Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Q3 2022 Earnings Presentation
21 slides from Bread Financial's earnings presentation, Oct 27, 2022
Slide 1: Bread Financial Third Quarter 2022 Results
Bread FinancialThird Quarter 2022 Results ©2022 Bread Financial | Confidential & Proprietary 1 Ralph Andretta President & CEO Perry Beberman EVP & CFO October 27, 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
Remain focused on driving sustainable, profitable growth Advanced technology modernization to further operating efficiencies and innovation Seasoned financial services industry executive leadership with successful history of managing through full economic cycles Improved financial resilience provide
Slide 4: Business Development Highlights
©2022 Bread Financial Business Development Highlights New & Renewed Brand Partners Select New Bread Pay Partners 4 Enables virtual card for a frictionless consumer and merchant experience Sales finance lending platform providing distribution in diversified verticals 125+ integrated merchants New Inn
Slide 5: Third Quarter 2022 Financial Highlights
Third Quarter 2022 Financial Highlights 5 Credit sales of $7.7 billion up 4% in 3Q22 versus 3Q21 Third quarter average loans of $17.6 billion were up 14% versus 3Q21 Revenue increased 15% versus 3Q21, while total non-interest expenses increased 13% Income from continuing operations of $134 million w
Slide 6: Financial Results – Continuing Operations
Financial Results – Continuing Operations nm – not meaningful 6 ©2022 Bread Financial ($ in millions, except per share) 3Q22 3Q21 $ Chg % Chg YTD ‘22 YTD ’21 $ Chg %Chg Total interest income $1,218 $994 $224 23 % $3,359 $2,851 $508 18 % Total interest expense 133 91 42 47 308 298 10 3 Net interest i
Slide 7: Net Interest Margin
Net Interest Margin Average interest-bearing liabilities ($ 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) 7 ©2022 Bread Financial
Slide 8: 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% Revolving Credit Risk Distribution (Vantage score) 5 year Max rate: 6.0% 5 year Avg rate: ~5% 5 year Min rate: 3.3% 8 ©2022 Bread Financial The
Slide 9: 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 Expect the year-end loan balance to be between $21 and $22 billion as a result of
Slide 10: Strengthened Financial Resilience
Strengthened Financial Resilience Transforming our Company to deliver sustainable, profitable growth with an expectation to outperform historic loss levels 10 Enhanced credit risk management and underlying credit distribution Improved balance sheet strength and funding mix ©2022 Bread Financial Stro
Slide 11: Appendix
Appendix ©2022 Bread Financial | Confidential & Proprietary 11
Slide 12: Average Loans and Credit Sales
Average Loans and Credit Sales ($ in billions) 12 ©2022 Bread Financial
Slide 13: Total Non-Interest Expenses
Total Non-Interest Expenses $ in millions +10% Total non-interest expenses were up 13% versus 3Q21 Employee compensation and benefit costs increased 20%, primarily driven by increased salaries, continued digital and technology modernization-related hiring, incentive compensation, and higher volume-r
Slide 14: Capital and Liquidity
Capital and Liquidity Banks Combined Capital Ratios 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Common equity tier 1 capital ratio(2) 18.8% 18.4% 21.0% 22.1% 22.6% 20.0% 20.8% 20.1% 21.4% Tier 1 capital ratio(3) 18.8% 18.4% 21.0% 22.1% 22.6% 20.0% 20.8% 20.1% 21.4% Total risk-based capital ratio(4)
Slide 15: Summary Financial Highlights Continuing Operations
Summary Financial HighlightsContinuing Operations 15 ©2022 Bread Financial ($ in millions) 3Q22 3Q21 3Q22 vs 2Q22 2Q22 vs YTD ’22 YTD ’21 YTD ’22 vs 3Q21 1Q22 YTD ’21 Credit sales $7,689 $7,380 4% $8,140 (6)% $22,716 $20,825 9% Average credit card and other loans $17,598 $15,471 14% $17,003 3% $17,0
Slide 16: Summary Financial Highlights Continuing Operations
Summary Financial HighlightsContinuing Operations ($ in millions) 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 YTD ‘21 YTD ’22 Credit sales $6,152 $7,657 $6,043 $7,401 $7,380 $8,778 $6,887 $8,140 $7,689 $20,825 $22,716 Year-over-year change (21)% (18)% (1)% 54% 20% 15% 14% 10% 4% 22% 9% Average cred
Slide 17: Financial Results Continuing Operations
Financial ResultsContinuing Operations ($ in millions, except per share) 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 YTD ’21 YTD ‘22 Total interest income $915 $950 $942 $915 $994 $1,017 $1,068 $1,073 $1,218 $2,851 $3,359 Total interest expense 114 112 107 100 91 84 79 95 133 298 308 Net interest i
Slide 18: Net Interest Margin
Net Interest Margin 3Q22 YTD 2022 ($ in millions) Average Balance Interest Income / Expense Average Yield / Rate Average Balance Interest Income / Expense Average Yield / Rate Cash and investment securities $4,235 $23 2.2% $4,001 $34 1.1% Credit card and other loans 17,598 1,195 27.2% 17,084 3,325 2
Slide 19: Financial Results
Financial Results ($ in millions, except per share amounts) 3Q22 3Q21 $ Chg % Chg YTD ’22 YTD ’21 $ Chg % Chg Income from continuing operations, net of taxes $134 $206 $(72) (35) % $358 $737 $(379) (51) % (Loss) income from discontinued operations, net of taxes 0 18 (18) nm (1) 46 (47) nm Net income
Slide 20: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures 20 ©2022 Bread Financial ($ in millions) 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 YTD ’21 YTD ‘22 Pretax pre-provision earnings (PPNR) Income before income taxes $162 $129 $367 $354 $259 $65 $302 $16 $189 $980 $508 Provision for credit losses
Slide 21: Credit Quality Trends
Credit Quality Trends Net Loss Rates Delinquency Rates 5 year Max rate: 7.6% 5 year Min rate: 3.9% 5 year Avg rate: ~6% 5 year Max rate: 6.0% 5 year Avg rate: ~5% 5 year Min rate: 3.3% 21 ©2022 Bread Financial (2) (3) The 3Q22 Delinquency rate was impacted by the transition of our credit card proces
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