Financial Data and Key Metrics Changes - Bread Financial reported a net income available to common stockholders of $53 million for Q4 2025, with adjusted net income of $95 million and earnings per diluted share of $2.07, reflecting a strong performance [12][13] - For the full year 2025, credit sales reached $27.8 billion, a 3% increase year-over-year, while average loans decreased by 1% to $17.9 billion [15][16] - The company achieved a tangible book value per common share growth of 23% year-over-year to $57.57, with a return on average tangible common equity of 20% for the full year [12][22] Business Line Data and Key Metrics Changes - Co-brand credit sales comprised 52% of total credit sales in Q4 2025, up from 48% in Q4 2024, indicating a positive trend in brand partnerships [8][9] - The direct-to-consumer deposit balances increased by 11% year-over-year, now representing 48% of total funding, up from 43% a year ago [9][10] Market Data and Key Metrics Changes - Consumer finance health remained resilient, driving a 2% year-over-year increase in credit sales due to higher transaction sizes and increased transaction frequency [13][14] - The delinquency rate for Q4 was 5.8%, down 10 basis points year-over-year, while the net loss rate improved to 7.4%, down 60 basis points from the previous year [25][26] Company Strategy and Development Direction - The company aims to capitalize on strengths while fortifying its business to offset potential external pressures, focusing on responsible growth and disciplined credit management [33][34] - Continued investment in technology modernization and product innovation, including AI, is expected to drive growth and efficiencies [29][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumers and the gradual improvement in credit metrics, anticipating a positive trajectory for loan growth entering 2026 [13][14] - The outlook for 2026 includes expectations for low single-digit growth in average credit card and other loans, supported by a stable partner base and new business launches [27][30] Other Important Information - The company returned $350 million in capital to shareholders in 2025, including $310 million in common share repurchases and a 10% increase in the quarterly common stock dividend [10][24] - A credit rating upgrade from Moody's and Fitch was received, reflecting the company's strengthened financial resilience [10][22] Q&A Session Summary Question: What is driving the loan growth into 2026? - Management noted that loan growth is driven by resilient consumer behavior, sales momentum, and stable partnerships, with no loosening of underwriting standards [37][39] Question: How does the company view the impact of the labor market on credit quality? - Management is encouraged by underlying data, observing improvements in roll rates and credit metrics, indicating a resilient consumer base despite potential economic pressures [41][43] Question: What are the objectives for direct-to-consumer deposits? - The company aims for direct-to-consumer deposits to reach 70% of total funding over time, benefiting from competitive pricing due to its online presence [59][60] Question: What is the outlook for the reserve rate? - The reserve rate is expected to improve in line with credit quality, with management optimistic about gradually moving risk weightings back to neutral [62][63] Question: How does the company plan to achieve positive operating leverage in 2026? - Management indicated that positive operating leverage will depend on macro conditions impacting revenue, with a focus on operational excellence and continuous improvement initiatives [84][85]

Financial Data and Key Metrics Changes - Bread Financial reported a net income available to common stockholders of $53 million for Q4 2025, with adjusted net income of $95 million and earnings per diluted share of $2.07, reflecting a strong performance [12][13] - Full-year credit sales reached $27.8 billion, a 3% increase year-over-year, while average loans decreased by 1% to $17.9 billion [15][17] - The company achieved a tangible book value per common share growth of 23% year-over-year to $57.57, with a return on average tangible common equity of 20% for the full year [12][22] Business Line Data and Key Metrics Changes - The Home vertical saw significant expansion with new partnerships, including Bed Bath & Beyond and Raymour & Flanigan, contributing to a 52% share of credit sales in Q4, up from 48% in Q4 2024 [8][9] - The direct-to-consumer deposit balances increased by 11% year-over-year, now representing 48% of total funding, up from 43% a year ago [9][10] Market Data and Key Metrics Changes - Consumer finance health remained resilient, driving a 2% year-over-year increase in credit sales, with notable increases in travel and entertainment spending [13][14] - The delinquency rate for Q4 was 5.8%, down 10 basis points year-over-year, while the net loss rate improved to 7.4%, down 60 basis points from the previous year [25][26] Company Strategy and Development Direction - The company aims to capitalize on strengths while fortifying its business against external pressures, focusing on responsible growth and disciplined credit management [33][34] - Continued investment in technology modernization and product innovation, including AI, is a priority to drive growth and efficiencies [29][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of consumers and the gradual improvement in credit metrics, anticipating a positive trajectory for loan growth entering 2026 [13][14] - The outlook for 2026 includes expectations for low single-digit growth in average credit card and other loans, supported by a stable partner base and new business launches [27][30] Other Important Information - The company returned $350 million in capital to shareholders in 2025, including $310 million in share repurchases and a 10% increase in quarterly dividends [10][24] - A credit rating upgrade from Moody's and Fitch was received, reflecting improved financial resilience and risk management [10][11] Q&A Session Summary Question: What is driving the anticipated loan growth into 2026? - Management indicated that loan growth is driven by resilient consumer behavior and stable partnerships, with no loosening of underwriting standards [37][39] Question: How does the company view the impact of credit quality and potential economic pressures? - Management remains optimistic about credit quality improvements and consumer resilience, despite potential economic pressures [41][43] Question: Can you elaborate on the new travel and entertainment products? - The company has introduced new fee-based products with existing partners, contributing to growth in the travel and entertainment vertical [49][50] Question: What are the expectations for net interest margin (NIM) in 2026? - Management expects NIM to remain stable to slightly higher, influenced by pricing changes and the mix of products [51][52] Question: What is the outlook for direct-to-consumer deposits? - The long-term goal is to increase direct-to-consumer deposits to over 70% of total funding, with competitive pricing expected [59][60] Question: How will the reserve rate evolve with improving credit metrics? - The reserve rate is expected to decrease as credit quality improves, with a target around 10% over time [62][63]

Financial Data and Key Metrics Changes - Bread Financial reported a net income available to common stockholders of $53 million for Q4 2025, with adjusted net income of $95 million and earnings per diluted share of $2.07, reflecting a strong performance [11] - The company's tangible book value per common share grew 23% year-over-year to $57.57, and the return on average tangible common equity was 8% for the quarter and 20% for the full year [11] - Credit sales for the full year reached $27.8 billion, a 3% increase year-over-year, while average loans decreased by 1% to $17.9 billion [14][17] - Total non-interest expenses decreased by $72 million or 3%, driven by lower impacts from debt repurchases [14] Business Line Data and Key Metrics Changes - Co-brand credit sales comprised 52% of total credit sales in Q4 2025, up from 48% in Q4 2024, indicating a positive trend in brand partnerships [6] - The company signed seven major new brand partnerships in 2025, including Bed Bath & Beyond and Crypto.com, while renewing multiple existing partnerships [4][5] - The direct-to-consumer deposit balances increased by 11% year-over-year, now representing 48% of total funding, up from 43% a year ago [8] Market Data and Key Metrics Changes - Consumer finance health remained resilient, driving a 2% year-over-year increase in credit sales due to higher transaction sizes and frequency [12] - The delinquency rate for Q4 was 5.8%, down 10 basis points year-over-year, while the net loss rate was 7.4%, down 60 basis points from the previous year [25] Company Strategy and Development Direction - The company aims to capitalize on its strengths while fortifying its business to offset potential external pressures, focusing on responsible growth and disciplined credit management [32][33] - Continued investment in technology modernization and product innovation, including AI, is a priority to drive growth and efficiencies [28][33] - The company plans to optimize its capital structure and return excess capital to shareholders through share repurchases and dividends [24][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate returns and navigate economic challenges, supported by strong capital levels and cash flow generation [13][33] - The outlook for 2026 anticipates continued consumer resilience and gradual improvements in credit metrics, with expectations for low single-digit growth in credit card and other loans [27][30] - Management noted that while there are pressures from anticipated lower prime rates, the company remains optimistic about its credit performance and overall financial health [20][30] Other Important Information - The company returned $350 million in capital to shareholders in 2025, including $310 million in share repurchases and a 10% increase in quarterly dividends [8][9] - A credit rating upgrade from Moody's and Fitch was received, reflecting the company's strengthened financial resilience [9] Q&A Session Summary Question: What is driving the anticipated loan growth into 2026? - Management indicated that loan growth is driven by a resilient consumer and stable partnerships, with no loosening of underwriting standards [36][38] Question: What is the company's outlook on Bread Pay and its growth potential? - Management expects Bread Pay volume to increase with the addition of new partners and improved underwriting [39] Question: Are there any underlying economic pressures affecting credit quality? - Management noted improvements in roll rates and credit metrics, indicating consumer resilience despite potential economic pressures [41][42] Question: What is the company's strategy regarding direct-to-consumer deposits? - The long-term goal is to increase direct-to-consumer deposits to over 70% of total funding, with competitive pricing expected [56][57] Question: How does the company view the reserve rate and its future trajectory? - Management anticipates the reserve rate will decrease as credit quality improves, with a target around 10% over time [60]