Bread Financial Holdings, Inc. Reports First Quarter 2026 Results" or "Bread Financial Holdings, Inc. Files Quarterly Report for the Period Ended March 31, 2026

Overview

Bread Financial Holdings, Inc. is a tech-forward financial services company that provides payment, lending and saving solutions to U.S. consumers. The company has continued to diversify its product mix through the growth of co-brand credit card programs, which have higher credit sales per account and an improved credit risk mix compared to private label credit cards. Bread Financial also offers its own proprietary credit cards and “Bread Pay” installment loan and “split-pay” products.

Bread Financial’s partner base consists of large consumer-based businesses across a range of industries, including travel, entertainment, apparel, health, beauty, jewelry, sporting goods, technology, electronics, home and furniture. The company believes its comprehensive suite of payment, lending and saving solutions, along with its marketing and data analytics, gives it a competitive advantage in serving customers across all age groups.

Financial Performance

For the first quarter of 2026, Bread Financial reported the following key financial results:

• Total net interest and non-interest income of $1.018 billion, up 5% year-over-year
• Provision for credit losses of $303 million, up 2%
• Total non-interest expenses of $472 million, down 1%
• Income from continuing operations of $181 million, up 28%
• Net income of $181 million, up 32%
• Earnings per diluted common share of $4.15, up 50%

The increase in total net interest and non-interest income was driven by higher interest and fees on loans, partially offset by lower interest on cash and investment securities. Interest expense decreased due to lower rates on deposits and borrowings. Non-interest income declined due to higher costs associated with brand partner retailer share arrangements, partially offset by higher merchant discount fees and payment protection product revenue.

The provision for credit losses increased compared to the prior year period, reflecting a $28 million reserve release and net principal losses of $331 million, versus a $69 million reserve release and $365 million in net principal losses in Q1 2025. The company’s reserve rate declined to 11.46% from 12.19% a year earlier, reflecting improved credit metrics and higher-quality new account acquisitions.

Total non-interest expenses decreased slightly, driven by a credit received on outsourced data processing costs, partially offset by higher employee compensation and benefits. The effective tax rate declined to 25.3% from 28.1% in the prior year period.

Liquidity and Capital

Bread Financial maintains a strong focus on liquidity and capital management. The company’s primary sources of liquidity include cash flow from operations, a $700 million revolving credit facility, issuances of senior and subordinated unsecured notes and preferred stock, securitization programs, and deposits.

As of March 31, 2026, Bread Financial had $14.0 billion in interest-bearing deposits, including $8.7 billion in direct-to-consumer deposits, which represented 48% of total funding. The company also had $3.8 billion in committed capacity under its securitization conduit facilities, with $1.7 billion drawn.

In the first quarter of 2026, Bread Financial repurchased $150 million of its common stock and $50 million of its subordinated notes. The company’s common equity tier 1 capital ratio increased to 13.3% from 12.0% a year earlier, driven by net earnings.

Bread Financial’s credit ratings from Moody’s, S&P and Fitch remained unchanged as of March 31, 2026, with a positive or stable outlook. The company’s asset-backed securities also maintained AAA ratings.

Business Environment and Outlook

Bread Financial’s first quarter 2026 results demonstrate its success in driving responsible growth, with a focus on strategic capital allocation and disciplined credit risk management. The company’s 2026 financial outlook is unchanged and reflects continued consumer resilience, elevated inflation, and a generally stable labor market.

Based on the company’s current economic outlook and visibility into its new business pipeline, Bread Financial expects:

• Growth in average credit card and other loans to be up low-single digits from 2025
• Total net interest and non-interest income growth to also be up low-single digits from 2025
• Full year net interest margin to be higher than 2025, as pricing actions and an improving cost of funds offset lower billed late fees
• Positive operating leverage in 2026, excluding debt repurchase impacts
• A full year net principal loss rate ranging from 7.2% to 7.4%
• A normalized effective tax rate of 25% to 27%

The company remains confident in its ability to generate strong returns and increased value for stockholders in 2026.

Analysis and Outlook

Bread Financial’s first quarter 2026 results demonstrate the company’s ability to drive growth and profitability despite the challenging macroeconomic environment. A few key takeaways:

Diversified Product Mix and Partner Base: Bread Financial has successfully diversified its product offerings, with co-brand credit cards now representing a larger proportion of the portfolio. This has resulted in higher credit sales per account, lower delinquencies and losses compared to private label cards. The company’s diverse partner base across multiple industries also helps mitigate concentration risk.

Disciplined Credit Risk Management: Bread Financial has maintained prudent credit underwriting standards, as evidenced by its improving credit metrics and reserve rate. The company’s focus on higher-quality new account acquisitions and proactive collections strategies have helped offset pressure from macroeconomic factors like inflation.

Robust Liquidity and Capital Position: The company’s diversified funding sources, including growing direct-to-consumer deposits, and strong capital ratios provide financial flexibility and the ability to weather potential market disruptions. Bread Financial’s credit ratings and access to capital markets also support its liquidity.

Outlook Reflects Cautious Optimism: Bread Financial’s 2026 outlook calls for modest growth in loans and revenue, while maintaining disciplined expense management. The company’s guidance on net interest margin, credit losses and tax rate suggests it is navigating the current environment effectively.

However, Bread Financial does face some risks that could impact its performance:

Macroeconomic Uncertainty: Persistent inflation, rising interest rates, and the potential for a recession could pressure consumer spending and credit performance. The company’s exposure to the U.S. consumer credit market makes it vulnerable to broader economic trends.

Regulatory and Legislative Risks: Pending legislation or regulatory actions related to credit card interest rates, fees or other practices could adversely affect Bread Financial’s business model and profitability.

Competition from Fintech and Alternative Providers: The company faces increasing competition from new, non-traditional players in payments and lending, which could erode market share and margins over time.

Operational and Cyber Risks: Failures or breaches in Bread Financial’s operational or security systems could result in disruptions, data loss and reputational damage.

Overall, Bread Financial appears well-positioned to navigate the current environment based on its diversified business model, disciplined risk management, and strong liquidity and capital. However, the company will need to continue adapting to evolving market conditions and competitive threats to sustain its performance going forward.