Slide 1: Second quarter 2023 results
Bread Financial Second quarter 2023 results July 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
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: 2Q23 key highlights
2Q23 key highlights Continued progress toward our long-term financial goals • Achieved major milestones in parent debt plan: ◦ Reduced unsecured debt by more than $500 million ◦ Refinanced our term loan and revolving line of credit ◦ Extended certain debt maturities • Tangible book value per share o
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; that deliver long-term value ensure proactive credit, liquidity, and interest rate risk management Optimize data & technology Strate
Slide 5: Prudent balance sheet management
Prudent balance sheet management Strengthened balance sheet and funding mix Strong, stable funding base Growing online direct-to-consumer deposits; >90% FDIC insured Re-entered public ABS market and renewed conduit lines Capital ratios significantly improved +3x TCE/TA ratio increase since 1Q20 to 9
Slide 6: Second quarter 2023 financial highlights
Second quarter 2023 financial highlights Continuing operations $952 million $64 million $1.27 Revenue Income from continuing operations Diluted EPS Year-over-year comparisons • Credit sales of $7.1 billion decreased 13%, reflecting the sale of the BJ's Wholesale Club portfolio in late February 2023,
Slide 7: Financial results
Financial results Continuing operations ($ in millions, except per share) 2Q23 2Q22 $ Chg % Chg YTD'23 YTD'22 $ Chg % Chg Total interest income $ 1,197 $ 1,073 $ 124 12% $ 2,531 $ 2,141 $ 390 18% Total interest expense 205 95 110 nm 422 174 248 nm Net interest income 992 978 14 1% 2,109 1,967 142 7%
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% 26.1% 25.6% 25.6% 26.0% 25.2% 25.0% 4.4% 4.6% 23.9% 22.7% 3.9% 22.3%
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 deposits Average direct-to-consumer deposit mix +51% $5.8 $5.6 $5.4 $4.9 ($ in billions) $3.9 4.0% $3.3 3.5% $3.1 2.9% 45% $2.7 2.0% 36% 33% $2.3 1.0%
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: 8.0% 5.5% 8.0% 5 year avg rate: ~5.0% 5.7% 5.7% 5.5% 5 year avg rate: ~6.0% 7.0% 4.4% 4.1% 6.3% 3.8% 3.9% 4.8% (1) 4.4% 5.6% 3.3% 3.9% 5.1% 5.0% 5 year low rate: 3.3% 5 year low rate: 3.9% 2Q21 3Q2
Slide 11: 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 12: Capital allocation
Capital allocation Improve capital metrics Reduce debt levels Drive shareholder value $1.2 billion tangible common equity build since 2020 Paid down $1.7 billion since 2020 ~$24 increase in TBVPS since 2020 Total company Parent level debt outstanding Tangible book value per share (TBVPS)⁽²⁾ tangible
Slide 13: 2023 financial outlook
2023 financial outlook Updated to reflect slower sales growth as a result of strategic credit tightening and moderation in consumer spending Full year 2023 Full year 2022 actuals Commentary outlook Average loans Up low- to mid- • Updated based on our new and renewed brand partner announcements, visi
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% 1% 2% 5% 4% -5% $19.8 $19.4 $17.6 $17.7 $16.7 $17.0 ($ in billions) $15.5 $16.1 $15.3 $10.2 $8.8 $8.1 $7.7 $7.4 $7.4 $6.9 $7.4 $7.1 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Average loans Credit sales Year-over-year change in average loans ©2023 Brea
Slide 16: Total non-interest expenses
Total non-interest expenses Continuing operations 2Q23 vs. 2Q22 change in non-interest expenses Total non-interest expenses 12% Employee comp. & benefits: $26 14% $530 $473 Card and processing: $32 37% Info. processing & comm.: $14 23% Marketing: (20)% $(10) Depreciation & amortization: $5 17% 2Q22
Slide 17: Summary financial highlights
Summary financial highlights Continuing operations 2Q23 vs 2Q23 vs YTD'23 vs 2Q23 2Q22 1Q23 YTD'23 YTD'22 ($ in millions) 2Q22 1Q23 YTD'22 Credit sales $ 7,057 $ 8,140 (13%) $ 7,373 (4%) $ 14,430 $ 15,028 (4%) Average credit card and other loans $ 17,652 $ 17,003 4% $ 19,405 (9%) $ 18,528 $ 16,827 1
Slide 18: Summary financial highlights
Summary financial highlights Continuing operations ($ in millions) 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 YTD'22 YTD'23 Credit sales $ 7,401 $ 7,380 $ 8,778 $ 6,887 $ 8,140 $ 7,689 $ 10,166 $ 7,373 $ 7,057 $ 15,028 $ 14,430 Year-over-year change 54% 20% 15% 14% 10% 4% 16% 7% (13%) 12% (4%) Ave
Slide 19: Financial results
Financial results Continuing operations ($ in millions, except per share) 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 YTD'22 YTD'23 Total interest income $ 915 $ 994 $ 1,017 $ 1,068 $ 1,073 $ 1,218 $ 1,325 $ 1,335 $ 1,197 $ 2,141 $ 2,531 Total interest expense 100 91 84 79 95 133 195 218 205 174 42
Slide 20: Net interest margin
Net interest margin 2Q23 YTD'23 Interest income / Average yield / Interest income / Average yield / ($ in millions) Average balance Average balance expense rate expense rate Cash and investment securities $ 3,613 $ 44 4.9% $ 3,851 $ 90 4.7% Credit card and other loans 17,652 1,153 26.1% 18,528 2,441
Slide 21: Financial results
Financial results ($ in millions, except per share amounts) 2Q23 2Q22 $ Chg % Chg YTD'23 YTD'22 $ Chg % Chg Income from continuing operations, net of taxes $ 64 $ 12 $ 52 nm $ 519 $ 224 $ 295 nm (Loss) income from discontinued operations, net of taxes (16) — (16) nm (16) (1) (15) nm Net income $ 48
Slide 22: Capital and liquidity
Capital and liquidity Total company Parent level: tangible common equity/ tangible assets ratio(1) • Liquidity as of June 30, 2023, of $0.9 billion, consisting of cash plus revolver capacity +1.9% • Prudent interest rate management with no held-to-maturity securities 9.4% Bank level (combined banks*
Slide 23: Reconciliation of GAAP to non-GAAP financial measures
Reconciliation of GAAP to non-GAAP financial measures ($ in millions) 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 YTD'22 YTD'23 Pretax pre-provision earnings (PPNR) Income (loss) before income taxes $ 354 $ 259 $ 65 $ 302 $ 16 $ 189 $ (207) $ 638 $ 86 $ 319 $ 724 Provision for credit losses (14) 16
Slide 24: 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% 5.8% 5.7% 5.7% 5 year avg rate: ~5.0% 5.5% 5.5% 4.4% 4.4% 4.1% 4.7% 3.8% 3.8% 3.9% 4.3% 5 year low rate: 3.3% 3.3% 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Net l