What Bread Financial (BFH) Said on Its Q3 Earnings Call

Key Points

• Q3 performance improved operationally: Revenue rose 5% year over year to support $156 million in net income, while loans grew 7% to $18.9 billion and credit sales increased 9%. Reported net income fell 17% because the prior-year quarter benefited from a $38 million tax item.
• Credit trends strengthened: Delinquencies and net credit losses improved year over year, prompting Bread Financial to lower its 2026 net loss-rate outlook to 6.9%–7.0%, below its prior 7.0%–7.1% forecast.
• Capital and funding remain priorities: Consumer deposits grew 21% to $9.9 billion, and the company completed its bank merger to improve funding flexibility. Bread raised its dividend 9% and repurchased $75 million of stock, though it expects minimal buybacks in the fourth quarter.

Bread Financial NYSE: BFH reported third-quarter 2026 net income of $156 million, or $3.82 per diluted share, as loan growth, credit sales and improving credit performance supported revenue gains. The company also raised its quarterly dividend by 9% and repurchased $75 million of common stock during the quarter.

Net income declined 17% from a year earlier, but Chief Financial Officer Perry Beberman said the prior-year period included a $38 million favorable discrete tax item. Excluding taxes, pretax income increased 6%, or $13 million, year over year.

Loans, Revenue and Consumer Spending

End-of-period loans rose 7% from a year earlier to $18.9 billion, while average loans increased 6% to $18.6 billion. Credit sales grew 9%, supported by new and existing brand partners as well as general-purpose card spending.

Revenue increased $46 million, or 5%, year over year. Beberman said the increase was primarily driven by loan growth, lower interest expense, and higher merchant and interchange fees. Higher retailer-share arrangements and lower billed late fees partially offset those gains.

President and Chief Executive Officer Ralph Andretta said consumer spending remained resilient, though customers were becoming more deliberate in their purchasing decisions. Higher-credit-quality consumers continued to spend, while lower-score consumers showed more focus on bargains and non-discretionary purchases, he said.

Andretta cited strength in sporting goods, home improvement and beauty spending. He also said partners with multiple financing products, including Academy Sports + Outdoors, and partners focused on essential spending and gasoline, such as AAA, performed particularly well. New home furnishings relationships, including Furniture First and Raymour & Flanigan, continued gaining traction, as did the company’s Bread Pay relationship with Vivint.

Credit Metrics Improve, Loss Outlook Raised

Bread Financial reported year-over-year improvement in both delinquency and net credit losses. The third-quarter delinquency rate was 5.57%, down 47 basis points from a year earlier, though up 32 basis points sequentially. The net credit loss rate was 6.40%, improving 99 basis points year over year and 58 basis points from the prior quarter.

The reserve rate declined 60 basis points year over year to 11.12%. The company said 64% of its cardholders had a prime score above 650, while higher-quality new-account vintages and changes in product mix contributed to improved credit trends.

Management tightened its full-year 2026 net loss rate forecast for the second consecutive quarter. The company now expects a rate below 7%, with a range of 6.9% to 7.0%, compared with prior guidance of 7.0% to 7.1%.

Beberman said the company expects the loss rate to move lower in 2027, although likely not by as many basis points as in 2026. He noted that the outlook remains dependent on macroeconomic conditions, including consumer confidence, interest rates, inflation, energy costs and policy developments.

Partners, Funding and Capital Actions

During the quarter, Bread Financial renewed and extended long-term agreements with two of its top 10 partners, Signet Jewelers and Sephora. The Signet agreement covers its KAY, Zales and Jared brands, and Bread Financial plans to launch a new Blue Nile credit-card program ahead of the holiday season.

Andretta said the Sephora renewal is intended to support expanded personalization, marketing and digital customer experiences. He added that the company’s partner pipeline includes opportunities across multiple industries rather than one specific sector.

The company completed the merger of its two banks on Oct. 1. Management said the combined bank should provide greater flexibility to grow consumer deposits, improve capital efficiency and support a larger, more diversified balance sheet.

Consumer deposits increased 21% from a year earlier to $9.9 billion at quarter-end. Average consumer deposits accounted for 53% of total funding, compared with 47% a year earlier. Beberman said Bread Financial’s long-term objective is for consumer deposits to represent 60% to 70% of funding, though he said reaching that level would take several years.

Total liquid assets and undrawn credit facilities stood at $7.1 billion, representing more than 30% of total assets. Deposits represented 83% of total funding at quarter-end, according to the company.

Bread Financial ended the quarter with a common equity Tier 1 ratio of 13.1% and said its target range is approximately 12% to 13%. The company repurchased 700,000 shares for $75 million and had $374 million remaining under its repurchase authorization. Management expects minimal repurchase activity in the fourth quarter, absent a preferred-stock issuance, because of seasonal loan growth and holiday spending.

Updated Outlook and Margin Expectations

For full-year 2026, Bread Financial expects average loan growth of approximately 4% and revenue growth of approximately 5%. It expects full-year net interest margin to be slightly higher than in 2025, helped partly by improved funding costs.

However, Beberman said fourth-quarter net interest margin is expected to compress modestly from the third quarter because of seasonal factors, declining billed late fees and upward pressure on deposit rates. Looking into 2027, he said net interest margin could be flat to slightly lower as the company shifts further toward co-brand, proprietary-card and installment-loan products that carry lower assigned annual percentage rates and fewer late fees.

Management said it remains committed to positive operating leverage, excluding pretax debt-repurchase impacts, while continuing to invest in technology, data analytics, artificial intelligence, customer service and risk management. Andretta said the company is pursuing practical AI applications to improve productivity, personalization, risk management and customer experiences.

About Bread Financial (NYSE:BFH)

Bread Financial Holdings, Inc NYSE: BFH is a financial services company that provides payment, lending and savings solutions to consumers and businesses. Its offerings include private-label and co-branded credit cards, installment lending, buy now, pay later services and deposit products.

The company operates through its Bread platform, which supports merchants with financing options, payment processing and customer loyalty solutions. Its consumer products have included Bread Cashback credit cards, Bread Pay installment payment services and Bread Savings deposit accounts.

Bread Financial primarily serves consumers and merchants in the United States, with solutions designed for retail, travel, home improvement and other industries.

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