Slide 1: First Quarter 2023 Results
Bread Financial First Quarter 2023 Results April 27, 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 and 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: 2023 Focus Areas
2023 Focus Areas Responsible Growth Enhance Balance Sheet Support organic growth and Build capital and reduce new brand partner launches parent-level debt; that deliver long-term value ensure proactive credit, liquidity, and interest rate risk management Optimize Data & Technology Strategically Inve
Slide 4: 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 5: Prudent Balance Sheet Management
Prudent Balance Sheet Management Strengthened balance sheet and funding mix Strong, Stable Funding Base +3x Growing online direct-to-consumer deposits; small average account size Capital ratios TCE/TA ratio increase significantly improved since 1Q20 to 9.1% >90% FDIC insured Diverse funding sources
Slide 6: First Quarter 2023 Financial Highlights
First Quarter 2023 Financial Highlights $1,289 million $455 million $9.08 Revenue Net Income Diluted EPS Year-over-year comparisons • Credit sales of $7.4 billion increased 7% driven by brand partner additions and growth across brand partners • First quarter average loans of $19.4 billion grew 17% •
Slide 7: Financial Results
Financial Results Continuing Operations ($ in millions, except per share) 1Q23 1Q22 $ Chg % Chg Total interest income $ 1,335 $ 1,068 $ 267 25% Total interest expense 218 79 139 nm Net interest income 1,117 989 128 13% PPNR Growth* Total non-interest income 172 (68) 240 nm +50% Revenue 1,289 921 368
Slide 8: 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 27.2% 26.6% 25.6% 25.6% 26.0% 4.4% 25.2% 25.0% 3.9% 23.8% 23.9% 22.3% 22.4% 22.7%
Slide 9: Direct-to-Consumer Deposit Growth
Direct-to-Consumer Deposit Growth Strong growth in Bread SavingsTM direct-to-consumer deposits diversifies our funding mix Average Direct-to-Consumer Deposit Growth +70% Average Direct-to-Consumer Deposit Mix $5.6 $5.4 $4.9 ($ in billions) $3.9 $3.1 $3.3 3.5% $2.7 41% 2.9% $2.3 $1.9 30% 28% 2.0% 19%
Slide 10: Credit Quality and Allowance
Credit Quality and Allowance Delinquency Rates Net Loss Rates 5 year peak rate: 6.0% 5 year peak rate: 7.6% 5.7% 5 year avg rate: ~5.0% 7.0% 5.7% 6.3% 5.5% 5 year avg rate: ~6.0% 4.4% 4.1% 3.8% 3.8% 3.9% 4.8% (1) 5.0% 4.4% 5.6% 3.3% 5.1% 3.9% 5.0% 5 year low rate: 3.3% 5 year low rate: 3.9% 1Q21 2Q2
Slide 11: Capital Allocation
Capital Allocation Improve capital metrics Reduce debt levels Drive shareholder value Total Company Parent Level Debt Outstanding Tangible Book Value per Share⁽²⁾ Tangible Common Equity / Tangible Assets Ratio (TCE / TA)⁽¹⁾ +3x +36% CAGR $0.9 $1.4 -39% $38.44 9.1% $1.4 $1.4 $31.87 7.8% $2.3 5.2% $1.
Slide 12: 2023 Financial Outlook
2023 Financial Outlook Our 2023 full year outlook remains unchanged from our guidance provided in January 2023 Full Year 2022 Full Year 2023 Commentary Actuals Outlook Average loans Up mid- • We expect full year 2023 average credit card and other loans to grow in the mid-single digit range relative
Slide 13: Appendix
Appendix © 2 0 2 2 B r e a d F i n a n c i a l |
Slide 14: Average Loans and Credit Sales
Average Loans and Credit Sales 23% 11% 14% 17% 1% 2% 5% -5% -14% $19.8 $19.4 $17.0 $17.6 $16.7 ($ in billions) $15.8 $15.5 $16.1 $15.3 $10.2 $8.8 $8.1 $7.7 $7.4 $7.4 $6.9 $7.4 $6.0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Average loans Credit sales Year-over-year change in average loans ©2023 Br
Slide 15: Pretax Pre-Provision Earnings
* Pretax Pre-Provision Earnings 50% $230 Gain on portfolio sale 24% 17% 13% ($ in billions) 52% $515 14% $495 24% $493 $485 23% $410 $428 $420 $400 4% $340 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Percentages equal year-over-year growth rate. The first quarter 2023 marks the eighth consecutive q
Slide 16: Total Non-Interest Expenses
Total Non-Interest Expenses 1Q23 vs. 1Q22 Change in Non-Interest Expenses Total Non-Interest Expenses +28% Employee comp. & benefits: $41 23% $544 Card and processing: $38 46% $426 Info. processing & comm.: $19 34% Marketing: $8 26% Depreciation & amortization: $13 63% 1Q22 1Q23 $ in millions Other:
Slide 17: Summary Financial Highlights
Summary Financial Highlights Continuing Operations 1Q23 vs 1Q23 vs 1Q23 1Q22 4Q22 ($ in millions) 1Q22 4Q22 Credit sales $ 7,373 $ 6,887 7% $ 10,166 (27%) Average credit card and other loans $ 19,405 $ 16,650 17% $ 19,820 (2%) End-of-period credit card and other loans $ 18,060 $ 16,843 7% $ 21,365 (
Slide 18: Summary Financial Highlights
Summary Financial Highlights Continuing Operations ($ in millions) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Credit sales $ 6,043 $ 7,401 $ 7,380 $ 8,778 $ 6,887 $ 8,140 $ 7,689 $ 10,166 $ 7,373 Year-over-year change (1%) 54% 20% 15% 14% 10% 4% 16% 7% Average credit card and other loans $ 15,785
Slide 19: Financial Results
Financial Results Continuing Operations ($ in millions, except per share) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Total interest income $ 942 $ 915 $ 994 $ 1,017 $ 1,068 $ 1,073 $ 1,218 $ 1,325 $ 1,335 Total interest expense 107 100 91 84 79 95 133 195 218 Net interest income 835 815 903 933 98
Slide 20: Net Interest Margin
Net Interest Margin 1Q23 ($ in millions) Average Balance Interest Income / Expense Average Yield / Rate Cash and investment securities $ 4,087 $ 46 4.5% Credit card and other loans 19,405 1,289 26.6% Total interest-earning assets 23,492 1,335 22.7% Direct-to-consumer (Retail) 5,559 49 3.5% Wholesale
Slide 21: Financial Results
Financial Results ($ in millions, except per share amounts) 1Q23 1Q22 $ Chg % Chg Income from continuing operations, net of taxes $ 455 $ 211 $ 244 nm Income (loss) from discontinued operations, net of taxes — (1) 1 nm Net income $ 455 $ 210 $ 245 nm Net income per diluted share from continuing ops
Slide 22: Capital and Liquidity
Capital and Liquidity Parent Level: Total Company Tangible Common Equity/ • Liquidity as of March 31, 2023, of $1.0 billion, consisting of cash on hand plus revolver capacity Tangible Assets Ratio(1) Bank Level (Banks Combined*): +1.3% 9.1% • As of March 31, 2023, the banks finished the quarter with
Slide 23: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures ($ in millions) 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Pretax pre-provision earnings (PPNR) Income (loss) before income taxes $ 367 $ 354 $ 259 $ 65 $ 302 $ 16 $ 189 $ (207) $ 638 Provision for credit losses 33 (14) 161 363 193 404 304 692
Slide 24: Credit Quality Trends
Credit Quality Trends Delinquency Rates 15 year peak rate(1): 6.2% 5 year peak rate: 6.0% 5.7% 5.9% 6.0% 5.8% 5.7% 5 year avg rate: ~5.0% 5.5% 5.2% 4.4% 4.1% 4.7% 3.8% 3.8% 3.9% 4.3% 4.4% 3.3% 5 year low rate: 3.3% 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 Net L