Bread Financial Q2 Earnings Call Highlights
Key Points
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- Bread Financial posted stronger Q2 2026 results, with net income of $146 million and EPS of $3.55, helped by 7% revenue growth, 11% higher credit sales, and improving credit performance. Management also raised parts of its full-year outlook.
- Credit and funding trends improved, as delinquencies and net loss rates fell year over year, while direct-to-consumer deposits grew 16% to $9.4 billion and now make up 50% of the funding mix. The company also maintained strong liquidity at $6.7 billion.
- Bread Financial continued to return capital and invest for growth, repurchasing $241 million of stock and issuing $135 million of preferred shares, while also increasing technology and AI investments. Management said expenses should rise later in the year, but it still expects positive operating leverage in 2026.
Bread Financial (NYSE:BFH) reported stronger second-quarter 2026 results, citing higher credit sales, loan and deposit growth, increased revenue and improved credit performance, while also raising parts of its full-year outlook.
President and Chief Executive Officer Ralph Andretta said the company delivered “strong financial results” during the quarter, pointing to “accelerating credit sales, continued loan and deposit growth, increased revenue and PPNR, and improving credit performance.” He said the performance reflected the company’s focus on responsible growth and operational execution amid continued macroeconomic uncertainty.
For the quarter, Bread Financial reported net income of $146 million and diluted earnings per share of $3.55. Tangible book value per common share rose 22% year-over-year to $63.66. Adjusted pre-provision net revenue, or PPNR, increased 11% from a year earlier, supported by 7% revenue growth and disciplined expense management.
Loan Growth and Partner Momentum
Executive Vice President and Chief Financial Officer Perry Beberman said average loans increased 3% year-over-year to $18.2 billion, while end-of-period loans rose 5% to $18.5 billion. Revenue increased $64 million, or 7%, from the prior year, driven by average loan growth, previously implemented pricing changes, lower interest expense and higher interchange and merchant discount fees tied to higher credit sales.
Andretta said second-quarter credit sales grew 11% year-over-year, with growth across the company’s product mix and industry verticals. He highlighted existing co-brand partnerships, particularly in travel and sporting goods, as areas of strength. The company also cited momentum from its Ford program launch, new home partnerships with Raymour Flanigan, Furniture First and Ethan Allen, and its Bread Pay partnership with Vivint.
During the question-and-answer portion of the call, Andretta said growth was broad-based, but travel and entertainment, sporting goods, and new furniture partners helped drive the gains. He also said Bread Pay had “a really good quarter,” particularly around Vivint.
Beberman said the company is seeing strong performance from both existing partners and newer programs launched in the second half of 2025. However, he cautioned that June was stronger than usual across the industry and that July was already showing signs of a pullback. He said comparisons will become more difficult later in the year as Bread Financial begins to lap recent partner launches, particularly in the furniture vertical.
Deposits, Liquidity and Capital Actions
Bread Financial’s end-of-period direct-to-consumer deposits grew 16% year-over-year to $9.4 billion, which Andretta said marked the company’s second-strongest quarter of growth since the program began in 2019. Direct-to-consumer deposits now make up 50% of the company’s funding mix, reaching a target established during its initial Investor Day.
Beberman said average direct-to-consumer deposits represented 50% of total funding, up from 45% a year ago. At quarter end, deposits represented 80% of total funding, with the majority consisting of FDIC-insured direct-to-consumer deposits. total liquid assets and undrawn credit facilities were $6.7 billion, or nearly 30% of total assets.
The company also continued to adjust its capital structure. Bread Financial issued $135 million of 8.875% preferred stock and repurchased 2.8 million common shares for $241 million during the quarter, representing 7% of outstanding common shares. The company ended the quarter with $449 million remaining under its current stock repurchase authorization.
Beberman said the pace of buybacks will slow in the third quarter as loan growth is expected to increase. He said the company planned to repurchase $25 million of common stock in July, while any additional preferred share issuance would likely occur no earlier than the fourth quarter, depending on market conditions.
Credit Metrics Improve
Credit performance improved during the quarter. Bread Financial’s delinquency rate was 5.25%, down 48 basis points from a year earlier and 34 basis points sequentially. Its net loss rate was 6.98%, down 90 basis points year-over-year and 35 basis points from the previous quarter.
Beberman attributed the improvement to disciplined credit risk management, underwriting and the maturation of higher-quality new accounts. He said the company expects the third-quarter net loss rate to be approximately 30 basis points better than the second quarter.
The reserve rate improved 66 basis points year-over-year to 11.23%, which Beberman said reflected improving credit metrics, higher-quality new vintages and stronger credit risk distribution. He noted that 65% of cardholders had a prime score above 650.
During the Q session, Beberman said the improvement was visible across the existing portfolio and new vintages. He said the company has “plenty of runway” before seasoning effects would slow credit improvement, adding that the company continues to target a path toward a 6% loss rate over time. He said that target depends on the macroeconomic environment and would likely not be reached on a full-year basis in 2027.
Outlook Raised for 2026
Bread Financial revised its 2026 outlook based on first-half performance and assumptions that consumers remain resilient, inflation stays above the Federal Reserve’s 2% target and the labor market remains generally stable.
- Average credit card and other loan growth is now expected to be up low to mid-single digits compared with 2025, versus prior guidance for low single-digit growth.
- Total revenue growth is now expected to be up low to mid-single digits, primarily driven by average loan growth.
- Full-year net interest margin is expected to be flat to slightly higher than 2025.
- The full-year net loss rate is now expected to be 7.0% to 7.1%, improved from prior guidance for the low end of 7.2% to 7.4%.
- The normalized effective tax rate is still expected to be 25% to 27%.
Beberman said net interest margin benefited from pricing actions and improved funding costs, though those tailwinds are expected to be partly offset by lower billed late fees as delinquency trends improve and by a continued shift toward better credit-risk product mix.
The company also expects higher retailer share arrangement payments going forward. Beberman said those payments are increasing because of higher credit sales-related partner payments and increased profit-sharing tied to improved loan yields and credit losses. He described higher RSA payments as “a positive indicator” of stronger credit sales, growing loan balances and the benefits of pricing actions.
Expense and Technology Investments
Total non-interest expenses were nearly flat year-over-year. Excluding the impact of debt repurchases, expenses rose $15 million, or 3%. Beberman said employee compensation and benefits increased because of higher wages, incentive compensation and medical claims, partially offset by operational excellence initiatives.
Management said expenses are expected to rise sequentially in the third and fourth quarters because of growth-related variable costs and continued investment in technology, efficiency initiatives and new capabilities. Beberman said Bread Financial remains committed to delivering positive operating leverage in 2026, excluding the pre-tax impacts of debt repurchases.
Andretta said the company is investing in digital and technology enhancements, including the responsible use of artificial intelligence. He said Bread Financial is integrating AI to improve productivity and efficiency, support innovation and enhance risk management, while also working with partners on use cases in agentic commerce and servicing.
Andretta said the company’s transformation over the past six years is now evident in its financial results, citing balance sheet strengthening, responsible growth investments and efficiency efforts. Beberman said continued PPNR growth, capital stack optimization and improving credit metrics provide a path toward the company’s long-term mid-20% return on tangible common equity target in coming years.
About Bread Financial (NYSE:BFH)
Bread Financial, formerly known as Alliance Data Systems, is a Columbus, Ohio–based financial services company that specializes in providing private label credit programs, co-brand credit cards and digital payment solutions for retail partners. The company designs, issues and services proprietary credit products, enabling merchants to offer branded financing options that drive customer loyalty and increase basket sizes at the point of sale. Through its Bread technology platform, Bread Financial delivers installment-based payment options that integrate directly into e-commerce and in-store checkout experiences.
In addition to its core credit offerings, Bread Financial provides analytics, marketing and loyalty services to help merchants better understand consumer behavior and optimize promotional strategies.
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