is well-positioned to navigate market volatility and uncertainty, thanks to its increased capital flexibility and financial resilience. However, there are cautions, particularly regarding the ongoing litigation related to the CFPB's final rule and the potential impact on credit sales and net loss rate.
Analysts' Questions and Insights
Analysts on the call sought clarification on the company's expectations for future losses, the impact of the hurricane relief efforts, and the mitigation strategies for the CFPB's late fee rule. Perry Beberman, Executive Vice President and Chief Financial Officer, provided insights into these matters, highlighting the company's focus on prudent capital management and risk mitigation strategies.
Conclusion
Bread Financial's Q3 2024 earnings call underscored the company's commitment to responsible growth, strategic acquisitions, and balance sheet improvement. Despite challenges, the company remains optimistic about its future prospects, with a focus on operational excellence, digital and technology capabilities, and market diversification. The earnings call provided a comprehensive overview of Bread Financial's financial health and strategic direction, offering valuable insights for investors and stakeholders.
