Bread Financial Holdings Inc at Goldman Sachs U.S. Financial Services Conference Transcript

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

Question: Ryan Nash - Goldman Sachs - Analyst : Great. Maybe let's talk a little bit about state of the consumer how the macroeconomic environment is influencing them, their spending patterns? And maybe any differential you see across different risk bands.

Question: Ryan Nash - Goldman Sachs - Analyst : Maybe just to expand on that, Perry, in terms of how the holiday season is shaping up. I know that you had said October and early November is strong, but there were some tricky comps from maybe from the election, what are you hearing or seeing from your brand partners? Any verticals in particular that you're more bullish on heading into next year? And just any spend updates relative to expectations?

Question: Ryan Nash - Goldman Sachs - Analyst : So Maybe just to build on that a little bit. So in terms of loan growth, you've guided to flat and slightly down for average loans in '25, and we all know the reasons why, given the strategic tightening that you've done I know you'll provide specific guidance when we get to earnings, but just talk directionally about loan growth given the macro environment, do you see a path back to low to mid-single digits? And what do you expect to be some of the key drivers behind it?

Question: Ryan Nash - Goldman Sachs - Analyst : Yeah, that makes sense. I mean you've been in a, I'll say, restrictive underwriting stance for a period of time here, just given all the things that you talked about probably the cumulative inflation. Can you maybe talk about what underwriting curtailments still remain in place? And what do you want to see to remove inevitably, what you still have that has kept loan growth at bay? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 10, 2025 / 6:40PM, BFH.N - Bread Financial Holdings Inc at Goldman Sachs U.S. Financial Services Conference

Question: Ryan Nash - Goldman Sachs - Analyst : Got you. Ralph, I wanted to talk about partners for a minute. I know in past years, you've even announced new partners at the conference. Maybe just talk about what your pipeline for new customers looks like and I know you had a couple of wins in the home vertical space. I think Perry alluded that there's more to come. Maybe just talk about how does it compare to prior years? And are you seeing any differences in the type of partners that are emerging?

Question: Ryan Nash - Goldman Sachs - Analyst : And I'll come back to your top partners in a second, but just curious when you guys have talked historically, you've talked about $100 million to $500 million sort of portfolio as being sort of your sweet spot. And obviously, we know we all have a good sense of who the top 10 partners are. But when you think about some of those recent announcements, Bed Bath & Beyond, Furniture First frame like any context in terms of are these the types of partners that could be top 10 partners over time?

Question: Ryan Nash - Goldman Sachs - Analyst : Got you. So you mentioned that the top 10 partners are locked up well into 2028, some through the end of the decade. Obviously, that means a lot of them have been renewed over the last period of time. Maybe just talk about any emerging trends with the renewal, whether it's sharing economics or trends and value propositions that you've seen?

Question: Ryan Nash - Goldman Sachs - Analyst : Yeah that makes sense. Perry, let's shift gears a little bit and talk about credit. You guys have had very successful credit performance throughout the year. We've seen improving trends. You released your 8-K this morning that showed continued improvement in charge-offs. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 10, 2025 / 6:40PM, BFH.N - Bread Financial Holdings Inc at Goldman Sachs U.S. Financial Services Conference Selling, I think we're in line to slightly mix. I think you noted that you expect to kind of the lower end of your [7.8 to 7.9] loss rate guidance. Maybe just talk about what you're seeing credit in the near term and what gives you confidence that you'll be on the low end.

Question: Ryan Nash - Goldman Sachs - Analyst : And by that point, we should have all 12 months.

Question: Ryan Nash - Goldman Sachs - Analyst : I guess while we're talking about near-term stuff, Barry, I mean, we talked about spend being up 1% to 2%. We talked about the credit. Anything else that you wanted to highlight for the fourth quarter, given that we're more than two months in whether it's top line growth expenses reserves, anything else you wanted to touch upon in your remarks.

Question: Ryan Nash - Goldman Sachs - Analyst : Yeah, and that's obviously because it's a determination of debt. That makes total sense. So you mentioned in your remarks just before that you expect losses can improve 30 to 40, which is sort of consistent with what you've been saying, particularly now that you were confirming we're going to be in the low end of the guidance. Maybe just dig a little bit deeper on your early expectations for '26. First, what's driving the improvement? And then secondly, what's giving you the confidence in the improvement.

Question: Ryan Nash - Goldman Sachs - Analyst : Absolutely. And look, your consumer more than most has been impacted by the cumulate inflation you had talked about a lot and that loss rates above 8%. Now we're working our way back down. And you've had this sort of long-term historical average of around 6%. Can you talk about what gets you back there over what period of time? And given the upward pressure that it puts on losses, can you resume growing at sort of single-digit levels and continue to make progress on credit over time?

Question: Ryan Nash - Goldman Sachs - Analyst : Sure. Maybe to round out the discussion on credit. So the reserve rate has been declining a little bit over the past few quarters. We're in the high 11s now. I guess, first, do you think the trajectory, assuming the macro holds can continue and how much more room is that? And over what time to get back to sort of that 10% level that I think that you have talked about as a more steady-state reserve.

Question: Ryan Nash - Goldman Sachs - Analyst : Ralph, since you've taken over as CEO, probably a little over 5 years now, 5.5 years, give or take, you've made tons of investments in the business, repositioned the technology, done tons of things to upgrade the standing of the company. Maybe just talk about the investments that -- what is on your agenda for right now? And how do you balance that with an improving yet not like great revenue environment? Obviously, we've seen you guys have taken a lot of actions across the board on the revenue side. But just talk to us how you think about the overall investment picture.

Question: Ryan Nash - Goldman Sachs - Analyst : And when I think about -- and again, I know we'll get guidance in January, and this is a question for either of you. As you think about balancing investments in an improving revenue environment with positive operating leverage, how do you think about the balance? I mean you've continued to post year in and year out positive operating leverage even in more challenging revenue environments. How are you thinking about it into '26?

Question: Ryan Nash - Goldman Sachs - Analyst : And one of the things that a lot of companies have been talking about at the conference has been AI and just the heightened focus on how it's being utilized in businesses. Maybe just talk to us about how you guys evaluate opportunities to use it, how you're currently leveraging it and what your plans are to deploy new technology and capabilities in '26.

Question: Ryan Nash - Goldman Sachs - Analyst : And I guess just sort of building on that, obviously, there's a ton of technological change that's happened. We talked about AI. There's things like digital wallets, a host of other things. Like what is Bread doing to assure that you guys remain top of mind for your partners and don't get lost in the mix given new players in the space and like I said, all these things that are.

Question: Ryan Nash - Goldman Sachs - Analyst : Yes, absolutely. And maybe we'll come back to buy now pay later. So I wanted to talk a little bit about capital. I like our acronym alpha as a grow maintained distribute I think with the three things that you highlighted, you can -- you could phrase that, if you want. You've spoken about the progress that you've made building capital, paying down debt. I think you recently issued preferred. Maybe just talk about, Perry, what are the next steps on capital from here in terms of just overall capture.

Question: Ryan Nash - Goldman Sachs - Analyst : I remember you guys -- I've been around long enough to remember you guys barely had any capital. So you guys have done a great job rebuilding it. So I guess, Perry, maybe to build on that, you have -- I think you put up two different buyback authorizations. You had like over almost $350 million outstanding. How should we think about the pace of utilization? And then that transition that you just talked about from the 13% to 14% to 12% to 13%. We have to get all the way there on the preferred issuance to be able to formally do that? Or can we start legging into that over the next couple of quarters?

Question: Ryan Nash - Goldman Sachs - Analyst : So you mentioned returns, and I know you've talked about wanting to get to mid-20s returns. You've had some successful quarters where credit has been strong. You've been in that range. Maybe just talk about the two to three main drivers to achieving that goal and over what time frame? Obviously, getting the credit losses down is a big piece of it. But maybe just spend a minute just talking about the key components of that.

Question: Ryan Nash - Goldman Sachs - Analyst : There any sort of formalized efficiency level you guys are hoping to get to? Or is it more just broad trucks continuing to.

Question: Ryan Nash - Goldman Sachs - Analyst : That's fair enough. Just a couple of other areas I wanted to hit on. Ralph, when you talked about repeat partners, obviously, you brought up BNPL, maybe just talk about how this fits into your ecosystem and what the competitive landscape these looks like. And obviously, these companies are growing at a fast pace, but -- and people are constantly asking me are they taking share from the incumbents. Or are these more parts of the market that you guys really don't plan help contextually.

Question: Ryan Nash - Goldman Sachs - Analyst : Got you. Perry, maybe I want to spend a minute or two just talking about margins. And I know that there's lots of moving pieces like the expression movements in rates, payment rates, APR repricing, handful of other things. But when you put all those together and you think about the rate backdrop, how do you think about the trend in your case expectation? Can we see expansion or did the negatives outweigh the positives.

Question: Ryan Nash - Goldman Sachs - Analyst : No, that's super helpful. One thing that's helped the margin over time as you've been on a journey to improve the overall funding base, we just talked about debt and we talked about preferred, but maybe let's spend a minute just talking about the deposit side. Where are you on the journey? Where would you like to take this to over the medium term and over what time frame?

Question: Ryan Nash - Goldman Sachs - Analyst : Two last questions I want to hit on another we're under the 2-minute warning. Do you want to talk about football Perry?

Question: Ryan Nash - Goldman Sachs - Analyst : No football, no football. It's a soft It's a soft subject about paring Much more so than me. But we've spoken about the impact of APR repricing. Some others have made some tweaks or roll back, maybe just talk a little bit about the partner response you've seen. I know that there's still more to go as it layers in? And are there any other changes you're expecting over the next 12 to 18 months?

Question: Ryan Nash - Goldman Sachs - Analyst : So maybe one last question. I think I've asked you for a handful of years. Ralph, so might not -- why stop now, although maybe a little nuance. So the stock is now trading above tangible book value. I think last year it was below. So good for you guys. Obviously, there's still uncertainty around the macro landscape. But what are you telling investors to get them excited about owning shares of Bread right now?