Perry Beberman
Thanks, Ralph. I will touch on our full year 2024 financial highlights on Slide five before moving on to our fourth quarter 2024 results. For the year, credit sales of $27 billion decreased 7%, and average loans of $18.1 billion decreased 1%, reflecting moderated consumer spending, our proactive credit tightening actions and elevated gross losses, partially offset by new partner growth.
Revenue of $3.8 billion decreased $451 million or 11% due to a $230 million gain on sale on the comparative 2023 period, while in 2024, we had lower finance charges and late fees, resulting from a gradual shift in risk and product mix, leading to a lower proportion of private label accounts. Our loan yield was impacted by lower average primary driven by the 100 basis points of Fed rate cuts that started in September and, lastly, reduced merchant discount fees resulting from lower big-ticket sales.
Total noninterest expense, net income, income from continuing operations and diluted EPS have all been adjusted for the impact from our repurchased convertible notes, which was primarily the premium paid for those repurchases. All adjusted figures are non-GAAP financial measures, and a reconciliation table can be found at the bottom of the slide as well as in the appendix along with our non-GAAP financial measures.
Adjusted total noninterest expenses decreased 7%, excluding the $107 million pretax impact from our repurchase convertible notes. The decline was primarily driven by lower card and processing expenses, which includes lower fraud expense. Adjusted diluted EPS for the year was $7.60.
Slide 6 provides our fourth quarter financial highlights. During the fourth quarter, credit sales of $7.9 billion increased 1% year-over-year, reflecting new partner growth and stronger holiday sales, while average loans of $18.2 billion decreased 1%, reflecting lower full year credit sales and elevated gross credit losses in the year.
Revenue was $0.9 billion for the quarter, down 9% year-over-year, and total noninterest expenses increased $20 million or 4%. Income from continuing operations decreased $37 million, primarily due to the lower net interest income and a $13 million post tax impact from our repurchased convertible notes, partially offset by a lower provision for credit losses. Adjusted income from continuing operations and adjusted diluted EPS, both of which exclude the impact from our repurchased notes were $21 million and $0.41, respectively.
Looking at the quarterly financials in more detail on Slide seven. Total net interest income for the quarter decreased 8% year-over-year, primarily due to a lower loan yield, which I will discuss further on the next slide. Noninterest income was down $4 million, which was primarily the result of reduced merchant discount fees due to lower big-ticket credit sales.
Total noninterest expenses increased $20 million or 4%, including a $22 million increase in employee compensation and benefits costs and technology-related transformation costs and an $11 million pretax impact from our repurchased convertible notes. Excluding the $11 million related to the convertible repurchases, expenses increased 1%. Additional details on expense drivers can be found in the appendix of the slide deck posted on our website.
Pretax preprovision earnings, or PPNR, decreased $111 million or 22% and primarily due to lower net interest income and higher employee compensation and benefits costs. Finally, note that the tax rate in the fourth quarter of 2024 benefited from favorable discrete items.
Turning to Slide 8. Both loan yield of 25.7% and net interest margin of 17.8% were lower sequentially following seasonal trends. Loan yield decreased 200 basis points year-over-year primarily due to lower finance charges and late fees, resulting from a gradual shift in product and risk mix, leading to a lower proportion of private label accounts, lower average prime rate and higher seasonal transactor balances related to strong holiday spend.
On the funding side, we are seeing the rate on our funding costs decreased as savings accounts and new term CD rates decline with lower Fed and US treasuries. Note that repricing of our retail CD portfolio, which comprises over half of our direct-to-consumer deposits, will lag the rate changes in both our savings portfolio and the overall loan portfolio.
Looking at the bottom right chart, you can see that our funding mix continues to improve, fueled by growth in direct-to-consumer deposits, which increased to $7.7 billion at quarter end. Direct-to-consumer deposits accounted for 43% of our average total funding, up from 35% a year ago. Concurrently, wholesale deposits decreased from 39% to 30%.
Moving to credit on Slide 9. Our delinquency rate for the fourth quarter was 5.9%, down 60 basis points from last year and down 50 basis points sequentially, following seasonal trends. This gradual improvement provides an early sign of potential optimism for improved credit performance in the second half of 2025, subject to macroeconomic conditions continuing to improve.
The fourth quarter net loss rate was 8.0%, flat to last year and slightly higher than the third quarter 2024 rate of 7.8%. As previously mentioned, we estimate the net loss rate benefited by more than 20 basis points or approximately $10 million from the hurricane-related, customer-friendly actions we took in October and November, which consequently will have a negative impact on the May and June 2025 net loss rates.
Our reserve rate of 11.9% improved slightly year-over-year as expected, which is further evidence of stabilization in our credit portfolio. We continue to maintain appropriately conservative weighting on the economic scenarios in our credit reserve modeling given the wide range of potential 2025 macroeconomic outcomes.
Further, our total loss absorption capacity, comprised of total company tangible common equity plus credit reserve, ended the quarter at 24% of total loans, an increase of 90 basis points from a year ago, demonstrating a strong margin of protection should more adverse economic conditions arrive.
Looking at our credit risk distribution, the percentage of cardholders with a 660-plus credit score improved slightly during the quarter to 58%, up from 57% sequentially and above pre-pandemic levels despite continued inflationary pressures. This is primarily a result of our ongoing prudent credit tightening actions as well as our more diversified product mix. We continue to proactively manage our credit risk to protect our balance sheet and ensure we are appropriately compensated for the risk we take.
Moving to Slide 10. Our 2025 outlook acknowledges the economic progress in 2024 in terms of stabilizing inflation and improvements in real wages in a stable, albeit cooling labor market. We anticipate our consumers will continue to responsibly moderate their spending due to ongoing elevated prices. We also recognize that consumer impacts related to the new administration's legislative and monetary policies are unknown at this time.
Our outlook assumes no late fee reduction related to the CFPB late fee rule given uncertainty surrounding the timing and outcome of the ongoing litigation. It also assumes further interest rate reductions by the Federal Reserve, which will pressure total net interest income. Note that as we remain slightly asset sensitive, lower recent and future Fed and prime rates will pressure net interest margin as our variable rate assets reprice faster than our liabilities.
We expect 2025 average credit card and other loans to be relatively flat compared to 2024 based on our current economic outlook, strategic tightening actions, anticipated elevated gross credit losses and visibility into our pipeline and existing partner relationships. As a result of new business growth and higher credit sales in the year, we anticipate year-end 2025 loans will be slightly higher than year-end 2024.
Total revenue growth, excluding portfolio sale gains is anticipated to be up low single digits, with the full year net interest margin modestly higher than full year 2024 rate. This is a result of the mitigation actions taken in response to the CFPB late fee rule, partially offset by an expected continued shift in product mix to co-brand, proprietary and installment lending products, which would lead to lower finance charges and late fees as well as a lower average year-over-year prime rate.
To expand a bit on a few of the key variables that are expected to drive NIM into 2025, first, I would note the negative impact on loan yields from the 100 basis points reduction in prime rate in late 2024 and that impact rolling through on a quarter and full year basis, then factoring in the potential timing of potential additional Fed interest rate cuts in 2025.
Next, I would highlight the expectation for lower billed late fees given better early-stage delinquency trends as a result of our improving risk mix and more diversified product mix, as I mentioned previously. Third, on a quarterly basis, you have seasonality from the buildup in transactor balances, timing around tax refunds and the level of gross losses in each quarter. For example, sequentially, the first quarter will see pressure from expected higher gross losses and expected lower early-stage delinquencies resulting in lower billed late fees but will benefit slightly from normal seasonality as holiday transactor balances pay down.
Additionally, as we have said, the result of the mitigation actions we have taken in response to the CFPB late fee rule should gradually build into our portfolio over the coming quarters in the form of higher APRs. We recognize there are many moving pieces, so we will continue to provide additional insights regarding the loan yields throughout the year.
From the interest expense side, we are pleased with our continued progress in growing our direct-to-consumer deposits and lowering our rates while remaining very competitive. As I mentioned, the impact from our CD rate reductions will lag relative to the changes in the yield curve, which leads to additional shorter-term pressure on net interest margin.
As a result of efficiencies gained from ongoing operational excellence initiatives, along with disciplined investment and expense management, we expect to generate nominal full year positive operating leverage in 2025, excluding portfolio sales and the 2024 $107 million pretax impact from our repurchased convertible notes. The degree of positive operating leverage will be macro dependent related to credit improvement, loan growth and pace and timing of further Fed interest cuts.
We anticipate a year-over-year net loss rate in the 8.0% to 8.2% range for 2025. As I mentioned earlier, the customer-friendly hurricane actions we took in October and November in 2024 will result in a modest shift of losses from the fourth quarter of 2024 to the second quarter of 2025, negatively impacting the second quarter loss rate.
We expect the net loss rate in the first half of the year to remain elevated. Given positive early indications, we project that the first quarter net loss rate will be at slightly or better than the first quarter 2024 rate of 8.5%, with a peak rate in the upper 8% range in February as a result of the day weighting calculation methodology that we implemented last year.
Delinquency performance over the next 90 days will help to save our expectations for the second half of the year as there is still potential volatility in credit performance driven by the changing administration, tax season and broader macroeconomic conditions.
Overall, our baseline loss outlook assumes a slow gradual improvement in the macroeconomic environment as it will take time for the effects of a prolonged period of elevated inflation to be fully absorbed by consumers. Finally, our full year normalized effective tax rate is expected to be in the range of 25% to 26%, with quarter-over-quarter variability due to the timing of certain discrete items.
Now I will turn it back to Ralph to review our 2025 focus areas.
Ralph Andretta
Thanks, Perry. Before we open it up for questions, I wanted to provide a refreshed view of our focus areas for 2025 as seen on Slide 11. While our focus areas have remained fairly consistent over the last few years, they continue to evolve with our transformation and the ever-changing business environment.
First, our commitment to responsible growth will not change. We have made significant progress diversifying our product suite over the last few years. This enables us to appropriately scale, improve our risk mix and grow our partnerships, expanding revenue-generation opportunities.
Second, we will leverage our sophisticated end-to-end credit management process to continue balancing risk and reward and effectively manage changes in the macroeconomic environment. We will continue to adapt to regulatory uncertainty and closely monitor the potential impacts from legislative and monetary changes.
Third, due to the successful execution of our long-term debt plan, including the paydown of more than $1 billion of debt over the last three years, and our disciplined approach to allocating capital, our balance sheet is stronger than ever. This provides a necessary foundation and flexibility for continued business growth and resiliency. We look for opportunities to optimize our capital and debt stack.
And as we continue to generate capital, we will ensure appropriate returns on our investments and maintain the balance sheet strength we have worked so hard to build. Then over time, we will look to return excess capital to our shareholders.
In the last five years, we have made substantial progress enhancing our enterprise risk management practices, including capital planning as well as interest rate risk management. We will continue to strengthen and advance all aspects of risk management to ensure we are a prudent and well-run financial services company.
Finally, the successful integration and execution of our operational excellence efforts continue. We will look to accelerate continuous improvement and transform initiatives to deliver technology advancements, improved customer satisfaction, enterprise-wide efficiency and value creation.
In summary, our experienced leadership team remains focused on generating strong returns through prudent capital and risk management. This reflects our unwavering commitment to drive sustainable, profitable growth and build long-term value for our shareholders and other stakeholders throughout dynamic, economic and regulatory environments. We are proud of what we accomplished in 2024 and look forward to building on our momentum in 2025.
Operator, we are now ready to open up the lines for questions.
Operator
Sanjay Sakhrani, KBW.
Sanjay Sakhrani
Thank you. Good morning, Perry. I just wanted to talk about the path to your medium-term targets. I guess as we think about mitigation and the and no late fee regulation. I would think that that accelerates the path to this potential. Maybe you could just talk about how you're thinking about that and give us a sense of some of the points that you made on Nim and how much mitigation is coming through over the next couple of years.
Perry Beberman
Sure. Yeah, I'd say, and thanks for the question. I'd say we're well on the path to achieving those medium term targets. You know, I think some of the key things to look at is when you start to look at what happened in the fourth quarter and how we expect that to pull through in the first half of the year, we're still operating in a period of elevated losses, right? And so gross losses, you have that higher period of reversal of interest and fees from prior periods.
So that was occurring and will continue to occur into the first part of the year when we're still north of 8% on gross losses. So that needs to come back down to that 6% level to really achieve those, those targets. And then you take into consideration that we did see marked improvement in delinquency. So, the 50 basis points improvement linked quarter or 56 basis points, you're starting to bend the curve. And so in that period, you're starting to have a lower billed late fees.
So you're kind of getting that double whammy in that transition period. As credit quality is improving, you're getting billed late fees that is pulling back on your net interest margin a little bit. But at the same time, you still have elevated reversal of interest and fees from prior periods when you have more of those bill fees. So that's going to play through in that transitional period as you start to work towards that, I'll call it more normalized credit as that starts marching downward.
At the same time, we did have the 100 basis points of fed cuts and translating the prime cuts that happened pretty rapidly in the fourth quarter. Us being, asset sensitive that's pulling through and impacted yield. As the liabilities catch up in terms of repricing, you'll start to see NIM normalize as well. And then to your point, the CFPB late fee mitigation actions that are in flight, when we put this out, it was a year of building to get all those APRs higher APRs translating into the interest income on those revolving balances.
So we're moving closer to those medium term targets. But really, it's going to be largely credited, feel very confident with the way we're managing expenses to deliver positive operating leverage. And a lot of that will be macro dependent to the degree of which we deliver positive operating leverage as we talk about. And you know, we talk more about what, what those impacts of the possible economy are. But that's kind of the way I think about the glide path as we march through the back half of this year really be set up nicely to start to hit those medium term targets.
Sanjay Sakhrani
Got it and then just a follow up maybe Ralph, I'm just trying to think about how we see a re acceleration in nim a creative loan growth. I know there's been some mixed impacts you guys are growing in cobrand which is definitely helping credit. But as I look ahead, how do we get loan growth to accelerate? Is it, is it a function of credit? You know, like are you guys tightening?
So that's having an impact as well or can we see some loosening that can drive that? I mean, you talked a little bit about the spending trends specifically and then are there any portfolio acquisition opportunities? Thank you.
Ralph Andretta
Yeah, if you think about, let me answer that with, the fourth quarter shows a lot of green shoots, right? We saw some pick up in specialty apparel, T&E the millennial spend and, and, and Gen Z, we were really comfortable with that. And if you think about what we executed in 2024 those portfolios are going to mature as we move through 2025 and we do have a robust pipeline.
So if I look at you know, year end, our loans were our end of period loans were up end of period sales were up. I was pretty encouraged by that. I'm cautiously optimistic as we move forward through 2025 that, that sales will increase and then consequently loan growth will increase.
Sanjay Sakhrani
Thank you.
Operator
Vincent Caintic, BTIG.
Vincent Caintic
Good morning. Thanks for taking my questions. First one. Actually, just a follow up on the NIM and on mitigants rollout if you could maybe update us on the progress there. And you know, with the new administration coming in and I think expectations now with the CPB going away, I'm just wondering how your conversations are going with maybe some of the merchants who have not yet signed up. You know, just how, how that progress is and how much more could we see in Mi.
Perry Beberman
Yeah. So, as it relates to the mitigation, we have taken a, thoughtful approach with our brand partners in terms of how we phase these in. We said previously this was a phased in approach. It wasn't going to be a big bang where it all happened at some point last year. So there's still, I'll say like APR increases rolling out this year, we have 95% of the brand partners understand the contractual commitments of what's going to happen. Should the late fee will go into effect?
And Vincent to your point, there's optimism just from the litigation that was in flight in terms of hoping for a positive outcome. But we got to keep marching forward because the timing and the outcome of what's going to play forward in the courts is still uncertain. But judge Pitman's early indication that, late fees should be a deterrent, gives us some encouragement that that would be, where it goes.
So, more broadly, obviously, I think the industry wide is feeling more optimistic, with the change of administration the regulatory side, but there's other consequences that could be out there with policy changes and things that we just don't know. But as it rolls, we do think there's going to be some positivity in terms of what that means to net interest margin over time and how that plays forward into 2026 as well.
But there's still, some pressures on this year with rate cut, that the compression that we'll see from that improved delinquency lowers late fees. So you've got all these moving parts within that, which is why we're guiding where we are, but we do expect them to be slightly higher this year than last year largely because of the mitigation playing through.
Vincent Caintic
Okay, great. Thanks for that update and then, maybe, asking just on the medium term guidance again, I think, you know, sitting back in the Investor day and all the great detail you gave there. I think we were looking at you know, kind of getting to a run rate 20%, 25%. ROE by the fourth quarter of 2025. And so I'm just wondering with, Nim is coming up a bit.
And then you have the losses improving as well as credit reserves coming down. So it's nice to see the 30 basis points benefit. Just wondering if we're on track of that and what other pieces maybe we need to, to, to get to that meeting term? Thank you.
Perry Beberman
Yeah, I think I it's what you said there, right? How does the fourth quarter credit performance come in? Where does reserve rate come down? I would expect if things play out positively. And, and credit really continues to hold and even slightly improve as you through the next 90 days, that's going to be a good indication that, we'll finish the year with a lower reserve rate than where we finish this year. And if loss is coming better, obviously that then you're starting to drive those returns and that should set us up for 2026.
Vincent Caintic
Okay, great. Thanks very much.
Operator
Jeff Adelson, Morgan Stanley.
Jeff Adelson
Hey, Perry. Thanks for all the color into the moving pieces on the NIM. I just wanted to make sure we understood. So for the first quarter, should, should we be expecting more of a more pressure on the NIM or should that be more flat? I mean, you talked about the seasonality of transactors which tends to benefit in the first quarter. I just want to make sure we put a finer point on that.
Perry Beberman
Yeah, thanks for your question. So again, the moving parts transactor balances coming off, that helps to increase them. We've got the prime rate pull through for the full quarter that puts pressure on them. You've got some CFP B mitigation. So that's going to help. So you got a couple of positives offset with one, negative. So I'd say, we should be seasonally slightly up in from fourth quarter going into first quarter.
Jeff Adelson
Okay. Thanks for that and, and then just, just around the green shoots of spending there. You know, how do we balance that against, your expectation for consumers to kind of be cautiously moderating their spend here? You know, II get, you highlighted some of the key areas of growth you're seeing, is any of that coming from, you know, any account growth that you're maybe leaning to at this point or can you just help us understand, you know what that looks like and then as it related to that, like, are there any sort of trends that you're noticing under the hood? Just an update on the state of the consumer, whether it be by, high versus low income or FICO?
Perry Beberman
When I think about spend, I think more broadly about, the economy, right? And you think about the economy, there's clearly been signs of strength and stabilization where unemployments remained around 4.1%. That outlook is to be consistent through next year. Based on what everybody is saying, we're seeing encouraging signs with, CP I dropping 3.2% which is, which is positive.
So, our consumers, I think you can probably see the same thing, the low end consumers actually seeing some slight improvement, maybe start creeping up the ladder to the prime plus are starting to feel a pressure. We're watching things carefully with like min pay, we're starting to see stabilization, maybe some slight improvement on the lower end of who we underwrite. But you're starting to see a little bit of an increase as you start to go up the ladder.
So it's interesting to watch the two tails of the economy, right. The lower end of the tail. We've talked about the k economy in the past, we've actually seen stabilization to improvement and that's a lot of where we live. And you know, we serve those customers. And so we, what was breaking trend a little bit with the more broad industry on that because of the actions that we've taken the past couple of years around underwriting.
So you think about all called bottom, bottom out in terms of our credit strategy and where we are the vintages from here, we should start to see that continued improvement and the actions we've taken have set us up for that. Again, we're just remaining, I'll say cautious as it relates to 2025 because of the unknowns, right? And one of the unknowns as an example is what are customers going to do with their tax refunds? Are they going to spend more or are they going to pay down debt?
Are they going to put the savings and you know, just giving you a little factoid on this, from some past actions in 2023, 20% of the people use their tax refunds to pay down debt in 2024, 19% used a significant drop. That was one of the lowest that we've seen in over a decade this year. Just this morning, something came out that said in a survey, 37% plan to use it to pay down debt. So that would bode well for delinquency and creating more capacity.
So there's a lot of moving parts here and then similarly, what's going to happen with policies? Could it upward pressure on inflation that would change? You know, how we think about things. We've remained in our outlook, very cautious on inflation, not assuming things are going to continue to improve materially. But if things remain on track as they have, I think you could see some upside there.
Jeff Adelson
Okay, great. Thank you.
Perry Beberman
You're welcome.
Operator
John Pancari, Evercore ISI.
John Pancari
Morning on the on the linked quarter, loan yield change. I know the yield was down about 170 basis points linked quarter just to get a little bit more detail there. How much of that was the impact, the lagged impact of the fed cuts versus how much of that was the impact from the lower big ticket sales that you cited? And then a potential impact from the shift away from private labels. Is there a way to help us kind of size that up to assess the magnitude of each?
Perry Beberman
There's a lot of moving parts in there. You know, I don't want to say it's a third, a third, a third, but the it is the a large part of our portfolio, the vast majority is variable priced. So that quick movement in prime means that the loan yields drop almost instantaneously with when you know, 45 days of those prime rate reductions that pulls through. And as we've talked about the liabilities catch up over time, so that will happen over the coming quarters because of the CDS and other things.
Then, as we mentioned with the improvement delinquency, we saw lower bill late fees. So you take that is the other piece that dragged down the loan yield. But while not seeing material improvement in gross losses, which has that reversal of interest and fees, so it was a double whammy effect. You're kind of catching that, that faster reduction in loan yield and liability.
So that will smooth out as we march through 2025. And then as the reversal of interest and fees improve as low gross losses improve throughout the year, then you're going to start to get that nim expansion again follow normal season out.
John Pancari
Right? Okay. All right. Thanks for that. And then just one more. My second, my follow up is kind of a two parter on the private label shift away towards cobrand. Is that happening at about the pace you had expected or maybe at a faster clip than anticipated?
And then when you look at your expectation for flat average loans, but end of period, slightly higher, I was wondering if you could, it seems a bit modest just given the backdrop that should be strengthening here. So is there anything impacting your expectation balances here as you look at the year that you might be approaching it conservatively? Thanks.
Perry Beberman
Yeah, I think what you just said there that, that last point, it is conservative, right? Because we just don't know what the economy and policies are going to hold and what that means to consumer growth. But as we've talked about and we've been talking about the diversification of our portfolio and the continued move to more cobrand within cobrand and, and you know, I give a lot of credit to our business development team and working with existing brand partners. Many used to have only a private label account or card, which is going to use in the store.
So a lot of the brand partners now have some cobrand as well as private label. So you can think about taking the top tiers of private label. And now they're getting the cobrand card and they get to now use that card for more general purpose spend outside of the source that's given us a nice diversification of spend and that's helping to create the shift. Then on top of that, we're signing some new partners who have just cobrand. So that is just pure. So it is a slow migration.
I wouldn't say it's moving faster or slower. And then you would imagine as you have this period of elevated losses, your highest risk customers are the one charging off. You're not filling them back in with the same type of product because we're still in a tighter credit environment. So you're not even not underwriting as deep into the private label base. So you're charging more of those off replacing them with a better credit quality. And that's part of what's happened with this natural migration right now. I hope that answered your question.
John Pancari
It does. All right, thank you.
Operator
Bill Carcache, Wolfe Research.
Bill Carcache
Hi, good morning Ralph and Perry. Following up on the comments you just made Perry around the increase in co brand versus private label and remixing towards higher credit quality customer that we're seeing is the return profile of the business and the risk adjusted yields you generate changing with a less volatile but potentially a bit lower yielding revenue stream. You know, any color that you can give on sort of how to think about the persistence of those trends. And, if this is something we should think about as structural, you know, and is that does that align with the expectations with the guidance that you gave out yesterday?
Perry Beberman
Yeah. What I'd say is that 100% aligned to the guidance we gave an investor day that was all contemplated in our long term targets. Now, I would say I'm making this up completely, but if there was something where we, bought a $10 billion portfolio, which we're not. But if we were and it had a very different profile, we'd have to come back and revisit that. But no, with what we put out there for our growth targets and the business that we're in -- we, again, we underwrite for profit.
We're making sure we get paid for the capital. You know, we are committed to those returns and something we have to move very large and chunky to really move us off those targets. You know, we expect to deliver the returns. We're focused on operational office to continue to manage our expense base and to deliver positive operating leverage as well as making sure that we get the right return for the risk we take.
Bill Carcache
That's great as a follow up. I if the loan growth outlook remains flat as you expect, how should we think about your buyback capacity over the course of the year period? And then Ralph, could you give some color around the renewal process and how you think that potentially could change as a result of you know, some of the mitigating actions that that have been taken.
Perry Beberman
Yeah, so when you think about loan growth, again, really an excellent question, right? You have to care for, you have to take care of an anticipated loan growth throughout the year and into 2026 1st, we have to hit our capital ratios, right? So let's start with that. We're not quite there yet. We need to get there and then you know, a better line of sight in the pipeline consumer behavior and that will really, I'll say dictate you know what type of capacity there would be. And if credit quality continues to improve or does it weaken all those things factor into our discussions around capital planning? And you know, we'll, we'll give more insight on that as we march through the year.
Ralph Andretta
Yeah, so good to talk to you. I I'm really pleased with our renewal process and, and the results that we have if you think about where we are. I think we talked about it earlier. We got 85% of our portfolios renewed through 2026 9 out of our 10 biggest programs. Let's call it almost to the end of the decade. Really, really, well, we're proactive on renewals, you know, starting them well before they're due and, the kind of sidestepping RFPS, which we, it gets a little crazy out there.
You know, there's a little bit of compression but nothing that we is unexpected. Nothing that we, haven't, haven't, kind of incorporated in our, in our outlook. And the team does a terrific job. And unlike years in the past, we don't give away our piece of the pie. We grow the pie and we both benefit from a positive renewal with new, new data and new information, new products. So I feel very, very positive about what we do on renewals.
Bill Carcache
Great. Thank you for taking my questions.
Operator
Moshe Orenbuch, TD Cowen.
Moshe Orenbuch
Great, thanks. In the guide, you talked about positive operating leverage in an environment of kind of low single digit revenue growth and you made some comments in your closing remarks about operating efficiency. I was wondering if you can expand on that because I think it's going to take on some increased importance.
Ralph Andretta
Yeah. Well, last year we put in, we focus on operational excellence and for us, that means looking at everything we do and doing it more effectively and more efficiently. And we've had some really good success in 2024. That success rolls into 2025. We continue to look at everything we do from a process perspective, from an automation perspective, using artificial intelligence to do things better, faster and quicker and all that results in, reducing our cost to serve, reducing our cost to acquire all results in our positive operating leverage.
We'll continue to invest in our tech modernization which drives down our operating expenses. We'll look at, expanding mobile and web based account, account, account generation, drop down our expenses. And, we, we'll continue to deploy the right efficiencies across the organization. And you know, I think operating leverage will be, something we, we're focused on every day So I'm, I'm confident that we'll have, as we said, positive operating leverage in 2025 the level of positive operating leverage will depend on the macroeconomic environment [$3.4 billion].
Moshe Orenbuch
Okay. Maybe as a, as a follow up. And to an earlier question. Could you just talk a little bit specifically about the pricing impact on your expected margin for 2025? And perhaps how much by the end of '25 you would have expected of the impact of late fees to have been in your pricing and yield. I didn't have a go.
Perry Beberman
Yeah. So motion, what, what we try to articulate is all the moving parts that, that we're going to see throughout the year. You know, the headwinds, as we said, it was going to be nim compression from the current fed rate cuts as well as what may be a couple more throughout the year. We expect delinquency to hopefully continue to improve, that would have lower bill fees, which means you'll have less loan yield from that.
And then, as you go through the year and start to hopefully have better credit losses, you'll get some offset with the lower reversal of interest and fees. And then to your point, it's the, I will then ask you that you still have a product and risk mix shift going on, which will also, the higher quality customer has a lower contractual APR. So those things combined would put pressure on them, then you have the offset being the mitigation a PRS.
And as you know, we put out in the slide a while ago, it just takes years for the burden of all the APR increases to come through. And if you were dealing with a like for like population from say, two years ago, when you had more private label who had the highest APRS, yes, you may see a bit more of an impact, but when you're doing a little bit of a tighter and you're operating in a tighter credit environment with say fewer new accounts who are higher credit quality, the burning of the new vintage at the higher APRs is less impactful than what it would have been. Had. We been mixed a lot more to private label as an example. So there's a lot of moving parts and you know, we will continue to provide more refinements on guidance as we march through the year.
Moshe Orenbuch
Okay, thank you.
Operator
Mihir Bhatia, Bank of America.
Mihir Bhatia
Good morning and thank you for taking my questions. Wanted to start by asking about capital returns. You've improved your CET1 ratio or you know, you've been cleaning up your balance sheet, you've talked about lowering the double leverage. So where are we in that process? What are your thoughts on capital returns here heading into 2025? What should we expect? Thank you.
Perry Beberman
Yeah, look, we, we've remained very consistent for the past, I'll say three years around our capital deployment. First and foremost, we're going to fund responsible profitable growth and we've done that. I know it may not always feel like it because we're operating in an environment where you've had elevated losses. We've had, tighter underwriting. And the like, but that remains our first commitment and that is what we are doing and we'll continue to do throughout this year.
We continue to invest in, technology and digital capabilities. As Ralph said, now, a lot of that now is getting funded through that operational excellence, program we have instituted, we still are not all the way home yet on our capital ratios. So we still need to hit those numbers. You know, we have a goal to build our total risk based capital to around 16% with it, with cet one, around 14%.
Obviously, as we march through the year into next year, we hopefully can optimize our balance here a little bit by introducing some tier one and tier two. You know, and then, when we look at what we've achieved and how we've achieved all that, that frees us up then for how do we use capital to deploy it back to shareholders in the form buybacks or, or whatever.
Mihir Bhatia
Got it. Thanks. And then I wanted to talk about credit a little bit more. And so like a 2025 guidance, right? It's still about 200 bps, about a little bit more than 200 BPS about your long term target. So I'm just wondering this is a two part question, but, a do you need to tighten underwriting further to get to your long term target or is your current underwriting posture sufficient to get there just from mix shift? And I guess a little bit more time passing and easing of the inflation and macro pressures. And then part B is, do you have a time line you can share on when you can get to your target range just assuming a stable macro?
Perry Beberman
Yeah. So you know, this, it is an excellent question one that man, I really wish I had that crystal ball because this one, this macro environment is very different than what most of us have experienced. You know, during our decades of being in the credit card industry, you know, this period of high inflation, higher interest rates than the pace at which this has moved. And I'll say the slow steady improvement of inflation, it just takes time. I feel very comfortable with the credit posture.
We're in certainly not a time to loosen because like you mentioned, we're a couple of 100 basis points above where we are I'll tell you the recent vintages are performing really well and back in with what we want to see out of vintage performance. So that means as those come in and as the existing portfolio, I'll say cleanses a little bit as the riskiest customers kind of charge off.
With the new vintages coming on, we're bending that curve back down. It's just, the first part of the year, of the first quarter, we're going to have a, a loss rate that approaches, that the peak we saw in the first quarter of last year of 8.5% you know, hopefully, then we can continue to improve from there. But it goes back to this being macro dependent on the pace at which this can improve.
I mean, structurally, I feel very comfortable with the actions that our credit team has taken. You know, the new, the new partners we're putting on the new business we're putting on it just now working its way through. It's just not going to happen fast because this is not an unemployment driven environment that's causing the pressure in loss rates where usually that cleanses out much faster. This is because of the macro environment, it's just a slow, steady improving.
So again, with our delinquencies, trends improving, we think that if that consistently holds, that's a sign that losses are going to come down and the pace of that improvement is what will drive, how quick we get back down to the 6% but structurally around credit, underwriting the new business we're putting on, it's setting us up to definitely get there. You know, I'm not going to say at the end of the year, that's not likely, but certainly as we march through the end of next year and beyond.
Mihir Bhatia
Thank you for taking my questions.
Operator
Terry Ma, Barclays.
Terry Ma
Hey, thank you. Good morning. I appreciate all the color on them, but maybe just on revenue growth for the year. And the guide of low single digits, any color you can provide on kind of the cadence as we kind of step through the year since you have the mitigants rolling in. So we expect accelerating revenue growth and then maybe you exit the fourth quarter higher in the full year guide.
Perry Beberman
Yeah, I think what you're going to see is, net interest margin is you kind of walk through the pieces in the first quarter. You're going to have some seasonality in there. Some of this is going to be dependent on the timing of rate cuts throughout the year. Do they happen, in the early part of the year or the late part of it's later? Obviously, then we won't see as much impact from that in terms of compression if delinquency continues to improve faster.
Okay. That means we're going to be collecting less late fees, but that's just set us up very nicely for the back part of the year with lower losses. So there's just a lot of moving parts on this. And again, we do have the mitigation action that we've got in flight from the potential CFPB late fee rule to help set us up. And that's where we've guided to the full year net interest margin being a little bit higher than what it was last year.
Terry Ma
Got it. Okay, then maybe as a follow up to credit, should we expect the historical relationship between delinquencies and charge offs to kind of hold or is there something else there? I seem to recall in prior quarters. You guys may have called out elevated role rates.
Perry Beberman
Xop question. So that that is one of the key factors in terms of how delinquency will, will translate into losses. And to that exact point, what we've been experiencing is some of the highest roll rates in history. So that's what we've been commenting that we need to see some of that improve and we are starting to see some slight improvement in all of the different buckets in terms of that roll rate improvement.
And if that actually starts to reverse back to I'll say historical norms, that would, so there should be an acceleration of losses. Now, that trend is very recent that we've seen a slight improvement. But really for the, to get back to that historical correlation between delinquency and losses, there needs to be more material improvement in the roll rates and that just hasn't manifested yet.
Terry Ma
Got it. Thank you.
Operator
Dominick Gabriele, Compass Point.
Dominick Gabriele
Great, thanks. Good morning. You guys have talked about a mix shift to higher FICO scores. Maybe just asking Bill's question earlier from a different, a different way, could there, how does this pressure your yields on a like for like basis because you're talking about trimming. But the portfolio, I was just curious if this trimming is really around the edge edges or as things normalize, will the portfolio mix, on average higher like 10% advantage scores? Like what kind of mix shift towards higher FICO scores are you?
Are you, are we really thinking about and how does this affect the seasonality of the yields in the business? I have a follow up. Thanks.
Perry Beberman
Yeah, I tell you it's going to be very gradual mix shifts. You know, we've got a lot of great new partners de Novo programs. It's going to blend in as credit improves, you can underwrite, I'll say a little deeper, but basically, I think that credit scores coming in, it will be improved. It's just a gradual improvement. I don't think you're going to see a to use your example, a 10% jump in you know, vantage score improvement in terms of mix happens quickly could happen over time.
We expect to continue to diversify our product set and continue to drive down losses. And if we did have a material mix shift, you would expect our through the cycle, guide of 6% to go lower than that. And that would also mean we could lower our our capital targets as an example. So a lot of these things will play together. But let's just go back to what we put out there in our investor day targets. We are committed to hitting those returns.
Dominick Gabriele
Right? Okay, great. And then you know, your efficiency, given the revenue growth has actually been pretty solid. You know, when the company thinks when the company moves back towards perhaps a normal revenue growth rate, can you talk about scale benefits to the efficiency ratio? You have in your business model and are you guys going to be still focused on the expense discipline? I guess I'm just kind of curious if the company, if the management team is happy with the 50 to 51% efficiency ratio as a run rate today.
Ralph Andretta
Yeah, operational excellence is all about efficiency ratio and doing things better and taking, taking advantage of scale and becoming expensive and elastic. So, there's always room for for improvement and we'll you know, we'll continue to focus on expense management and continue to focus on scale opportunities.
Dominick Gabriele
Great, thanks.
Operator
Reggie Smith, JP Morgan.
Reggie Smith
Yes, thank you. Good morning. Did you guys disclose what your, fed rate assumption was? And then I was curious, I know that your merchant partners have to approve any, any, APR increases. But have you guys talked about what proportion of your, your book has been repriced for late fees? Obviously, that takes a while to bleed in.
And then on that note, like how, like what could those increases look like? Maybe frame that and then finally, when those increases are applied, are they kind of uniform by merchant or do you actually look at the different credit tiers? So mechanically like, how does that, how, how are they, pushed down to the consumer and I have a follow up? Thank you.
Perry Beberman
Great. Thanks for the question. So, right now we've disclosed that we do have some fed cuts in there. We've got two cuts in there for the year. Think about that as a mid and late year cut. It's going to be fluid. Obviously, I think there's still, different opinions on when that will occur, as it relates to, you know, the APR increases, it's really partner dependent. It's really partner dependent in terms of how much private label did they have? Where are they on their risk profile? Right.
A higher credit quality portfolio requires, they're less late fee dependent, so they're less impacted. So that may look different. A big ticket merchant looks different in terms of whether promotional fees and other things. So it is, it really does vary partnered by partner.
And that's why I said 95% of those partners have contractual understanding of what would occur. Should the late fee change go into effect? Many of those changes are phasing in preparation for that. And that's really the best one to give you, but it does, it burns in over the course of the year and in the next year and the year after because of how the way APR increases play through.
Reggie Smith
Got it. So if I'm hearing this right, 95 have agreed to it, some have allowed you to, to go ahead and reprice even in advance of a change. Is that, is that the right way to that? I'm hearing that correctly?
Perry Beberman
That's exactly the right way to think about it. We're still phasing in changes.
Reggie Smith
Got it. And then at the sounds like at the merchant level, you, you're pricing these changes based on the mix. But like do you consider individual personal credit profile and performance as well or is it just universal? So merchant a like is a 300 basis points increase or is it, do you slice and dice within each?
Perry Beberman
Yes, it varies based on you know, the credit profile of the cohorts again with more late fee depending cohorts or not. And then that determines the degree to which the APR increases need to happen in order to ensure appropriate returns for that account for that cohort of customers.
Reggie Smith
Perfect, perfect. And the last one for me, I wanted to hear like your latest thinking on the bread B NPL product. Haven't talked about it in a while. Just curious. I know you guys have tightened credit. I'm not sure if that's what's been the issue with that business, but like how are you thinking about that? And how is the white label BNPL resonating with merchants today given, all of the other options that are out there. I thought that that would be, something really compelling for, for, for merchants, but, maybe it's, it's not so any, any color there would be great. Thank you.
Ralph Andretta
Yeah, I think our B MP L business will continue to grow. You know, it's, it's regulatory compliant, it's scalable. We're adding new partners, very consistently. We're, we're managing it in a, in a very efficient and effective way the rationality has come back to pricing and as contracts expire, we are able to work with our partners and convince them that we have this bag, this basket of products and B MP L is one of them and we can give them you know, good pricing, good optionality as we move forward.
So, you know, that's -- it's a business for us and, and we'll continue to, to manage it as such with that. I want to thank you all for joining the call today and for your interest in great financial. And we look forward to speaking to you the next quarter. Everybody have a Tori day. Thank you.
Operator
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
