On July 25, 2024, Bread Financial Holdings Inc (BFH, Financial) released its 8-K filing for the second quarter of 2024. Formed by a combination of JCPenney's credit card processing unit and The Limited's credit card bank business, Bread Financial is a provider of private label and co-branded credit cards, loyalty programs, and marketing services. The company's most financially significant unit is its credit card business that partners with retailers to jointly market Bread's credit cards to their customers. The company also retains minority interest in its recently spun-off LoyaltyOne division, which operates the largest airline miles loyalty program in Canada and offers marketing services to grocery chains in Europe and Asia.
Performance Overview
Bread Financial Holdings Inc (BFH, Financial) reported a net income of $133 million for Q2 2024, a significant increase from the $48 million reported in Q2 2023. Earnings per diluted share (EPS) for the quarter stood at $2.66, surpassing the analyst estimate of $1.65. However, the company’s revenue for the quarter was $939 million, slightly above the analyst estimate of $922.31 million and a 1% decrease from the $952 million reported in the same period last year.
Key Financial Achievements
The company highlighted several key financial achievements for the quarter:
- Average credit card and other loans increased by 1%, driven by ongoing growth in co-brand programs.
- Common equity tier 1 (CET1) capital ratio increased by 170 basis points to 13.8%.
- Tangible book value per share increased by 25% to $48.89.
- Direct-to-consumer deposits grew by 20% year-over-year to $7.2 billion by quarter-end.
- Signed a long-term agreement with new partner Saks Fifth Avenue.
Income Statement Highlights
Key details from the income statement include:
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Revenue | $939 million | $952 million | -1% |
| Net Income | $133 million | $48 million | +177% |
| Earnings per Diluted Share | $2.66 | $0.95 | +180% |
| Adjusted Earnings per Diluted Share | $2.67 | $0.95 | +181% |
Balance Sheet and Cash Flow Highlights
From the balance sheet, total assets stood at $22.144 billion as of June 30, 2024, compared to $23.141 billion at the end of 2023. The company’s total liabilities decreased to $18.974 billion from $20.223 billion over the same period. Cash and cash equivalents increased to $4.053 billion from $3.590 billion at the end of 2023.
CEO Commentary
"Actions we have taken over the past few years have enabled us to consistently generate solid results. We generated net income of $133 million in the quarter and increased our tangible book value by 25% year-over-year to $48.89. We advanced toward the targets provided at our investor day in June, with our double leverage ratio achieving our target level of less than 115% and direct-to-consumer deposits now representing 40% of our total funding. Further, our common equity tier 1 capital ratio increased 170 basis points year-over-year to 13.8%. We remain focused on disciplined capital allocation and proactive credit risk management, while maintaining the financial flexibility and resilience to successfully navigate through regulatory changes and economic volatility." - Ralph Andretta, president and chief executive officer
Analysis
Bread Financial Holdings Inc (BFH, Financial) demonstrated robust financial performance in Q2 2024, with significant growth in net income and EPS, despite a slight decline in revenue. The company's strategic initiatives, including the growth in direct-to-consumer deposits and the new partnership with Saks Fifth Avenue, indicate a positive outlook. However, the increase in delinquency and net loss rates, along with the ongoing litigation related to the CFPB's final rule on credit card late fees, pose potential challenges. The company's proactive measures in credit risk management and capital allocation are crucial in navigating these uncertainties.
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Explore the complete 8-K earnings release (here) from Bread Financial Holdings Inc for further details.
