Bread Financial Holdings, Inc. Reports Second Quarter 2022 Results

Strategic Insights -

Bread Financial Holdings, Inc. (formerly Alliance Data Systems Corporation) announced its second quarter 2022 results, showcasing a 20% year-over-year increase in net interest income and a 13% increase in second quarter average Total credit card and other loans. The company's financial services solutions, including private label and co-brand credit cards, installment lending, and buy now, pay later options, contributed to strong growth. Despite macroeconomic uncertainties, including persistently high inflation and the ongoing COVID-19 pandemic, Bread Financial remains optimistic about its future prospects.

Key Takeaways:

  • Net interest income increased by 20% year-over-year in the second quarter of 2022, driven by strong credit sales and efficient portfolio management.
  • Second quarter 2022 average Total credit card and other loans rose 11% from the prior year period, with an end-of-period balance up 13%.
  • The company expects ongoing interest rate increases by the Federal Reserve to result in a nominal benefit to net interest income in 2022.
  • Provision for credit losses increased primarily due to a large reserve release from the Allowance for credit losses in the prior year period and an increase in credit card and other loans driven by the economic scenario weightings in credit reserve modeling.
  • Allowance for credit losses increased compared to year-end 2021, with a reserve rate of 11.2% in the second quarter of 2022.
  • Credit metrics remain strong, with a delinquency rate of 4.4% and a net loss rate of 5.6% for the second quarter of 2022.
  • Total non-interest expenses for the second quarter of 2022 were up 12% from the prior year period, driven by increased marketing expenses, employee compensation, and technology modernization expenses.
  • Bread Financial will continue to invest in technology development, marketing, and product innovation to drive growth in 2022.
  • The company anticipates a net loss rate in the low-to-mid 5% range for 2022 as credit metrics normalize due to the expiration of federal stimulus and assistance programs.

Statistics:

  • Second quarter 2022 average Total credit card and other loans: $17.0 billion
  • End-of-period balance in Total credit card and other loans: up 13% year-over-year
  • Net interest income: $785.8 million (20% year-over-year increase)
  • Provision for credit losses: $123.5 million (increased primarily due to reserve release and increased credit card and other loans)
  • Allowance for credit losses reserve rate: 11.2% in the second quarter of 2022
  • Delinquency rate: 4.4% in the second quarter of 2022
  • Net loss rate: 5.6% in the second quarter of 2022
  • Total non-interest expenses: $445.6 million (up 12% year-over-year)
  • Planned incremental investment in digital and product innovation, marketing, brand, and technology enhancements: more than $125 million in 2022

Sources:

  • SEC Form 10-Q filing for the period ended June 30, 2022
  • Bread Financial Holdings, Inc.'s quarterly earnings report, August 4, 2022
  • COMTEX_411571986/2041/2022-08-04T07:33:21