Bread Financial (NYSE:BFH) Q3 2025 Earnings Call October 23, 2025 08:30 AM ET Company ParticipantsPerry Beberman - EVP and CFORalph Andretta - President and CEOBrian Vereb - Head of Investor RelationsJeff Adelson - Executive DirectorConference Call ParticipantsSanjay Sakhrani - Managing Director and Senior AnalystVincent Caintic - Managing Director and Specialty Finance AnalystRichie Smith - Business AnalystMoshe Orenbuch - Managing Director and Senior AnalystDominick Gabriele - Managing Director and Senior ...

Financial Data and Key Metrics Changes - The company reported net income of $188 million and adjusted net income of $191 million for Q3 2025, with earnings per diluted share of $4.2, excluding a $3 million post-tax impact from debt repurchase expenses [3][4] - Tangible book value per common share increased by 19% year over year to $56.36, and return on average tangible common equity was 28.6% for the quarter [3][4] - Total sales for the quarter were $6.8 billion, a 5% increase year over year, driven by new partner growth and higher general purpose spending [10][11] Business Line Data and Key Metrics Changes - Credit sales increased by 5% year over year, supported by strong back-to-school shopping, particularly in apparel and beauty [4][10] - Average loans decreased by 1% year over year to $17.6 billion, influenced by higher payment rates and elevated gross credit losses [11][12] - Non-interest income decreased by $7 million year over year, primarily due to higher retailer share arrangements [13] Market Data and Key Metrics Changes - The delinquency rate for Q3 was 6%, down 40 basis points year over year, while the net loss rate was 7.4%, also down 40 basis points year over year [20] - The reserve rate improved to 11.7% at quarter end, reflecting better credit metrics and higher quality new vintages [21][22] Company Strategy and Development Direction - The company is focused on responsible growth and executing its business strategy, with ongoing investments in technology modernization and product innovation [6][8] - A $200 million share repurchase program was initiated, with a 10% increase in the quarterly cash dividend to $0.23 per common share [7][19] - The company aims to leverage its full product suite and omnichannel customer experience to extend category leadership while expanding into new verticals [9][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumer financial health, despite ongoing inflationary concerns and a stable job market [4][5] - The company anticipates a gradual improvement in credit metrics and expects to achieve a full-year net loss rate in the guided range of 7.8% to 7.9% [24][25] - Management remains cautious about macroeconomic uncertainties, including inflation and consumer sentiment, while monitoring these trends closely [23][30] Other Important Information - The company received a credit ratings upgrade and positive outlook from Moody's, recognizing its progress in financial resilience and risk management [9][16] - Direct to consumer deposits accounted for 47% of average funding, up from 41% a year ago, enhancing the funding mix [16][17] Q&A Session Summary Question: Have you seen any signs of weakness in your portfolio? - Management noted that consumer metrics have been surprisingly resilient, with stable gradual improvement across all credit bands, and no significant cracks observed in the portfolio [30][33] Question: What is the outlook for loan growth? - Management indicated that with credit sales moving in the right direction and new partnerships being signed, loan growth is expected to pick up going forward [39][40] Question: How do you expect credit sales to trend in Q4 and into 2026? - Management expects credit sales to remain positive, with retailers likely to offer discounts and promotions to attract consumers during the holiday season [56][57] Question: What is the company's approach to AI and automation? - The company views AI as an opportunity to enhance operational excellence, improve efficiency, and drive growth, with over 200 machine learning models already in use [88][90]

Group 1 - The tourism market is experiencing a peak in bookings ahead of the National Day holiday, with significant increases in reservations for flights, hotels, and attractions compared to last year [1][3] - Financial institutions are actively launching diverse services and support measures related to transportation, accommodation, and cultural tourism consumption, aided by government policies such as consumption loan interest subsidies [1][3][4] - The combination of financial support and promotional activities is expected to stimulate consumer spending, contributing to economic growth [2][6] Group 2 - Various travel platforms report a substantial rise in bookings for travel-related products during the holiday period, driven by strategies like taking extended leave [3][4] - Banks are implementing marketing activities to convert interest subsidy policies into increased consumer spending, with a notable rise in inquiries and applications for consumer loans [3][4][5] - The introduction of targeted financial products and services is aimed at enhancing service consumption and expanding domestic demand [5][9] Group 3 - The government is emphasizing the importance of service consumption in driving high-quality economic development, with policies aimed at increasing consumer credit support [7][8] - A report indicates that there is significant potential for service consumption growth in China, supported by rising income levels and structural economic changes [7][8] - Collaborative efforts among multiple departments are enhancing the effectiveness of policies aimed at boosting service consumption across various sectors [8][9] Group 4 - The banking sector is focusing on expanding financial services in key consumption areas such as cultural tourism, healthcare, and education, while also innovating financial products to meet diverse consumer needs [5][10] - There is a growing emphasis on creating a comprehensive ecosystem that integrates financial services with consumer experiences, particularly in the tourism and hospitality sectors [9][10] - The overall loan balance in key service consumption areas has shown a year-on-year increase, indicating a positive trend in financial support for service consumption [9]

Group 1 - The core theme of the event is to explore how time-honored brands can innovate while preserving traditional culture, aiming for brand rejuvenation and leading the new trend of domestic consumption [1] - The event is guided by the Beijing Municipal Bureau of Commerce and organized by Beijing Business Daily and the Beijing Time-honored Brand Association, with Deep Blue Media Think Tank as the platform [1] - The roundtable discussion highlighted the necessity of breaking the barriers for time-honored brands and the financial and service support provided by Postal Savings Bank [1][2] Group 2 - Postal Savings Bank is enhancing the reach of time-honored brands through a dual approach of online and offline empowerment, including a digital platform for promotion and convenient consumer access [2] - The bank has over 100 branches in Beijing, with several themed branches that integrate brand experiences, such as a comedy-themed branch and a coffee-themed branch, fostering collaboration with various enterprises [2] - Suggestions for overcoming challenges in cross-industry integration include improving financial services by facilitating quick financing and leveraging brand reputation for support, as well as using bank branches for promotional activities [3]

Core Viewpoint - The traditional brands, known as "laozihao," are becoming a significant force in creating unique and innovative consumption scenarios while deeply exploring consumer potential in the context of building a new consumption landscape [1] Group 1: Event Overview - The "2025 Searching for Laozihao Consumption Power Salon" was held during the Service Trade Fair, focusing on how traditional brands can innovate to achieve brand rejuvenation, fashionability, and internationalization while preserving traditional culture [1] - The event was guided by the Beijing Municipal Bureau of Commerce and organized by Beijing Business Daily and the Beijing Laozihao Association, with Deep Blue Media Think Tank serving as the think tank platform [1] Group 2: Financial Support for Traditional Brands - Wei Wei, the head of Postal Savings Bank's Beijing Shijingshan branch, discussed the necessity of breaking the barriers for traditional brands to reach more consumers, emphasizing the bank's dual empowerment approach through online and offline channels [3] - The bank has integrated a "Postal Merchant Street" mini-program into its app to gather quality traditional brands nationwide, providing a promotional platform for these brands and facilitating convenient purchasing for consumers [3] - Postal Savings Bank is promoting cooperation among quality enterprises and creating specialized bank branches that incorporate brand themes, such as a comedy-themed branch and a coffee-themed branch, to foster collaboration and development [3] Group 3: Challenges and Recommendations - Wei Wei identified challenges in cross-industry integration for traditional brands and proposed suggestions in financial and promotional services [4] - The bank aims to streamline the financing chain for traditional brands, exploring options like trademark and intellectual property collateral loans to support cash flow for these enterprises [4] - For promotional services, the bank plans to utilize its numerous branches as promotional venues for traditional brands and intends to launch co-branded credit cards to offer consumer discounts, encouraging collaboration with suitable traditional brands [4]

Core Insights - The aviation industry's ancillary revenue has been steadily increasing, with estimates showing that it will rise from approximately 5% in 2010 to around 15% by 2024 [2] - Airlines are focusing on optimizing retail models rather than merely expanding service categories, emphasizing personalized recommendations and precise pricing strategies to enhance customer acceptance and conversion rates [2][3] - Frequent flyer programs have become a significant value pillar for many airlines, particularly in the U.S., where co-branded credit cards generate substantial revenue due to high credit card penetration and transaction fees [2] Group 1: Importance of Ancillary Revenue - Airlines are actively expanding ancillary services such as baggage fees, in-flight retail, and seat selection, which have higher profit margins and lower price sensitivity compared to base fares [2] - The global travel industry has not only recovered but surpassed pre-pandemic levels, with total bookings expected to reach 115% of 2019 levels by 2024 [3] Group 2: Retail Strategy and Customer Insights - Airlines are re-evaluating their product sales and customer service strategies to align with evolving consumer behaviors and expectations [3] - A survey of 7,000 travelers revealed eight common misconceptions in current retail strategies, highlighting the need for airlines to understand the complete retail journey from initial interest to post-travel interactions [3] Group 3: Misconceptions in Customer Preferences - Many airlines mistakenly believe they have fully tapped into customer preferences, while in reality, travelers are willing to pay a premium for desired services that go beyond static ticket packages [4] - Price is the primary consideration for 33% of travelers, but convenience and brand trust are equally important, each cited by 20% of respondents [5] Group 4: Potential for Revenue Growth - There is an estimated potential customer value of over $45 billion in the airline retail value chain that remains untapped, primarily due to misalignment between service offerings and customer willingness to pay [8] - Airlines need to shift from rigid pricing structures to dynamic, segmented, and customized service frameworks to fully exploit traveler demand [9] Group 5: Digital Experience and Customer Engagement - Airlines must enhance their digital retail capabilities by adopting advanced technologies and strategies that improve customer engagement and conversion rates [17] - The use of behavioral economics in the booking process can significantly influence traveler decisions, with effective prompts and visual presentations leading to higher conversion rates [18] Group 6: Distribution Channels and Market Dynamics - Direct sales channels have grown from 34% to 49% of global ticket sales from 2016 to 2024, but traditional intermediaries still play a crucial role in the booking process [20] - Despite the growth of direct sales, many travelers still prefer using intermediaries, particularly price-sensitive or infrequent travelers [20] Group 7: Key Pain Points in Booking - The primary concerns for travelers during the booking process are price transparency and flexible cancellation policies, rather than technical issues with booking systems [26][27] - Travelers express dissatisfaction with flight punctuality, seat comfort, and service quality, indicating that operational reliability is more critical than the booking experience itself [31] Group 8: Social Media Influence on Travel Decisions - While social media platforms are influential among younger travelers, traditional digital channels and personal recommendations remain significant sources of travel inspiration across all age groups [35][39] - Airlines should develop a comprehensive marketing strategy that transcends social media to engage travelers during the decision-making process [39]

Core Viewpoint - The co-branded credit card market is undergoing significant changes, with many banks halting or adjusting their co-branded credit card products due to a shift in strategy towards cost and revenue balance [1][2][3]. Group 1: Market Changes - Several major banks, including Postal Savings Bank and China Construction Bank, have announced the suspension of certain co-branded credit card products since January [2]. - Other banks such as Bank of China, China Merchants Bank, and others have followed suit, indicating a broader trend in the credit card market [2]. - The suspension of co-branded credit cards reflects a restructuring of the credit card business landscape [1][2]. Group 2: Regulatory Impact - The implementation of the "Credit Card New Regulations" in July 2022 has prompted banks to shift focus from acquiring new customers to retaining existing ones [3]. - The new regulations require banks to monitor and manage dormant credit cards, limiting the proportion of such cards to no more than 20% of total issued cards [3]. Group 3: Strategic Shifts - Banks are moving from aggressive customer acquisition strategies to a more value-driven approach, focusing on enhancing core competitiveness in credit card services [4][5]. - The future of credit card business is expected to integrate with other financial services, improving overall service quality for high-value customers [5].

Industry Investment Rating - No relevant information provided Core Viewpoints - On July 11, 2025, the domestic and foreign venture capital markets disclosed a total of 29 investment and financing events, including 15 domestic enterprises and 14 foreign enterprises, with a total financing amount of approximately 9.239 billion yuan [1] Summary by Category Fundraising Events - Tianjin Jingkai Science and Technology Innovation Mother Fund expanded to 380 million yuan, aiming to build a state - owned capital market - oriented industrial fund system and a "Angel + Venture Capital + Industry + Merger" fund group [1] - China Chengtong and the Jiangsu Provincial People's Government signed a framework cooperation agreement to establish the 10 - billion - yuan Chengtong Science and Technology Innovation (Jiangsu) Fund, and 2 sub - funds of Chengtong Science and Technology Innovation (Beijing) Fund also signed relevant framework agreements, aiming to support early - mid - stage technology projects and form a "mother fund + direct investment fund" synergy [2][3] Large - scale Financing - Inmo Technology completed over 150 million yuan in Series B+ financing, and the funds will be used for R & D, AI core capacity building, and business expansion [4] - Shijia Technology completed nearly 100 million yuan in Series A financing, and the funds will be used for the construction of a smart manufacturing center and key technology R & D [5] - BILT completed a $250 million Series C financing, and the funds will be used for business expansion in multiple fields [6] Policy Focus - Beijing released the first local policy for scientific intelligence, aiming to build a scientific foundation large - model, multiple databases, and form an international - competitive industrial cluster by 2027 [7] - The 2025 national basic medical insurance drug catalog adjustment started, and a commercial health insurance innovative drug catalog was added for the first time [8] - The Shanghai Stock Exchange launched a pre - review mechanism for IPOs on the Science and Technology Innovation Board, allowing eligible technology - based enterprises to apply for pre - review [10]