Bread Financial® Holdings, Inc. Reports Performance Update Highlighting Net Loss and Delinquency Rates

Bread Financial's May 2025 performance update reveals a slight year-over-year improvement, with the net loss rate decreasing to 8.0% from 8.8% and the delinquency rate dropping to 5.7% from 5.9%; net principal losses also decreased to $120 million from $133 million. These figures reflect the impact of earlier actions related to hurricanes, which temporarily froze delinquency progression, and the company anticipates these measures will negatively affect future net principal losses and loss rates. Average credit card and other loans saw a minor decrease of 1% to $17.714 billion.

Analysis

Bread Financial Holdings, Inc. (BFH) reported seemingly improved operational metrics for May 2025, with average credit card and other loans at $17.714 billion, a minor 1% decrease year-over-year. Net principal losses fell to $120 million from $133 million, resulting in a net loss rate of 8.0%, an improvement from 8.8% in May 2024. The delinquency rate also showed a slight decrease to 5.7% from 5.9%. However, these positive movements are qualified by the company's disclosure that actions taken following hurricanes Helene and Milton, which involved a temporary freeze on delinquency progression for affected cardholders, contributed to these lower loss and delinquency figures. Critically, Bread Financial anticipates these same actions will negatively impact net principal losses and the net loss rate in the second quarter of 2025, suggesting the current improvements may be transient and could mask underlying credit pressures. Despite the year-over-year betterment, the absolute net loss rate of 8.0% and delinquency rate of 5.7% remain elevated, reflecting ongoing challenges within its loan portfolio and supporting the provided negative sentiment score for BFH (-0.3).

Key Decisions for Investors

• Investors should view the reported improvements in Bread Financial's net loss and delinquency rates with caution, recognizing the temporary positive influence from hurricane-related delinquency freezes.
• It is crucial to monitor the company's second-quarter 2025 results for the anticipated reversal and negative impact on net principal losses and the net loss rate, as guided by management.
• Consider the persistently high absolute levels of net losses (8.0%) and delinquencies (5.7%) as key risk indicators, despite the recent year-over-year improvements, when assessing the company's credit quality and financial stability.