Bread Financial Holdings Inc Q3 2024 Earnings Call Transcript

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

Question: Mihir Bhatia - Bank of America - Analyst : Hi, thank you for taking my questions. Can we just start? I just wanted to get, big picture. you made some comments on losses and expecting seasonality from here, but I think you also mentioned that you expect your credit actions to get better. So I guess the big question everyone's trying to answer, are you close to peak losses right now? And will 2025 losses be better than 2024 losses if the macro stays stable?

Question: Mihir Bhatia - Bank of America - Analyst : Got it. Okay. And then just, I guess as a follow up, maybe I can just talk about the late fee situation. What I'm trying to understand is what mitigants of yours are already in the market? How much of a benefit are you getting from them right now? And are you like, is the delay going to help from the standpoint of if it gets implemented at some point next year, should the headwinds be less? Because some of the mitigants were in the market already, particularly, I guess, higher interest rates?

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

Question: Sanjay Sakhrani - KBW - Analyst : Thank you. Good morning. Hey Perry, just to go back on the credit stats. I guess when we look at that second derivative of the year over year change in delinquency that does steadily continue to improve, I guess based on your comments, do you expect that to just stabilize? as we move forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call I know there was some comments on like the late-stage delinquencies, not necessarily seeing a lot of improvement has that changed in any way, I'm just trying to think about any tightening that you guys would have done and how that sort of impacted the credit metrics. Didn't that positively help your credit metrics as we look into next year? Thanks.

Question: Sanjay Sakhrani - KBW - Analyst : Okay, and then just did the hurricane actions help the delinquency metrics in September? I'm just curious on that and then maybe one more question on the late fee. Sorry, I'm asking the same question as the previous one question you're asked just as far as like mitigation, like when should we expect you to offset all of the impacts from the late sea stuff? Assuming it would have kicked in this year or whatever. I'm just trying to think about the sequencing of those impacts. Thanks.

Question: Sanjay Sakhrani - KBW - Analyst : All right. Thank You. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call

Question: Vincent Caintic - BTIG - Analyst : Hey, good morning. Thanks for taking my questions. First one. I wanted to talk about your perspective on the fourth quarter, particularly the holiday sales season. What's your perspective on first, how the consumer is feeling and we'll be doing in terms of the holiday sales and then additionally, in terms of the merchant engagement you're experiencing perhaps on promotions or other merchant discussions you're having in terms of fourth quarter sales. Thank you.

Question: Vincent Caintic - BTIG - Analyst : Okay, great. That's very helpful. And yeah, I was thinking about that that day count as well. So I appreciate all that detail. And then second one for Perry, I appreciate all the guidance on the losses and in the impact of the hurricanes. I was just wondering if you could put a finer point on that. So I think in the past we were thinking about fourth quarter charge off rates in the 8.3%. So $10 million benefit would be 20 basis points lower, but then first quarter is typically has a higher charge off rate. And then you're talking about second quarter as well. So I don't know if you could maybe help us with a finer numbers in terms of how to think about the fourth quarter versus your prior guidance and how to think about the first quarter and enrolling into the second quarter. That would be super helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call

Question: Vincent Caintic - BTIG - Analyst : Okay, great. That's very helpful. Thanks so much.

Question: Jeff Adelson - Morgan Stanley - Analyst : Hey, good morning, Perry and Ralph,

Question: Jeff Adelson - Morgan Stanley - Analyst : Perry, you talked about the persistent impact of higher prices and have real wage growth here. But you, you've highlighted that dynamic as a part of the reason why your late-stage role rates have been more elevated. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call I was wondering if you could just maybe give us a quick update on how the late-stage dynamic has been evolving. And I guess as we think about the rest of 2025 should the seasonality cadence for charge offs be similar to delinquencies or is there any dynamic in the roll rates that might be impacting that seasonality?

Question: Jeff Adelson - Morgan Stanley - Analyst : Okay. And as my follow up, as we think about the forward curve, your asset sensitivity, how should we also quantify the impact your gross card deals from what could be a higher level of charge offs into 2025? And when do you think those reversals could start to be a good guide? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call

Question: Jeff Adelson - Morgan Stanley - Analyst : Okay. Thank you.

Question: Bill Carcache - Wolfe Research Securities - Analyst : Thank you. Good morning, Ralph and Perry. I wanted to start off with a high-level question. When we look across the broader universe of companies extending consumer credit, you guys have relatively higher exposure to customers with lower credit scores. Than many as you've described, but you don't seem to be experiencing the same credit headwinds. Could you discuss why you think that is particularly since all lenders are essentially sharing the same population of customers?

Question: Bill Carcache - Wolfe Research Securities - Analyst : That's helpful. Perry. Thank you. And, if I could follow up on credit, you made it clear, you expect your loss rates to drift very gradually towards your longer term through the cycle targets from here. But could you parse out for us? How to sort of think about frequency and severity dynamics from here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call I think you discussed these dynamics a little bit in an earlier response, but I think if the macro sort of plays out in that soft landing under that soft landing scenario, should we start to see some cure rates as we move into 2025 lead to the back end the later stage of delinquency improvements and ultimately lower loss rates and all of that being supportive to ultimately the reserve rate being able to drift lower at some point in 2025?

Question: Bill Carcache - Wolfe Research Securities - Analyst : Understood. That's very clear. Thank you for taking my questions.

Question: David Rochester - Compass Point Research & Trading - Analyst : Hey good morning, guys.

Question: David Rochester - Compass Point Research & Trading - Analyst : On expenses. You mentioned those would be higher in 4Q. And when I look at the expense guide, it seems to imply a pretty sizable step-up quarter over quarter just to get to the more favorable end of that guidance range. Do you just possibly narrow down that range of an increase you're expecting in the fourth quarter? And I guess that's all coming from higher marketing and sales volume pick up. Is that right?

Question: David Rochester - Compass Point Research & Trading - Analyst : Okay. And on the margin, I appreciate all the comments you made on all the forces that work there in the fourth quarter the supports and the pressures is the net of all that still a net negative. When are you still expecting margin pressure or could the mitigants rolling in be enough to drive some stability there or maybe even some upside in the fourth quarter. Thanks.

Question: David Rochester - Compass Point Research & Trading - Analyst : Okay. So definitely no expansion but potentially not much in the way of impression.

Question: David Rochester - Compass Point Research & Trading - Analyst : Great. All right, Thanks guys.

Question: John Pancari - Evercore ISI - Analyst : Morning. Perry, you had indicated that you expect the loss trajectory to begin to reflect more of your normal seasonality here, how would you define that normal seasonality? And specifically, when we look at first quarter 2025, I believe you're looking at it, maybe your historical seasonal increase may have been around 70 basis points. So could that put your first quarter 2025 loss rate above 9%?

Question: John Pancari - Evercore ISI - Analyst : Okay. All right. Thanks for that. And then separately, I know you flagged a few times on this call, the expected impact of the storms just out of curiosity how much of Bread's cardholder base is in Florida and the storm impacted areas?

Question: John Pancari - Evercore ISI - Analyst : Okay. Got it, and if I could ask just one last quick one. It was on an earlier question, I think Mihir's question around the mitigation impact, just to confirm, did you indicate that it was not a material impact to your full year 2024 guide? And therefore, should we assume not a material impact to this quarter or next, in terms of the mitigation benefits? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call

Question: John Pancari - Evercore ISI - Analyst : Got it. Okay, Great. Thank you.

Question: Reggie Smith - JPM - Analyst : So that they have a question. It's probably a really easy answer to this. But could you remind us of the calculus you guys did internally when deciding to redeem those converts, which have a fairly low coupon rate and how you thought about that versus paying out a more expensive debt or you want to write them back. So I'm going to have a few follow up.

Question: Reggie Smith - JPM - Analyst : Got it. I understand. And then I guess thinking about the mitigation stuff, I know what the APRs -- the APR increases, I believe only apply to like new purchases. I was curious, I know there's a bleed in period there but, mechanically when people pay back their balances it pays off those higher APR balances first. Is that how that works? Is part one of the question, part two is when you're talking about the fourth quarter impact, is it safe to assume that most of that benefit is coming from the statement fees? And I'm not sure if you guys have articulated what those -- the range of those fees could be. If anything, you could share on that would be great. Thank you.

Question: Reggie Smith - JPM - Analyst : Got it. Okay, perfect. Thank you.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Good Morning REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, BFH.N - Q3 2024 Bread Financial Holdings Inc Earnings Call

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Just Yeah, I want to get out of the P&L for a second here. And in your guidance, you talk about visibility into your pipelines. Can you talk a little bit about what you're seeing in the pipelines? And then Ralph, you've been pretty quiet. Perry's been kind of beat up, but can you maybe talk about new business activity, new business win potential for the company and what you're seeing right now?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay, thank you. That's all I have.