- Key insights: Bread Financial reached an inflection point for loan growth and posted its sixth consecutive quarter of improving credit.
- What's at stake: Higher fuel prices and persistent inflation are putting a damper on consumer confidence and sentiment, which could cause consumers to spend less in the near term.
- Forward look: Bread expects its loan portfolio and revenue to continue to grow in 2026 at a low-single-digit clip.
Bread Financial is staying cautiously positive about its outlook this year on the heels of a strong quarter even in the face of record gas prices and depressed consumer confidence and sentiment.
"For the year ahead, [we are going to] just keep doing what we've been doing," Perry Beberman, Bread's chief financial officer, told American Banker. "We've been focused on responsible growth, and responsible means that in times when you're in a challenging credit environment or macro environment, dialing it back a little bit. Right now, we've inflected the growth, which is what investors have been looking for, and what we've been looking for but not chasing it."
For the first quarter ended March 31, Bread's period-end loans hit $18.1 billion, an increase of 2% from the same reporting period last year. Credit sales jumped 7% to $6.5 billion. And direct-to-consumer deposits were up 10% to $8.7 billion.
Revenue jumped 5% to $1.02 billion, and net income rose 32% to $4.15 million, or $4.15 per diluted share. Analysts expected a net income of $142.68 million, or $3.16 per diluted share, according to S&P Capital IQ.
Credit also improved. Delinquencies dropped 34 basis points from the prior-year period to 5.59% and the net loss rate dropped 83 basis points to 7.33%. Provisions ticked up 2% to $303 million, largely due to the increase in its loan portfolio, and its Tier 1 capital ratio increased 130 basis points to 13.3%.
"With the good support of employment-wage growth, consumers are still engaging in purchasing," Beberman said on a call with analysts Thursday. "They're managing their credit obligations, so the payments have been still solid, so they're probably adjusting their lifestyle, which is good."
The jump in sales, return to growth and improving credit metrics were big wins for the credit card issuer, according to analysts.
"Overall, Bread Financial reported a solid beat with most of the KPIs beating our expectations," Keefe Bruyette & Woods analyst Sanjay Sakhrani said in a research note. "Importantly, sales volumes and loan growth were strong, while credit quality stats were better than our expectations. … This quarter validates Bread has solid momentum and is why we've mentioned it as a focus name in our space."
Positive performance during the quarter led the way for Bread to affirm its 2026 outlook, which pointed to revenue growth and average loans up in the low-single digits and an improvement in the lender's net loss rate to 7.2% to 7.4% of its portfolio.
Still, Bread is keeping a close eye on some of the macroeconomic pressures facing consumers, such as high gas prices and higher-than-desired inflation.
There are two key elements that are helping buoy consumers, Beberman told American Banker. First, the labor market has held up. Second, wage growth has outpaced inflation to date.
"So long as that's happening for the middle American family, which is who we serve, they've held up pretty well," Beberman said. "They have been dealing with periods of very high inflation now since post COVID, so with the sharp increase in gas prices, they're able to adjust."
Bread is also conscious of low consumer sentiment.
"What you see in the core data, it's disconnected a little bit from sentiment, but that doesn't mean it won't pull through later, which is why we're cautious and being very mindful of our credit strategies."
