Bread Financial’s 2026 Guidance Contradicts Q1 Strength, NIM and Pricing Timelines Diverge

Date of Call: Apr 23, 2026

Financials Results

• Revenue: $48M increase, or 5% growth year-over-year
• EPS: $4.15 per diluted share (net income of $181M)

Guidance:

• Loan growth for full year 2026 expected to be up low single digits compared to 2025.
• Total revenue growth anticipated to be up low single digits, largely in line with average loan growth.
• Full year net interest margin expected to be higher than 2025, but stability expected as benefits from pricing changes slow.
• Noninterest income expected to be pressured up to $40M in Q2 2026 compared to Q1 2026.
• Full year net loss rate expected to be at the low end of the 7.2% to 7.4% targeted range.
• Full year normalized effective tax rate expected in the range of 25% to 27%.

Business Commentary:

Strong Financial Performance and Loan Growth:

• Bread Financial reported net income of $181 million and revenue growth of 5% year-over-year for Q1 2026, with credit sales increasing by 7%.
• The growth was driven by successful new partner launches, increased shopping activity, and a return to positive loan growth, which reflects improving consumer resilience and budgeting amid economic challenges.

Credit Metrics Improvement:

• The company's delinquency rate decreased by 34 basis points year-over-year to 5.59%, and the net loss rate improved by 83 basis points to 7.33%.
• This improvement was attributed to disciplined credit risk management, product diversification, and overall consumer resilience.

Capital and Shareholder Value:

• Bread Financial's tangible book value per common share increased by 26% to $61.57, and the company retired 3.5 million shares, representing 8% of outstanding shares at year-end 2025.
• The capital generation and shareholder value enhancement were driven by strong cash flow, strategic debt repurchases, and the unwind of capped call transactions.

Technology and AI Investment:

• The company is deploying AI responsibly across its operations to enhance productivity, efficiency, and risk management.
• Investments in digital and technological advancements are aimed at driving sustainable long-term value and supporting operational excellence initiatives.

Partnership Expansion:

• New credit card relationships with Ford and Ethan Allen were launched, and comprehensive payment options with Academy Sports were introduced.
• These partnerships were facilitated by Bread Financial's expertise, product diversification, and strong partner model, contributing to growth in the automotive and home verticals.

Sentiment Analysis:

Overall Tone: Positive

• Management described first quarter results as 'strong' and 'extremely proud' of the company's history and transformation. They noted a 'return to loan growth,' 'improving delinquency rates,' and 'continued improvement in our credit metrics.' They are 'very pleased' with the capital structure outcomes and 'well positioned to execute on our capital and growth priorities.'

Q&A:

• Question from Vincent Caintic (BTIG, LLC): Given the strong Q1, why is the full-year loan growth and revenue guidance only low single digits, and what is the expected cadence?
  Response: Management expressed high confidence in the guidance due to a strong start and reaffirmed targets, noting that average loan growth is expected to build throughout the year with ending loans higher than low single digits.

• Question from Vincent Caintic (BTIG, LLC): How should we think about the cadence of future share repurchases and the long-term CET1 framework?
  Response: Share repurchase cadence will depend on earnings generation, growth, and capital targets; future preferred share issuance is market-dependent and could provide additional capital return opportunities. Long-term, they are looking to optimize the capital stack, including potential Basel III Endgame opportunities.

• Question from Natalie Howe (BofA Securities): How are pricing changes flowing through the model and what are the levers for NIM stability, including rate cuts?
  Response: Pricing change benefits are gradually slowing as most of the portfolio is repriced. NIM is expected to be reasonably stable despite ongoing product mix shifts, funding changes, and credit quality factors.

• Question from Natalie Howe (BofA Securities): How durable is strength in travel and entertainment given current fuel prices and sentiment?
  Response: Consumers are being thoughtful with spending, but T&E has been and is expected to remain a strong category for the company.

• Question from William Ryan (Seaport Research Partners): How will the pricing change affecting payment hierarchy impact future loan growth and portfolio composition?
  Response: The change only affects the mix between principal and interest/fees paid; it has no effect on total loans, which include both components.

• Question from William Ryan (Seaport Research Partners): What were the changes related to the NFL portfolio and are you expecting acceleration?
  Response: The change involves American Express becoming the brand partner for the NFL; the partnership is expected to be exciting but specific growth acceleration is yet to be determined.

• Question from Moshe Orenbuch (TD Cowen): What are the competitive dynamics and areas for new partnerships or portfolio opportunities?
  Response: The pipeline is robust, with strength in home, beauty, and automotive verticals. Bread Financial expects to continue adding partners due to its product set, underwriting sophistication, and market reputation.

• Question from Moshe Orenbuch (TD Cowen): How are you thinking about the macroeconomic outlook, including gas prices, and its impact on credit and spend?
  Response: Consumers remain resilient despite low sentiment and confidence, but elevated oil prices are being monitored as they could impact spending. The outlook is cautiously optimistic, with the company carefully monitoring economic indicators.

• Question from Sanjay Sakhrani (Keefe, Bruyette, & Woods, Inc.): How do the late fee mitigation impacts sequence through the year and continue into next year?
  Response: Benefits from pricing changes will gradually decline throughout the year as they are largely implemented, with other factors like product mix and rate cuts influencing NIM stability.

• Question from Sanjay Sakhrani (Keefe, Bruyette, & Woods, Inc.): What is the target for the charge-off rate given portfolio mix shift, and what is the impact of tax refunds?
  Response: The target loss rate remains around 6% or below, as co-brands are underwritten for risk. Tax refunds provided consumers with additional funds, but they have not led to a material increase in payments beyond expectations, with consumers using the refunds for various purposes including saving.