Bread Financial Holdings Inc Q1 2025 Earnings Call Transcript

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

Question: Sanjay Sakwani - KBW - Analyst : Thank you, good morning, and appreciate all the commentary. Obviously, credit trends continue to perform well as Perry you mentioned, but the macro backdrop is choppy. Could you just talk about, what exactly you're seeing underneath if you peel the onion a little bit in terms of payment behavior, just credit trends, how the state of the consumer is for you real time? And then maybe Perry, just talk about how you've incorporated that into your baseline for the reserve?

Question: Sanjay Sakwani - KBW - Analyst : Got it. Thank you. And I guess is there an explicit unemployment rate assumption that you can average out to? And then I have the follow up for just Ralph, is obviously it seems like we're getting positive results on the late fee regulation not coming through, but there were mitigation efforts that you guys were planning to put through. Could you just talk about the conversations you're having with retailers? And you know what's factored in to the guide this year and how we should think about the sequencing going forward?

Question: Sanjay Sakwani - KBW - Analyst : And how's that in the numbers made Perry, like just as we think about the guy. Yeah, that is included in the guide at this point. Okay, great. Thank you.

Question: Moshe Orenbuch - TD Cowen - Analyst : Great thanks. Perry, you talked about better late stage roll rates and its impact, positive impact on credit. To talk a little bit about maybe if you have thoughts as to what the underlying causes of that, is that just wage growth, exceeding inflation for a longer period of time? Is there something else going on? Is it vintage performance? And I guess, because we're all trying to think about this in the context of how to think about other changes that might happen positive and negative? And so any thoughts there would be most appreciated.

Question: Moshe Orenbuch - TD Cowen - Analyst : Got it thanks and maybe to expand on the prior question on mitigants and partner discussions, it seems like to me that the partner business is probably a little bit insulated from direct competition, because in most of those accounts, they're not competing with every other account that's out there. But talk a little bit about, how your partners think about the interplay between pricing and growth here and value and growth and when you think about what you would likely do to kind of help increase profitability both for you and them as you as you kind of look out for the balance of this year and into next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, BFH.N - Q1 2025 Bread Financial Holdings Inc Earnings Call

Question: Moshe Orenbuch - TD Cowen - Analyst : Thanks very much.

Question: Jeff Adelson - Morgan Stanley - Analyst : Hey, thanks for taking my questions. So we've heard a lot so far through this earnings season about how the consumer is resilient. There's been some, I think, mixed messaging on whether there's a pull-forward dynamic happening here. But maybe just sort of thinking about the prior commentary in prior quarters about consumers trading down, are you still seeing any of that? Is it possible to strip that out? Or are there any other signs of consumer health you're seeing that you can point to trying to extrapolate out from what might be a pull-forward dynamic? Just anything under the hood there or what you're seeing by income or FICO cohort?

Question: Jeff Adelson - Morgan Stanley - Analyst : Got it. And just to sort of circle back on the strategic credit tightening, can you help us understand what incremental actions you took this quarter, if any? I know you talked about the multiyear tightening there. Just wondering if you took further steps and that might be why you're taking down the loan growth a little bit for the guidance this year. Thanks.

Question: Jeff Adelson - Morgan Stanley - Analyst : It does. Thanks so much, Perry.

Question: John Pancari - Evercore ISI - Analyst : Just on the capital front, good to see the CET ratio -- CET1 ratio pretty solid at 12%. You completed the $150 million buyback authorization earlier than we thought. So maybe you can help us think how you're thinking about the pace of buybacks, particularly in the context of possibly slower balance sheet growth as you're alluding to? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, BFH.N - Q1 2025 Bread Financial Holdings Inc Earnings Call

Question: John Pancari - Evercore ISI - Analyst : Okay. And then on the margin, solid expansion this quarter to about 18.1%. If you could just help us think about how we should think about the margin trajectory from here given the volatile rate environment. I know that might be challenging. But how could we think about it here? I believe you had indicated previously, maybe as recent as January, the expected modest expansion in the margin, but I didn't see that noted in your outlook today. So curious how you think about the margin from here.

Question: Bill Carache - Wolfe Research - Analyst : Thank you. Good morning, Ralph and Perry. Following up on your commentary around the 7% peak unemployment waiting in your allowance, that's the most conservative assumption that we've heard. And so if we go down that path, seems likely that the Fed would be cutting pretty aggressively. But if we do start seeing unemployment rise, can you frame your ability to start lowering your reserve rate as losses are rising versus the likelihood that you would actually have to potentially build even more and that 7% weighting could go even higher?

Question: Bill Carache - Wolfe Research - Analyst : That's helpful. And then following up on your NIM commentary, are you putting on new originations at wider spreads currently or have spreads been pretty stable? Curious how the macro environment is affecting your decisions there? And then sort of along the lines of the pricing discussion earlier, even though the ruling has been vacated, maybe if you could just share your thoughts on the risk that we could see a future administration come back another attempt at a cap.

Question: Bill Carache - Wolfe Research - Analyst : Very helpful, thank you.

Question: Terry Ma - Barclays - Analyst : Hey, thank you, good morning. Maybe to just follow up on the roll rate comment. Any color you can kind of provide on the magnitude of the improvements you're kind of seeing across your FICO buckets and maybe like how sustainable that is? You obviously maintained your charge-off guide for the year, so maybe just help us reconcile that.

Question: Terry Ma - Barclays - Analyst : Got it. Okay. And then you reduced your loan growth guide for the year. Maybe can you just talk about how that kind of impacts the phasing of your mitigants, particularly the APR piece?

Question: Mihir Bhatia - Bank of America - Analyst : Good morning, Ralph and Perry. Just had one quick follow-up here. On the pull-forward effect that you talked about, obviously, we've heard that

Question: Mihir Bhatia - Bank of America - Analyst : Got it. And then just one quick other one -- might not be quick. In terms of the guidance and the outlook, you talked -- we've talked quite a bit about across -- I think across issuers about the hard data being reasonably decent but the soft data and sentiment indicators being weak. Can you just talk about some of the levers you would be pulling if you start seeing the hard data follow the sentiment data?

Question: Mihir Bhatia - Bank of America - Analyst : Thank you.

Question: Vincent Caintic - BTIG - Analyst : Hi, good morning. Thanks for taking my questions. First question, wanted to talk again about the merchant side but zoom out a bit. So related to the uncertainty of the market, could you discuss how your conversations have been going with your merchants? Are you seeing more merchant engagement? And are there any focal points with your merchant discussions? Like are they discussing approval rates or economic sharing or anything else? Thank you.

Question: Vincent Caintic - BTIG - Analyst : Okay. That's helpful. And then relatedly, I thought your Crypto.com, partnership was really fascinating. It seems very innovative. First, like how difficult it is -- is it to do that kind of rewards program with Crypto Has Rewards? And then when you're competing for a program wins like Crypto.com, is the current competitive environment leaning on any particular factor to win business? Like is it price or the willingness to go lend down credit? Just talking about the competitive environment.