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BF

BREAD FINANCIAL HOLDINGS, INC. (BFH)·Q3 2025 Earnings Summary

Executive Summary

  • Bread Financial delivered a strong quarter: adjusted diluted EPS of $4.02 versus S&P Global consensus of $2.11, a significant beat, and revenue of $971M versus $967M consensus, a slight beat . Values from S&P Global estimates marked with an asterisk below.
  • Credit quality improved: net loss rate fell to 7.4% (down 40 bps YoY, down 50 bps QoQ) and delinquency held at 6.0% .
  • Capital return accelerated: Board increased buyback authorization by $200M to ~$340M total capacity and raised the dividend 10% to $0.23 per share, with CET1 at 14.0% at the top end of the medium-term target range .
  • 2025 outlook largely maintained, with net loss rate expected at the low end of 7.8%-7.9%, revenue roughly flat YoY, and updated effective tax rate to 19%-20% due to a $38M discrete item .
  • Catalyst: the large EPS beat, improving credit metrics, dividend increase, and expanded buyback authorization are likely positive stock reaction drivers .

What Went Well and What Went Wrong

What Went Well

  • EPS strength and operating leverage: Adjusted diluted EPS rose to $4.02, with adjusted income up 104% YoY, supported by lower provision for credit losses and expense discipline .
  • Credit improvements: Net loss rate fell to 7.4% and delinquency to 6.0%, aided by multi-year credit tightening and product mix shifts; “we anticipate…net loss rate…increase sequentially [in 4Q] following typical seasonal trends,” but current trends are better than expected .
  • Capital return and confidence: “We announced a 10% increase to our quarterly cash dividend… and a $200 million increase to our share repurchase authorization,” reflecting strong capital and liquidity .
  • Quote: “We will continue to invest in technology modernization, digital advancement, artificial intelligence solutions, and product innovation that will drive future growth and efficiencies” .

What Went Wrong

  • Top-line pressure: Revenue was down 1% YoY due to lower billed late fees from improved delinquencies and higher retailer share arrangements (RSAs), only partially offset by pricing changes and lower interest expense .
  • Loan growth softness: Average loans declined 1% YoY, pressured by higher payment rates and lingering elevated gross credit losses; management guides average loans “flat to slightly down” for 2025 .
  • Margin headwinds complexity: NIM dynamics remain choppy—lower billed late fees and mix shifts toward co-brand/proprietary cards with lower APRs temper yield, while pricing changes and improving gross losses offer offsets; forecasting “the perfect inflection point” remains difficult .

Financial Results

Headline Comparison vs Prior Year, Prior Quarter, and Estimates

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$983 $929 $971
Diluted EPS (GAAP)$0.06 $2.93 $3.96
Adjusted Diluted EPS (Non-GAAP)$1.84 $3.14 $4.02
Net Interest Margin (%)18.8% 17.7% 18.8%
Net Loss Rate (%)7.8% 7.9% 7.4%
Delinquency Rate (%)6.4% 5.7% 6.0%
Provision for Credit Losses ($USD Millions)$369 $274 $299
Total Non-Interest Expenses ($USD Millions)$574 $481 $476
Credit Sales ($USD Billions)$6.464 $6.814 $6.787
Average Loans ($USD Billions)$17.766 $17.686 $17.596

Performance vs Wall Street Consensus (S&P Global)

MetricConsensusReported
Primary EPS ($)$2.11*$4.02
Revenue ($USD Millions)$967.2*$971

Values retrieved from S&P Global*

Highlights:

  • Bold EPS beat: $4.02 vs $2.11 consensus*
  • Slight revenue beat: $971M vs $967M consensus*

Additional P&L and Balance Metrics

MetricQ3 2024Q2 2025Q3 2025
Net Interest Income ($USD Millions)$1,037 $974 $1,032
Non-Interest Income ($USD Millions)($54) ($45) ($61)
Income Before Income Taxes ($USD Millions)$40 $174 $196
CET1 Ratio (%)13.3% 13.0% 14.0%
End-of-Period DTC Deposits ($USD Billions)$7.483 $8.080 $8.188

Segment/Product Mix (Mix Percentages)

CategoryQ3 2025
End-of-Period Loans: Private Label54%
End-of-Period Loans: Co-Brand40%
End-of-Period Loans: Proprietary4%
End-of-Period Loans: Bread Pay2%
Credit Sales: Private Label39%
Credit Sales: Co-Brand55%
Credit Sales: Proprietary4%
Credit Sales: Bread Pay2%

KPIs

KPIQ3 2024Q2 2025Q3 2025
Payment Rate (%)14.4% 15.0% 14.9%
Loan Yield (%)27.4% 26.0% 27.0%
Reserve Rate (%)12.2% 11.9% 11.7%
Liquid Resources ($USD Billions)$7.6 $7.8 $7.8
Tangible Book Value per Share ($)$47.48 $52.21 $56.36

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Loss RateFY 20257.8%-7.9% (updated in Q2) 7.8%-7.9%; expect low end Maintained; narrowed to low end
Average LoansFY 2025Flat to slightly down Flat to slightly down Maintained
Revenue (excl. gain on sale)FY 2025Flat vs 2024 Flat vs 2024 Maintained
Operating Leverage (Adj.)FY 2025Nominal positive Positive operating leverage Maintained (confidence reinforced)
Effective Tax RateFY 202525%-26% normalized 19%-20% (due to $38M discrete) Lowered
Dividend per ShareQ4 2025$0.21 prior $0.23 (10% increase) Raised
Share Repurchase AuthorizationAs of 10/23/25$140M remaining prior +$200M increase; ~$340M total capacity Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
AI/TechnologyOngoing modernization; 200+ ML models; efficiency focus “Fast follower” approach; >200 ML models; generative/agentic AI on deck; efficiency upside Building capabilities; prudent scaling
Macro/TariffsHeightened uncertainty; wage growth > inflation; cautious reserve weighting Consumers “surprisingly resilient”; watch Fed policy and tariffs; reserve rate changes driven by credit quality Stable-to-improving consumer; macro still uncertain
Credit QualityLate-stage roll rates improving; entry to collections below pre-pandemic Net loss 7.4%; delinquency 6.0%; expect typical seasonal uptick in Q4 Gradual improvement; seasonality ahead
Capital ReturnCompleted $150M buyback (Q1/Q2); CET1 moved to 13% (Q2) +$200M buyback, $0.23 dividend; CET1 14.0% Accelerating return; strong capital
NIM/Late FeesNIM guided slight expansion for FY; late fees declining with better delinquencies NIM 18.8% (flat YoY, up QoQ); lower billed late fees continue to pressure, mitigated by pricing Mixed drivers; sequential improvement
Partner Pipeline/Home VerticalRenewals (Caesars); Crypto.com co-brand launched New signings: Bed Bath & Beyond, Furniture First, Raymour & Flanigan Pipeline broadening; home category expansion
BNPL/Product SuiteBread Pay as part of product basket BNPL as one product in diversified suite; partnership focus vs ecosystem landgrab Balanced multi-product strategy

Management Commentary

  • Strategic positioning: “We are well positioned to achieve our long-term financial targets and anticipate increasing shareholder value over time” .
  • Capital actions: “With our CET1 ratio at the top of our targeted range…we announced a…$200 million increase to our share repurchase authorization. We also announced a 10% increase to our quarterly cash dividend” .
  • Credit outlook: “We expect that we will be at the low end of our full-year [net loss] outlook range of 7.8% to 7.9%…improving loss rate and delinquency rate trends are encouraging” .
  • Technology investment: “We will continue to invest in technology modernization, digital advancement, artificial intelligence solutions, and product innovation” .
  • New partners: Expansion in home vertical (Bed Bath & Beyond, Furniture First, Raymour & Flanigan) for profitable growth .

Q&A Highlights

  • Credit/reserve trajectory: Reserve rate changes driven by credit quality improvements; overlays unchanged QoQ, potential tailwind as adverse scenarios rebalanced over time .
  • Loan growth: Expect loan growth as credit improves and new partners onboard; mix effects matter (home vertical larger ticket vs co-brand higher payment rate) .
  • NIM and late fees: Lower billed late fees follow delinquency improvement; pricing changes build gradually; hard to pinpoint the inflection with multiple moving parts .
  • RSAs/interchange dynamics: RSAs pressured by increased sales and lower losses; MDFs could recover with big-ticket improvements; netting makes forecasting challenging .
  • Capital structure: CET1 binding constraint (13%-14% medium-term); potential preferred issuance to lower CET1 target to 12%-13% longer term; ratings upgrade helpful but not prerequisite .
  • BNPL/product posture: Portfolio approach across co-brand, private label, pay-over-time; focus on partner ecosystems vs direct platform landgrab .
  • AI: “Fast follower,” 200+ ML models, RPA in 100+ processes; expecting efficiency and operating leverage gains while staying prudent in a regulated environment .

Estimates Context

  • Results materially exceeded consensus EPS and slightly beat revenue. The magnitude of the EPS beat is likely to prompt upward estimate revisions for FY25 and FY26 as analysts factor in improved credit metrics, lower provision, and tax rate benefits .
  • Areas for estimate adjustment: lower net loss rate trajectory, tax rate at 19%-20% for FY25, and operating leverage given expense discipline and technology investments .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • The quarter delivered a notable upside surprise on EPS driven by lower provision, a discrete tax benefit, and continued expense control; credit metrics improved sequentially and YoY .
  • Capital return stepped up with a dividend increase and a larger buyback authorization; CET1 at 14.0% and strong liquidity provide flexibility .
  • Top-line will be tempered near term by lower billed late fees and higher RSAs as credit quality improves; pricing actions and mix shifts aim to mitigate margin pressure over time .
  • Pipeline is robust, with home vertical signings (Raymour & Flanigan, Bed Bath & Beyond, Furniture First) poised to support growth and diversification .
  • FY25 guidance intact: average loans flat to slightly down, revenue flat, positive operating leverage, and net loss rate at the low end of 7.8%-7.9%; effective tax rate lowered to 19%-20% .
  • Trading lens: EPS beat and capital return actions are near-term positives; watch for holiday season sales trends, seasonal credit normalization in Q4, and management’s early-2026 view on reserve overlays .
  • Medium-term thesis: improving credit and disciplined underwriting, balanced funding mix (47% DTC deposits), technology-enabled efficiency, and diversified product/vertical portfolio support durable returns and ROTCE expansion .

Citations: Earnings call transcript and slides . Additional Q1/Q2 context .