Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Q2 2022 Earnings Presentation
21 slides from Bread Financial's earnings presentation, Jul 28, 2022
Slide 1: Bread Financial Second Quarter 2022 Results
Bread FinancialSecond Quarter 2022 Results ©2022 Bread Financial | Confidential & Proprietary 1 Ralph Andretta President & CEO Perry Beberman EVP & CFO July 28, 2022
Slide 2: Forward-Looking Statements
Forward-Looking Statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be iden
Slide 3: Key Highlights
Business transformation efforts continue Advanced technology modernization through digital enhancements and processing transition Continued diversification across both products and industry verticals Strong foundation of seasoned financial services industry executive leadership with success in manag
Slide 4: Business Development Highlights
Business Development Highlights Brand Partner Renewal New Brand Partnership Select New Bread Pay Partners 4 ©2022 Bread Financial Serves over three million customers through its e-commerce platform and over 600 stores One of North America’s largest and most trusted membership organizations serving m
Slide 5: Technology Modernization
Technology Modernization 5 Digital Modernization Accelerate Customer-Centric Growth Seamless Self Service & Engagement Deliver a Robust Set of Product and Partner Capabilities ©2022 Bread Financial Key Benefits of Core Processing Conversion to Fiserv Faster speed-to-market for new products, brand pa
Slide 6: Second Quarter 2022 Financial Highlights
Second Quarter 2022 Financial Highlights 6 Credit sales of $8.1 billion were up 10% versus 2Q21 Second quarter average loans of $17.0 billion were up 11% versus 2Q21 Revenue increased 17% versus 2Q21, inclusive of a $21 million write-down in the carrying value of the Company’s investment in Loyalty
Slide 7: Financial Results – Continuing Operations
Financial Results – Continuing Operations * Pretax pre-provision earnings is a non-GAAP financial measure. nm – not meaningful 7 ©2022 Bread Financial ($ in millions, except per share) 2Q22 2Q21 $ Chg % Chg YTD ‘22 YTD ’21 $ Chg % Chg Total interest income $1,073 $915 $158 17 % $2,141 $1,857 $284 15
Slide 8: Net Interest Margin
Net Interest Margin Average interest-bearing liabilities ($ in billions) Loan yield Avg. earning asset yield Net interest margin Cost of total interest-bearing liabilities Cost of deposits Average interest-earning assets ($ in billions) 8 ©2022 Bread Financial
Slide 9: Credit Quality and Allowance Reserve Rates
Credit Quality and Allowance Reserve Rates ($ in millions) Net Loss Rates Delinquency Rates 5 year Max rate: 7.6% 5 year Min rate: 3.9% 5 year Avg rate: ~6.0% * Calculated as the percentage of the Allowance for credit losses to end-of-period Credit card and other loans. Revolving Credit Risk Distrib
Slide 10: 2022 Financial Outlook
2022 Financial Outlook Full Year 2021 Actuals Full Year 2022 Outlook Commentary Average loans $15,656 million Up low double digits Continued sales growth and net partner additions driving sustainable, profitable growth On a year-over-year basis, expect year-end loan growth to be stronger than full y
Slide 11: Strengthened Financial Resilience
Strengthened Financial Resilience Transforming our Company to deliver sustainable, profitable growth with an expectation to outperform historic loss levels 11 Enhanced credit risk management and underlying credit distribution Improved balance sheet strength and funding mix ©2022 Bread Financial Stro
Slide 12: Appendix
Appendix ©2022 Bread Financial | Confidential & Proprietary 12
Slide 13: Average Loans and Credit Sales
Average Loans and Credit Sales ($ in billions) Loans continue to inflect higher with strong year-over-year credit sales growth providing momentum 13 ©2022 Bread Financial
Slide 14: Total Non-Interest Expenses
Total Non-Interest Expenses $ in millions +9% Total non-interest expenses were up 12% versus 2Q21 Employee compensation and benefit costs increased 18%, primarily driven by increased salaries, continued digital and technology modernization-related hiring, incentive compensation, and higher volume-re
Slide 15: Summary Financial Highlights Continuing Operations
Summary Financial HighlightsContinuing Operations 15 ©2022 Bread Financial ($ in millions) 2Q22 2Q21 2Q22 vs 1Q22 2Q22 vs YTD ’22 YTD ’21 YTD ’22 vs 2Q21 1Q22 YTD ’21 Credit sales $8,140 $7,401 10% $6,887 18% $15,028 $13,445 12% Average credit card and other loans $17,003 $15,282 11% $16,650 2% $16,
Slide 16: Summary Financial Highlights Continuing Operations
Summary Financial HighlightsContinuing Operations ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 YTD ‘21 YTD ’22 Credit sales $4,799 $6,152 $7,657 $6,043 $7,401 $7,380 $8,778 $6,887 $8,140 $13,445 $15,028 Year-over-year change (36)% (21)% (18)% (1)% 54% 20% 15% 14% 10% 23% 12% Average
Slide 17: Financial Results Continuing Operations
Financial ResultsContinuing Operations ($ in millions, except per share) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 YTD ’21 YTD ‘22 Total interest income $860 $915 $950 $942 $915 $994 $1,017 $1,068 $1,073 $1,857 $2,141 Total interest expense 127 114 112 107 100 91 84 79 95 207 174 Net interest inc
Slide 18: Net Interest Margin
Net Interest Margin 2Q22 YTD 2022 ($ in millions) Average Balance Interest Income / Expense Average Yield / Rate Average Balance Interest Income / Expense Average Yield / Rate Cash and investment securities $3,975 $8 0.8% $3,884 $11 0.6% Credit card and other loans 17,003 1,064 25.0% 16,827 2,130 25
Slide 19: Capital and Liquidity
Capital and Liquidity Banks Combined Capital Ratios 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Common equity tier 1 capital ratio(2) 18.3% 18.8% 18.4% 21.0% 22.1% 22.6% 20.0% 20.8% 20.1% Tier 1 capital ratio(3) 18.3% 18.8% 18.4% 21.0% 22.1% 22.6% 20.0% 20.8% 20.1% Total risk-based capital ratio(4)
Slide 20: Financial Results
Financial Results ($ in millions, except per share amounts) 2Q22 2Q21 $ Chg % Chg YTD ’22 YTD ’21 $ Chg % Chg Income from continuing operations, net of taxes $12 $263 $(251) (95) % $224 $531 $(307) (58) % (Loss) income from discontinued operations, net of taxes 0 11 (11) nm (1) 29 (30) nm Net income
Slide 21: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures 21 ©2022 Bread Financial ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 YTD ’21 YTD ‘22 Pretax pre-provision earnings (PPNR) Income before income taxes $28 $162 $129 $367 $354 $259 $65 $302 $16 $721 $319 Provision for credit losses
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