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Bread Financial Holdings (NYSE:BFH) reported its first quarter 2025 financial results on April 24, showing improved profitability despite slight revenue declines, as the company navigates ongoing macroeconomic uncertainty while maintaining disciplined risk management.
Quarterly Performance Highlights
Bread Financial posted net income of $142 million for the first quarter of 2025, a 5% increase compared to the same period last year. Diluted earnings per share reached $2.86, while revenue declined 2% year-over-year to $970 million, primarily due to lower finance charges and late fees.
The company’s credit sales showed modest growth of 1% to $6.1 billion, driven by increased general-purpose spending. However, average loans decreased 2% to $18.2 billion, which the company attributed to the challenging macroeconomic environment throughout 2024.
As shown in the following summary of profit and loss results, Bread Financial managed to improve its bottom line despite the revenue challenges:
"We demonstrated financial resilience through responsible growth, proactive risk management, and prudent capital allocation to strengthen our balance sheet," the company stated in its presentation, highlighting a tangible book value per common share of $48.92, which increased 6% year-over-year.
Credit Quality and Risk Management
A notable bright spot in the quarter was the improvement in credit metrics. The delinquency rate decreased to 5.9% from 6.2% in the first quarter of 2024, while the net loss rate improved to 8.2% from 8.5% in the prior-year period.
The company’s provision for credit losses decreased 8% to $296 million, contributing to the improved profitability. Bread Financial maintained a strong reserve rate of 12.2%, reflecting its cautious approach to risk management amid economic uncertainty.
The following chart illustrates the company’s credit quality trends:
Bread Financial emphasized its proactive approach to risk management given the uncertain economic environment, noting that it is "monitoring impact of the new administration’s policies including tariffs, trade, immigration, tax, and deregulation, and their impacts on consumers and business."
The company’s revolving credit risk distribution shows that approximately 57% of its portfolio has a VantageScore under 600, highlighting the importance of maintaining strong credit discipline.
Capital Position and Shareholder Returns
Bread Financial strengthened its capital position during the quarter, completing an offering of $400 million in subordinated notes due 2035, which increased its total risk-based capital ratio as tier 2 capital.
The company’s funding sources and capital ratios are illustrated in the following slide:
Direct-to-consumer deposits grew 13% year-over-year to $7.9 billion, now representing 43% of average total funding. This growth in deposits provides the company with a stable and cost-effective funding source.
Bread Financial continued its share repurchase program, buying back $102 million, or 2.1 million shares, in the first quarter. The company subsequently repurchased an additional 1.1 million shares, completing its board-authorized program of $150 million.
Net Interest Margin and Funding Mix
The company’s net interest margin showed some pressure, as illustrated in the following chart:
The average earning asset yield and net interest margin have declined in recent quarters, reflecting broader interest rate trends. However, the company has managed to partially offset this through its funding mix, with deposits comprising 72% of its funding sources.
2025 Financial Outlook
Looking ahead, Bread Financial provided a cautious but stable outlook for the full year 2025:
The company expects average loans to remain flat to slightly down compared to 2024, while revenue (excluding gain on sale) is projected to be flat to slightly up. Bread Financial anticipates a net loss rate of 8.0% to 8.2%, consistent with its 2024 performance of 8.2%.
The company emphasized its focus on achieving positive operating leverage through operational excellence initiatives, including technology advancements, improved customer satisfaction, and enterprise-wide efficiency.
Strategic Priorities
Bread Financial outlined four key focus areas for 2025: responsible growth, managing to the macroeconomic and regulatory environment, disciplined capital allocation and risk management, and operational excellence.
The company aims to scale its diversified product suite to enable growth and expand revenue generation opportunities while proactively executing strategies to improve credit performance and mitigate regulatory uncertainty.
In the current trading session, Bread Financial shares were up 0.52% in premarket trading at $48.12, following a 2.09% gain in the previous session. The stock has traded between $33.58 and $66.71 over the past 52 weeks.
Full presentation:
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