Bread Financial (NYSE:BFH) reported what management described as a strong start to fiscal 2026, citing a return to loan growth, higher credit sales, and continued improvement in credit performance metrics during the first quarter. On the company’s earnings call, President and CEO Ralph Andretta and EVP and CFO Perry Beberman also reaffirmed the company’s full-year outlook, while acknowledging ongoing macro uncertainty and consumer sensitivity to higher fuel costs.
Credit sales rise 7% as loan growth turns positive
Andretta said first-quarter results were “underscored by a return to loan growth alongside increasing growth in credit sales and continued improvement in our credit metrics.” The company reported credit sales growth of 7% year over year, which Andretta attributed to “successful new partner launches across our full product suite and increased shopping activity with our long-standing partners, especially among Gen Z and millennials.”
Andretta noted that while “consumers are being thoughtful and budgeting actively amid lower sentiment and confidence in higher fuel costs,” Bread still saw year-over-year sales growth across several verticals, including:
- Health and beauty
- Jewelry
- Travel and entertainment
- Home (which Andretta said “grew nicely”)
New partner activity highlights co-brand and installment expansion
Andretta emphasized new and expanded partnerships during the quarter, including launches with Ford and Ethan Allen. He said Bread’s long-term agreement with Ford includes “co-brand credit card and installment loan programs,” and is designed to increase loyalty by enhancing the car ownership experience through rewards and financing for subscriptions, parts, and services. He added that Ethan Allen’s addition “strengthens our prominence in the home vertical with flexible financing options.”
The company also highlighted installment growth initiatives. Andretta said Bread is offering Bread Pay installment loans for AAA, Dell, and Ford, and announced a “new comprehensive suite of payment options with Academy Sports + Outdoors, including co-brand, private label, and installment loans.”
On the competitive environment and new customer opportunities, Andretta told analysts the partnership pipeline “continues to be robust,” adding the company “win[s] more than our fair share because of our product set and the sophistication of how we underwrite.”
Financial results: revenue growth, higher NIM, and share retirements
Beberman said first-quarter revenue increased $48 million, or 5%, “primarily reflecting the implementation of pricing changes and lower interest expense,” partly offset by lower billed late fees and higher retail share arrangements paid to partners. Bread posted net income of $181 million and diluted earnings per share of $4.15, with Beberman noting that EPS now reflects dividends paid on preferred equity.
Net interest income rose 6% year over year, and Beberman said net interest margin was 19.3%, increasing both year over year and sequentially. He attributed the improvement to pricing changes that lifted loan yields and actions that improved funding costs, including reducing parent senior notes last year and lowering the associated rate “from 9.75% to 6.75%.”
Beberman also said the company repurchased $50 million of subordinated debt during the quarter, leaving $350 million in principal outstanding.
On expenses, Beberman said total non-interest expenses fell $5 million, or 1%, reflecting expense discipline and a credit received during the quarter. He cited higher wages and incentive compensation as drivers of a $5 million increase in employee compensation and benefits, while information processing and communications costs declined $5 million due to “lower outsourced data processing costs as a result of a credit received in the quarter.” Pre-provision net revenue (PPNR) increased $53 million, or 11%, which Beberman said reflected “risk-based pricing discipline” and operating expense management.
Andretta said tangible book value per common share grew 26% to $61.57. He also said the company “retired a total of 3.5 million shares of common stock or 8% of our outstanding shares at year-end 2025,” driven by stock repurchases and the unwind of capped call transactions.
Beberman detailed that the full unwind of the capped call resulted in the retirement of 1.5 million shares in the quarter. As of quarter end, remaining share repurchase authorization stood at $690 million, with future cadence dependent on capital generation, growth, investment needs, and capital levels versus policy targets. He also said the company expects to “further optimize” its capital structure over time, including the potential issuance of additional preferred shares depending on market conditions.
Credit metrics improve for a sixth consecutive quarter
Management emphasized continued progress in credit performance. Beberman said the first-quarter delinquency rate was 5.59%, down 34 basis points from last year and down 16 basis points sequentially. Net loss rate was 7.33%, down 83 basis points year over year and down 10 basis points sequentially.
Beberman said the reserve rate improved 73 basis points year over year to 11.46%, driven by improving credit metrics and higher credit quality new vintages, with stability in risk distribution. He noted 64% of cardholders have a prime credit score above 650. He added that the reserve rate increased 26 basis points sequentially due to seasonal paydowns of holiday-related transactor balances.
Discussing the customer base, Beberman said Bread’s typical customer represents “a middle-income American,” and that new customers have an average annual income of “around $100,000.”
Outlook reaffirmed; management cites macro uncertainty and consumer sensitivity to fuel
Bread reaffirmed its 2026 outlook. Beberman said full-year average credit card and other loan growth is expected to be up “low single digits” versus 2025, supported by partner stability, new launches, credit sales growth, and improving credit losses, partially offset by higher payment rates. Total revenue growth is also expected to be up low single digits and “largely in line with average loan growth.”
Beberman said net interest margin should be higher than 2025, but that incremental benefits from pricing changes will slow as “the majority of our portfolio will have repriced.” He also pointed to pressures including lower billed late fees as delinquency improves, higher payment rates, and shifts in risk and product mix. For non-interest income, he said Bread expects “meaningfully higher” retail share arrangements going forward, and specifically forecasted that in the second quarter this dynamic would pressure non-interest income “up to $40 million compared to the first quarter of 2026.”
On expenses, Beberman said the company expects positive operating leverage in 2026 excluding pre-tax impacts from debt repurchases, and that second-quarter total expenses are expected to rise sequentially with investments in growth and capabilities. He provided an initial estimate of second-quarter expenses of “just under $500 million.”
For credit, Beberman said the company is on track to achieve a net loss rate at “the low end” of its 7.2% to 7.4% targeted range for 2026, assuming stable macro conditions and continued mix shifts. The company’s normalized effective tax rate expectation remains 25% to 27%.
In Q&A, Beberman said management was “really pleased with the first 90 days of results” but maintained guidance due to uncertainty, telling BTIG’s Vincent Caintic it felt “a little premature to declare a victory yet.” He added that while average loan growth guidance is low single digits, “ending loans [are expected] to be higher than low singles.”
On consumer conditions, Beberman said employment and wage growth have supported resilience even as sentiment and confidence remain low. Management said it is monitoring elevated fuel prices, with Beberman noting consumers feel that “immediately…at the pump.” Andretta said consumers may pull back on travel and entertainment if gas prices rise, but added that travel and entertainment “has been a strong category of ours for some time.”
Beberman also discussed tax refund season, saying customers have seen $300 to $350 higher refunds on average, but Bread has not seen a material increase in payments beyond expectations, as some consumers appear focused on saving or offsetting near-term fuel impacts.
Looking longer term, Beberman reiterated the company’s ambition to reach a net loss rate target “around 6% or below” and said Bread is aiming to achieve a longer-term “mid-20% ROTCE target in the 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.
