Slide 1: Second Quarter 2022 Results
Bread Financial Second Quarter 2022 Results July 28, 2022 Ralph Andretta President & CEO Perry Beberman EVP & CFO
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 ide
Slide 3: Key Highlights
Key Highlights Quality growth with strong core performance trends Consistent credit sales growth, up 10% versus 2Q21 Growth continues to accelerate as average and end-of-period loans increased 11% and 13%, respectively, versus 2Q21 Pretax pre-provision earnings* up 24% versus 2Q21; 5th consecutive q
Slide 4: Business Development Highlights
Business Development Highlights New Brand Partnership Brand Partner Renewal One of North America’s largest and most trusted membership Serves over three million customers through its organizations serving more than 56 million U.S. members e-commerce platform and over 600 stores Select New Bread Pay
Slide 5: Technology Modernization
Technology Modernization Key Benefits of Core Processing Conversion to Fiserv Faster speed-to-market for new products, brand partner launches, and portfolio conversions Ability to seamlessly integrate a variety of additional payment products in the future Ability to manage risk more effectively and
Slide 6: Second Quarter 2022 Financial Highlights
Second Quarter 2022 Financial Highlights $893 million $12 million $0.25 Revenue Net Income Diluted EPS • Credit sales of $8.1 billion were up 10% versus 2Q21 • Second quarter average loans of $17.0 billion were up 11% versus 2Q21 • Revenue increased 17% versus 2Q21, inclusive of a $21 million write-
Slide 7: Financial Results – Continuing Operations
Financial Results – Continuing Operations ($ in millions, except per share) 2Q22 2Q21 $ Chg % Chg YTD ‘22 YTD ’21 $ Chg % Chg Total interest income $1,073 $915 $158 17 % $2,141 $1,857 $284 15 % PPNR Growth* Total interest expense 95 100 (5) (5) 174 207 (33) (16) Net interest income 978 815 163 20 1,
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 7.0% 25.6% 25.2% 25.6% 25.0% 23.9% 24.1% 23.8% 23.9% 5.0% 21.3% 20.9% 2.5% 2.5% 2
Slide 9: Credit Quality and Allowance
Credit Quality and Allowance Delinquency Rates Net Loss Rates 5 year Max rate: 6.0% 7.6% 5 year Max rate: 7.6% 5 year Avg rate: ~5.0% 6.0% 5 year Avg rate: ~6.0% 4.3% 4.4% 4.4% 4.1% 4.7% 3.8% 3.8% 3.9% 5.0% 5.1% 5.6%** 5.8% 4.8% 3.3% 4.4% 5 year Min rate: 3.3% 5 year Min rate: 3.9% 3.9% 2Q20 3Q20 4Q
Slide 10: 2022 Financial Outlook
2022 Financial Outlook Full Year 2021 Full Year 2022 Commentary Actuals Outlook • Continued sales growth and net partner additions driving sustainable, profitable growth • On a year-over-year basis, expect year-end loan growth to be stronger than full year average Average loans Up low loan growth gi
Slide 11: 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 Increased mix of Proactive risk Loan loss reserve Red
Slide 12: Appendix
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Slide 13: Average Loans and Credit Sales
Average Loans and Credit Sales $30.0 50% 11% $25.0 1% 2% 5% -4% -5% -12% -13% -14% 0% $20.0 -50% $16.7 $17.0 $15.0 $16.1 $15.8 $15.8 $16.1 $15.3 $15.3 $15.5 -100% $10.0 $8.8 ($ in billions) $7.7 $8.1 $7.4 $7.4 $6.9 -150% $5.0 $6.2 $6.0 $4.8 $0.0 -200% 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Ave
Slide 14: Total Non-Interest Expenses
Total Non-Interest Expenses 2Q22 vs. 2Q21 Change in Non-Interest Expenses Total Non-Interest Expenses Employee comp. & benefits: $29 18% +9% $897 Card and processing: 1% $1 $826 Info. processing & comm.: $6 11% Marketing: $15 41% +12% $473 Depreciation & amortization: $8 36% $424 Other: (15)% $(10)
Slide 15: Summary Financial Highlights
Summary Financial Highlights Continuing Operations 2Q22 vs 2Q22 vs YTD ’22 vs 2Q22 2Q21 1Q22 YTD ’22 YTD ’21 ($ in millions) 2Q21 1Q22 YTD ’21 Credit sales $8,140 $7,401 10% $6,887 18% $15,028 $13,445 12% Average credit card and other loans $17,003 $15,282 11% $16,650 2% $16,827 $15,533 8% End-of-pe
Slide 16: Summary Financial Highlights
Summary Financial Highlights Continuing Operations ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 YTD ‘21 YTD ’22 Credit sales $4,799 $6,152 $7,657 $6,043 $7,401 $7,380 $8,778 $6,887 $8,140 $13,445 $15,028 Year-over-year change (36)% (21)% (18)% (1)% 54% 20% 15% 14% 10% 23% 12% Average
Slide 17: Financial Results
Financial Results Continuing Operations ($ in millions, except per share) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 YTD ’21 YTD ‘22 Total interest income $860 $915 $950 $942 $915 $994 $1,017 $1,068 $1,073 $1,857 $2,141 Total interest expense 127 114 112 107 100 91 84 79 95 207 174 Net interest in
Slide 18: Net Interest Margin
Net Interest Margin 2Q22 YTD 2022 Interest Income / Average Yield / Interest Income / Average Yield / ($ in millions) Average Balance Average Balance Expense Rate Expense Rate Cash and investment securities $3,975 $9 0.8% $3,884 $11 0.6% Credit card and other loans 17,003 1,064 25.0% 16,827 2,130 25
Slide 19: Capital and Liquidity
Capital and Liquidity Tangible Common Equity/ Tangible Assets Ratio(1) Parent Level: +1.1% • Liquidity as of June 30, 2022, of $0.8 billion, consisting of cash on hand plus revolver capacity 7.5% 6.4% Bank Level (Banks Combined): • As of June 30, 2022, the banks finished the quarter with $3.0 billio
Slide 20: Financial Results
Financial Results ($ in millions, except per share amounts) 2Q22 2Q21 $ Chg % Chg YTD ’22 YTD ’21 $ Chg % Chg Income from continuing operations, net of taxes $12 $263 $(251) (95) % $224 $531 $(307) (58) % (Loss) income from discontinued operations, net of taxes 0 11 (11) nm (1) 29 (30) nm Net income
Slide 21: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures ($ in millions) 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 YTD ’21 YTD ‘22 Pretax pre-provision earnings (PPNR) Income before income taxes $28 $162 $129 $367 $354 $259 $65 $302 $16 $721 $319 Provision for credit losses 250 207 153 33 (14) 161 3