Executive Summary

Q1 2025 delivered resilient results with adjusted diluted EPS of $2.90, a clear beat versus S&P Global consensus $2.23, aided by lower provisioning and disciplined OpEx; GAAP diluted EPS from continuing ops was $2.86 . EPS consensus: $2.23*, actual: $2.90* (beat). Values retrieved from S&P Global.
“Revenue” as defined by company (total net interest and non-interest income) was $0.97B; net revenue after provision was $0.674B, below S&P consensus of $0.954B. Using S&P’s definition (after provision) implies a large miss; using company’s pre-provision revenue implies a modest beat . S&P revenue consensus: $0.954B*, actual: $0.674B* (miss). Values retrieved from S&P Global.
Credit metrics improved YoY (delinquency 5.9%, net loss rate 8.2% vs 6.2% and 8.5% YoY), while NIM rose sequentially to 18.1%; CET1 at 12.0% and TRBC at 15.5% reflect stronger capital after a $400M sub debt issuance and completion of a $150M buyback (3.2M shares) .
Management lowered 2025 loan growth outlook (flat to slightly down) and trimmed revenue outlook (flat to slightly up), citing tariff/ macro uncertainty, but maintained net loss rate (8.0–8.2%) and tax rate (25–26%) guidance; dividend of $0.21 declared for Q2 .

What Went Well and What Went Wrong

What Went Well

Strong EPS performance: adjusted diluted EPS from continuing ops $2.90 vs $2.73 YoY; GAAP diluted EPS from continuing ops $2.86 vs $2.73 YoY. “We reported strong first quarter 2025 earnings… net income of $138 million and EPS of $2.78” (total) .
Balance sheet/capital actions: $400M sub notes increased Tier 2 capital, lifting TRBC by >200 bps; completed $150M buyback at ~5% below TBV/share; liquidity resources $7.4B (33% of assets) .
Credit improvement and funding mix: delinquency 5.9% (down 30 bps YoY), net loss rate 8.2% (down 30 bps YoY), direct-to-consumer deposits $7.9B (+13% YoY), comprising 43% of average funding vs 36% YoY .

Management quotes:

“We are well positioned to generate capital and cash flow to deliver strong returns and create sustainable long-term value” .
“Our direct-to-consumer deposits… increased to $7.9 billion… up 13% year-over-year” .
“We completed our $150 million… repurchase program… 3.2 million shares” .

What Went Wrong

Top-line pressure: revenue down 2% YoY on lower finance charges/late fees; NIM down 60 bps YoY (18.1% vs 18.7%), reflecting lower average prime, fewer late fees, mix shift toward co-brand .
Macro/tariffs uncertainty: management flagged consumer pull-forward of spend (electronics, home, auto parts) and risks that tariffs/inflation could pressure future demand; baseline outlook lowered for loans and revenue .
Near-term credit/loss dynamics: Q2 net loss rate to be elevated given $13M hurricane loss timing shift; reserve rate stable at 12.2% (little room to release until macro improves) .

Financial Results

Core P&L and Margins (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue (Total net interest + non-interest income, $USD Billions)	$1.000	$0.900	$0.970
Net Revenue After Provision ($USD Billions)	N/A	N/A	$0.674
GAAP Diluted EPS – Continuing Ops ($)	$0.06	$0.15	$2.86
Adjusted Diluted EPS – Continuing Ops ($)	$1.84	$0.41	$2.90
Net Interest Margin (%)	18.8%	17.8%	18.1%
Loan Yield (%)	27.4%	25.7%	26.5%
Delinquency Rate (%)	6.4%	5.9%	5.9%
Net Loss Rate (%)	7.8%	8.0%	8.2%
PPNR ($USD Millions)	$409	$390	$493

Estimates vs Actuals (Q1 2025)

Metric	Consensus	Actual
Primary EPS Consensus Mean ($)	2.23*	2.90*
Revenue Consensus Mean ($USD Billions)	0.954*	0.674*

Notes: Values retrieved from S&P Global. Company-reported “Revenue” (pre-provision) was $0.970B . S&P’s “Revenue actual” reflects net of provision (after credit losses) for BFH.

KPIs and Balance Sheet (oldest → newest)

KPI	Q3 2024	Q4 2024	Q1 2025
Credit Sales ($USD Billions)	$6.5	$7.9	$6.1
Average Loans ($USD Billions)	$17.8	$18.2	$18.2
End-of-Period Loans ($USD Billions)	N/A	N/A	$17.8
Direct-to-Consumer Deposits ($USD Billions)	$7.5	$7.7	$7.9
CET1 Ratio (%)	13.3%	12.4%	12.0%
Total Risk-Based Capital (%)	N/A	N/A	15.5%
TCE + Credit Reserve Rate (% of loans)	25.0%	24.0%	25.3%
Reserve Rate (%)	12.2%	11.9%	12.2%
Payment Rate (%)	N/A	N/A	15.1%

Guidance Changes

Metric	Period	Previous Guidance (Q4 2024 Call)	Current Guidance (Q1 2025 Call)	Change
Avg. Loans	FY 2025	Relatively flat vs 2024	Flat to slightly down	Lowered
Total Revenue (ex gains)	FY 2025	Up low single digits	Flat to slightly up (after loan guidance adj.)	Lowered
Net Interest Margin	FY 2025	Modestly higher than 2024	Slight improvement year-over-year	Maintained
Net Loss Rate	FY 2025	8.0%–8.2%	8.0%–8.2%	Maintained
Normalized Effective Tax Rate	FY 2025	25%–26%	25%–26% (quarterly variability)	Maintained
Q2 Net Loss Timing Shift (hurricane)	Q2 2025	~$10M shift to Q2	~$13M shift to Q2	Raised
Marketing Expenses	FY 2025	Higher Q4 seasonality	Expected to build sequentially through 2025	Incremental detail
Dividend	Q2 2025	N/A	$0.21 per share, payable Jun 13, 2025	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
AI/Tech & Operational Excellence	Focus on tech modernization and efficiency; positive operating leverage target	Continued OpEx discipline; leveraging AI, mobile/web to reduce cost-to-serve	Ongoing execution
Tariffs/Macro Uncertainty	Watching inflation, labor market; guiding cautiously for 2025	Heightened uncertainty; consumer pull-forward; tariff-driven inflation risk	Deteriorated macro visibility
Credit Trends & Roll Rates	Stabilizing delinquency; elevated roll rates; seasonality expected	Late-stage roll rates modestly improving; reserve weighting conservative	Gradual improvement
Product Mix (Co-brand vs Private Label)	Shift toward co-brand/proprietary; impacts yields/late fees	Mix shift continues; pricing changes offset lower late fees	Structural shift continues
Regulatory/CFPB Late Fee	95% partners contracted for mitigants; early APR actions	Court vacating late fee rule; management not rolling back mitigations; maintained guide	Regulatory risk abates; mitigants persist
Funding & Deposits	DTC deposits rising; improving funding mix	DTC deposits $7.9B; deposits 72% of total funding	Strengthening funding base
New Partnerships	Saks, Hard Rock launched	Crypto.com announced; AAA expansion; Academy renewal	Pipeline robust

Management Commentary

Strategy and capital: “We are well positioned to allocate more of our capital and sustainable cash flow generation towards supporting responsible, profitable growth and generating value” .
Macro posture: “The risk of economic weakness continues to grow… risks associated with tariffs, trade policies and inflation may adversely impact consumer strength” .
Pricing and mitigants: “We have not seen an immaterial impact to retail sales… incremental profit share to the partner… maintain a risk‑adjusted margin” .
Deposits/funding: “Direct‑to‑consumer deposits accounted for 43% of our average total funding… wholesale deposits decreased from 37% to 29% YoY” .
Partnerships: “Card program announcement with Crypto.com… expanded AAA… extended Academy Sports” .

Q&A Highlights

Reserves and scenarios: Management weights severe scenarios (avg ~7% unemployment assumption), keeping reserve rate stable amidst macro uncertainty; potential to dial back severe weights if baseline worsens, stabilizing reserve rate .
NIM trajectory: Slight full-year NIM expansion expected despite headwinds from prime cuts, lower billed late fees, and mix shift; pricing changes and lower reversals as gross losses improve act as tailwinds .
Loan growth and credit posture: Loan guide trimmed due to uncertainty; credit unwind actions deferred; maintaining conservative posture with targeted adjustments .
Capital returns: Buybacks opportunistic, below TBV; future buybacks contingent on capital ratios, pipeline, stress scenarios; Board discussions ahead .
Partner economics: Mitigants phased; 95% of partners have contractual understanding; APR increases vary by cohort and partner mix .

Estimates Context

EPS: BFH beat consensus EPS (actual $2.90 vs $2.23 consensus), driven by lower provision and OpEx discipline; S&P’s “Primary EPS” appears aligned with adjusted continuing-ops EPS . EPS consensus/actual: 2.23*/2.90*. Values retrieved from S&P Global.
Revenue: Using S&P’s definition (net of provision), BFH missed consensus ($0.674B actual vs $0.954B consensus). Company’s pre-provision revenue was $0.970B, reflecting lower finance charges/late fees YoY, but a sequential NIM lift . Revenue consensus/actual: 0.954B*/0.674B*. Values retrieved from S&P Global.
Implication: Street models may need to reconcile definitions (pre vs post provision) and incorporate updated 2025 guide (flat/slightly down loans; flat/slightly up revenue ex gains; net loss rate unchanged), lowering top-line assumptions while raising EPS on cost/pricing mitigation.

Key Takeaways for Investors

EPS beat vs consensus was meaningful; revenue optics depend on pre-/post-provision definition. Expect Street to adjust frameworks accordingly.
Watch tariff/inflation developments: management flagged accelerated purchases now and potential give-back later; loan growth outlook trimmed accordingly .
Credit stabilization is underway (better delinquency, modest roll-rate improvement), but reserve rate prudently stable; Q2 loss rate will be elevated due to hurricane timing .
NIM slight expansion for 2025 despite prime cuts, thanks to pricing actions and improving reversals as losses normalize; quarterly NIM could be choppy .
Capital strength improved: TRBC 15.5% after $400M sub debt; buyback completed below TBV; dividend maintained ($0.21), leaving optionality for further returns as ratios approach targets .
Structural mix shift (co-brand/proprietary, DTC deposits) lowers late fees and yields but enhances risk-adjusted returns and funding stability .
Near-term trading: EPS beat vs consensus is supportive; caution for Q2 credit headline (hurricane loss shift) and macro tariff rhetoric; medium term thesis rests on operating leverage, pricing mitigants, and pipeline wins.

Footnote: All S&P Global estimate values are marked with an asterisk and were retrieved from S&P Global.

BREAD FINANCIAL HOLDINGS, INC. (BFH)·Q1 2025 Earnings Summary