Bread Financial Holdings’ BFH operating income of $2.86 per share for the first quarter of 2025 beat the Zacks Consensus Estimate by 36.2%. Shares gained 2.2% in the last trading session to reflect the outperformance. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
The bottom line improved 4.8% year over year. The quarterly results reflected a drop in revenues but higher credit sales.
Behind the Headlines of BFH
Revenues decreased 2.1% year over year to $970 million, primarily due to lower finance charges and late fees resulting from a lower average prime rate, lower delinquencies, and a gradual shift in risk and product mix leading to a lower proportion of private label accounts. The top line, however, beat the consensus estimate by 1.3%.
Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise
Bread Financial Holdings, Inc. Price, Consensus and EPS Surprise
Bread Financial Holdings, Inc. price-consensus-eps-surprise-chart | Bread Financial Holdings, Inc. Quote
Credit sales of $6.1 billion increased 1%, driven by higher general-purpose spending and overall transaction volume, as consumers likely advanced purchases ahead of potential price increases. Also, lower gas prices helped to bolster their discretionary purchasing power.
Average loans of $18.2 billion decreased 2%, primarily due to the macroeconomic environment, which resulted in lower consumer spending, higher gross losses and tighter underwriting standards. Our estimate for the same was $18.1 billion.
Total interest income decreased 5.3% to $1.2 billion. Our estimate and the Zacks Consensus Estimate were both pegged at $1.3 billion.
Net interest margin contracted 60 basis points (bps) to 18.1%. The Zacks Consensus Estimate for the metric was 17.8%.
Total non-interest expenses decreased 1% to $477 million, primarily driven by lower other expenses.
The delinquency rate of 5.9% improved 30 bps year over year. The net loss rate of 8.2% improved 30 basis points year over year.
Pre-tax pre-provision earnings decreased 3.1% year over year to $493 million due to lower net interest income.
BFH’s Financial Update
As of March 31, 2025, cash and cash equivalents were $4.2 billion, up 14.4% from the level of 2024.
As of March 31, 2025, long-term debt and other debt increased 28.7% from the 2024-end level to $1.3 billion.
Tangible book value was $48.91 per share as of March 31, 2025, up 6% year over year.
Return on average equity was 17.7% in the first quarter of 2025. The figure expanded 20 basis points year over year.
Cash from operations in the first quarter of 2025 decreased 12.1% year over year to $393 million.
Capital Deployment of BFH
Bread Financial bought back $102 million or 2.1 million shares in the first quarter. Subsequently, in April, it repurchased an additional 1.1 million shares for a total of 3.2 million shares, exhausting the board-authorized share repurchase program of $150 million.
BFH’s 2025 Guidance
Management estimates average receivables to be slightly down from 2024. It expects average credit card and other loans to be flat to slightly down from the 2024 level.
Total revenues are estimated to be flat to slightly up. The net loss rate is guided in the range of 8-8.2%.
BFH’s Zacks Rank
Bread Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases
American Express Company AXP reported first-quarter 2025 earnings per share (EPS) of $3.64, which beat the Zacks Consensus Estimate by 5.5%. The bottom line climbed 9% year over year. Total revenues net of interest expense amounted to $16.97 billion, which missed the Zacks Consensus Estimate by 0.2%. The top line improved 7% year over year in the quarter under review.
Network volumes of $439.6 billion rose 5% year over year in the first quarter, driven by higher U.S. consumer spending. The figure, however, missed the Zacks Consensus Estimate by 1.2%. Total interest income of $6.1 billion increased 6% year over year and beat the consensus mark by 1%. Provision for credit losses declined 9% year over year to $1.2 billion due to a modest net reserve release.
American Express anticipates revenues to increase between 8% and 10% in 2025 from the 2024 level of $65.9 billion. Management expects EPS in the range of $15-$15.50, the midpoint of which indicates an improvement of 8.9% from the 2024 level of $14.01.
Discover Financial Services DFS reported first-quarter 2025 adjusted earnings per share of $4.25, which surpassed the Zacks Consensus Estimate by 28.8%. Also, the bottom line climbed 31% year over year. DFS’ revenues, net of interest expenses, were $4.3 billion. The metric inched up 2% year over year and beat the consensus mark by 0.7%.
Interest income slipped 3% year over year to $4.8 billion and missed our estimate of $5 billion. Interest expense of $1.2 billion fell 15% year over year, lower than our estimate of $1.4 billion. Non-interest income grew 3% year over year to $693 million.
Earlier, management anticipated loan growth to follow the pre-pandemic trend. The net interest margin was forecasted to be relatively consistent with the fourth-quarter 2024 level of 11.96%. DFS’ expense base was not expected to change significantly before merger approval. Net charge-off was forecasted to start seeing a downward trend in 2025.
Synchrony Financial SYF reported first-quarter 2025 adjusted EPS of $1.89, which outpaced the Zacks Consensus Estimate by 16%. However, the bottom line declined 39.8% year over year. Net interest income was $4.5 billion, which inched up 1.3% year over year. However, it missed the consensus mark by 1.8%.
Synchrony continues to anticipate low single-digit growth in period-end loan receivables. Purchase volume growth is expected to reflect credit actions and consumer spending behavior. The company expects the payment rate to be generally in line with 2024. Net revenues are still projected between $15.2 billion and $15.7 billion, the mid-point of which indicates a 4% decline from the 2024 figure.
Management expects net charge-offs to be between 5.8% and 6% compared with the earlier guidance of 5.8-6.1% and follow normal seasonal trends in the second half of the year. The efficiency ratio projection has been reiterated between 31.5% and 32.5%, the mid-point of which suggests an increase of 200 bps from the 2024 level.
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