Bread Financial Holdings Inc at Bank of America Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mihir Bhatia - Bank of America - Analyst : That's great. Let's start with credit. And this morning, you put out January numbers, markets reacted well to the people. They do seem to show some pretty nice trends. Maybe talk about how they came in relative to your expectations, what should people keep in mind in February, March and the rest of the year?

Question: Mihir Bhatia - Bank of America - Analyst : Got it. I guess the next question inevitably comes on, what do you need to see to call a peak in losses, to say the cycle has turned? What are you not seeing today that you need to see to be able to make that call?

Question: Mihir Bhatia - Bank of America - Analyst : Right. I do want to stay on credit for just one more second and then I will actually turn to policy, but on credit, when you think about the if we get a stable macro, what is the pace of improvement going to be like, right? Like, okay, the cycle's turning February, March, then what is the pace of improvement look like? Are we looking at 2026 to get into closer to the 5.5%, [the 6-ish-percent] loss rates, or is that still like ['26] is too optimistic?

Question: Mihir Bhatia - Bank of America - Analyst : Okay. So we talked about the release from this morning, so continuing to work backwards from news on the news. This weekend we have big news around the CFPB. I guess I'll just leave this very open ended. Any comments? What are your thoughts on what's going on with the CFPB? Where do we go from here? How is Bread reacting? What is Bread doing in response? Yeah, take it wherever you want. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 8:30PM, BFH.N - Bread Financial Holdings Inc at Bank of America Financial Services Conference

Question: Mihir Bhatia - Bank of America - Analyst : We will talk more about the mitigants around the CFPB in a bit, but before we do that, let's just take a step back big picture, health of the consumer more generally. The base is a little more subprime than some of the other large issuers. So how are those customers doing? Any callouts that you want to make, whether by income, IO score, in terms of just health of the customer and what you're seeing?

Question: Mihir Bhatia - Bank of America - Analyst : Staying with trends you're seeing Fourth Quarter purchase volumes really across the industry, but even for you all came in a little bit better than at least what we were expecting. Has that strength held up in the First Quarter? Any quarter to date updates you can share in terms of just purchase volume numbers? What are you seeing?

Question: Mihir Bhatia - Bank of America - Analyst : But that could just be a little bit like you said, it's a need. If you're a stressed consumer, maybe the needs become the Christmas presents, the holiday presents versus.

Question: Mihir Bhatia - Bank of America - Analyst : Big ticket spending is an important piece of, especially the promotional financing. When do you see that bouncing back? Are you hearing anything from retail partners? Are they seeing any green shoots?

Question: Mihir Bhatia - Bank of America - Analyst : Got it. So, let's talk about '25 outlook. We don't need to go through every number in the guidance, but big picture, where's the biggest opportunity? Where's the biggest risk? Anything you're seeing early in the quarter that gives you more confidence, less confidence?

Question: Mihir Bhatia - Bank of America - Analyst : Right. And one other topic I did want to touch on from a policy perspective is tariffs. I don't think it like, the average customer is being like, oh, there might be tariffs. Let me go buy this thing today, right? But there are knock-on effects from tariffs.

Question: Mihir Bhatia - Bank of America - Analyst : Talk about that a little bit about how, what do you do when you hear all this talk of tariffs and how is that impacting how you manage the business, what you're hearing?

Question: Mihir Bhatia - Bank of America - Analyst : Maybe, let's turn to credit a little bit. Actually, before we turn to credit, let's do the mitigants because we were talking about name a few minutes ago. The mitigants from the late fee rule, the largest mitigant really if you think about it like, from the charts you've laid out is going to come from higher interest rates as loans repriced. So I guess the first question is just Seems like the loan the rule might not even go into effect, right? So what does that mean for you all? Like, is there mitigants you've already put in place, that people are getting charged the higher interest rate, you're going to get that benefit till it gets completed away or whatever, or like I'm just trying to understand, like, can you help us size some of that, like how much mitigants is already in the numbers already in process versus something that maybe never gets implemented?

Question: Mihir Bhatia - Bank of America - Analyst : Right. I'm going to stay on this for a couple of more things. One of the things you mentioned was invested back in the product, right? You could choose, but like you just sent a bunch of change of terms out. You don't want to send another change of terms out six months later, so you might say, okay, I get this extra revenue. I'll reinvest back. How are we talking about reinvested back? Is it expand the credit box? Is it more marketing? What are we doing there?

Question: Mihir Bhatia - Bank of America - Analyst : Well. If I'm a retailer, I'm going to be like, hey, you earning more, give me more sales by expanding the credit box.

Question: Mihir Bhatia - Bank of America - Analyst : And that's why I wanted to ask because that is absolutely like, concern one for investors is that if that starts happening, it becomes to your point, like how sustainable is the higher interest rates. The other question that we get a lot on these mitigants is you give some color around, okay, you have these headwinds, we're still showing NIM is going up, which means a meaningful percentage of the portfolio has mitigants in place, which is going to make them go up. But We still don't know how much that is. And I'll ask again, like, is there anything you can give us which will help us figure out like, this percent of the portfolio is never going to get mitigants, this percent of the portfolio has it? Like, I guess, why the hesitancy to make that disclosure?

Question: Mihir Bhatia - Bank of America - Analyst : Go it. On the credit side, I think one thing we did not touch on when we talked about, the improvement in credit is the reserve rate, right? And how are you thinking about the reserve rate? Like what is going to make it come lower? Because even as delinquencies have improved, we haven't seen big, the bigger improvements in reserve rate yet. So, like what do you need to see? How should investors be thinking about the reserve rate from here?

Question: Mihir Bhatia - Bank of America - Analyst : Right. Then so everyone always talks about day 1 CECL. I appreciate day 1 CECL is a different management team, different risk profile for the business even arguably a little bit. We didn't know pandemic could happen; there's all this stuff. So is 10% the right way to think about for your rather than think of day 1 CECL, think of 10% as more the, where the reserve rate ends up at a 6-ish percent?

Question: Mihir Bhatia - Bank of America - Analyst : Right. Maybe switching, one of the interesting things that Bread with the new management team has been the willingness to go after larger portfolios, if you will, AAA, a couple of years ago, NFL maybe not in size, but in terms of being high profile. So I did want to ask you about what are you seeing on the horizon for 2025? Are there interesting large deals that you could go after that are coming to market that you're on the RFP process for? Give us a little preview of what 2025 looks like from an acquisition deal standpoint. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 8:30PM, BFH.N - Bread Financial Holdings Inc at Bank of America Financial Services Conference

Question: Mihir Bhatia - Bank of America - Analyst : What about -- what are you hearing or seeing on competitive intensity in general? Is are the players behaving rationally? Has the fact that this late fee rule, it feels more and more like it's going to go away? Are people, is that increasing the willingness to do deals, willingness to look at programs? What are you seeing? What's the latest on the competitive side?

Question: Mihir Bhatia - Bank of America - Analyst : Got it. And then I guess maybe talk a little bit about investments this year, OpEx, I think the guidance is nominal fully positive operating leverage. So what are some of the larger investments that are being made this year?

Question: Mihir Bhatia - Bank of America - Analyst : I guess maybe somewhat related, but doesn't have to be OpEx related. But like in general, you've been there a few years now. You've had experience at other places goes up. You'll have obviously put in place some improvements like you mentioned the outsourcing of processing, things like that. But like what are the big opportunities, the big areas for Bread, where you still look at it and you say, well, there's a lot more we can do there, a lot of improvement potential?

Question: Mihir Bhatia - Bank of America - Analyst : We have about 5 minutes left. So I just wanted to see if anyone had any questions, happy to open it up for the audience. Do we have a mic? Okay, just go ahead. I'll repeat it. Go ahead. Unidentified Participant (inaudible) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 8:30PM, BFH.N - Bread Financial Holdings Inc at Bank of America Financial Services Conference

Question: Mihir Bhatia - Bank of America - Analyst : Right. Anyone else? Not seeing any, so maybe I'll just continue. A couple more questions for me. So maybe the first one I wanted to ask about was just As you think about the actually the proprietary product, right? You launched a proprietary product with Amex. Where does that fit in? Do you want to grow that product bigger? Or is that more of a, hey, if some program is going to go away, we can just convert the cardholders. It's a strategic optionality, but not really a focus.

Question: Mihir Bhatia - Bank of America - Analyst : So maybe we can end with this one. We've talked about a few different topics today. When you sit back and look at think about 2025 when Ralph and you meet and what are the 2, 1, 2, 3 things that you're most focused on that it's like if we get these 1, 2, 3 initiatives, right, the rest of it will kind of fall in place might be up, down a little bit. But longer term, we need to get this stuff right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 8:30PM, BFH.N - Bread Financial Holdings Inc at Bank of America Financial Services Conference

Question: Mihir Bhatia - Bank of America - Analyst : Great. I think with that, we ran at time. So again, thank you so much for joining us. Really appreciate you taking the time.