Bread Financial (BFH) Q2 missed profits, credit sales up year-over-year


Pain Financial HoldingsBFH’s operating profit of 25 cents per share for the second quarter of 2022 beat Zacks’ consensus estimate by 88.9%. Net income fell about 96% year over year.

Bread Financial Holdings, Inc. Price, Consensus, and EPS Surprise

Bread Financial Holdings, Inc. price-consensus-eps-surprise-chart | Quote from Bread Financial Holdings, Inc.

Behind the headlines

Revenue decreased 11.9% year-over-year to $893 million, driven by higher average loan balances and improved loan yields, partially offset by a $21 million write-down of the carrying value of our equity-accounted investment in Loyalty Ventures Inc. consensus estimate of 0.9%.

Credit sales rose 10% to $8.1 billion as consumer spending continued to recover. Average receivables of $17 billion increased 11% year over year.

Total interest income increased 17% to $1.1 billion. Net interest margin increased by 130 basis points to 18.6%.

Total non-interest expenses increased by 12%, mainly due to an increase in compensation, marketing expenses and investments in the Bread Pay platform as part of the technology modernization initiative.

The delinquency rate of 4.4% deteriorated 110 basis points year over year, while the net loss rate of 5.6% deteriorated 50 basis points from to the period of the previous year.

Profit before tax and before provision increased 24% year-over-year to $420 million, reflecting profitable loan growth and improved cost of funds.

Financial update

As of June 30, 2022, cash and cash equivalents were $3.1 billion, up 2.1% from the 2021 level.

At the end of the quarter, the level of debt had decreased by 1.2% compared to the end of 2021 to approximately $2 billion.

Tangible book value of $31.75 per share as of June 30, 2022 improved 17.1% from the end of 2021.

Cash from operations increased 1.4% year-over-year to $743 million in the first half of 2022. Bread Financial’s capital expenditures increased 22.9% year-on-year on the other to reach $43 million over the same period.

Dividend Update

The board has approved a quarterly dividend of 21 cents to be paid Sept. 16 to shareholders of record as of Aug. 12.

Orientation 2022

Management expects average trade receivables growth to be in the lower double-digit range from the 2021 level.

Total revenue growth should be closely aligned with average loan growth.

Total non-interest expense should reflect positive operating leverage.

Total spend will increase in 2022, given continued investments in technology modernization, digital advancement, marketing and product innovation, as well as strong portfolio growth.

The net loss rate is guided in the low to medium range of 5%.

Zacks Rank

Bread Financial currently carries a Zacks rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other industry players

Mastercard Incorporated MA reported Q2 2022 earnings of $2.56 per share, which beat Zacks’ consensus estimate of 8.5% and was up 31% year-over-year. Net revenue grew 21% year-over-year to $5.5 billion and topped the consensus mark of 4.3%.

GDV (representing the aggregate dollar amount of purchases made and cash disbursements obtained with MasterCard-branded cards) increased 14% year-over-year in local currency to $2.1 trillion during of the second trimester. Cross-border volumes (a key metric that tracks spend on cards beyond the issuing country) soared 58% year-over-year based on local currency.

Switched transactions, which indicate the number of times a company’s products are used to facilitate transactions, rose 12% year-over-year to 30.4 billion.

Visa Inc.Earnings of $1.98 per share of . V in the third quarter of fiscal 2022 beat the Zacks consensus estimate by 13.8% and improved 33% year over year. Net revenue of $7.3 billion was up 19% year over year and topped the consensus mark of 3.1%.

Visa’s constant dollar payment volume grew 12% year-over-year. On a constant dollar basis, Visa’s total cross-border volume improved 40% year over year.

Upcoming release

Global Payments GPN is expected to report its second quarter 2022 results on August 1. Zacks consensus estimate for the second quarter is pegged at $2.36, indicating a 15.7% increase from the figure reported a year ago.

Global Payments has delivered an earnings surprise over the past four quarters.

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