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    BFH
    Earnings call· Mar 2026(Q1 FY26)

    BREAD FINANCIAL HOLDINGS Q1 FY26 earnings call BFH

    Apr 23, 2026 Source

    Executive summary

    Bread Financial Q1 FY26 — Return to Loan Growth and Improving Credit Metrics

    Bread Financial reported strong Q1 FY26 results, marked by a return to positive loan growth and continued improvement in credit metrics, driven by strategic partnerships and product diversification. The company reaffirmed its full-year outlook, emphasizing disciplined capital management and operational excellence despite macroeconomic uncertainties and anticipated pressure on noninterest income in Q2. Investments in technology and AI are ongoing to enhance productivity and risk management.

    Highlights

    6

    • Credit sales grew 7% year-over-year, driven by new partner launches and increased shopping activity.

    • Average loans increased 1% to $18.3 billion, and end-of-period loans increased 2% to $18.1 billion, marking a return to positive loan growth.

    • Net income reached $181 million, with diluted EPS of $4.15.

    • Tangible book value per common share grew 26% year-over-year to $61.57.

    • The CET1 ratio improved by 130 basis points year-over-year to 13.3%.

    • Delinquency rate decreased by 34 basis points year-over-year to 5.59%, and net loss rate decreased by 83 basis points year-over-year to 7.33%.

    Concerns

    4

    • Noninterest income was $13 million lower year-over-year, primarily due to higher retailer share arrangements.

    • Expect Q2 noninterest income to be pressured up to $40 million compared to Q1 FY26 due to higher retailer share arrangements.

    • Q2 total expenses are estimated to be just under $500 million, representing a sequential increase from Q1.

    • NIM tailwinds from pricing changes are slowing and will be partially offset by lower billed late fees due to improving delinquency trends and higher payment rates.

    Guidance & targets

    8
    CategoryTargetConfidence
    Average credit card and other loan growth
    up low single digits
    high materiality
    High
    Total revenue growth
    up low single digits
    high materiality
    High
    Net interest margin (NIM)
    higher than 2025
    medium materiality
    High
    Noninterest income pressure
    up to $40 million
    medium materiality
    High
    Total expenses
    just under $500 million
    medium materiality
    High
    Net loss rate
    low end of our 7.2% to 7.4% targeted range
    high materiality
    High
    Normalized effective tax rate
    25% to 27%
    low materiality
    High
    Return on Tangible Common Equity (ROTCE)
    mid-20%
    high materiality
    Medium

    Operational metrics

    13
    Direct-to-consumer deposits
    $8.7 billionup 10% year-over-year
    Q1 FY26

    Increased at quarter end, representing a growing portion of total funding.

    Total liquid assets and undrawn credit facilities
    $6.4 billion
    Q1 FY26

    Represents nearly 29% of total assets, indicating a strong liquidity position.

    Deposits as percentage of total funding
    78%
    Q1 FY26

    The majority of deposits are FDIC-insured direct-to-consumer deposits.

    Remaining stock repurchase authorization
    $690 million
    Q1 FY26

    Authorization is open-ended, with cadence contingent on capital generation and growth outlook.

    Subordinated debt repurchased
    $50 million
    Q1 FY26

    Repurchased using excess cash, reducing principal outstanding.

    Parent senior notes reduction
    $400 millionreduced from $900 million to $500 million
    FY25

    Actions taken last year to reduce parent senior notes and their interest rate, benefiting funding costs.

    Pre-Provision Net Revenue (PPNR)
    $53 millionincreased 11% year-over-year
    Q1 FY26

    Result of risk-based pricing discipline and sound operating expense management.

    Employee compensation and benefits costs
    $5 millionincreased
    Q1 FY26

    Primarily due to higher wages related to annual merit increases and incentive compensation.

    Information processing and communication expenses
    $5 milliondecreased
    Q1 FY26

    Primarily due to lower outsourced data processing costs as a result of a credit received in the quarter.

    Total loss absorption capacity
    25.5%
    Q1 FY26

    Comprising total company tangible common equity plus credit reserves, demonstrating a strong margin of safety.

    New customers average annual income
    $100,000
    Q1 FY26

    For context, the typical customer represents a middle-income American.

    Tax refunds
    $300 to $350higher on average
    Q1 FY26

    Consumers are using some of this to save or offset gas prices, not primarily to pay down credit card debt.

    Q2 total expenses estimate
    just under $500 millionup sequentially from Q1
    Q2 FY26

    Reflects continued investment in the business to drive growth and build new capabilities.

    Industry KPIs

    13
    MetricValueDetails
    Fee revenue—
    Funding mix—
    Payment rateHigher
    Delinquencies5.59%%
    Capital returns3.5 million shares retiredshares
    Credit quality mix64%%
    Net charge off rate7.33%%
    Loans card receivables$18.3 billion (average), $18.1 billion (end-of-period)USD
    Provision reserve rate11.46%%
    Rewards engagement costs—
    New accounts card acquisitions—
    Billed business purchase volume$6.5 billionUSD
    Net interest margin yield on receivables19.3%%

    Product announcements

    4
    ProductTypeDetails
    Ford Credit Card and Installment Loan Programslaunch
    Ethan Allen Credit Card Programlaunch
    Bread Pay Installment Loansexpansion
    Academy Sports Payment Optionslaunch

    Deals & partnerships

    5
    FordNew credit card relationship including co-brand credit card and installment loan programs.long-term agreement

    Leverages deep expertise in automotive retail, aims to increase customer loyalty and accessibility to services.

    Ethan AllenNew credit card relationship providing flexible financing options.

    Strengthens Bread Financial's prominence in the home vertical with a premium furniture retailer.

    AAA, Dell, FordExpansion of Bread Pay installment loan offerings.

    Continues to expand the Bread Pay product offering to new partners.

    Academy SportsNew comprehensive suite of payment options.

    Includes co-brand, private label, and installment loans.

    NFL / American ExpressContinued issuance of the NFL card, with American Express as the new brand partner.

    Bread Financial remains the issuer of the NFL card, expecting an exciting partnership with NFL and American Express.

    Risks & headwinds

    5
    Macroeconomic uncertaintyFull year 2026

    Inflation remaining above the Federal Reserve target of 2%, ongoing uncertainty regarding trade policy and global conflicts, and downstream impacts on inflation and unemployment.

    Mitigation: Applying prudent weightings on economic scenarios in credit reserve modeling; continuous monitoring and adaptation to consumer spend and payment behaviors.

    Elevated oil pricesNear-term

    Consumers immediately feeling impact at the pump.

    Mitigation: Monitoring closely for pull-through effects on other price increases; consumers adjusting lifestyle and being 'choiceful' in spending.

    Lower billed late feesFull year 2026

    Offsetting NIM tailwinds from pricing changes.

    Mitigation: Expected as credit continues to improve, partially offset by pricing changes and improved funding costs.

    Higher retailer share arrangements (RSAs)Q2 FY26 and going forward

    Noninterest income pressured up to $40 million in Q2 FY26 compared to Q1 FY26.

    Mitigation: RSAs are a result of both higher credit sales-related partner payments and increased profit share driven by improved loan yields and credit losses.

    Slowing benefit from pricing changesThroughout 2026

    Incremental benefits tied to pricing changes slow throughout the year as the majority of the portfolio will have repriced.

    Mitigation: NIM tailwinds will be partially offset by other factors like lower billed late fees and product mix shifts, leading to NIM stability rather than significant expansion from pricing alone.

    What to watch in Q2 FY26

    4

    Cadence of share repurchases

    next quarter
    Current$690 million remaining authorization
    TargetIncreased pace or further clarity on preferred share issuance

    Why it matters

    The pace of capital return to shareholders is contingent on capital generation and market conditions for preferred share issuance, impacting shareholder value.

    Our share repurchase cadence going forward⏳ will be contingent upon capital generation from our business, our growth outlook, incremental investment expectations and the resulting capital levels against our capital policy targets. Additionally, we look to further optimize our capital structure in the future by issuing additional preferred shares.

    Q&A highlights

    5

    Given strong Q1 results (5% revenue growth, 7% credit sales, positive loan growth), why is full-year guidance for loan and revenue growth still low single digits? Is there conservatism baked in, and how should we expect growth cadence for the rest of the year?

    Management is pleased with Q1 results, which provide high confidence in reaffirming guidance. They acknowledge macroeconomic uncertainty, making it premature to raise guidance. Average loan growth will build throughout the year, with ending loans expected to be higher than low single digits.

    “With the degree of uncertainty in the macro environment, it feels a little premature to declare a victory yet that we can then up it. But again, if the trends continue on into the second quarter, I think there's some optimism there.”

    asked by Vincent Caintic · answered by Perry Beberman

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Partnerships and Product Expansion

    Bread Financial continues to expand its partner ecosystem, launching new credit card relationships with Ford and Ethan Allen in Q1 FY26. The Ford partnership includes co-brand credit card and installment loan programs, leveraging expertise in automotive retail. Ethan Allen strengthens the home vertical with flexible financing. The company also expanded its Bread Pay installment loan offering for AAA, Dell, and Ford, and announced a comprehensive suite of payment options with Academy Sports, including co-brand, private label, and installment loans. These initiatives underscore the company's full product suite and differentiated partner model.

    02

    Credit Performance and Consumer Resilience

    The company reported six consecutive quarters of improving credit metrics, with the delinquency rate down 34 basis points year-over-year to 5.59% and the net loss rate down 83 basis points year-over-year to 7.33%. Management highlighted the resilience of the middle-income American consumer, with new customers having an average annual income of around $100,000. This resilience is evidenced by continued credit sales growth and strong payment behaviors, despite lower consumer sentiment and higher fuel costs, which the company continues to monitor closely.

    03

    Capital Management and Shareholder Returns

    Bread Financial demonstrated strong capital generation and shareholder value creation in Q1 FY26. The CET1 ratio increased by 130 basis points year-over-year to 13.3%. The company retired 3.5 million shares of common stock, representing 8% of outstanding shares at year-end 2025, through ongoing repurchase activity and the unwind of capped call transactions. A remaining stock repurchase authorization of $690 million provides future flexibility, with the cadence contingent on capital generation, growth outlook, and market conditions for preferred share issuance.

    04

    Financial Performance Drivers and Outlook

    First quarter revenue grew 5% year-over-year, driven by pricing changes and lower interest expense, partially offset by higher retailer share arrangements. Net interest margin expanded to 19.3%, benefiting from loan yield increases and improved funding costs. While pricing benefits are slowing, the company anticipates full-year NIM to be higher than 2025. PPNR increased 11% year-over-year, reflecting risk-based pricing and sound operating expense management. The full-year 2026 outlook remains unchanged, based on strong Q1 results and a stable labor market.

    05

    Investment in Technology and AI

    The company continues to invest in digital and technology advancements, including the responsible deployment of AI across the enterprise. These investments aim to accelerate operational excellence, increase productivity and efficiency, drive innovation, and strengthen risk management. A disciplined value tracking framework ensures a strong return on investment for these initiatives, supporting future growth and operational capabilities for both Bread Financial and its partners.

    AI-generated summary of the company’s earnings call. Not investment advice.