Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Q4 2023 Earnings Presentation
25 slides from Bread Financial's earnings presentation, Jan 25, 2024
Slide 1: Fourth quarter and full year 2023 results
Bread Financial Fourth quarter and full year 2023 results January 25, 2024 Ralph Andretta | President & CEO Perry Beberman | EVP & CFO © 2 0 2 2 B r e a d F i n a n c i a l |
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: 2023 achievements
2023 achievements Launched new card brand partnerships Responsible growth • Loans grew low to mid-single digits as guided • Grew year-over-year pretax pre-provision earnings for each quarter of 2023 • Successful launch of new iconic brand partners and renewal of key partners • Secured top five brand
Slide 4: Fourth quarter 2023 key highlights
Fourth quarter 2023 key highlights Demonstrated financial strength • Net income of $43 million and 11th consecutive quarter of year-over-year PPNR growth • Tangible book value per share of $43.70, increased 49% year-over-year • Completed offering of $600 million senior unsecured notes due 2029, the
Slide 5: Capital allocation
Capital allocation Improve capital metrics Reduce debt levels Drive shareholder value $1.4 billion tangible common equity build since 2020 Paid down $1.7 billion since 2020 ~$28 increase in TBVPS since 2020 Total company tangible common equity / tangible Parent level debt outstanding Tangible book v
Slide 6: 2024 focus areas
2024 focus areas Responsible Manage Accelerate digital Operational growth macroeconomic and technology excellence Scale and diversify and regulatory Advance capabilities Accelerate continuous product offerings to align environment to enhance customer improvement gains to with the changing experience
Slide 7: Full year 2023 financial highlights
Full year 2023 financial highlights Continuing operations $4.3 billion $737 million $14.74 Revenue Income from continuing operations Diluted EPS Year-over-year comparisons • Credit sales of $28.9 billion decreased 12%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023, o
Slide 8: Fourth quarter 2023 financial highlights
Fourth quarter 2023 financial highlights Continuing operations $1.0 billion $45 million $0.90 Revenue Income from continuing operations Diluted EPS Year-over-year comparisons • Credit sales of $7.8 billion decreased 23%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023,
Slide 9: Financial results
Financial results Continuing operations ($ in millions, except per share) 4Q23 4Q22 $ Chg % Chg 2023 2022 $ Chg % Chg Total interest income $ 1,312 $ 1,325 $ (13) (1%) $ 5,145 $ 4,684 $ 461 10% Total interest expense 237 195 42 21% 879 503 376 75% Net interest income 1,075 1,130 (55) (5%) 4,266 4,18
Slide 10: Net interest margin
Net interest margin Interest-earning asset yields & mix Interest-bearing liability costs & funding mix Loan yield Avg. earning asset yield Net interest margin Cost of total interest-bearing liabilities Cost of deposits 28.6% 27.7% 27.2% 26.6% 26.1% 25.6% 26.0% 5.0% 5.2% 25.2% 25.0% 24.8% 4.4% 4.6% 2
Slide 11: Credit quality and allowance
Credit quality and allowance Delinquency rates Net loss rates 5 year peak rate: 6.5% 5 year peak rate: 8.0% 6.5% 5.7% 5.7% 5.5% 5.5% 6.3% 8.0% 8.0% 5 year avg rate: ~5.0% 5 year avg rate: ~6.0% 7.0% 6.9% 4.4% 4.8% 5.0% 6.3% 4.1% 4.4% 5.6% (1) 3.9% 5 year low rate: 3.3% 5 year low rate: 3.9% 4Q21 1Q2
Slide 12: Strengthened financial resilience
Strengthened financial resilience Bread Financial is positioned to perform well through a full economic cycle Strong corporate Strengthened balance sheet and funding mix governance Capital ratios Increased mix of Loan loss reserve Reduced debt Proactive risk significantly direct-to-consumer material
Slide 13: 2024 financial outlook
2024 financial outlook Reflects moderating sales growth as a result of macroeconomic pressures and strategic credit tightening Full year 2024 Full year 2023 actuals Commentary outlook • Based on our current economic outlook, ongoing strategic credit tightening actions, higher gross credit losses, an
Slide 14: Appendix
Appendix © 2 0 2 2 B r e a d F i n a n c i a l |
Slide 15: Average loans and credit sales
Average loans and credit sales 23% 11% 14% 17% 2% 5% 4% —% (8)% $19.8 $19.4 $17.7 $18.3 $17.0 $17.6 $17.5 $16.7 ($ in billions) $16.1 $10.2 $8.8 $8.1 $7.7 $7.8 $6.9 $7.4 $7.1 $6.7 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Average loans Credit sales Year-over-year change in average loans ©2024 Bre
Slide 16: Total non-interest expenses
Total non-interest expenses Continuing operations 4Q23 vs. 4Q22 change in non-interest expenses Total non-interest expenses ($ in millions) 8% Employee comp. & benefits: $13 6% $2,092 $1,932 Card and processing: (20)% $(23) Info. processing & comm.: (4)% $(3) (6)% Marketing: (17)% $(10) $548 $516 De
Slide 17: Summary financial highlights
Summary financial highlights Continuing operations 4Q23 vs 4Q23 vs 2023 vs 4Q23 4Q22 3Q23 2023 2022 ($ in millions) 4Q22 3Q23 2022 Credit sales $ 7,802 $ 10,166 (23%) $ 6,668 17% $ 28,900 $ 32,883 (12%) Average credit card and other loans $ 18,267 $ 19,820 (8%) $ 17,540 4% $ 18,216 $ 17,768 3% End-o
Slide 18: Summary financial highlights
Summary financial highlights Continuing operations ($ in millions) 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 2022 2023 Credit sales $ 8,778 $ 6,887 $ 8,140 $ 7,689 $ 10,166 $ 7,373 $ 7,057 $ 6,668 $ 7,802 $ 32,883 $ 28,900 Year-over-year change 15% 14% 10% 4% 16% 7% (13%) (13%) (23%) 11% (12%) Av
Slide 19: Financial results
Financial results Continuing operations ($ in millions, except per share) 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 2022 2023 Total interest income $ 1,017 $ 1,068 $ 1,073 $ 1,218 $ 1,325 $ 1,335 $ 1,197 $ 1,301 $ 1,312 $ 4,684 $ 5,145 Total interest expense 84 79 95 133 195 218 205 219 237 503 8
Slide 20: Net interest margin
Net interest margin 4Q23 2023 Interest income / Average yield / Interest income / Average yield / ($ in millions) Average balance Average balance expense rate expense rate Cash and investment securities $ 3,659 $ 48 5.3% $ 3,707 $ 184 5.0% Credit card and other loans 18,267 1,264 27.7% 18,216 4,961
Slide 21: Financial results
Financial results ($ in millions, except per share amounts) 4Q23 4Q22 $ Chg % Chg 2023 2022 $ Chg % Chg Income (loss) from continuing operations, net of taxes $ 45 $ (134) $ 179 nm $ 737 $ 224 $ 513 nm (Loss) income from discontinued operations, net of taxes (2) — (2) nm (19) (1) (18) nm Net income
Slide 22: Capital and liquidity
Capital and liquidity As of December 31, 2023: • Total company liquidity of $6.2 billion including all undrawn credit facilities and conduits at the banks; parent liquidity of $1.0 billion consisting of cash plus revolver capacity • Total company common equity tier 1 capital ratio of 12.2%, up 350 b
Slide 23: Reconciliation of GAAP to non-GAAP financial measures
Reconciliation of GAAP to non-GAAP financial measures ($ in millions) 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 2022 2023 Pretax pre-provision earnings (PPNR) Income (loss) before income taxes $ 65 $ 302 $ 16 $ 189 $ (207) $ 638 $ 86 $ 225 $ 19 $ 300 $ 968 Provision for credit losses 363 193 404
Slide 24: Credit quality trends
Credit quality trends Delinquency rates 5- & 15-year peak rate(1): 6.5% 5.7% 6.5% 5.5% 5.5% 6.3% 6.0% 5-year avg rate: ~5.0% 5.7% 4.7% 3.8% 3.8% 3.9% 4.3% 4.4% 4.4% 3.3% 4.1% 5-year low rate: 3.3% 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Net loss rates (1) 15-y
Slide 25: Definition of terms
Definition of terms Summary financial highlights (1) Return on average assets: Return on average assets represents annualized Income from continuing operations divided by average Total assets. (2) Return on average equity: Return on average equity represents annualized Income from continuing operati
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