Bread Financial Holdings’ operating income of 90 cents per share for the fourth quarter of 2023 beat the Zacks Consensus Estimate of a loss of 73 cents. The bottom line improved from the year-ago quarter’s reported loss of $2.68 per share.
The quarterly results reflect the execution of growth initiatives and the strengthening of the balance sheet by lowering the debt level. With the sale of the BJ’s portfolio in February 2023 and strategic credit tightening, loans grew at a low to mid-single digit.
The company’s shares rose 7% in the last trading session reflecting the outperformance.
Behind the Headlines
Revenues decreased 2% year over year to $1 billion, attributable to lower late fee revenues, higher interest expense, and higher reversals of interest and fees resulting from higher gross credit losses, partially offset by higher finance charge yields and non-interest income. The top line beat the consensus estimate by 3.03%.
Credit sales of $7.8 billion decreased 23% year over year, reflecting the sale of the BJ’s Wholesale Club portfolio in late February 2023, ongoing strategic credit tightening and moderating consumer spending, partially offset by new partner growth. The estimated metric was pegged at $8.9 billion.
Average loan amount of $18.3 billion decreased 8% year over year, driven by the decline in credit sales. The estimated amount was pinned at $18.4 billion.
Total interest income decreased 1% to $1.3 billion. The net interest margin expanded 50 basis points to 19.6%. Total non-interest expenses decreased 6% to $516 million, primarily attributable to a decrease in card and processing expenses and employee compensation and benefit costs as well as marketing expenses.
The delinquency rate of 6.5% deteriorated 100 basis points year over year. The net loss rate of 7.5% deteriorated 210 basis points. Pre-tax pre-provision earnings increased 3% year over year to $501 million.
Financial Update
As of Dec 31, 2023, cash and cash equivalents were $3.6 billion, down 7.7% from the 2022 level. Long-term debt and other debt declined 26.3% from the 2022-end level to $1.4 billion. Tangible book value of $43.70 per share as of Sep 30, 2023, improved 49% year over year. Return on average equity was 27.1%, which expanded 1730 basis points year over year.
Cash from operations in 2023 increased 7.5% year over year to $2 billion. Capital expenditure decreased 33.3% year over year to $48 million in the same period.
Full Year Highlights
The company reported an operating income of $14.74 for full-year 2023. Revenues of $4.3 billion increased 12% year over year, driven by higher finance charge yields and non-interest income, including the gain on portfolio sale, partially offset by higher interest expense, and reversals of interest and fees resulting from higher gross credit losses.
The delinquency rate was 6.5%, up from 5.5% in the previous year. The net loss rate was 7.5%, up from the prior-year level of 5.4%.
Dividend Update
The board also approved a quarterly dividend of 21 cents to be paid out on Mar 15, to stockholders of record as of Feb 9.
2024 Guidance
Management estimates average receivables to decline in the low single-digit range from the 2023 level. Total revenues are estimated to decline in the low to mid-single digits. Net interest margin is expected to be lower than the 2023 full-year rate. The net loss rate is guided in the low 8% range.
Zacks Rank
Bread Financial currently carries a Zacks Rank #3 (Hold).
Upcoming Releases
Mastercard Incorporated will report fourth-quarter 2023 results on Jan 24. Western Union is set to report fourth-quarter 2023 results on Feb 6. Global Payments will report fourth-quarter 2023 results on Feb 9.
