Bread Financial Holdings, Inc. · NYSE:BFH
Bread Financial — Alliance Data Systems — Q4 2022 Earnings Presentation
25 slides from Bread Financial's earnings presentation, Jan 26, 2023
Slide 1: Fourth Quarter and Full Year 2022 Results
Bread Financial Fourth Quarter and Full Year 2022 Results January 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
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: Continued Business Transformation in 2022
Continued Business Transformation in 2022 Transforming our Company to deliver sustainable, profitable growth Invested more than $125 million in technology Rebranded to Bread Financial, a tech-forward Successfully launched new brand partners and modernization, digital advancement, marketing, financia
Slide 4: Achievement of 2022 Financial Outlook
Achievement of 2022 Financial Outlook Full Year 2021 Full Year 2022 Full Year 2022 Actuals Outlook Actuals Average loans $15,656 million Up low double digits Up 13% $17,768 million ☑ Revenue $3,272 million Aligned with / better than loan growth Up 17% $3,826 million ☑ Total non-interest expenses $1,
Slide 5: 4Q22 Business Development Highlights
4Q22 Business Development Highlights New Brand Partnerships Brand Partner Renewal Select New Bread Pay Partners Continued strong boutique tech retailer luxury handbags tires, wheels & online jewelry & exercise & fitness merchant adoption auto parts accessories retailer equipment ©2023 Bread Financia
Slide 6: Fourth Quarter 2022 Financial Highlights
Fourth Quarter 2022 Financial Highlights $1,033 million $(134) million $(2.68) Revenue Net Loss Diluted EPS • Credit sales of $10.2 billion were up 16% versus 4Q21 driven by new brand partner additions including AAA and NFL, as well as new products and growth from existing brand partners • Fourth qu
Slide 7: Full Year 2022 Financial Highlights
Full Year 2022 Financial Highlights Continuing Operations $3,826 million $224 million $4.47 Revenue Net Income Diluted EPS • Credit sales of $32.9 billion were up 11% versus 2021 driven by organic growth, as well as new product and brand partner additions • Full year 2022 average loans of $17.8 bill
Slide 8: Financial Results
Financial Results Continuing Operations ($ in millions, except per share) 4Q22 4Q21 $ Chg % Chg 2022 2021 $ Chg % Chg Total interest income $ 1,325 $ 1,017 $ 308 30% $ 4,684 $ 3,868 $ 816 21% Total interest expense 195 84 111 132% 503 383 120 31% PPNR Growth* Net interest income 1,130 933 197 21% 4,
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 27.2% 25.6% 25.6% 26.0% 25.2% 25.0% 24.1% 3.9% 23.8% 23.9% 22.3% 22.4% 2.8% 20.8%
Slide 10: Credit Quality and Allowance
Credit Quality and Allowance 5 year peak rate: 6.0% Delinquency Rates Net Loss Rates 5 year peak rate: 7.6% 5 year avg rate: ~5.0% 5.5% 5.7% 5 year avg rate: ~6.0% 4.4% 4.4% 6.3% 4.1% 6.0% 3.9% 5.0% 5.1% 5.0% 3.8% 3.8% 4.8% (1) 4.4% 5.6% 3.3% 5 year low rate: 3.9% 3.9% 5 year low rate: 3.3% 4Q20 1Q2
Slide 11: 2023 Financial Outlook
2023 Financial Outlook Full Year 2022 Full Year 2023 Commentary Actuals Outlook • Based on our new and renewed business announcements, visibility into our pipeline, anticipated BJ's portfolio Average loans Up mid- sale, and our current economic outlook, we expect full year 2023 average credit card a
Slide 12: Strengthened Financial Resilience
Strengthened Financial Resilience Transforming our Company to deliver sustainable, profitable growth with an expectation to outperform historic loss levels Strong corporate governance Improved balance sheet strength and funding mix Capital ratios Proactive risk Loan loss reserve Reduced debt Increas
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% 1% 2% 5% -5% -13% -14% $19.8 $17.0 $17.6 $16.7 ($ in billions) $15.8 $15.8 $15.5 $16.1 $15.3 $10.2 $8.8 $7.7 $8.1 $7.7 $7.4 $7.4 $6.9 $6.0 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Average loans Credit sales Year-over-year change in average loans ©2023 B
Slide 15: Pretax Pre-Provision Earnings
* Pretax Pre-Provision Earnings 24% 17% 13% 52% $495 $493 $485 14% 24% $420 $428 $420 $400 23% ($ in billions) $340 $282 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 The fourth quarter 2022 marks the seventh consecutive quarter with double-digit year-over-year growth. * Pretax pre-provision earnings
Slide 16: Total Non-Interest Expenses
Total Non-Interest Expenses 4Q22 vs. 4Q21 Change in Non-Interest Expenses Total Non-Interest Expenses +15% Employee comp. & benefits: $25 14% $1,932 $1,684 Card and processing: $30 37% Info. processing & comm.: $27 50% +28% Marketing: $9 18% $548 $427 Depreciation & amortization: $11 48% 4Q21 4Q22 2
Slide 17: Summary Financial Highlights
Summary Financial Highlights Continuing Operations 4Q22 vs 4Q22 vs 2022 vs 4Q22 4Q21 3Q22 2022 2021 ($ in millions) 4Q21 3Q22 2021 Credit sales $ 10,166 $ 8,778 16% $ 7,689 32% $ 32,883 $ 29,603 11% Average credit card and other loans $ 19,820 $ 16,086 23% $ 17,598 13% $ 17,768 $ 15,656 13% End-of-p
Slide 18: Summary Financial Highlights
Summary Financial Highlights Continuing Operations ($ in millions) 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 2021 2022 Credit sales $ 7,657 $ 6,043 $ 7,401 $ 7,380 $ 8,778 $ 6,887 $ 8,140 $ 7,689 $ 10,166 $ 29,603 $ 32,883 Year-over-year change (18%) (1%) 54% 20% 15% 14% 10% 4% 16% 20% 11% Averag
Slide 19: Financial Results
Financial Results Continuing Operations ($ in millions, except per share) 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 2021 2022 Total interest income $ 950 $ 942 $ 915 $ 994 $ 1,017 $ 1,068 $ 1,073 $ 1,218 $ 1,325 $ 3,868 $ 4,684 Total interest expense 112 107 100 91 84 79 95 133 195 383 503 Net in
Slide 20: Net Interest Margin
Net Interest Margin 4Q22 2022 Average Interest Income / Average Yield / Average Interest Income / Average Yield / ($ in millions) Balance Expense Rate Balance Expense Rate Cash and investment securities $ 3,813 $ 35 3.7% $ 3,954 $ 69 1.8% Credit card and other loans 19,820 1,290 26.0% 17,768 4,615 2
Slide 21: Capital and Liquidity
Capital and Liquidity Parent Level: • Liquidity as of December 31, 2022, of $0.9 billion, consisting of cash on hand plus revolver capacity Bank Level (Banks Combined): • As of December 31, 2022, the banks finished the quarter with $3.8 billion in cash on hand and $3.3 billion in equity • Total risk
Slide 22: Loss Absorption Capacity and Debt Levels
Loss Absorption Capacity and Debt Levels Tangible Common Equity + Credit Reserves Rate* Parent Level Debt Outstanding -33% $1.4 18.6% 18.4% $1.4 $1.4 16.8% $1.5 $0.7 $0.6 4Q20 4Q21 4Q22 4Q20 4Q21 4Q22 $ in billions Term Loan Senior Notes Capital Priorities Support Profitable Growth Improve Capital M
Slide 23: Financial Results
Financial Results ($ in millions, except per share amounts) 4Q22 4Q21 $ Chg % Chg 2022 2021 $ Chg % Chg (Loss) income from continuing operations, net of taxes $ (134) $ 61 $ (195) nm $ 224 $ 797 $ (573) (72%) Income (loss) from discontinued operations, net of taxes 0 (44) 44 (100%) (1) 4 (5) (111%)
Slide 24: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures ($ in millions) 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 2021 2022 Pretax pre-provision earnings (PPNR) Income (loss) before income taxes $ 129 $ 367 $ 354 $ 259 $ 65 $ 302 $ 16 $ 189 $ (207) $ 1,044 $ 300 Provision for credit losses 153 33 (
Slide 25: Credit Quality Trends
Credit Quality Trends Delinquency Rates 15 year peak rate(1): 6.2% 5 year peak rate: 6.0% 5.9% 6.0% 5.5% 5.8% 5.7% 5 year avg rate: ~5.0% 5.2% 5.2% 4.4% 4.1% 4.7% 3.8% 3.8% 3.9% 4.3% 4.4% 5 year low rate: 3.3% 3.3% 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Net L
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