Bread Financial (NYSE:BFH) executives highlighted improving early-year credit performance, signs of stabilization in loan growth, and continued progress on funding and technology initiatives during a conference discussion hosted by Bank of America’s Mihir Bhatia.
January credit trends and first-quarter expense expectations
Chief Financial Officer Perry Beberman said the company was “really pleased” with January performance, citing losses and delinquency that came in favorably and loan growth that was flat, which he described as “a nice little bit of inflection.” He cautioned, however, that February typically sees a seasonal step-up, noting it should “get closer to 8” in February before coming back down, alongside normal day-weighting and seasonality.
CEO reflects on transformation and balance sheet progress
Chief Executive Officer Ralph Andretta, marking roughly five years in the role, pointed to the buildout of the management team as a key achievement and said the company exited the fourth quarter and the full year “really strong.” He described Bread’s post-COVID period as a multi-year transformation and said the company has made notable progress strengthening its balance sheet, including paying down debt and improving tangible value. He also cited the company receiving ratings from rating agencies as “a great step in the right direction.”
Andretta said the company previously faced trade-offs among investing in the business, strengthening the balance sheet, and returning value to shareholders, and added that Bread now believes it can do all three.
Customer positioning: “Middle America” and a resilient consumer
Andretta described Bread’s target customer as “the middle of the K” in the often-cited K-shaped economy framework, emphasizing that the company does not primarily target superprime consumers at the top end or subprime consumers at the lower end. He said newer vintages have an average income of about $94,000, which he characterized as “truly Middle America.”
He said this consumer cohort has faced a challenging post-COVID environment, including 30%–35% compounded inflation, but has adapted spending and budgeting behavior. Andretta described the customer as “resilient,” making choices such as trading down in price points or adjusting quantities purchased, and he said Bread remains optimistic about the consumer outlook, contrasting weaker sentiment data with what he described as resilient “hard data.”
Broader product set and vertical expansion
Andretta said Bread has moved beyond being “a private label credit card shop” by adding co-brand cards, direct-to-consumer products (including deposits and direct-to-consumer credit cards), and buy now, pay later offerings including installment loans that can evolve into personal loans. He described the company as having “seven or eight products” it can offer consumers.
He also outlined a range of verticals where Bread operates, including:
- Soft retail, jewelry, and beauty
- Travel and entertainment (T&E)
- Home improvement, furniture, and a newer home/furnishings vertical (including Raymour & Flanigan, Furniture First, and Bed Bath & Beyond)
- Electronics and technology (including Dell, HP, and B&H Photo)
Andretta said offering multiple products gives partners more “choice” and can widen the pool of eligible consumers—for example, providing a private label card at a lower line when a customer cannot qualify for a co-brand product. He added that partners can also benefit from spend occurring outside the partner when a co-brand card becomes more “top of wallet.”
Loan growth, losses, reserves, and funding priorities
On loan growth and purchase volume, Beberman said he wanted to see “a few more months” before declaring a sustained inflection, but said trends were aligning with the company’s expectations and supporting its outlook for “up single digits, low single digits” growth, aided by new partner launches and improving credit quality. He said winter storms did not have an “overly big impact,” noting some spend was pulled forward as consumers prepared.
Beberman said stronger T&E spend in the fourth quarter reflected portfolio mix shifting toward more co-brand cards and a more recognizable seasonal pattern, adding that co-brand cards can capture more general spend. He said he would expect more seasonal T&E activity throughout the year.
Discussing guidance sensitivities, Beberman noted uncertainty in consumer behavior, including how tax refunds might be used. He said if consumers pay down debt, that could raise payment rates and reduce loans, while greater spending could support higher loan balances. On losses, he said the company did not “overplan” any benefit from potentially higher refunds due to uncertainty, and that refund behavior could be a tailwind rather than a headwind for achieving the loss outlook.
On credit metrics, Andretta pushed back on the idea that management is “comfortable” with losses above 7%, saying the company has a clear expectation to move toward “around 6%,” but without taking overly aggressive credit actions that could damage partner sales or reduce returns. He said the company underwrites for profit and returns and has chosen not to “choke off credit” simply to drive losses down faster.
On reserves, Andretta said that under a more neutral economic outlook and with a loss rate “gliding down to 6%,” a long-term reserve rate “around that 10% range” would be reasonable, adding that reserve levels should be driven by credit quality and macro inputs and noting the company has already reduced reserves as delinquency improved.
On competitive dynamics and growth opportunities, Andretta described the partner pipeline as “robust” and said Bread can compete across partner sizes, from de novo programs to portfolios in the $500 million to $1 billion range. He said de novo programs are attractive because they can be built without upfront capital outlay and cited Ulta as an example of a program that scaled significantly. He also pointed to areas of perceived vertical strength, including beauty and jewelry, and said the company has been expanding in technology and digital-focused partnerships, mentioning Crypto.com as evidence of “digital chops.”
On funding, Beberman reviewed actions taken in 2025, including refinancing and paying down senior notes (from $900 million at 9.75% to $500 million at 6.75%), issuing $400 million of subordinated notes, and completing a first preferred stock offering of $75 million. He said Bread ended the year with roughly $8.5 billion in direct-to-consumer deposits and expects to continue growing deposits, with an aim of reaching a target of 50% of total funding. He said the company is not currently looking for activity in senior notes, may reduce subordinated debt opportunistically, and could issue additional preferred stock depending on market conditions.
Separately, Andretta said Bread’s top 10 partners are locked through 2028.
Closing the discussion, Andretta and Beberman pointed to priorities including responsible, repeatable growth, maintaining positive operating leverage, and continuing technology transformation—such as migrating to cloud infrastructure and applying AI to improve servicing, underwriting, and fraud prevention—while maintaining governance around customer and partner data.
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.
