Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| Our ongoing disciplined balance sheet management actions enhance our financial resilience and provide additional flexibility for capital utilization, including supporting business growth, and further reducing debt |
| But when you look to get to the other side of it, we have full expectation to be able to deliver strong returns |
| Our disciplined capital allocation strategy, which focuses on profitable growth and proving capital metrics and reducing debt has driven substantial growth and tangible book value over the past several years |
| We have also strengthened our balance sheet by reducing debt and building capital while maintaining conservative loan loss reserve of 12.3%, for the last three quarters |
| This additional source of funding has strengthened our balance sheet and enhanced our financial flexibility |
| Through our industry expertise, technology and data and analytic capabilities, we are well positioned to drive value for both our new and existing partners |
| We are seeing the benefits of those credit strategies and that we're seeing a little bit lower early-stage delinquency, which demonstrates that the credit actions are taking hold |
| So I feel very good about that |
| Bread Financials business model, which features and industry leading risk adjusted yield, conservative reserves, strong capital positioning is built to consistently performed well through the full cycle |
| Moving to Slide five, we have significantly enhanced our financial resilience, strengthening our balance sheet and funding mix while effectively managing credit risk |
| They are growing responsibly, strengthening our balance sheet, optimizing data and technology and strategically investing in our business |
| But yes, there's a full expectation that we will be able to run a business delivering strong returns in the future |
| Supported by our strong cash flow generation, we expect to continue to grow our tangible book value |
| We believe this growth combined with our meaningful improved financial resilience and a strengthened balance sheet should yield a company valuation that is multiple of tangible book value |
| And you can see right now, it's not like we're closing off these tickets, we are still delivering very strong margins, and I appreciate you commented on that |
| In addition, machine learning remains one of the many tools we have utilized for many years to bring stronger credit risk models to continually enhance our underwriting line management and collections |
| Our third quarter results which include net income of $171 million and a 25% return on equity demonstrate our continued financial resilience despite losses above or through the cycle average in this current more challenging macroeconomic environment |
| Income from continuing operations was up $39 million for the quarter versus the third quarter of 2022, while pretax pre-provision earnings or PPNR grew for the 10th consecutive quarter, increasing by 7% year-over-year |
| We remain confident in our strategic direction, and our commitment to drive long term value creation |
| Moving to the second chart, we are proud of the progress we have made with respect to debt reduction |
| Revenue for the quarter was $1.0 billion up 5%, while total non-interest expenses increased 3% year-over-year, income from continuing operations was $173 million up 29% and diluted EPS from continuing operations was $3.46 |
| We strive to deliver exceptional value and experiences for our cardholders |
| Our significant accomplishments over the past three years demonstrate our focus and the success of managing our business responsibly to build long term value for our stakeholders |
| So we start to have a brighter outlook, and that might be -- if we see a brighter outlook in 2025 |
| And the team is doing a really good job of partnering with them |
| Before I turn it over to Perry, I will again highlight the improvement in our tangible book value per share, shown on the last graph, which has grown at 37% compounded annual rate since the first quarter of 2020 |
| We remain confident in our discipline credit risk management and our ability to drive sustainable value through the full economic cycle |
| On the data and technology front, we are leveraging innovative capabilities gained from our platform conversion, system enhancements and expanded product portfolio |
| As Ralph highlighted, you can see the disciplined management decisions and successful execution of our plans over the past three years |
| Additionally, we continue to deliver on our commitment to build long-term shareholder value as tangible book value per share exceeded $42 nearly triple the level compared to the fourth quarter of 2020, when I joined the company |
| Statement |
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| We expect consumer macroeconomic pressures to continue to drive softer consumer spending, which, coupled with our continued tighter credit underwriting and line management actions, will likely lead to loan growth remaining below our longer-term targets next year |
| However, as evidenced by many retailers updated financial outlooks, economic pressures are expected to continue to manifest in terms of softer sales in the fourth quarter |
| The economic environment, remains challenging and consumers contend with numerous headwinds including the compounding effect of persistent inflation relative to wage growth, high interest rates, the resumption of student loan payments, and gas volatility |
| Our financial outlook is updated to reflect slowing sales growth as a result of both our strategic and targeted credit tightening as well as an expected continued moderation in consumer spending |
| Broadly speaking, these factors are weighing on consumers and in part led to the reduction in our credit sales in the third quarter, particularly within our retail and home industry verticals |
| Bread Financials credit sales were down 13% year-over-year to $6.7 billion, reflecting the sale of the BJs Wholesale Club portfolio in late February 2023, strategic credit tightening and moderating consumer spending, partially offset by new partner growth |
| We now expect the fourth quarter net loss rate to be approximately 8%, driven by normal seasonal trends, continued consumer payment pressure and the denominator effect from lower loan growth |
| And I think the way you can look at it is when you think about the fourth quarter and what retailers are saying, what our brand partners are saying that they're projecting a softening of sales this holiday season, which is kind of in line with some of the trends they've been seeing over the summer |
| As macroeconomic headwinds persisted during the quarter, our credit risk score distribution deteriorated slightly compared to the second quarter, driven by downward score migration from existing customers, despite new account risk scores by distribution being well above the portfolio blend |
| The challenge is that once consumers get into delinquency, even though they're employed, they're struggling to get back to current |
| So I think as we commented you're seeing some slowdown in some retail categories, some home furnishings year-over-year |
| The third quarter net loss rate was elevated compared to last year's level due to more challenging macroeconomic conditions, pressuring the consumer’s payment rate as well as actions taken to the transition of our credit card processing services in June of 2022 |
| And the unintended consequence here is we may not be able to lend in the population we lend to today |
| We would expect net interest margin to move lower sequentially in the fourth quarter following typical seasonality and due to an increase in the reversal of interest in fees related to expected in a sequential increase in gross losses |
| People are upside down, and their mortgage are eating the -- they had negative equity |
| So I think you're going to see continued pressure on delinquency for a bit |
| So that I believe is going to be casualty of this late fee legislation, and that's unfortunate because people will not be able to borrow as they do today because the legislation has made it riskier for people to borrow |
| By our math, that metric was actually negative when you took over, Ralph, which is real testament to the significant capital that you've all accreted since taking over from the prior management team |
| As Ralph highlighted, we have been proactive in tightening our credit, underwriting and credit line assignments for both new and existing customers, given the economic uncertainties and pressures affecting a portion of our customer base |
| Given the ongoing macroeconomic stresses faced by many consumers, we have continued to responsibly tighten our underwriting and credit line management |
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