Slide 1: Third quarter 2023 results
Bread Financial Third quarter 2023 results October 26, 2023 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; Non-GAAP financial measures
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: Third quarter 2023 key highlights
Third quarter 2023 key highlights Demonstrated financial resilience • Net income of $171 million and a return on equity of 25% • Tangible book value per share of $42.45, increased 24% year-over-year • Continue to expand our brand partner relationships • Completed authorized $35 million share repurch
Slide 4: 2023 focus areas
2023 focus areas Responsible growth Enhance balance sheet Support organic growth and Build capital and continue to reduce new brand partner launches parent-level debt; ensure proactive credit, that deliver long-term value liquidity, and interest rate risk management Optimize data & technology Strate
Slide 5: 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 6: 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 ~$27 increase in TBVPS since 2020 Total company capital ratios Parent level debt outstanding Tangible book value per share (TBV
Slide 7: Third quarter 2023 financial highlights
Third quarter 2023 financial highlights Continuing operations $1,031 million $173 million $3.46 Revenue Income from continuing operations Diluted EPS Year-over-year comparisons • Credit sales of $6.7 billion decreased 13%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 202
Slide 8: Financial results
Financial results Continuing operations ($ in millions, except per share) 3Q23 3Q22 $ Chg % Chg YTD'23 YTD'22 $ Chg % Chg Total interest income $ 1,301 $ 1,218 $ 83 7% $ 3,832 $ 3,359 $ 473 14% Total interest expense 219 133 86 64% 641 308 333 nm Net interest income 1,082 1,085 (3) —% 3,191 3,051 14
Slide 9: 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% 27.2% 26.6% 26.1% 25.6% 25.6% 26.0% 5.0% 25.2% 25.0% 24.8% 4.4% 4.6% 22.7%
Slide 10: Credit quality and allowance
Credit quality and allowance Delinquency rates Net loss rates 5 year peak rate: 6.3% 5 year peak rate: 8.0% 6.3% 8.0% 5 year avg rate: ~5.0% 5.7% 5.7% 5 year avg rate: ~6.0% (1) 7.0% 6.9% 5.5% 5.5% 5.6% 4.4% 4.8% 6.3% 4.1% 4.4% 3.8% 3.9% 3.9% 5.0% 5 year low rate: 3.3% 5 year low rate: 3.9% 3Q21 4Q2
Slide 11: 2023 financial outlook
2023 financial outlook Reflects moderating sales growth as a result of strategic credit tightening and easing of consumer spending Full year 2023 Full year 2022 actuals Commentary outlook Average loans Up low- to mid- • Based on our new and renewed brand partner announcements, visibility into our pi
Slide 12: Appendix
Appendix © 2 0 2 2 B r e a d F i n a n c i a l |
Slide 13: Average loans and credit sales
Average loans and credit sales 23% 11% 14% 17% 1% 2% 5% 4% —% $19.8 $19.4 $17.6 $17.7 $17.5 $16.7 $17.0 ($ in billions) $15.5 $16.1 $10.2 $8.8 $8.1 $7.7 $7.4 $6.9 $7.4 $7.1 $6.7 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Average loans Credit sales Year-over-year change in average loans ©2023 Bread
Slide 14: Total non-interest expenses
Total non-interest expenses Continuing operations 3Q23 vs. 3Q22 change in non-interest expenses Total non-interest expenses ($ in millions) 3% Employee comp. & benefits: $8 4% $502 $486 Card and processing: $22 26% Info. processing & comm.: (4)% $(2) Marketing: (17)% $(8) Depreciation & amortization
Slide 15: Summary financial highlights
Summary financial highlights Continuing operations 3Q23 vs 3Q23 vs YTD'23 vs 3Q23 3Q22 2Q23 YTD'23 YTD'22 ($ in millions) 3Q22 2Q23 YTD'22 Credit sales $ 6,668 $ 7,689 (13%) $ 7,057 (6%) $ 21,098 $ 22,716 (7%) Average credit card and other loans $ 17,540 $ 17,598 —% $ 17,652 (1%) $ 18,199 $ 17,084 7
Slide 16: Summary financial highlights
Summary financial highlights Continuing operations ($ in millions) 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 YTD'22 YTD'23 Credit sales $ 7,380 $ 8,778 $ 6,887 $ 8,140 $ 7,689 $ 10,166 $ 7,373 $ 7,057 $ 6,668 $ 22,716 $ 21,098 Year-over-year change 20% 15% 14% 10% 4% 16% 7% (13%) (13%) 9% (7%) Av
Slide 17: Financial results
Financial results Continuing operations ($ in millions, except per share) 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 YTD'22 YTD'23 Total interest income $ 994 $ 1,017 $ 1,068 $ 1,073 $ 1,218 $ 1,325 $ 1,335 $ 1,197 $ 1,301 $ 3,359 $ 3,832 Total interest expense 91 84 79 95 133 195 218 205 219 308
Slide 18: Net interest margin
Net interest margin 3Q23 YTD'23 Interest income / Average yield / Interest income / Average yield / ($ in millions) Average balance Average balance expense rate expense rate Cash and investment securities $ 3,469 $ 45 5.2% $ 3,723 $ 135 4.8% Credit card and other loans 17,540 1,256 28.6% 18,199 3,69
Slide 19: Financial results
Financial results ($ in millions, except per share amounts) 3Q23 3Q22 $ Chg % Chg YTD'23 YTD'22 $ Chg % Chg Income from continuing operations, net of taxes $ 173 $ 134 $ 39 29% $ 693 $ 358 $ 335 94% (Loss) income from discontinued operations, net of taxes (2) — (2) nm (18) (1) (17) nm Net income $ 1
Slide 20: Capital and liquidity
Capital and liquidity As of September 30, 2023: • Total company liquidity of $6.1 billion including all undrawn credit facilities and conduits at the banks; parent liquidity of $0.9 billion consisting of cash plus revolver capacity • Total company common equity tier 1 capital ratio of 12.9%, up 140
Slide 21: Reconciliation of GAAP to non-GAAP financial measures
Reconciliation of GAAP to non-GAAP financial measures ($ in millions) 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 YTD'22 YTD'23 Pretax pre-provision earnings (PPNR) Income (loss) before income taxes $ 259 $ 65 $ 302 $ 16 $ 189 $ (207) $ 638 $ 86 $ 225 $ 508 $ 950 Provision for credit losses 161 363
Slide 22: Credit quality trends
Credit quality trends Delinquency rates 5- & 15-year peak rate(1): 6.3% 5.5% 5.5% 6.3% 5.8% 6.0% 5.7% 5.7% 5-year avg rate: ~5.0% 4.7% 3.8% 3.8% 4.3% 4.4% 4.4% 4.1% 5-year low rate: 3.3% 3.9% 3.3% 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 Net loss rates (1) 15-y
Slide 23: 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