Bread Financial Q2 Earnings Beat, Revenues Miss, Credit Sales Rise

Core Insights - Bread Financial Holdings (BFH) reported an operating income of $3.14 per share for Q2 2025, exceeding the Zacks Consensus Estimate by 69.7% and reflecting an 18% year-over-year improvement [1][8] Revenue Performance - Revenues decreased by 1.1% year over year to $929 million, primarily due to lower finance charges and late fees from a reduced average prime rate, lower delinquencies, and a shift in risk and product mix [2][8] - The revenue figure missed the consensus estimate by 0.9% [2] Credit Sales and Loans - Credit sales increased by 4% to $6.8 billion, driven by new partner growth and increased general-purpose spending, surpassing the estimate of $6.6 billion [2][8] - Average loans decreased by 1% to $17.7 billion, attributed to the macroeconomic environment affecting consumer spending and tighter underwriting standards [3] Interest Income and Margins - Total interest income fell by 3% to $1.2 billion, aligning with estimates [3] - Net interest margin contracted by 30 basis points to 17.7%, slightly better than the Zacks Consensus Estimate of 17.4% [3] Expenses and Earnings - Total non-interest expenses rose by 3% to $481 million, driven by debt extinguishment costs [4] - Pre-tax pre-provision earnings decreased by 5% year over year to $448 million due to lower net interest income [4] Financial Position - As of June 30, 2025, cash and cash equivalents increased by 14.4% to $4.2 billion [5] - Long-term debt rose by 28.7% to $1.3 billion compared to the end of 2024 [5] - Tangible book value per share was $52.21, up 7% year over year [5] - Return on average equity was 17.5%, expanding by 80 basis points year over year [5] Share Repurchase - In April, BFH repurchased 1.1 million shares, completing a $150 million share repurchase program [6] Future Guidance - Management estimates average receivables to be flat to slightly down from 2024, with total revenues expected to remain flat year over year [9] - The net loss rate is guided to be in the range of 7.8-7.9% [9]